One of the big differences between class actions and mass actions is supposed to be attorneys fees. In mass actions, plaintiffs lawyers sign contingency fee contracts with each of their clients. Except in extraordinary cases (such as the 9/11 first responders litigation) those contracts, which typically give plaintiffs lawyers 35 or 40 percent of their clients’ recovery, govern attorneys fees.

In class actions, though, class counsel fees have to be approved by the court. And in our experience, courts are rarely willing to hand over 35 percent of the class’s money to plaintiffs lawyers. We’re used to seeing awards of 15 or 20 percent of the settlement–and even smaller percentages in megacases.

So the fee award in a Missouri state court class action against A.G. Edwards is notable on its face. Last May Judge Angela Quigless of the St. Louis circuit court approved $21 million in fees and $600,000 in expenses for the plaintiffs lawyers who prosecuted a class action claiming A.G. Edwards breached its fiduciary duty to brokerage clients by accepting payments from mutual fund companies. That $21 million represented a full 35 percent of the purported $60 million settlement Judge Quigless approved the same day. “The court finds such sums to be fair and reasonable under the circumstances of this case,” Judge Quigless wrote, without the sort of additional analysis of hourly billings and lodestars we’re accustomed to seeing in class action fee rulings. (In a brief in support of their fee request, the plaintiffs cited the procedural history of the case, which involved remand motions and two trips to the state court of appeals. They also cite other 35 percent fee awards, though none more recent than 2001.)

But according to an appeal filed Tuesday on behalf of an objector to the settlement, the A.G. Edwards deal isn’t worth anything like the $60 million that the judge based her fee award on. The objector’s lawyer, Ted Frank of the Center for Class Action Fairness, argues in the state court appellate brief that class members are slated to receive only $6 million in cash. The other $34 million in their share of the purported $60 million settlement comes in the form of vouchers worth $8.22 apiece and redeemable once a year for the next three years by current A.G. Edwards customers.

Frank argues that the settlement deliberately makes the vouchers difficult to redeem, virtually assuring that relatively few class members will take the trouble to receive the brokerage account credit. “In all likelihood, the defendant will spend less than $30 million on the settlement that the trial court valued at $60 million, and the plaintiffs’ attorneys have already collected $21 million of that money,” Frank asserts.
Frank’s brief says the value to the class of the settlement is closer to $9 million than $60 million. According to him, that means the deal is “inherently unreasonable because of the provision for excessive attorneys’ fees of $21 million without any way for the class to recover additional amounts.” (In a blog post about the filing, Frank says the question of how to value a coupon in a class action settlement is one of first impression in the Missouri state courts.)

Plaintiffs lawyer Chris Bauman Blitz Bardgett & Deutsch told us that Frank has repeatedly mischaracterized the vouchers as coupons, when, in fact, they don’t require class members to make additional purchases. “There’s absolutely no evidence to support” Frank’s assertion that the class only receives a $9 million value from the settlement. “The standard the court has to follow is to determine whether what’s before it is fair and reasonable. Judge Quigless found it was,” he said.
Bauman also said the fee award is justified by the “complex and time consuming” procedural history of the case, as well as the results obtained for the class.
Ten firms are listed as plaintiffs counsel on Judge Quigless’s approval order: Blitz Bardgett; Goodin, Macbride, Squeri, Day & Lamprey; Holloran White & Schwartz; Hulett Harper Stewart; Brower Piven; Milberg; Stanley Iola; Stull, Stull & Brody; Weiss & Lurie; and the Law Offices of Alfred G. Yates Jr. We called lawyers at Milberg, Stull, and Blitz Bardgett but didn’t hear back.

A.G. Edward is represented by Morgan, Lewis & Bockius and Husch Blackwell. Kevin Rover of Morgan Lewis declined our request for comment on the objector’s brief.