§ 26.003.Attorney's Fees

The substance of the chapter, and both subsections address a documented complaint about class settlements.

Subsection (a) fixes the method. Where a fee award is available under applicable substantive law, the rules must provide that the trial court shall use the Lodestar method — hours reasonably worked multiplied by a reasonable hourly rate. The rules may give the court discretion to increase or decrease that figure by no more than four times, based on specified factors.

Lodestar rather than percentage-of-recovery is the choice being made. A percentage fee rises with the size of the settlement whether or not the work justified it; Lodestar begins with the work done. The four-times limit then caps how far the court may move from that anchor in either direction.

Subsection (b) is the coupon settlement provision, and it is the more consequential one. If any portion of the benefits recovered for the class are in the form of coupons or other noncash common benefits, the attorney's fees must be in cash and noncash amounts in the same proportion as the recovery for the class.

The abuse it addresses is specific. A settlement paying class members discount coupons of doubtful value, while paying counsel in cash, gives the lawyers a real recovery and the class a nominal one. This provision makes counsel share the form of what the class receives — a settlement that is half coupons produces a fee that is half coupons.

It works by aligning incentives rather than by prohibiting anything. Coupon settlements remain available; counsel take them on the same terms as the class.