Plaintiffs’ lawyers in the United States play a key role in combating corporate fraud. Shareholders who lose money as a result of fraud can file securities class actions to recover their losses, but most shareholders do not have enough money at stake to justify overseeing the cases filed on their behalf. As a result, plaintiffs’ lawyers control these cases, deciding which cases to file and how to litigate them. Recognizing the agency costs inherent in this model, the legal system relies on lead plaintiffs and judges to monitor these lawyers and protect the best interests of absent class members. Yet there is remarkably little data on the business of securities class action lawyers, leaving lead plaintiffs and judges to oversee this area without the tools to understand how it works. This Article looks inside the black box of securities class action lawyering to explore the business behind these cases. Our study includes hand-collected data on all securities fraud class actions against public corporations filed between 2005 and 2018, a total of nearly 2500 cases. We find that the business of securities class action lawyering is far more complex than prior scholarship has recognized. Contrary to conventional wisdom, there are not two tiers of plaintiffs’ law firms; instead, there are multiple tiers of firms, each with its own client base, litigation patterns, and revenue model. Our study gives lead plaintiffs and judges the data and tools they need to understand these tiers and to compare the performance of the law firms within them. We also examine how these law firms are compensated, finding that judges’ fee awards fail to account for the difficulty of cases or the risk of non-recovery in any systematic way. These fees are crucial to ensuring that law firms pursue the right cases on behalf of shareholders, so we suggest ways that judges can use data to improve fee awards. As we will see, the path to reforming securities class actions starts with understanding the business behind them
