This week I received another notice of a class action suit that ostensibly I am a part of.  Like all of the rest I have seen, it is written in generally incomprehensible language and places demands on those participating in the class to prove they belong.  This particular one involves Lehman Brothers and includes two parts – one for those that purchased Lehman securities and notes ($90,000,000) and the other for underwriters ($426,218,000).  The period covered is from June 12, 2007 and September 15, 2008 and off course they demand a withering level of detail to support any claim.  As luck would have it, since that time frame I have switched financial advisors and no longer have on-line access to the account where these securities were held.  Having said that, they obviously have solid evidence that I did own covered securities in that account as the information in the address label is the exactly the same as the account title and contains more information than just my name and address. Given that, one wonders why I have to provide the transaction detail as they probably know more than I do.  It would seem that agreeing to the terms of the settlement would be enough.  However, when one understands that any unclaimed amounts goes back into the pool and is divided among those that do file claims and guess which group is most likely to have complete access to level of detail required? Probably not us smaller players.

A few years ago there was a class action suit against State Farm over life insurance policies.  In that action the law firms received something like $5,000,000 and the members of the class received the right to buy more insurance.  No kidding.  There is a continuing parade of actions like this and in most cases the only winners are the law firms.

Now let’s talk about the attorney’s fees in the Lehman case.  As proposed the attorneys will receive something over $90,000,000 in fees plus $2,500,000 in expenses.  Even is the average hourly billing rate for those on the project is $250, which is probably high, these fees would equate to over 361,000 billable hours! By the way,that is 174 man years.  Now we begin to see the attraction of class action suits for law firms.

Here is the text of a letter I wrote some time ago to the Court handling a class action law suit; On Friday, August 29, 2008 I received an e-mail titled NOTICE OF CLASS ACTION CONCERNING NORTON SUBSCRIPTIONS.  As I have reviewed the document a number of both questions and concerns occurred to me.  First, I am always amazed that in any other legal proceeding, the client is required to sign a document selecting the attorney that represents them.  In this action I neither signed any such document nor in any way requested that the listed attorneys represent me.  Now I understand that obtaining letters of representation from all members of a class would be burdensome but many things in the civil legal process are deemed necessary even though they are burdensome.  Second, in any other proceeding, the attorney is required to state how they will be compensated – hourly, contingent fee or some combination thereof.  In this proceeding there is the following statement regarding attorney compensation; If plaintiffs prevail in this lawsuit, attorneys’ fees and costs will be deducted from the recovery on behalf of the class or will be paid by Symantec. In either case, the court must approve the amount paid to the attorneys. You are not personally responsible for paying any of the attorneys representing the class.  Nowhere in that statement is there any indication as to what type of compensation the attorneys will be requesting.  Also, while members of the class will not be responsible for paying the attorneys directly, the amount that might be received will certainly be impacted negatively by the attorney’s fees.

Class action law suits like this rarely generate any substantive benefit to the members of the class.  I remember one from a few years ago involving State Farm Life Insurance where the members of the class received the option to purchase more insurance and the attorneys walked away with over $5 million.

Here is the text of the Judge’s response to my letter; I have received and reviewed your letter of September 2, 2008 and appreciate your comments regarding class actions. Your comments mirror remarks I often hear or read about class action suits. You seem to believe that class actions are very beneficial to the attorneys who are successful, but not to members of the class. Quite frankly, this opinion is shared by others.

As a judge who potentially could hear these cases, I can make no comment on this issue, but understand your feelings.

Given the amount of money the trial lawyers contribute to legislative candidates it is probably unlikely that we will see substantive change any time soon but maybe, just maybe, if we talk about it enough someone will notice.