In 2021, cybercriminals breached T-Mobile’s computer systems and stole data on 76.6 million customers, which was then sold. T-Mobile agreed to a $350 million settlement with the customers who filed lawsuits against them. The lawyers representing these customers initially requested $78.75 million in fees, which was contested. However, a US appeals court has now overturned the decision, deeming the lawyers’ fees to be excessive. The case was brought to the 8th U.S. Circuit Court of Appeals after class members objected to the high fees.
The new ruling stated that shortly after class counsel filed a case on behalf of customers from across the US, a settlement discussion began. Within a month of filing the complaint, a settlement was reached. Individual customers were determined to be eligible for payments of up to $25,000 for out-of-pocket losses resulting from the breach. Customers who did not provide proof of loss were entitled to either $25 or $100 if they resided in California. Additionally, T-Mobile offered complimentary identity defense and monitoring services for two years. Finally, T-Mobile announced it would allocate an extra $150 million toward enhancing security measures.
Class counsel anticipated receiving a fee award of 22.5 percent of the settlement fund, equating to $78.75 million.
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Those who disagreed with the fee award argued that the settlement created what they referred to as a “megafund,” defined as a settlement exceeding $100 million.
It was argued that in megafund settlements, the high recoveries are often attributed to the size of the class rather than the efforts of the council. The argument suggests that when funds reach significant amounts, even standard percentages lead to fees that are excessively large and provide a windfall to the class counsel.
In short, it was implied that attorneys were receiving a large sum of money with minimal effort.
The class counsel responded by pointing out that although 22.5 percent may seem like a large amount when taking into account T-Mobile’s commitment to spend an extra $150 million on security measures, they are essentially requesting only 15.75 percent of the $500 million fund.
The district court stated that the class counsel was highly skilled, able to quickly secure relief for the class members, and requested fees comparable to those received by other counsel in similar cases.
The lawyers dedicated over eight thousand hours to the case and anticipated spending an additional three thousand hours.
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The appeals court has determined that the awarded fee was unreasonable and pointed out that the initial decision took into account the estimated future work hours. Despite the fact that the class counsel only worked on the case for a few months, they did not need to dedicate the same amount of time and effort to receive the same return as the court granted.
Putting things into perspective, if the fee is approved, attorneys could potentially earn between $7,000 and $9,500 per hour, an amount that no class member would be willing to pay for legal assistance. Therefore, even if only half of the requested fee is granted, which equates to $3,500 to $4,750 per hour, it should not be viewed as excessive.
This is not meant to imply that the appeals court believes the class counsel did not do a good job, as they have been praised for effectively representing the class.
The case will be transferred to a different court for additional proceedings.
It remains to be seen if this ruling will affect the outcome of the next class action lawsuit against T-Mobile.
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