Labaton Settlement Sheds Light on Behind-the-Scenes Class Practices

A proposed settlement in a festering fee dispute could upend the relationships between law firms and how they connect with plaintiffs in class action cases.

Under the deal that still needs federal court approval, Labaton Sucharow, a leading class action securities law firm, would pay $4.8 million in legal fees to plaintiffs and other law firms involved in a case involving pension funds but avoid further legal consequences.

The settlement sheds light on the behind-the-scenes arrangements that some law firms make to “find” plaintiffs in large-scale cases, particularly in consumer fraud or securities.

Sometimes, law firms pay referral fees to ...