Part 1 – The Whys and the Hows
The goals of a mass tort practice in selecting and litigating specific multidistrict litigation are to achieve a successful outcome for clients, optimize the settlement payouts those clients receive—and maximize your firm’s profit. Remember, as MTI often says, “Think business, not law.”
However, mass tort attorneys and paraprofessionals must understand that while that sounds simple enough, it is anything but in reality. The structural and procedural complexities of these very large, aggregated, and centralized MDLs necessitate a couple of unavoidables:
- There will always be a top-level of leadership among the plaintiff’s attorneys
- Plenty of variables will be out of your control as a result
As part of our mission to educate and lift up mass tort professionals, we want to focus on one of these mass tort variables: common benefit fees.
What is a common benefit fee?
A common benefit fee must be deducted from each and every settlement. Its existence embodies this principle: Those who bear the most burden and responsibility for managing and executing something as large as an MDL should be fairly compensated for accepting that burden on behalf of other involved parties.
Thus, this fee is usually a low-to-mid-single-digit percentage of a settlement’s starting dollar figure that acknowledges and rewards the plaintiff’s attorneys in the leadership nexus of the MDL for their immersion in and influence on reaching a settlement with the defendant. This pool of attorneys may include lead counsel and co-counsel as well as members of important attorney committees, such as the Plaintiff’s Steering Committee.
Where does the “common benefit” language come from?
The fee takes its name from a “common benefit doctrine” long-entrenched within English common law. One needs to go all the way back to an 1881 U.S. Supreme Court decision to find a starting point for its presence within America.
The Court, in that age-old but still good decision, noted that the doctrine extends to a number of scenarios, such as the oversight of funds held in a trust. Application of the doctrine, the Court ruled, relates to:
- Establishing that a group of parties possess a “common interest” in an undertaking
- Compensating the parties for their work equitably
Technically, who pays the common benefit fee?
Your firm, and not your client, is most often responsible for paying the entire common benefit fee. That distinction might not actually matter much to clients focused on the number of zeroes on their check, but it is an important one for you to make in your planning and record-keeping.
Think of the common benefit fee as a “tax” on your firm for ultimately enjoying the benefits of a windfall borne from the big-picture decision-making and skill of your peers at the top of the hierarchy. Even U.S. District Court judges sometimes use “tax” to describe the effect of this fee.
Another, blunter concept from economics often associated with these common benefit fees is the notion of a “free-rider” problem. This concept stems from a view that some attorneys use mass tort selection as a way of profiting nakedly without dripping a whole lot, or none, of their own sweat, especially as the consolidation of cases into MDLs continues to rise sharply.
How is the common benefit fee administered and determined by courts?
As a District Court begins to anticipate settlements, whether for individual cases on the MDL as a whole, it will generally establish a common benefit fund. Occasionally, this is done at the beginning of the MDL.
It is important to note here that attorneys do not automatically receive an award of fees from this fund. They apply for this privilege and produce proof of their “common benefit work.”
That said, courts usually determine the common benefit fee by using a lodestar method where fees are paid proportionately, by assigning a flat percentage that applies to all attorneys in the MDL, or a mixture of both (here is a good explainer article). The goal is to estimate the value of the “common benefit work” performed in the MDL as a whole and then reflect that value numerically.
How do law firms actually pay common benefit fees?
More and more, the standard for the recovery of the fees is for courts to order that the determined percentage be “held back” by the defendant prior to the remittance of settlement funds. Those withheld monies are then directed to the common benefit fund.
Are common benefit fees reasonable?
This is actually a hot question in modern mass tort law.
The answer to what is “reasonable” depends on the circumstances and scope of the MDL itself. Regardless, the common benefit feel can often feel arbitrary and subjective, and perhaps unfair.
That feeling has grown significantly recently as the percentages requested by lead counsel, and in some cases approved by courts, creep higher, to the point where even some judges cannot restrain contempt.
U.S. District Court Judge Vince Chhabria, who is presiding over In Re: Roundup Products Liability Litigation in the Northern District of California, made waves in June 2021 when he castigated lead plaintiff’s counsel for its audaciousness, even as he approved their request for an 8.25% hold-back fee on a narrower basis than sought.
Judge Chhabria, in his decision, wrote, “The request assumes … that even if the attorneys who did common benefit work have already been compensated obscenely compared to the free riders—they should automatically be entitled to more because those who benefitted from their work should be taxed no matter what. That is neither necessary nor desirable.”
Even a “free rider” needs to put in some work on behalf of its clients, something which merits more respect, Judge Chhabria said in essence here.
What really raised Chhabria’s ire, though, was counsel’s argument that potential plaintiffs who had yet to file their claims, plaintiffs seeking compensation in state court, and other tangential subsets of plaintiffs should be included in the population subject to the common benefit fee. That prompted him to declare that the system for determining attorney compensation in mass tort claims itself “seems to have gotten totally out of control,” especially since he saw this “as a request that has some support from past MDL practice.”
A Final Thought
No matter the principle behind it, how they’re determined, or whether you see them as fair or not, common benefit fees are a fact of MDL life. They are not going away, in spite of whatever in-fighting, aggravation, and policy determinations are in play.
Mass tort professionals need to ensure that the presence of common benefit fees is accounted for in their budgeting and in the way they assign return on investment to individual cases. And no matter what, they must continue to focus most of all on the needs of individual clients and recovery for their damages.
Your clients are the lifeblood of what you do, even if the powers that be assign no “common benefit” to your work.
In Part 2 of this series, MTI will discuss how to factor common benefit fees into the final settlement payments to clients, and how to talk to those clients about the fees and set their expectations properly.
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About the Author
Christopher O’Connor, Esq., is a licensed attorney (N.Y.) and a longtime journalist. His areas of focus include mass tort practice, employment law, enterprise technology, mental and spiritual health, and e-discovery. O’Connor lives just outside of Houston, TX, and enjoys hiking, podcasting, and cooking for his wife.
The Mass Tort Institute is a consortium of industry leaders dedicated to providing education, training, and networking opportunities for those advocating on behalf of mass tort victims.