1. The Class Action Industrial Complex.
- Author
-
Weinberg, Neil and Fisher, Daniel
- Subjects
CLASS actions ,PENSION trusts ,LAWYERS' fees ,ACTIONS & defenses (Law) ,JUSTICE administration ,LAWYERS ,BUSINESS & politics - Abstract
The article examines problems associated with class action suits in the U.S. Three years ago a couple of little-known law firms stood poised to reap the biggest shares of a huge legal fee: $262 million--$10,861 per billable hour--for their role in landing a $3.2 billion settlement against scandal-scarred Cendant Corp. Then Leslie Conason got in their way. Conason, a staff lawyer for New York City, whose pension fund was one of three lead plaintiffs represented by the two firms in the Cendant suit, was outraged by the sum. She tried coaxing the pair of firms--Bernstein Litowitz Berger & Grossmann of New York and Barrack, Rodos & Bacine of Philadelphia--into taking less. They refused. Then she appealed to the U.S. Third Circuit Court of Appeals. The appeals court called the fees "staggering" and ordered the parties to agree on a smaller sum. But here's the weird part: Conason had to wage this fight alone. The other two lead plaintiffs--the New York State Common Retirement Fund and the California Public Employees' Retirement System--did not join her push for lower fees. H. Carl McCall, who at the time was state comptroller and the sole trustee of the New York State fund, says there was no need for him to challenge the legal fees because the city was taking care of it. Was that the only reason he wasn't complaining about the $10,861-per-hour fee? McCall's ties to the two law firms are close. He played a role in naming Bernstein Litowitz and Barrack, Rodos to handle the Cendant case and a few others, including a suit against WorldCom and Citigroup in the wake of the telco's belly flop. McCall, meanwhile, received $140,000 in campaign contributions from the two class action firms. And so it goes in the cozy confines of the class action racket. Plaintiff lawyers give handily to the politicians who hire them. None of this is illegal per se; nor does it violate existing rules of legal ethics. But even some lawyers have problems with it. INSETS: Negative-Sum Game;Money on the Table.
- Published
- 2004