On The Case

Is $97.5 million fee award in Facebook privacy case a ‘punishment’?

(Reuters) - Do not shed a single tear for the plaintiffs' lawyers who won final approval on Friday for the biggest privacy class action settlement in U.S. history.

The deal calls for Facebook to pay $650 million for allegedly violating the Illinois Biometric Information Privacy Act by employing facial recognition technology to allow users to “tag” photos of their friends.

U.S. District Judge James Donato of San Francisco awarded class counsel from law firms Robbins Geller Rudman & Dowd; Edelson; and Labaton Sucharow $97.5 million in fees, or 15% of the class recovery. That’s a lavish payday by any reckoning.

The firms had asked for a bit more – $110 million – in their motion for final approval of the settlement. But Paul Geller of Robbins Geller told me in an email that he’s just fine with what he and his colleagues got.

“It wasn’t really a major haircut, it was more like a trim,” Geller said by email. “I’m pleased, I’m not going to complain, and we move on.”

There is nevertheless a good argument to be made that the Facebook fee award – and, especially, Donato’s justification for trimming class counsel’s request – sends a perverse message to the plaintiffs’ bar.

Class counsel from the three firms worked about 30,100 hours on this case over six years. Their lodestar billings totaled about $20.7 million. Donato said he could not stomach a fee award that amounted to $3,654 per hour for every hour that class counsel put into the case. And though the judge said that class counsel’s reported hours and billing rates were reasonable, he could not countenance an award that totaled more than five times class counsel’s lodestar billings. “That is too high,” Donato said.

Is it? Or is the judge essentially penalizing class counsel for litigating a novel and complex case with efficiency?

Donato himself pushed plaintiffs’ lawyers to streamline leadership – only three firms submitted bills – and not to pad their hours. Geller told me that class counsel deliberately sought to maximize their effectiveness, not their billable hours. At the Jan. 18 hearing on final approval, even Facebook lawyer Michael Rhodes of Cooley highlighted his opponents’ efficiency after a lawyer for objectors urged the judge to limit the fee award to $50 million based on class counsel’s lodestar billings.

“Far be it from me to say what fee counsel should get,” Rhodes said. “But, you know, lawyers shouldn’t be punished when they’re very, very skilled because they don’t put a lot of - they don’t put excess time in it.”

Facebook counsel Rhodes declined to comment on the award. Objectors’ counsel John Pentz, who had pushed for a $50 million award, said by email that the judge should have applied a multiplier of no more than three times class counsel’s lodestar billings and that he plans to discuss an appeal of Donato’s decision with his clients.

One of the experts who backed class counsel’s fee request, Harvard Law School professor William Rubenstein, said in his declaration that what made this case exceptional was both the outcome class counsel obtained – the biggest-ever settlement in a privacy class action and by far the biggest recovery per class member in a privacy case – and the “remarkably low” number of hours it took plaintiffs’ lawyers to get those results.

Rubenstein’s declaration was informed by two sets of data: a set of more than 1,000 class action settlements approved between 2007 and 2011; and a separate compilation of information about lodestar billings from 19 class action settlements approved in the Northern District of California in 2019.

Rubenstein evaluated the Facebook lawyers’ billing rate based on the latter, finding that class counsel charged a blended rate that was about 13% above the mean from the 2019 cases. But that could be explained, he concluded, by the higher experience level of the lawyers in the Facebook class action, who, on average, had nearly five years’ more experience than lawyers in the 2019 data set.

To determine whether the hours billed by Facebook class counsel were reasonable, Rubenstein looked at the hours reported by plaintiffs’ lawyers in 11 cases with settlements of $400 million to $800 million in his 2007-2011 class action database. (The separate 2019 data set did not include any comparably large settlements.) Facebook class counsel billed fewer hours than plaintiffs’ lawyers in any of the other mega-settlements, Rubenstein said. The median in those cases was 70,600 hours – more than twice the 30,100 hours billed by Facebook plaintiffs lawyers.

Rubenstein said in the declaration that the multiplier requested by Facebook class counsel appeared high – but argued that it was the inevitable consequence of class counsel’s “admirable efficiency” in achieving a landmark settlement.

“To penalize them for that efficiency by lowering the percentage award will simply incentivize class counsel in future cases to churn unnecessary work, thereby raising their hours and lodestar, and lowering the proposed multiplier,” Rubenstein told Donato in the declaration. “That benefits no one, particularly not the underlying class members.” (Class counsel’s other expert, Vanderbilt law professor Brian Fitzpatrick, argued in his declaration that clients in the real world don’t rely at all on lodestar cross-checks, which incentivize lawyers to work more hours rather than focusing on their clients’ recovery.)

Rubenstein made an appearance at the Zoom hearing on final approval of the settlement to offer an efficiency pitch to Donato. “This is really an exceptional case, in my experience,” he said. “And I would not testify to a multiplier at this height if I did not think it was.”

The judge said in Friday’s opinion that he based the fee award on a percentage of the class recovery. Class counsel had asked for 16.9%, which they said was well within the 25% benchmark in the 9th U.S. Circuit. Donato said 15% was “more reasonable.”

I wouldn’t have blinked if Donato’s opinion had ended with his assessment that class counsel deserved a 15% slice of the class recovery, since that is a perfectly reasonable percentage-based fee award. Indeed, the judge noted that plaintiffs’ expert Rubenstein cited a study reporting a 12% mean award for class counsel in settlements over $500 million.

But rejecting a 5.3 multiplier out of hand just doesn’t sit right. I want to be clear: Plaintiffs’ lawyers in the Facebook case don’t need anyone’s sympathy because they got $12.5 million less than they asked for. They know that.

On the other hand, class counsel should be rewarded for doing their jobs skillfully and efficiently. If you’ve obtained a great recovery for the class, your relatively low lodestar billings should not be a scythe to slash your fees.

The opinions expressed here are those of the author. Reuters News, under the Trust Principles, is committed to integrity, independence and freedom from bias.