Massive Wachovia “Pick-a-Payment” Settlement Exemplifies Modest Fee Awards

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The widely-covered $2 billion settlement in In re Wachovia Corp. “Pick-A-Payment” Mortgage Marketing and Sales Practices Litigation, No. M:09-MD-02015-JF, has recently been finalized following the resolution of three appeals; the Effective Date of Settlement is September 7, 2011.  Of note is the relatively modest $25 million in fees sought by and awarded to class counsel, to be divided among the seven firms appointed as such.  The reality of the fee award stands in marked contrast to public misperceptions concerning attorney fees with regard to class actions, exemplified by this comment, posted by “The Attorney” at

Let me explain how it really works. They plan to settle for 50 million and the lawyers are wanting 25 million. The lawyers will then sue the plaintiff for the 25 million. (They will not get it from the settlement nor from the people who are receiving the settlement.) There are 26 people [referring to the named plaintiffs] who will receive 125,000 each. This money is taken out of the settlement.  Leaving 46,750,000. . . . [T]here are 517,000 people who take part of this Class action lawsuit. So when you divide the money by 517,000 . . . each person will get 90.425 (90.43 if you round up).  


Apart from getting the settlement amount wrong (by $1.95 billion) this seemingly informed commentator massively overestimates a 50% fee request, and imagines a process whereby class counsel sues for fees.  In fact, the fees awarded in this case are just 1.25% of the $2 billion total settlement value.  Further, the attorney fees are not part of the $2 billion settlement fund, which is not denominated as a “common fund.”  Rather, the fees are to be paid separately, and thereby do not diminish the money going to class members.  Moreover, the fee award is to be divided among the seven firms appointed as class counsel, just as the $125,000 enhancement payment is to be divided among the 26 named plaintiffs.