Qwest retirees take on fat fees
A stand well worth taking
August 14, 2005
Congratulations and good luck to the Association of U S West Retirees. They're protesting the seemingly exorbitant fees requested by the attorneys who settled a class-action stockholder suit against Qwest Communications.
We hope Denver District Judge John Coughlin honors the association's request that he delay ratification of the settlement until he takes a hard look at the fees.
Class-action suits all too often produce minimal payouts for the individual plaintiffs and huge returns for the attorneys. But protests are rare because they're expensive.
In this suit, for instance, the $135 court filing fee alone exceeds the modest amounts that would be paid to most of the individual stockholders - and then there is their own attorney's fee.
The original stockholder suit asked $273 million from Qwest because it maneuvered its way out of paying a 53 cents-per-share quarterly dividend after merging with U S West five years ago. Just before the trial in June the case was settled for $50 million. The money would come not from the named defendants but the telco's insurance companies.
From the $50 million, the law firm of Lerach Coughlin asked for a $15 million fee plus $1.7 million in expenses, or a third of the gross. The shareholders are expected to get less than 10 cents a share. For example, the owner of 300 shares would get a very modest $30.
Of course the lawyers who negotiated the settlement should be paid, and handsomely. But there's a difference between handsome fees and the outrageous.
Curtis Kennedy, attorney for the retirees, suggests Lerach Coughlin could end up making two to three times more than if they billed by the hour - and he's assuming an hourly rate of $500. "Greed gone wild," he calls it. The judge should demand a full accounting and not just, as Kennedy puts it, "rubber-stamp" the request.
Although a typical contingency fee may equal 33 percent of the settlement, that's no reason for the judge to endorse this particular request. First, he can't assume all members of the class who signed on to the case agreed to such a percentage. Second, even contingency fees - which most nations ban outright - ought to bear some relationship to the actual work done on a case.
That's why the judge's role in determining fees is so important, and why he should demand a careful accounting of how each hour on the case was spent.
Kennedy and the Qwest retirees deserve credit for tackling the issue of fees rather than simply letting the class-action attorneys waltz away with what might well amount to an unearned bonanza. It's unfortunate, however, that such challenges don't happen more often.