No rise in class action recoveries or fees, study finds.

Amid corporate cries that class action suits drive up the cost of doing business and damage the economy, a new study by two law professors has found that the average cost of settling a class action and average attorney fees have held steady for 10 years. (Theodore Eisenberg & Geoffrey P. Miller, Attorney bees in Class Action Settlements : An Empirical Study, 1 J. EMPIRICAL LEGAL STUD. 27 (2004), available at www.stern.nyu.edu/clb/2003/03-017.pdf.)

"Contrary to popular belief, we find no robust evidence that either recoveries for plaintiffs or fees of their attorneys as a percentage of the class recovery increased," wrote Theodore Eisenberg, of Cornell Law School, and Geoffrey Miller, of New York University School of Law.

To provide empirical data to help trial court judges determine appropriate and reasonable fees in class action suits, the authors conducted the study without financing from corporations or trial lawyers. To produce the most comprehensive study to date, they examined the results of actual court cases between 1993 and 2002, considering approximately 400 opinions in which state and federal courts report class action fees and recoveries, as well as information compiled by Class Action Reports for more than 600 cases during that period.

"It's refreshing to see credible, empirical studies like this one being conducted," said ATLA President David Casey Jr. "This study supports what we've been saying all along: The legal system is working correctly." Study findings include:

* "The mean client recovery has not noticeably increased over the last decade." Attorney fees have also remained stable.

* The size of recoveries determines fees. "Overwhelmingly the most important determinant" of attorney fees was the amount of the client's recovery.

* "The percent of the recovery that goes to attorneys decreases as the size of the recovery increases." That is, the larger the settlement, the smaller the percentage allocated to attorney fees. In addition, "the fee as a percent of client recovery is noticeably below the widely quoted one-third level." On average, lees were 12 percent for the largest settlements and almost 30 percent for the smallest.

* Several factors affect fee amount. For example, fees in cases where fee-shifting provisions exist were significantly higher as a percentage of class recovery. Fees were lower when defendants were forced to pay than when they came from the class recovery.

"The fact that the defendant pays the fees in a non-fee-shifting case was highly significant in most models ... and negative, suggesting that even when the money in some sense comes out of the same 'pot' (the defendant's bank account), the defendant's commitment to pay the fees had a moderating effect on their amount."

Another factor--"soft relief," such as injunctive relief or coupons, "has no material effect on the fee."

* The "lodestar" method for calculating fees may be inadequate. The amount of recovery" generally explains the pattern of awards better" than the lodestar calculation (the product of reasonable hours billed at reasonable rates). The authors said that their results "cast doubt on whether the fees actually awarded by courts follow the frequent case-law admonition that fees determined on the percentage method [similar to the contingent fee in individual tort cases] should be checked for reasonableness against the lodestar calculation."

* Risk and complexity affect fees and costs. High-risk cases are associated with higher fees; complexity also appeared to raise fees, depending on factors like the age of the case and its potential for success on appeal. However, the authors noted that these results are "ambiguous."

* As the amount of recovery increases, costs decrease as a percentage of the recovery. However, "costs ... increase with case complexity and are higher in fee-shifting cases."

* Venue affects fees. Cases in federal court resulted in higher fees than those in state court.

"It's time that the truth comes to light," said Casey. "The myths perpetrated by the business lobby and others who support so-called tort reform are false. There is no justification for the current class action reform legislation other than payback to the insurance, tobacco, drug, chemical, and other special-interest industries that have spent billions of dollars to avoid being held accountable for their actions."