Yahoo settles e-mail privacy class-action: $4M for lawyers, $0 for users

That's a good question. My example left out a part, so that I could make my point simply. That part I left out is the expense of going to trial.

You see, the lawyer's payment for him to perform services for you is just one part of the cost equation. For example, just letting the court know "hi, court? Yes, it's me. Well there's this guy, and I'm pretty confident he did a thing he wasn't supposed to do. So I'm officially going to start a lawsuit to sue him now, ok?"

Well, instead of a phone call to the court, you file paperwork. The court most often charges money for filing that paperwork. So who pays that bill to the court? It's like a chef agreeing to perform the service of making you an awesome sandwich for $5, but he's not going to buy the bread, meat, or cheese for you; you have to pay for the ingredients yourself. Same thing with a lawsuit. The lawyer will perform legal services, but the lawyer isn't going to pay for the cost of "legal ingredients" to make the lawsuit happen.

So back to the example where your ISP wrongfully charges you an extra dollar each month. Let's say it's happened for 3 months before you reach out to an attorney, then it's another 3 months (so 6 months total) before the lawyer gathers enough details to realize the ISP is potentially taking an extra dollar from a lot of people. The lawyer sends the ISP a letter saying they should stop doing that, and that the lawyer is going to sue them.

So the ISP stops taking that extra dollar at this point. Well, one dollar per person, per month, times 1 million people, times 6 months = $6 million.

The lawyer says he'll take the case for 30% of what they collect. So $2 million is going to the lawyer, and $4 million will be spread across the 1 million people, right? Well, not quite. The legal costs will come out of that $4 million.

Gotta mail letters to 1 million people. How much does that cost? 1 million pieces of paper... Drafting, printing, and mailing costs a lot of money. What about the responses to those letters? In order to claim 1 million people were affected, someone has to look through the records to see. How much time will that take?

Lawyers hire other companies to do this sort of legwork because it's often overwhelming for any single law firm to do it themselves. Those companies don't work for free, so they gotta get paid. Where does that money come from? The lawyer may front the money themselves, out of their own pocket, as a sort of loan to make sure the case can go forward. The lawyer will just be reimbursed for those extra expenses from the amount collected.

So after many years, the ISP finally pays up $6 million. $2 million goes to the lawyer, and $4 million remains. Well, there could easily be $1 million in expenses in a case like this, so that gets deducted from the $4 million. Now there's $3 million remaining to be distributed across 1 million people (which is $3 per person, even though each person had $6 wrongfully taken from them).

Also, understand that the $2 million to the lawyer isn't exactly a lottery payout for him. First, these cases often go on for years. So let's say this case took 4 years to settle. That's $2 million over 4 years = $500,000 per year.

Then, that money doesn't go directly into the lawyer's pocket; the money is paid to the "law firm," which is a business that likely has employees. So now you, as a lawyer, have an office and employees. The going rate for a quality paralegal could easily fetch $50-60k per year, and you may have more than one paralegal for a more complex case.

Factor in office overhead (rent, utilities, office supplies, access to legal research databases which are crazy expensive) and employees and splitting the profits with the other lawyers in the law firm, that $2 million payout can easily be less than $90k for a lawyer. And while that sounds like a lot of money for most people, most people don't have greater than $100,000 in student loan debt to pay off.

Hell, I know a lawyer who has a roommate in an apartment, drives a 13-year-old car, and has to make at least $90k per year to barely cover both his minimum student loan payments and basic living expenses (and he'll be stuck living on a college student's budget until he's 40 years old.).

So all I'm saying is that the payout for these sort of cases is complicated, and not all lawyers are the wealthy Denny Crane and Alan Shore you see on TV.

/r/offbeat Thread Parent Link - arstechnica.com