Sep 222011
 

Thomson Reuters recently reported that a current bill before Governor Andrew Cuomo, if signed, would allow New York attorneys who successfully challenge settlements on behalf of individual plaintiffs in class action lawsuits to be awarded legal fees for their services. The bill would permit courts to award fees to attorneys whose work benefits an entire class. The bill, which passed both houses of the legislature, would reverse a 1975 law. Presently, attorney’s fees may be awarded only for “representatives of a class.” This means that lawyers who represent class members who disagree with the settlement agreement cannot be awarded attorney’s fees. 

If enacted, the new law would provide an incentive for class members to raise objections to unfair provisions of a settlement agreement. Also, it would make it more difficult for “class-action defendants to craft ‘coupon’ settlements, in which they provide plaintiffs with a token award, such as a gift coupon, without addressing their grievances.”

The bill was prompted by the 2010 Court of Appeals decision in Flemming v. Barnwell Nursing Home.  In that class action, 242 plaintiffs alleged wrongful death and medical malpractice against a nursing home. The defendant nursing home settled for $950,000. Of that amount, $448,000 was set aside for attorney’s fees.  One class member’s executor objected to the amount of fees allocated to the attorneys. As a result, an appellate court reduced the fee award to $425,000. Thereafter, the executor applied for an award of attorney’s fees. However, the court, citing the 1975 law, rejected the application. In his dissent, Judge Robert Smith described the ruling as “bad policy,” stating that “no one disputes the need to control class counsel’s fees, and nothing furnishes so effective a check on those fees as an objecting lawyer.”

Some have expressed concern that the new law would flood the courts with meritless objections.    Terry Jesse, the executive director of the Chicago-based National Association of Legal Fee Analysis, stated that “there could be more objectors coming out of the woodwork and trying to muck up a settlement process.” However, because judges would maintain discretion in awarding fees, “it could keep unreasonable objections to settlements in check.”

A spokesman for the Governor’s office would not say when a decision on the bill should be expected.