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Archive for March 31st, 2011

Legal commentator and unabashed crusader for class action reform, Lawrence W. Schonbrun, has a new article on The Huffington Post discussing so-called “professional” objectors in class action lawsuits.  Schonbrun criticizes what he believes is hypocrisy in plaintiffs’ class action lawyers attempting to vilify those who seek to object to class action settlements for profit because, in his view, many class actions themselves are simply vehicles for lawyers’ profit with no other social utility.  Whether you agree with his perspective, Schonbrun’s commentaries are always thought-provoking, and this piece is no exception.

I will leave it to Schonbrun and others to comment on the social value of professional objectors or class actions more generally.  As a defense practitioner, my concern is with the potential practical impact on my clients’ cases.  From a practical perspective, it is important to note that what most practitioners would consider “professional” objectors does not include nonprofit associations and lawyers whose motivation is based on a genuine belief that the settlement is unfair to consumers or that class actions should be reformed.  Nor would it include a lawyer who was retained by a client because of the client’s bona fide objection to the fairness of the settlement.  While it is possible that the motivations of a particular objector’s counsel could be mixed or unclear, most practitioners would agree that the term “professional objector” is susceptible to the same “I know it when  I see it” standard as Justice Potter Stewart’s  standard for identifying obscenity.

There is no doubt that there exists several cottage industries of entrepreneurial lawyers who have found creative ways to profit from class actions filed by other lawyers and their clients.  Professional objectors are but one of at least three groups of what many traditional plaintiffs’ attorneys would consider interlopers who seek to make a cheap buck off of someone else’s class action:

1) “Copy cat” lawyers, who file competing lawsuits in other jurisdictions

2) “Opt out” lawyers, who round up individuals to opt out of class action settlements in order to file mass actions raising the same claims

3) “Professional objectors,” attorneys who solicit members of a class in order to raise objections to a class settlement, in the hopes of being able to extract a portion of the fee or to take over as class counsel. 

From my perspective, the influence of these groups, at least in the consumer class action context, has waned over the past decade.  Five or ten years ago, it was common to expect one or more objections to a large class action settlement filed by attorneys who had an obvious track record of objecting to class actions (and no obvious political or charitable agenda).  Back then, many plaintiffs’ lawyers would simply agree to pay a small portion of the fee to the objector’s lawyer, rather than have the entire settlement held up for months or years while the objectors exhausted their appeals.  These days, by contrast, there are a variety of techniques that have been successful in  reducing the number of objections motivated purely by an outside lawyer’s attempt to profit from the settlement.  The most significant tool has been to file a motion to require the objector or his attorney to post a significant bond, measured by a percentage of the value of the settlement, pending any appeal of the denial of an objection.

The problem of dealing with professional objectors is customarily the role of plaintiffs’ counsel, although after having agreed to a settlement, the defendant has nearly as much of an incentive to overcome objections as the plaintiffs’ lawyers do.  There are several key preventative measures that both parties to a class action settlement can take to ward off professional objectors (or any objectors, for that matter), including:

  • Avoiding the appearance of collusion.  This problem is usually avoided if the settlement is reached after an otherwise contested litigation, but can be a problem if the parties reach a settlement shortly after the complaint has been filed.  In most cases, experienced plaintiffs’ counsel will insist on at least performing some confirmatory discovery before agreeing to a settlement in the first place.
  • Retaining a qualified notice expert to ensure that the notice program follows current best practices and to opine, if necessary, about the fairness, reach, and reasonableness of the settlement notice.  This is important because the most persuasive arguments that can be made by an objector is not that the settlement value is unfair (after all, the settlement is the result of a compromise between the parties) but rather it was procedurally unfair because it did not provide potential claimants with reasonable notice.

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