A judge slashed legal fees Monday in a $303 million settlement between General Motors Corp. and investors, saying a 19 percent share sought by attorneys was excessive and wouldn't sit well with the middle class.
Lawyers will get 15 percent of the pool of money, or $45 million. That adds up to a rate of $1,825 per hour, said U.S. District Judge Gerald Rosen for the Eastern District of Michigan.
The lawyers represented people who invested in GM stock or bonds over a six-year period. The class-action lawsuit said they suffered because of GM's accounting mistakes and misleading statements about the health of the company.
GM's common stock dropped 75 percent between spring 2000 and spring 2006.
Two lead lawyers and five law firms had requested 19 percent, or nearly $60 million, in compensation, saying the case was very risky because of GM's financial condition and no guarantee of victory. The hourly rate: $2,310.
"We provide a very useful societal function ... at our own expense," Jonathan Plasse said of challenging corporate executives.
Rosen said lawyers who rightly take on companies need to be paid. But he wondered what the reaction would be if the courtroom were filled with autoworkers and small investors.
"They'd say it's exorbitant," the judge said.
"Nineteen seeks like a relatively low percentage until you look at the size of the beast," he said, referring to the $303 million deal.
GM has agreed to pay $277 million and its auditor, Deloitte & Touche LLP, will pay $26 million.
GM attorney Robert Kopecky had no opinion on legal fees but said the overall agreement is "fair and reasonable." Rosen said he would grant final approval in early January.
The settlement was reached last summer before the automaker's dark finances grew even worse. The Bush administration last week agreed to provide $13.4 billion in loans to GM.
Lower legal fees will mean an additional $12 million for investors in the case. How much each investor gets will depend on the number of claims. Before the judge reduced attorney fees, the prediction was roughly 25 cents per share, if all eligible shareholders participate.
Fewer claims will lead to a larger share.
"It's impossible to be specific at this point," James Sabella told Rosen.
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