What Is a Reasonable Attorney Fee? An Empirical Study of Class Action Settlements

Determining an appropriate fee is a difficult task facing trial court judges in class action litigation. But courts rarely rely on empirical research to assess a fee’s reasonableness, due, at least in part, to the relative paucity of available information. Existing empirical studies of attorney fees in class action cases are limited in scope, and generally do not control for important variables. To help fill this gap, we analyzed data from all state and federal class actions with reported fee decisions from 1993 to 2002 in which the fee and class recovery could be determined with reasonable confidence. We find that the level of client recovery is by far the most important determinant of the attorney fee amount. A scaling effect exists, with fees constituting a lower percent of the client’s recovery as the client’s recovery increases. The relation between fees and recovery is remarkably regular, and can be observed both in cases in which no fee-shifting statute applies, and in cases in which the plaintiff had a right to seek reimbursement under a fee-shifting statute. The presence of high risk is associated with higher fees, as is the presence of the case in federal rather than state court. Contrary to popular belief, we find no solid evidence that attorney fees increased during the period studied