The Class Action Bar's Dirty Secret: Ghost Billing, the Taxi Cab Problem, and the Lawsuit that Might Change Everything

Part 1 in the "Taxi Cab" Series

This is the first in a three-part series examining systemic billing fraud in class action lawsuits. Part 1 exposes the problem and its scope. Part 2 will examine Ford Motor Company's groundbreaking lawsuit that could change everything. Part 3 will explore potential reforms that could clean up the system.

---

Part 1: How Billing Fraud Steals Millions from Victims

Class actions, at their best, are powerful agents of change. They can compel industry-wide reforms, return billions of dollars to victims, and hold corporations accountable when regulators don't have the resources to act. But plaintiffs' lawyers cannot credibly advocate for reform if we ignore problems within our own ranks. Chief among them is systemic billing fraud, which quietly siphons millions from class members—often without courts or clients noticing.

A Quick Primer on Class Action Fees

For my non-legal readers: In any class action settlement, the defendant is focused on their "all-in" cost—the total amount they have to pay to make the case go away. That amount has to cover the relief for the class members, whatever it is: cash or (ick) coupons, credit monitoring, etc. But it also has to cover the fees for the plaintiffs' attorneys.

Because the defendant cares about the total number, there is an inherent tension. Even if the settlement is structured so that the attorneys' fees are paid "separately," a higher fee for the lawyers reduces the amount available for the class. An overreaching demand for fees by the attorneys always comes at the expense of their clients, directly or indirectly. A judge then decides if the fee request is fair to the class.

So How Do Class Lawyers Get Paid?

Often, they receive a percentage of the total settlement fund. But in many cases—especially when the class is getting something other than a direct cash payment—lawyers justify their fee differently:

1. The "Base Pay": They start by showing the judge a baseline figure for their work: the total hours their team spent on the case multiplied by their standard hourly rates. (The industry term for this is “lodestar.”)

2. The "Bonus": Then, they ask the judge to add a “multiplier,” arguing they should be rewarded for the financial risk of taking on a case they could have lost.

And even in cases where the attorneys are asking for a percentage of the settlement fund, many courts expect lawyers to explain how their fee compares to the work they’ve done in the case—that is, lawyers justify their fee using this same analysis above, even though the “ask” is for a chunk of the fund.

Remember, all of this matters because what the Court decides on fees is shifting money on the ledger between clients and their lawyers: either deciding a portion of the fund or approving a “separate” fee payment that’s really blessing a shift that already happened at the negotiation phase.

This dance happens in thousands of cases a year. But it's checkered by a reality that basically nobody is paying attention to.

The Dirty Secret of Billing Fraud

Here's the truth: problematic billing practices within certain segments of the class action bar are an open secret among plaintiff and defense lawyers, and likely suspected by some judges as well. But the issue rarely receives media attention—good luck getting a comment—and it can seem like too much "inside baseball" to attract broader interest.

The art of fraudulent class action billing exists on a continuum:

• At the mild end: Bill padders who throw five hours on the tab for reviewing a complaint without any contributions.

• Even worse: Firms hiring temporary lawyers for $50 an hour to handle minor tasks, then billing that time at $450 an hour.

• At the most extreme end: The "taxi cab" firms, where the meter mysteriously starts running at hundreds of thousands of dollars the minute they enter their appearances. These firms engage in fabricated billing, plain and simple.

Certain practice areas are especially vulnerable. Smaller firms handling high-volume, quick-settlement cases—like data breaches and false labeling class actions—create perfect conditions for abuse.

When Courts Notice (Rarely)

Most of the time, courts are not alerted to potential billing problems. That's because there's not really anybody arguing against the fee: the defendant agreed to the settlement, knows what it has to pay, and wants the case to be over. The plaintiff's lawyers, of course, want their money. In some cases, there's even outright agreement that the defendant won't oppose the fee, called a "clear-sailing" clause.

When courts do hear about this—usually from an objector—the response typically follows one of two paths: the consequences are minimal, or the court avoids a deep investigation.

Case Study #1: The Western Union Case (The Court Finds Misconduct)

A now-defunct plaintiffs' firm sought over $2.8 million in fees, supported by a very specific claim to have expended 2,164.4 hours on the case—time kept down to the tenth of an hour, spread across multiple attorneys. But when the court demanded time records supporting that request, the lead lawyer was forced to admit that no actual contemporaneous billing records existed.

Let's pause and let that sink in. A lawyer was looking to shift nearly $3 million away from the people he represented and towards himself, assuring the court that these fees were supported by detailed records. But when pressed, he acknowledged that the firm had "reconstructed" these numbers after the fact.

The result? Fees slashed to $425,000. But that was it. This wasn't even the first time that year the firm had drawn court scrutiny for a fee request. In a separate case, the Seventh Circuit described the firm's fee requests as "rapacious," including an "astonishing" request for nearly $1.5 million of post-judgment work that was focused on securing its own fees. The court found the firm's reported time on those tasks—more than a thousand hours—to be "grossly excessive," but the firm still walked away with over $200,000 in their pockets. No broader consequences. No reforms.

Case Study #2: The TikTok Case (The Court Avoids An Adversarial Process)

In a $92 million settlement in a case against TikTok for privacy violations, a group of plaintiffs' firms wanted a third of the settlement as a fee—meaning they had to justify a $30 million fee request. There was just one problem: the settlement was reached before TikTok even filed a motion to dismiss. (A later court would note "the speed at which the original MDL was settled and the at-least-facially unorthodox manner in which this settlement was reached.")

The swift settlement raised significant questions about the legitimacy of the hours billed by class counsel. Across 31 firms, a staggering 17,000 hours were claimed in a case that saw virtually no traditional litigation—no depositions, no adversarial discovery, and no trial preparation. Nearly 3,000 of these hours were attributed to mediating and negotiating the settlement itself.

Concerns were so pronounced that objectors—including our firm, acting pro bono—pointed to specific, seemingly questionable billing entries. One attorney, for instance, reported logging the equivalent of a full year's work—2,076 hours—on this single case in less than two years, all while juggling as many as 57 other legal matters.

Beyond the details of any single time sheet, the mere fact that so many firms were involved highlights a powerful systemic pressure: "competitive billing." This dynamic creates a classic prisoner's dilemma that can tug firms in a dangerous direction. When a fee award must be divided, firms face a perverse incentive to inflate their own hours to avoid losing their fair share to others who might be doing the same.

Despite these red flags, the court overseeing the settlement approved a third of the fund in fees, for a total of $29 million. (The only trim was a technical one: the Court awarded fees based on the fund net of notice and administration costs, not the entire fund.) While the court did ultimately receive the attorneys' time records, any potential review was conducted in camera—a private review by the judge—which shielded the records from public scrutiny and any meaningful adversarial process. No experts were appointed to analyze the voluminous and complex time entries, and ultimately, the court did not find a single minute of the claimed time to be excessive, inefficient, or duplicative. The court's approval even included praise for the attorneys, noting that several lead lawyers had reportedly "devoted essentially their entire professional lives to" the case.

The outcome for the class members, however, was starkly different. Less than 1.5% of the eligible class members received any monetary relief from the settlement.

Next on Left Side of the V: Part 2: Ford vs. The Ghost Billers: The RICO Lawsuit That Could Expose Systemic Fraud

Join the Conversation: The mission of Left Side of the V is to bring the conversations that happen in whispers at conferences and behind closed doors out into the open. Each article is a starting point, not the final word.

We believe our profession gets stronger through candid debate. Challenge our assumptions, tell us what we've missed, or offer a perspective we haven't considered.

Add your voice in the comments, or connect with me (Jay Edelson) on X or LinkedIn. And if you find our work valuable, please share it with a colleague.