Lawyers dream about doing little to no work and getting paid a fortune for the work they didn’t do.

A group of hotshot securities lawyers recently was on the verge of just such a payday. They stood to collect $370,000 in legal fees for work that didn’t benefit their clients one iota.

But last week, U.S. Appeals Court Judge Richard Posner not only pulled the plug on this highly remunerative scheme but said judges should dismiss all similar cases in the future.

“The type of class action illustrated by this case — the class action that yields fees for class counsel and nothing for the class — is no better than a racket. It must end,” wrote Posner, who sits on the 7th Circuit Court of Appeals in Chicago.

Posner issued his decision in “In Re: Walgreen Company Stockholder Litigation.”

It’s a textbook example of a legal shakedown conducted by lawyers who purported to represent Walgreens stockholders. In reality, the lawyers represented themselves, agreeing to a marginal settlement that did nothing for their clients but for which they were to be paid $370,000.

Their plan worked beautifully until the Washington-based Competitive Enterprise Institute decided to challenge the settlement. Ultimately, the case ended up before the 7th Circuit, where Posner wrote a decision that its proponents hope will discourage similar litigation in the future.

What was the lawsuit about?

Walgreens, a publicly owned company, merged with Alliance Boots, a Swiss company. Because a merger requires shareholder approval, the law mandated Walgreens inform its owners about the various aspect of the agreement.

A group of law firms representing a Walgreens shareholder challenged the merger, arguing that Walgreens had provided insufficient information about it.

Eighteen days after the suit was filed, it was settled. Walgreens agreed to provide additional information to shareholders. More importantly, it also agreed to pay $370,000 to the law firms that filed the suit.

Why would Walgreens roll over so quickly? It was cheaper than paying lawyers to defend a pointless lawsuit.

In that sense, the interests of lawyers on both sides of the case were aligned. The law firms wanted to be paid for doing nothing; Walgreens lawyers wanted to pay them to end the case.

What about Walgreens shareholders? Well, what about them?

To settle the case, Walgreens provided six additional pieces of information to shareholders — paying roughly $60,000 for each addition.

Posner said the new information “represented only a trivial addition to the extensive disclosures already made.”

Further, he said the information provided either was so obvious as to be useless or simply restated what already was contained in the company’s disclosure to stockholders.

The class-action lawyers, of course, couldn’t disagree more. In a lengthy legal filing, they described the hard work (528 hours) they did that justified fees averaging more than $690 an hour.

“The rates charged by plaintiffs’ counsel are reasonable given their legal reputation, experience and status,” stated a motion filed by six law firms from New York, Illinois and Pennsylvania.

In fact, the law firms’ motion states that, given the “significant time and resources” they put in, their fees were “modest.”

Further, they said, the legal services they provided to their clients “were of material value to the stockholders.”

That’s not how Posner saw it. He said the disclosures “contained no new information that a reasonable investor would have found significant.”

Joined in his opinion by Justice Diane Sykes, Posner wrote that there was no indication “that members of the class have an interest in challenging the reorganization that has created Walgreens Boots Alliance” and that “the only concrete interest suggested by this litigation is an interest in attorneys’ fees.”

Cases like this most often are handled in the Delaware courts. So how did it end up in Chicago?

A Delaware judge recently pulled the plug on this kind of litigation. So the class-action lawyers decided to look for a friendly judge elsewhere and initially were successful. They persuaded Chicago U.S. Judge Joan Gottschall to approve the $370,000 in fees. But in losing so emphatically before Posner, these class-action lawyers now face a bigger problem.

Not only is Posner’s decision now the law in the 7th Circuit, it’s the law in all federal circuits unless courts there have ruled to the contrary.

But don’t minimize the talents of the class-action lawyers. They’ll do their best to figure out other ways of getting paid a lot to do a little.

Jim Dey, a member of The News-Gazette staff, can be reached at [email protected] or 217-351-5369.