Working Hard or Making Work? Plaintiffs’ Attorney Fees in Securities Fraud Class Actions

Abstract

In this article, we study attorney fees awarded in the largest securities class actions: “mega‐settlements.” Consistent with prior work, we find larger fee awards but lower percentages in these cases. We also find that courts are more likely to reject or modify fee requests made in connection with the largest settlements. We conjecture that this scrutiny provides an incentive for law firms to bill more hours, not to advance the case, but to help justify large fee awards—“make work.” The results of our empirical tests are consistent with plaintiffs’ attorneys investing more time in litigation against larger companies, with the largest potential damages, particularly when there are multiple lead counsel firms. We find a similar pattern with relative efficiency, with more hours per docket entry for the largest‐stake cases with multiple lead counsel firms. Overall, our results suggest that plaintiffs’ attorneys are receiving windfall fee awards in at least some mega‐settlement cases at shareholders’ expense.