No Single Lawyer Takes Home Billions From a $4.85 Billion Settlement

When you hear about a $4.85 billion settlement, it is natural to wonder if the lead lawyer walked away with more than a billion dollars. Christopher Seeger, the plaintiffs lawyer who co-led the Vioxx litigation, says he did not. The fund for the lawyers who ran that whole case was 6% of the total, and the bigger the case, the smaller that percentage tends to be.

To understand why, start with the clients. In a mass case involving thousands of injured people, each person hires his or her own law firm and signs an individual agreement, usually promising that firm 25% to 40% of any recovery. Many of those firms find clients through advertising, then wait while a small group of appointed leaders does the shared work of litigating the case, trying cases, and negotiating a settlement.

That shared work is paid through what lawyers call a common benefit fund, and it works like a tax on lawyers, not clients. Suppose a client recovers $100 and the client's own firm is owed $30 under its agreement. If the holdback for the common fund is 10%, that $10 comes out of the firm's $30, leaving that firm with $20. The client still keeps $70, because ethics rules mean a client cannot pay more than the signed agreement allows.

A judge decides whether the leaders earned the money, and how much each firm should get. According to Seeger, judges must do more than sign off, issuing findings firm by firm that each fee has a reasonable basis and reflects work actually done.

That is why fee battles are often lawyer against lawyer. Seeger calls the firms that waited on the sidelines freeloaders, and says courts have held for 40 years that it would be unjust to let them use a settlement built by others without paying the builders.