Judge Shocked By Class Action Legal Fees

In the smallest Canadian class action settlement on record, a judge asked to approve the settlement called the claimed legal fees “remarkable”, “disturbing” and “deplorable”.

A Saskatchewan-based law firm claimed fees ranging up to $225,000 for achieving an $8,000 settlement. 

Pointing out that the $8,000 settlement was “very modest”, class action judge Justice Belobaba pointed out that the legal fees claimed were not proportional to the result achieved. It hardly takes a justice of the Superior Court in Ontario to point this out!

Justice Belobaba was shocked to hear that the plaintiff law firm had no written retainer agreement:

An experienced class action law firm was telling me in open court, and with a straight face, that “many” of its class action legal fee arrangements were like the one that was before me – no written retainer, no contingency fee provision, simply an agreement with the class representative that [the firm] would look to recover its legal fees from the defendant as part of the (hoped for) settlement agreement.

It must be obvious to anyone who gives this even a moment’s thought, that this type of settlement-driven legal fees arrangement in class action litigation is fundamentally and profoundly unacceptable. It provides all the wrong incentives.

The judge pointed out that this type of fee arrangement does not align the interests of the lawyers with the interests of the class members, encouraging only minimal commitment and suboptimal settlements. Legal fee arrangements worthy of approval by the courts are those that give class counsel incentive to drive for the highest possible recovery for the class. For example, a legal fee based on a percentage of the amount of the recovery.

By the way, the judge approved not the six figure amount requested by the law firm as fees, but the amount of $30,000. Not exactly in proportion to an $8,000 settlement for the class, but the law firm did do work.

This is the kind of legal fee claim which gives all lawyers a bad nameThere are bad apples in every barrel. The challenge for consumers is to find lawyers who will represent them to the best of legal ability and in the way that the merits of the claim deserve.

Every lawyer and client relationship is built on trust, although not all lawyers deliver. The challenge for consumers is to find the lawyers they can trust. If a lawyer is willing to publicize and criticize “deplorable” legal fee arrangements – as I am doing now – then that might be a good starting point for finding the lawyer who is right for the case, whether the case is a class action or a medical malpractice case.