Judge Asks Why So Many Law Firms Seek Fees in Suits

A federal judge in Manhattan is expressing surprise at the multitude of lawyers who are seeking a chunk of a $336 million settlement with Mastercard and Visa, as well as member banks such as JPMorgan Chase and Citibank. The settlement, reached in 2006, came in lawsuits alleging that the companies had overcharged cardholders on purchases made abroad and had hidden the added fees. The card issuers were alleged to have colluded to fix an added fee of between 1% and 3% on foreign purchases.

Based on the number of claims expected, the majority of class members will receive $25.

More than 30 law firms are asking for a total of about $86 million of the settlement, or just under 26%.

The lawyers say they deserve the amount because it is difficult to make a case based on allegations of collusion, and because their lawsuits did not piggyback on any regulatory action taken by the government.

By January, only 25 of the 21 million class members had objected to the fees the lawyers were requesting. At a court hearing yesterday prompted by those objections, a lawyer at the San Diego-based firm Coughlin Stoia Geller Rudman & Robbins, Bonny Sweeney, said the various plaintiffs' attorneys and paralegals had spent 77,000 hours on the case in all.

The federal judge who will decide how much the lawyers will receive did not seem concerned about the percentage of the take that the lawyers were seeking. Rather, the judge, William Pauley of U.S. District Court in Manhattan, seemed bothered by the number of law firms involved in the process and whether some law firms had already received payment for the work in a separate settlement.

"Can you explain to me why 31 law firms had to be involved with the plaintiffs?" Judge Pauley asked, adding that he "found a disconnect" between the number of the different groups of plaintiffs and the number of law firms. Ms. Sweeney explained that the "bulk of the work" — 84.7% — was done only by just six firms. Among those six firms are Ms. Sweeney's firm as well as the Philadelphia-based firms of Berger & Montague and Kohn Swift & Graf.

One sticking point yesterday involved a separate $32 million legal fee award that the card issuers had agreed to pay Coughlin Stoia and three other firms. The fee came in a similar lawsuit brought in California that was dismissed on appeal.

A lawyer who was objecting to the settlement, Irving Bizar, yesterday advised Judge Pauley to take those $32 million away from the law firms and add it to settlement pool.

Mr. Bizar objected not only to the legal fees but the settlement in general, saying that it did not "pass the smell test" and recovered only "a small fraction of the damages."

One lawyer who played a lead role in the cases, Merrill Davidoff of Berger & Montague said the $336 million represented between 9% and 42% of the fees that the card issuers had wrongfully charged.