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Plaintiffs' lawyers seek $688 million from settlements that could top $7.2 billion, but the propriety of the amount is disputed.
Stephen Taub, CFO.com | US
March 3, 2008
Here is another reminder why people go to law school.
San Diego-based law firm Coughlin Stoia Geller Rudman & Robbins LLP has requested $688 million in attorneys' fees for representing Enron Corp. shareholders and investors, according to the Associated Press. The plaintiffs stand to recover more than $7.2 billion as part of the lawsuit they filed after the company's collapse. If approved, the attorneys' fees would be the largest in a securities fraud case, the AP noted.
Keep in mind that this is one slice of the $40 billion in lawsuits that have alleged that financial institutions that worked with Enron participated in the accounting fraud that led to the company's collapse, according to the wire service.
U.S. District Judge Melinda Harmon, however, seems to need more time to decide whether to approve the sums agreed to in the Coughlin Stoia case. After a 4-1/2 hour hearing, she said she would make decisions on the plaintiffs' award, as well as the attorneys fees, as soon as possible, according to the report.
For his part, Patrick Coughlin, who represents the regents of the University of California, the lead plaintiffs, called the $7.2 billion settlement "fair and reasonable." He added, "The plan is doing whatever it can to help employees get whatever they can," according to the AP.
Coughlin also said that the $688 million in attorneys' fees reflects the agreement that his law firm made with the regents when it first took the case six years ago, calling for a 9.5 percent share of any settlement.
He stressed that the percentage was much lower than the standard 33 percent most lawyers get in similar cases. He also justified the fee by citing the complexity of the lawsuit and the risk involved in taking on a case that offered no guarantee of any settlements.
"This is the largest class (action) settlement ever," Coughlin stated. "There is no case comparable to this result."
The AP, however, pointed out that other attorneys had criticized the arrangement. It cited Avi Garbow, an attorney for former Enron workers who lost money through the company's savings plan and employee stock ownership plan. Garbow said the distribution plan was unfair because some investors and shareholders will be compensated more than they should be at the expense of others.
Lawrence Schonbrun, who represents another investor, told the AP that the attorney fees were exorbitant and "an affront to every working person in this country."
The $7.2 billion mostly resulted from settlements made with financial institutions such as Bank of America, JPMorgan Chase & Co. and Citigroup.
Other prominent financial institutions remain as defendants, including Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC, as well as several former Enron officers, including former chief executive Jeffrey Skilling.
However, the lawsuit has been on hold since an appeals court last year ruled shareholders and investors could not sue as a class, according to the AP.