Legal Fee Tracker: Clearview AI's choose-your-own-adventure privacy settlement
By David Thomas
Sept 12 (Reuters) -Most requests for class action legal fees have something in common: a settlement agreement or judgment with a concrete dollar figure from which the plaintiffs' lawyers can attempt to claim their reward.
Not so for Chicago-based law firm Loevy & Loevy, which reached an agreement with facial recognition company Clearview AI in June to resolve claims that Clearview violated the privacy rights of millions of Americans.
Instead, the lawyers agreed to drop their case in a complex deal that would grant the law firm a 39.1% share of a theoretical future settlement amount, based on Clearview's value if the beleaguered company goes public through an IPO or is liquidated through a merger or sale.
The Loevy firm estimated in a fee petition filed on Friday that the settlement fund in such a scenario could exceed $51 million. Based on that estimate, the Loevy firm's fee request would amount to $19.9 million.
"To the best of our awareness, this settlement is trailblazing, with no other class action lawyers having found a way to achieve significant value for their clients under such challenging circumstances," the firm said.
The agreement with Clearview and the fee request are now pending before U.S. District Judge Sharon Johnson Coleman, who gave preliminary approval to the deal in June.
The Loevy team, led by Jon Loevy, Michael Kanovitz and Thomas Hanson, has not disclosed how many hours the firm spent on the litigation or the lawyers' usual rates. They did not immediately respond to a request for comment.
Clearview, which denied any misconduct, is represented by a team of attorneys at Chicago-based Lynch Thompson. The company and its lawyers did not immediately respond to requests for comment.
There have been other settlements granting plaintiffs some kind of equity stake or stock in the defendants, legal experts said. Adam Pritchard, a professor at the University of Michigan Law School, noted that the ongoing fight over the plaintiffs' fee request in the $56 billion Elon Musk pay package case is about Tesla stock.
"What's unusual about this fee request is that the equity is not already publicly traded," Pritchard said of the Clearview case.
The data privacy case has its origins in a January 2020 New York Times article describing the use of Clearview's facial recognition tool by law enforcement agencies and private companies. The lawsuit accused Clearview of violating an Illinois biometric privacy law when it scraped billions of facial images from the web and sold information without consent.
The company struck a separate settlement with the American Civil Liberties Union in May 2022. Clearview agreed to stop granting paid or free access to its database of facial images to most private businesses and individuals, and to stop providing its database to government agencies in Illinois for five years.
The ACLU settlement left Clearview with "few assets" to compensate the private plaintiffs who also sued, thus requiring the lawyers to come up with a novel settlement strategy, the Loevy firm said in June.
The proposed resolution has other unusual provisions for the class and its attorneys to get paid absent a Clearview IPO or acquisition. Up until September 2027, a court-appointed settlement master could require Clearview to make a cash payment equal to 17% of its revenue since the settlement approval date.
The same master could also sell the settlement rights to a third party in order to maximize class recoveries.
A 39.1% fee request is "reasonable," the Loevy firm told Coleman in Friday's filing. The accord with Clearview is a "first of its kind equity-based settlement that dwarfs similar cases from a valuation perspective," the firm said.
So far, the settlement has attracted only one formal objection. Chicago resident Jessica Wang told the court it "would effectively trade the legal rights of class members for a nebulous promise of a small sum of money." Wang did not immediately respond to a request for comment.
- In other legal fee news, DLA Piper is requesting $1.17 million in fees from a shareholder of one of its former clients that brought a failed $180 million malpractice lawsuit against the firm.
A Manhattan federal judge in March sanctioned China AI Capital Limited and its counsel for its lawsuit against DLA Piper over the law firm's work for the Chinese software company Link Motion.
DLA Piper was represented in the lawsuit by a team of attorneys from Gibson, Dunn & Crutcher, whose partners charged between $1,245 and $1,675 an hour, according to the filing.
- Lawyers who represented T-Mobile customers in a $350 million data privacy class action settlement have asked a federal judge in Missouri to award them $46 million in legal fees after a federal appeals court struck down their earlier bid for nearly twice the amount.
(Legal Fee Tracker is a weekly feature exploring attorney compensation awards and disputes in class actions, bankruptcies and other matters. Please send tips or suggestions to D.Thomas@thomsonreuters.com.)
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