Class Action Settlements, Last in a Series

Another notorious case involved claims that accused AT&T and Lucent of cheating customers by not informing them they were leasing old telephones. Consumers’ bills didn’t clearly explain that they were being charged for leasing a phone that they may have thrown away years ago. Some individuals unknowingly spent more than $1,300 leasing a phone that could be replaced new for $10.

The case was settled in 2002 for $350 million, of which $300 was to go to the plaintiffs, and $50 million in the form of prepaid phone cards to be donated to charities. The lawyers received $84.5 million in fees and expenses. About 92,000 class members ultimately collected a total of only $8.4 million. The rest of the settlement money was returned to AT&T and Lucent.

For the AT&T, Lucent case class counsel’s compensation was presented as being $84.5M as compared with $350M for plaintiffs (or 15%), when the actual result was $84.5M compared to $8.4M, a the ratio of more than 10 to 1 (or 1000%.)!