Understanding the Legal Fees and Costs in Class Action Lawsuits

Introduction

It is important for class action group members to understand the legal fees associated with pursing a class action lawsuit. This article will break down the costs and consider how legal fees are structured into the three main categories of ‘no win, no fee’ basis, Group Cost Orders (GCO) and litigation funding.

 

How Legal Fees Are Structured in Class Action Lawsuits

‘No Win, No Fee’

A class action that operates on a ‘no win, no fee’ basis means that the applicant will not be required to pay the associated legal and professional fees until the conclusion of the matter. In this instance, the applicant will only be required to make payment if the case is successful. However, on a ‘no win, no fee’ basis, the applicant will still often be required to pay any disbursements that are incurred including filing fees, court fees or miscellaneous search fees. Matters which operate with this fee structure are usually charged on an hourly rate basis.

Group Cost Orders

GCOs require law firms to dictate a specific percentage for the split of recovery and legal fees. For instance, in a split of 80/20 the class members would receive 80% of the settlement and the other 20% would go towards the associated legal and court costs. This structure assists with increased certainty for clients as it specifies the exact percentage that they are required to pay for legal representation.

Litigation Funding

This involves funding from a third-party litigation funder who assists with paying the costs of legal fees arising from the class action. When this structure is utilised, the litigation funder and the law firm will re-acquire their costs through the settlement monies. As a result of the funding supplied by the third-party funder, they often obtain more from any settlement while the group members receive a lower payment in comparison to class actions that operate on a ‘no win, no fee’ basis or on a GCO.

 

Costs Associated with Class Action Litigation

Costs associated with class action litigation range from counsel costs, court fees, expert witness costs, administrative fees and legal professional fees. It is difficult to identify an exact figure representing the cost of running a class action as it varies on the size of the class, whether settlement occurs and specific intricacies in the court proceedings.

 

How Legal Fees Are Divided in Class Action Settlements

Legal fees are divided differently depending on the fee structure selected for the class action. For instance, in a ‘no win, no fee’ structure the class members will likely pay a fee from the settlement monies covering the hourly work of the lawyers, whereas a GCO ensures a percentage divide between the professional fees and the amount received by the class members with respect to the settlement monies. Lastly, where there is a third-party funder, they will often receive more in settlement monies meaning that group members will receive slightly less.

 

Conclusion

If you have any further questions about fee structures for class action lawsuits, please reach out to our office and we can assist you with navigating the complexities of class actions.

 

*This article was prepared with the assistance of Grace Tully