David Freddoso: When legal sharks attack ... each other 

"Do I understand that the whole estate is found to have been absorbed in costs?"

"Hem! I believe so."

This is how Charles Dickens depicts the end of the fictional case Jarndyce and Jarndyce in his 1853 novel "Bleak House."

Barristers and chancery court officers laugh out loud as they carry away the large volume papers related to the lawsuit, whose costs and fees ultimately consumed the entire Jarndyce estate. Two of the book's main characters, wrapped up in the interminable proceedings for the first 64 chapters, inherit nothing at all because the case has finally "lapsed and melted away."

Even in Dickens' time, this was an exaggeration of the English legal system's shortcomings. But it was no exaggeration then, nor is it now, to say that lawyers' fees for many cases reach the level of obscenity, coming often at the expense of those who should have expected to get something out of the litigation.

This is particularly true in class-action lawsuits where attorneys become wealthy at the expense of the allegedly harmed plaintiffs. Years after the Ford Explorer rollover controversy, trial lawyers in California pounced on the auto company for making safety claims they believed to be unwarranted.

In 2008, they settled a class-action lawsuit against Ford on behalf of 1 million Explorer owners, but the lawyers were the only ones to benefit. In compensation for Ford's alleged wrong of advertising the vehicle's safety, the motorists received coupons worth $500 off the purchase of a new Explorer, or $300 off the purchase of any other Ford.

A year later, only 75 Explorer owners had redeemed their coupons. The lawyers in the case walked away with $16 million in fees and an additional $6 million in expenses. In essence, Ford settled its case by buying off their attorneys' adversaries.

The brokerage firm A.G. Edwards, sued for taking "secret kickbacks" in exchange for putting clients into certain mutual funds, finally settled its class-action case in June. Hoodwinked customers get about $20 each under the settlement. The entrepreneurial lawyers who brought the case will walk away with about $20 million.

But every now and then, you run into a case in which the sharks begin attacking one another. The latest news in exorbitant attorneys' fees comes in a lawsuit filed this month, by attorney Joseph Gielata (representing his own father) against his former law firm, Grant and Eisenhofer. And the stakes in this case are much higher than in your average class action.

In 2007, Tyco International settled a massive accounting fraud case with its investors, prominent among whom was the Teachers' Retirement System of Louisiana. The total settlement amount in the case was $3.2 billion. The lawyers, from Grant and Eisenhofer and two other firms, walked away with $464 million.

But this month's lawsuit, filed in Delaware's federal district court, alleges that Grant and Eisenhofer had made a secret agreement with TRSL to seek no more than $210 million in attorneys' fees, and "to oppose any higher fee request."

In fact, the lawsuit says, the firm originally asked for $560 million, then scaled back its demands to $464 million. By doing so, the law firm allegedly "stole hundreds of millions of dollars from their clients in 2007. The new lawsuit seeks "not less than $215 million" in damages.

If Gielata is successful, how much of that amount do you suppose will go toward attorneys' fees?

David Freddoso is The Examiner's online opinion editor. He can be reached at dfreddoso@dcexaminer.com.

About The Author

David Freddoso

David Freddoso came to the Washington Examiner in June 2009, after serving for nearly two years as a Capitol Hill-based staff reporter for National Review Online. Before writing his New York Times bestselling book, The Case Against Barack Obama, he spent three years assisting Robert Novak, the legendary Washington... more
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