Bias Lawsuits a Bonanza for Attorneys
New York attorney Daniel Berger hit a Texas-sized money gusher recently, and the windfall has caused him to consider a career shift.
For more than a decade, Berger earned his living by suing companies on behalf of disgruntled shareholders. Then, in 1994, he was approached by a colleague to work on a race-discrimination lawsuit against Texaco Inc. Now Berger will earn a share of the nearly $29 million in lawyers’ fees requested recently as part of a December settlement--not bad for a case that lasted just two years.
“We’re getting hundreds of calls from workers across the country,” he said from his Manhattan office. “I’m going to keep a hand in securities suits, but we’re already considering which bias cases to bring next.”
Until recently, discrimination suits were considered a specialized legal niche, and attorneys who brought these cases typically viewed themselves as a new brand of civil rights crusader. Now, as more companies such as Texaco produce huge billable-hour bonanzas for lawyers, a crowd of attorneys is clamoring for a piece of the action, turning bias lawsuits into one of the legal industry’s hottest practice areas.
A growing number of plaintiffs’ lawyers are prowling for aggrieved employees to represent--membership in the Metropolitan Washington Employment Lawyers Organization, for example, has more than doubled to 209 in the last five years. Meanwhile, the business of defending companies against accusations of discrimination--and advising executives on how to avoid suits--is brisk.
And some lawyers who once were on corporate payrolls are switching allegiances, deciding that they would rather accuse companies of discrimination than defend them against such allegations. “I find it a lot more fun,” said James Finberg, a California attorney who leaped to the plaintiff side shortly after defending State Farm Insurance Co. in a huge bias suit in 1992.
It also is, very often, more profitable. Because of a 1991 change to the Civil Rights Act, lawyers who prevail in employment bias cases get a rare deal: They are able to charge the companies they sue double the usual hourly rates--and sometimes more--for time spent on a case. Because these cases can drag on for years and are much more likely to be settled than decided at trial, lawyers’ fees in class-action suits often are enormous and invariably leave attorneys with the largest chunk of the money.
When State Farm settled a class-action sex-discrimination case in 1992, for example, lawyers at the Oakland firm of Sapperstein, Goldstein, Demchak & Baller walked away with $65 million of the $250-million award.
Though the State Farm case was larger than most, in recent years there have been hefty settlements for employees against restaurant chains Shoney’s Inc. ($132.5 million) and Denny’s ($54 million), and against the Lucky Stores supermarket chain ($107 million). Just last month, the Florida grocery chain Publix Super Markets Inc. agreed to pay $81.5 million to settle a class-action sex discrimination case.
Figures like those, lawyers and legal experts said, are among the reasons that in the last five years the number of class-action race- and sex-discrimination lawsuits has more than doubled, to 68 in 1996 from 30 in 1992, according to the Equal Employment Opportunity Commission. And more of these cases are winding their way through the courts, including discrimination suits against Motel 6 L.P., Dun & Bradstreet Corp. and Home Depot Inc. All of these companies have denied allegations of bias and said they will fight the suits. A judge has certified class status in the Home Depot case.
“There’s a lot of competition in this field these days,” said Barry Goldstein of Oakland’s Sapperstein firm, which has won more than $600 million in damages and fees in bias cases since 1991.
But some law professors contend that the rise in such cases could have the unintended effect of reducing the willingness of some companies to hire women and minorities.
That’s because nearly all of the litigation in this area centers on whether employees were passed over for promotions or gratuitously fired. So simply by not hiring minorities and women, executives can significantly reduce their odds of getting sued.
“It’s highly unlikely that someone who doesn’t get hired by a company is going to sue,” said Eugene Volokh, a professor at UCLA Law School. “They’re too busy looking for a job, and it’s very hard for lawyers to prove that a company discriminated against a person because they didn’t get a job.”
Some business leaders regard the outburst of discrimination cases as opportunism run amok. Though some companies have treated minorities unfairly, usually the discrimination is limited to a small group, they argue, and rounding up hundreds of employees to sue is simply a way for lawyers to fatten their wallets.
“A lot of lawyers have had their appetites whetted by these huge verdicts and regard this as an area they can branch into,” said Stephen Bokat, general counsel at the U.S. Chamber of Commerce.
The bias-litigation boom is in large measure traceable to key changes in the Civil Rights Act of 1991. These amendments made employment litigation highly lucrative by allowing plaintiffs in class-action cases to sue for as much as $300,000 in damages for pain and suffering, rather than simply recovering their pay.
Lawyers bringing these cases also were given the chance to earn a multiple of their standard hourly rates if they win, reflecting the risks of working on cases that pay nothing if lost. And the law made it easier for workers to prevail by giving them the right to have their cases heard by juries, rather than by judges who had, in many instances, become increasingly hostile to employee discrimination lawsuits.
These rules vastly increased the number of discrimination cases that could be won or settled favorably out of court. But according to plaintiffs’ attorneys, proving workplace discrimination is extremely complicated and requires a large investment of both time and money.
“You have to spend a lot of dollars on experts and statistical analysis, and very high legal standards have to be met,” said Michael Hausfeld, a Washington attorney who worked on the Texaco case. “The cases can take years, and if you lose, you get nothing. The defense attorneys get paid regardless of the outcome.”
Nonetheless, many lawyers are proving how profitable this line of work can be, and none more so than Oakland’s Sapperstein firm.
“Companies don’t like to be branded as being discriminators,” said Goldstein, who works for the firm. “They fight very hard till you prove that you can prove the case, and that you have the commitment to win the case.”
