Introduction: An Unconventional Settlement-
In the realm of class action lawsuits, most settlements and legal fees follow a predictable path: a concrete dollar figure is agreed upon, and plaintiffs’ lawyers claim their share from this fixed amount. However, a recent case involving Clearview AI and the Chicago-based law firm Loevy & Loevy has introduced a novel approach, turning traditional settlement practices on their head.
The Deal: A Theoretical Future Payout-
In June, Loevy & Loevy reached a groundbreaking agreement with Clearview AI, a facial recognition company, to settle claims that Clearview violated the privacy rights of millions of Americans. Rather than a straightforward financial settlement, the deal involves a complex arrangement where the firm will receive 39.1% of a theoretical future settlement amount. This payout hinges on Clearview’s potential future value, such as if the company goes public through an IPO or is sold in a merger.
Estimating the Settlement: Big Numbers on the Horizon-
According to a fee petition filed on Friday, Loevy & Loevy estimated that if Clearview were to go public or be sold, the settlement fund could exceed $51 million. Based on this projection, the firm’s fee request would amount to approximately $19.9 million. Loevy & Loevy have described this settlement strategy as “trailblazing,” claiming that it is unparalleled in the realm of class action lawsuits under such challenging circumstances.
Court Approval and Pending Considerations
The agreement and fee request are currently under review by U.S. District Judge Sharon Johnson Coleman, who granted preliminary approval of the deal in June. The Loevy team, led by Jon Loevy, Michael Kanovitz, and Thomas Hanson, has yet to disclose the number of hours spent on the case or their usual billing rates. Clearview, which denies any wrongdoing, is represented by Chicago-based Lynch Thompson. Both Clearview and its attorneys have not responded to recent requests for comment.
Legal Precedents and Unusual Provisions-
Legal experts have noted that while equity stakes or stock in defendants have been part of other settlements, what sets this case apart is that the equity in question is not publicly traded. Adam Pritchard, a professor at the University of Michigan Law School, highlighted the uniqueness of this fee request given that the equity involved is still hypothetical.
The origins of this privacy case trace back to a January 2020 New York Times article that exposed the use of Clearview’s facial recognition technology by law enforcement and private entities. The lawsuit accused Clearview of breaching Illinois biometric privacy laws by scraping billions of facial images from the web and selling this data without consent.
Previous Settlements and Financial Strain-
In May 2022, Clearview reached a separate settlement with the American Civil Liberties Union (ACLU), agreeing to stop providing access to its facial image database to most private businesses and individuals, and to halt its database’s availability to Illinois government agencies for five years. This settlement significantly diminished Clearview’s financial assets, leaving the company with limited resources to address the claims from private plaintiffs. Consequently, Loevy & Loevy devised a creative settlement strategy to navigate these constraints.
Additional Provisions and Contingency Plans-
The proposed settlement includes other unconventional elements. Until September 2027, a court-appointed settlement master could mandate Clearview to make cash payments equal to 17% of its revenue since the settlement’s approval date. The master could also sell the settlement rights to a third party if it would enhance class recoveries.
Controversy and Objections-
The settlement has faced minimal formal opposition so far, with only one objection raised by Chicago resident Jessica Wang. Wang argued that the settlement might “trade the legal rights of class members for a nebulous promise of a small sum of money.” Wang did not respond to requests for further comment.
Other Legal Fee News-
In related legal fee news, DLA Piper is seeking $1.17 million in fees from a shareholder of a former client involved in a failed $180 million malpractice lawsuit. This case involved the Chinese software company Link Motion, and DLA Piper was represented by Gibson, Dunn & Crutcher, whose attorneys billed between $1,245 and $1,675 per hour.
Additionally, lawyers representing T-Mobile customers in a $350 million data privacy class action are requesting $46 million in legal fees. This comes after a federal appeals court rejected their earlier bid for nearly double that amount.
Conclusion-
The Clearview AI case stands as a testament to innovative legal strategies in class action settlements. By adopting an unconventional approach, Loevy & Loevy have not only set a precedent but also raised intriguing questions about the future of legal compensation in complex cases. As this case progresses, it will be closely watched for its potential impact on the broader legal landscape.
Legal Fee Tracker is a weekly feature exploring attorney compensation awards and disputes in class actions, bankruptcies, and other matters.
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