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Introduction[edit]

Plaintiff's class action lawyers (hereinafter, "PCALs") are lawyers who repeatedly file class action lawsuits that challenge various aspects of companies' business practices and procedures in order to receive a payment of money in exchange for the dismissal of the lawsuit.

The power of PCALs in the American legal system is unrivaled. It is no more clearly demonstrated than in their ability to have the word "professional" given a negative connotation by our country's judiciary when applied to counsel representing class members who object to proposed class action settlements and/or attorneys' fee requests – the so-called "professional objector," when they themselves are "professional" plaintiff's class action lawyers. Equally troubling has been PCALs' ability to have the judiciary cast aspersions on objectors' counsel for engaging in a litigation/business strategy not dissimilar from the litigation/business strategy of PCALs upon whom they heap the greatest praise. Although the mainstream judiciary fails to appreciate this tactical congruity, at least one prominent observer of class action industry practices, Professor John C. Coffee Jr. of Columbia University Law School, has noted the irony of PCALs' accusations regarding the predatory nature of so-called "professional objectors."[1]

To deflect attention from objectors' efforts to expose inadequate settlements and excessive attorneys' fee requests, PCALs have unleashed an unprecedented and unfortunately successful effort to discredit lawyers who represent objectors willing to challenge class action abuses. PCALs want to insulate their settlements and attorneys' fee requests from thorough judicial review by eliminating objectors and thereby preventing a truly adversarial hearing on the fairness of the proposed settlement and the amount of class counsel's fee. They don't want objectors trying to convince judges to reject bogus class action settlements and lower typically excessive[2] attorneys' fee requests.

In fact, there is an arsenal of litigation tactics that PCALs employ – with judicial complicity – to marginalize those who seek to expose the class action industry for what it really is.

Unfortunately, the judiciary doesn't want to fix the class action problem. Judges do not want to be reminded of the unfairness, inadequacy, and unreasonableness of a settlement they are prepared to approve as fair, adequate, and reasonable or the excessiveness of an attorneys' fee request that they are prepared to approve as reasonable. The judiciary is happy to accommodate attacks on "professional objectors." They provide a smoke screen with which to further cover-up the real judicial class action operating principle that a "bad settlement (and, it could be added, an attorneys' fee large enough to encourage PCALs to agree to settle (and, invariably, find someone else to sue) is almost always preferable to a good trial."[3] None of the participants is anxious to have this big shakedown racket exposed,[4] but is anxious to distract the public's attention by focusing on the similar business tactics of the enemies who seek to expose them - "professional objectors."


Section Two[edit]

The practices of plaintiffs' class action lawyers (PCALs) have been the focus of attention of numerous courts, legal commentators, and legislators, including the U.S. Congress – but not the editors of NEWBERG ON CLASS ACTIONS. It should come as no surprise that while there is a chapter in NEWBERG entitled "Abusive Conduct by Counsel Objecting to Class Action Settlements," there is no chapter entitled "Abusive Conduct by Counsel Representing Class Members in Class Action Settlements."

The treatise is presently co-edited by Professor William B. Rubenstein. "Professor"[5] Rubenstein, in addition to editing the class action treatise, is also a law professor at Harvard Law School, and moonlights as a "professional expert witness" on behalf of PCALs. He regularly tells judges that their proposed class action settlements are fair, adequate, and reasonable, and that their requests for attorneys' fees are reasonable. In fact, "Professor" Rubenstein, perhaps inspired by the size of the attorneys' fee requests that he regularly testifies in favor of, also moonlights as a PCAL.[6]

The NEWBERG treatise fails to observe that (the tort litigation business of which class actions are a major component) has eclipsed being merely a big business and has become an industry that rakes in almost $40 billion per year in revenues – 50 percent more than Microsoft or Intel and twice those of Coca-Cola.[7] The treatise also ignores the following observations regarding the litigation-business strategies of PCALs:

So-Called Attorneys' Fees Payments Are a Disguised Form of Ransom[edit]

PCALs seek out companies to sue in order to extract a payment, which the legal system obligingly calls a "reasonable attorneys' fee." The U.S. Congress, on the other hand, has used several less flattering terms to describe these payments, such as ransom[8] and extortion.[9] Class members who, in theory, are supposed to be the main beneficiaries of the class action system are, in reality, merely an excuse to shake down[10] payoffs from corporations with large treasuries or insurance policies in exchange for dismissing their class action lawsuits.

Meritless Class Action Lawsuits[edit]

The filing of unmeritorious class action lawsuits or strike suits[11] is well known. PCALs regularly file class actions which, were the lawsuits to proceed to decision, would be found to be without merit.[12] The standard of frivolousness[13] by which the legal system screens cases leaves much to be desired and allows many unmeritorious[14] lawsuits to be settled for substantial attorneys' fees. PCALs' business plan requires courts to review countless claims against companies merely to determine whether the claims meet legal standards such as plausible or of colorable merit. In the class action industry, once class action lawyers sink their teeth into a defendant, even weak legal claims[15] can have substantial settlement value. The standards for the lawyers to keep their foot in the courthouse door (or, more appropriately, foot on the throat of the defendant), i.e., "plausible" and "colorable," are like pornography – often in the eye of the judicial beholder.

In fact, PCALs file their lawsuits with the expectation that the legal merits of the alleged claim will never be adjudicated. Rather, they hope instead to be able to dismiss the lawsuit in exchange for a large payment of money for themselves. Such is the class action system in that even dismissals of their lawsuits by trial court judges still leave open the possibility of a significant payment of money to class counsel, so that a defendant can avoid the uncertainty, cost, and delay of an appeal.

Inadequate Settlements[16][edit]

Class members often receive trivial sums of money[17]or useless coupons or unnecessary extended warranties, or payments that typically represent a small a fraction of what class members lost,[18] any of which are dwarfed by the amount of attorneys' fees that is negotiated by the plaintiffs' lawyers for themselves. Such lawsuits are of "little benefit"[19] to class members but of enormous value to PCALs.

For example, in the settlement of the Ford Explorer SUV class action, the lawyers received $25 million in attorneys' fees because they told the judge the class was receiving a benefit of $500 million. However, what class members received were coupons for $500 towards the purchase of a new SUV. Only 148 people redeemed the coupons for a total value of $74,000. So the entire class actually received $74,000, while the class action lawyers received $25 million. Another example of this phenomenon is the IPO securities litigation, in which the plaintiffs' lawyers were awarded $170 million in fees while class members got 1¢ for every $1 of damages claimed![20]

Miniscule Numbers of Class Members Receive Actual Benefits[edit]

Compounding the problem of inadequate settlements is the problem of claiming by class members, which is typically quite low. One claims administrator used the figure of one in ten,[21]but that estimate is probably quite high.[22] This is due in part to the fact that the parties can create cumbersome requirements that class members must follow in order to file claims.[23]

Class Action Lawsuits That Injure the U.S. Economy[edit]

Courts have noted that class actions can "wreak enormous economic harm" and can "leave a state economy in shambles."[24] Indeed, one class member said it best when he compared PCALs to sharks and America's business community to an impending feast.[25]

The Supreme Court itself has acknowledged that the class action device was being used to injure "the entire U.S. economy."[26] PCALs manipulate their own clients – the class members they are supposed to be representing – with this simple formula: target deep-pocket defendants; file a standard or an "adventurous"[27] or a "creative" class action lawsuit; make abusive[28] discovery requests[29] to delay and obstruct the business affairs of a defendant, and thereafter obtain a (so-called) attorneys' fee for dismissing the lawsuit.

Class Action Lawsuits That Actually Harm Class Members[edit]

As if lawsuits that:

  • request attorneys' fees that amount to ransom and extortion
  • are without merit
  • offer minimal, if any benefits to class members
  • provide a miniscule percentage of class members with an actual benefit
  • injure a local and/or our national economy

were not bad enough, the legislative history of CAFA shows that Congress was concerned about the harm of class actions to class members themselves.[30] In other words, class actions that make the clients' situation worse![31]

  1. Class action lawsuits that pervert justice.
    Courts have noted how class actions can actually promote the settlement of unjust claims.[32] Such is the upside down world of class actions: a legal procedure that overcompensates the uninjured and undercompensates the injured.[33]
  2. Class action lawsuits that punish those who are themselves innocent victims.
    The unfortunate reality is that securities class actions in particular result in settlements that "do not comport with the most elementary notions of justice and morality"[34] because, in the end, it's the innocent victims – shareholders – who pay the costs of the litigation. U.S. District Court Judge Jed S. Rakoff refused to approve the $33 million SEC class action settlement with Bank of America. The reason for Judge Rakoff's concern was that the Bank of America shareholders were being ripped off by a dysfunctional class action system in which shareholder victims were the defendants who were paying for the settlement and attorneys' fees, in spite of the fact that it was the shareholders that the corporation's executives were accused of lying to![35]
  3. Class actions that hurt consumers.
    Courts and the federal government have admitted that consumers lose[36] because many class actions can leave consumers worse off than if there had been no lawsuit at all. The class action system increases the cost of doing business, which in turn hurts consumers through a mixture of higher prices,[37] lower quality, and poorer service.

Other Abuses[edit]

Other abuses by PCALs that NEWBERG ON CLASS ACTIONS fails to mention, but that were there a chapter entitled "Abusive Conduct by Counsel Representing Class Members in Class Actions," would certainly include:

  1. Boilerplate lawsuits.
    The filing of boilerplate[38] class action lawsuits that merely substitute the name of one defendant in the place of another and amount to fill-in-the-blanks canned complaints.
  2. Unnecessary class action lawsuits.
    • Unnecessary class action lawsuits can take several forms. One type is when the lawsuits are filed after the defendant has already begun to remedy the problem,[39] so that the only persons left to gain from the lawsuit are the PCALs.[40]
    • Another form of unnecessary litigation is when dozens of law firms file dozens of class action lawsuits, each seeking to represent the same class in order to cash in on the class action attorneys' fee bonanza.[41]
  3. Copycat lawsuits.
    Yet another abuse is the copycat lawsuit[42] where law firms copy then file a duplicate of a complaint already filed by another law firm. This adds nothing to the litigation other than giving the law firms the ability to participate in a fee award.[43]
  4. Delaying settlement negotiations.
    PCALs delay[44] settlement negotiations, even where the parties are in agreement, in order to increase their time in the case and thereby justify higher fees.
  5. Overlawyering.
    Overlawyering is the polite way of saying featherbedding cases with unnecessary work and personnel in order to increase the bill to the client class. The level of lawyer duplication is astounding.[45]
  6. Abusive use of experts.
    Another fertile area for PCALs' abuse is their (mis)use of experts and purported experts in order to influence judges to approve questionable settlements and excessive attorneys' fee requests.
    • Experts that are not expert in the field in which they testify.
      In a recent $400 million class action judgment against DuPont, West Virginia Supreme Court Justice Menis Ketchum issued a powerful dissenting opinion highlighting the injustice of the defendant's settlement based on the testimony of an unqualified[46]expert witness hired by class counsel.
    • Experts that are bought.[47]
      In the same DuPont case, the expert witness charged nearly a million dollars (before the trial even started).
    • Experts that are used for the prominence of their credentials.
      In retaining law professors and retired judges as experts, class action lawyers seek to (mis)appropriate the appearance of impartiality,[48] which scholars or retired judges possess.


You be the judge:

What is the bigger swindle: the alleged misconduct of the defendants, or the conduct of the PCALs who are suing them? Here is how one class member described his choice:[49]

Dear Judge ______:
I am writing to voice my extreme objection to the settlement in [this] class action case. I have tried to understand what has occurred in this case, but that is quite difficult. What I do know, is that I lost about $40,000.00 in this fund, and my notice of settlement indicates I will now get $269 bucks. Don’t bother. The only persons making anything of substance in this are the attorneys, of course.... In fact, this litigation is almost "protective" of the interests of [the defendant]. By paying people like me a pittance, I presume I am now cut off from pursuing any other remedies against them. It is a joke. A bad joke. One would think this suit is to protect the aggrieved consumer. But it really protects [the defendant] corporation from legitimate claims.... As usual, the little guy, the consumer, takes it up the wazoo.... If I get $200 bucks for my $40,000.00 loss, that is a half cent on the dollar, I believe. I don’t even have words to describe how disgusting that is. This settlement is worse than what the [defendant] did to us in selling us this debacle of an investment with their misrepresentations....

Quiz on Section Two[edit]

Who is being referred to: PCALs or "professional objectors"?

  1. They pursue litigation to delay and complicate business affairs of the defendant, hoping to be paid a ransom in order to avoid further litigation.
  2. They provide inadequate settlement recoveries to their clients – pennies on the dollar of damages, useless coupons, unnecessary extended warranties.
  3. They file copycat pleadings.
  4. They overlawyer the case in order to obtain higher attorneys' fee awards.
  5. They raise unmeritorious claims.
  6. They settle their cases, but a very low percentage of class members actually receive a benefit.
  7. Their lawsuits can injure the U.S. economy.
  8. Their lawsuits can harm class members.
  9. Their lawsuits can hurt consumers.
  10. Their lawsuits pervert justice.
  11. Their lawsuits punish innocent victims.
  12. They file unnecessary lawsuits.
  13. They file lawsuits alleging boilerplate claims.
  14. They delay settlements in order to increase the amount of their attorneys' fees.
  15. They misuse purported "expert" witnesses.


Who is the real problem? "Professional plaintiffs' class action lawyers" or "professional objectors"?

Section Three[edit]

Professor Rubenstein has been quoted as saying that the record of professional objectors "has been less than stellar,"[50] but never mentions that the record of plaintiffs' class action lawyers (PCALs) has been even less than "less than stellar." Congress, courts, both state and federal, and legal commentators have noted the following less than "less than stellar" practices of PCALs:

  1. They seek out companies to sue in order to extract a payment called "attorneys' fees," which should be more accurately described as ransom.[51]
  2. They negotiate inadequate settlements.[52]
  3. They file unmeritorious class action lawsuits.[53]
  4. They file duplicative class actions asserting similar claims on behalf of essentially the same people.[54]
  5. They file copycat lawsuits.[55]
  6. They file class action lawsuits, using boilerplate allegations.[56]
  7. They file class action lawsuits to delay and complicate the business affairs of a defendant corporation in the hopes of receiving a payment of money (mis)labeled "attorneys' fees" to go away.
  8. They delay settlement negotiations in order to increase their billable time.[57]
  9. They spend excessive and unnecessary time litigating class action lawsuits.[58]
  10. They abuse the use of experts or purported experts in order to influence judges.[59]
  11. They file class action lawsuits that hurt consumers.[60]
  12. They file class action lawsuits that injure the U.S. economy.[61]
  13. They deceive the courts by representing their own interests rather than those of the class.[62]
  14. They file class action lawsuits that pervert justice by punishing those who are themselves innocent victims.[63]
  15. They ignore fundamental due process rights of class members.[64]

A "less than stellar" record for professional objectors – Really!

Congress, courts, both state and federal, and legal commentators have exposed the schemes of PCALs, yet Professor Rubenstein has written nothing about the "less than stellar" performance of the PCALs. Here is what various courts and commentators have said about PCALs being, "more interested in coercing a fee than in correcting a wrong"[65]:

  • Litigating "for the sake of generating attorneys fees."[66]
  • Postponing settlements in order to rack up more billable hours.[67]
  • Convincing judges to grant "class members illusory nonmonetary benefits….while granting substantial monetary attorney fee awards."[68]
  • "[E]ssentially forc[ing] corporate defendants to pay ransom to class attorneys by settling – rather than litigating – frivolous lawsuits."[69]
  • Using the class action mechanism to transfer large fees to themselves, with little or no benefit to class members.[70]
  • Becoming "overnight millionaires" by "seeking large-dollar recoveries rather than acting as objective servants of the law."[71]
  • Focusing on opportunism rather than service.[72]
  • Filing class action lawsuits against companies that have already remedied or begun to remedy the alleged harm.[73]

The attitude of the legal "profession" towards class action "attorney-felons" is demonstrated by the fact that neither academic professional expert witnesses, who would like to be thought of as protectors of the integrity of the class action process, nor any other professors from our nation's law schools nor the American Bar Association have even suggested that Congress investigate the assertion of Attorney William Lerach (once considered a prominent class action attorney, whose misconduct in class actions landed him in a federal penitentiary), that the conduct for which he was imprisoned was a common practice[74] among the plaintiffs' class action bar.

The silence of the legal profession in light of Mr. Lerach's accusation was so deafening as to cause one class action observer to lament: "Despite the highly publicized travails of what was once America's leading class-action law firm, there has been little public discussion of whether other firms may have emulated the secret payment scheme Lerach and other Milberg lawyers devised."[75]

The power of the PCALs is so immense that despite prison sentences for its most prominent practitioners, the plaintiffs' class action bar still has enough influence in the halls of Congress to suppress any Congressional investigation [76]to determine which other plaintiff's class action lawyers were guilty of the crimes that warranted Mr. Lerach's imprisonment.

Is there a link between Congress' unwillingness to investigate the alleged illegal business practices of the plaintiff's class action bar and lawyers’ campaign contributions exceeding those of every other industry or profession over the last two decades?[77]

Quiz on Section Three[edit]

Who should Professor Rubenstein be referring to when he talks about attorneys' "less than stellar" performance, and attorneys "more interested in coercing a fee than in correcting a wrong"? "professional plaintiff's class action lawyers" or "professional objectors"?

Section Four[edit]

The adverse perception of plaintiffs' class action lawyers (PCALs) [not professional objectors] has led the United States Congress to pass two major pieces of legislation to curb the abuses of the plaintiffs' class action bar: the Private Securities Litigation Reform Act of 1995 (PSLRA),[78] and the Class Action Fairness Act of 2005 (CAFA).[79] The legislative history of CAFA shows that Congress' intent was to address the problem of self-interested[80] PCALs who settle class actions in which they secure large attorneys' fees for themselves, but class members are left with little or nothing.[81]

The Federal Judicial Center had the following warning for federal judges about "self-interested" PCALs:

  • Among the "abuses that threaten to undermine" the utility of class actions are excessive attorney's fees.[82]
  • "Most settlements [prohibit] the parties and attorneys from opposing…stipulations about attorney fees."[83]
  • Judges should "prevent unnecessary litigation and overstaffing."[84]
  • Judges cannot rely on class counsel to shape the issues that the judge must resolve.[85]

In addition, the Manual for Complex Litigation[86] warns judges to be aware of the self-interested PCALs trying to manipulate them into:

  • "granting class members illusory nonmonetary benefits....";[87]
  • "settling attorney fees based on a very high value ascribed to nonmonetary relief awarded to the class....";[88]
  • "assessing class members for attorney fees in excess of the…damages awarded to" individual class members.

An example of what PCALs try to get away with in our courts is reflected in the decision by United States federal district court judge William H. Alsup, Northern District of California, in In re Zoran Corporation Derivative Litigation.[89] He admonished the following actions of class counsel:

  • Failing to disclose to the court and the class "the true date the options were repriced."[90]
  • Exaggerating to the court and the class the value of the repriced options.[91]
  • Passing off to the court and the class as a benefit to the class something the defendant had already done.[92]
  • Misrepresenting to the court and the class purported settlement benefits which had in fact been agreed to by the defendant before the settlement negotiations had even begun.[93]
  • "Try[ing] to slip a weak or collusive settlement past the judge…"[94]
  • Not trying hard enough "to meet their obligations as officers of the court."[95]

But the aforesaid irregularities merely scratch the surface of the abuses in class action litigation that judges should be aware of as they review proposed settlements. Both the Federal Judicial Center Center and the Manual for Complex Litigation warnings are accurate, but they could and should extend their warnings to judges to include the following well-documented abuses of "self-interested" PCALs who:

  1. seek out companies to sue in order to extract a payment called "attorneys' fees," which should be more accurately described as ransom;
  2. negotiate inadequate settlements;
  3. file copycat lawsuits;
  4. file duplicative class actions asserting similar claims on behalf of essentially the same people;
  5. file unmeritorious class action lawsuits;
  6. file class action lawsuits to delay and complicate the business affairs of a defendant corporation in the hopes of receiving a payoff to go away;
  7. file class action lawsuits that injure other class members;[96]
  8. file class action lawsuits that injure the economy;
  9. spend excessive and unnecessary time litigating class action lawsuits;
  10. abuse the use of experts or purported experts in order to influence judges;
  11. ignore class members' constitutional due process rights.[97]


References:

  1. ^ "The irony is that such abuses [it appears that the objector may have been engaged simply in an attempt to extort a portion of expected legal fees by threatening to delay the settlement's approval] are the equivalent of nuisance actions brought against defendants; here, the target is the original plaintiff's attorney and the consequence again is to erode his expected return from the action." John C. Coffee Jr., The Unfaithful Champion: The Plaintiff as Monitor in Shareholder Litigation, Law & Contemp. Probs., 48 DUKE L.J. 3, 5, 54 (Summer 1985).
  2. ^ Which the judiciary sometimes euphemizes as "generous" or "handsome" when making such fee awards.
  3. ^ One judge let the secret out when he acknowledged: "[T]he court starts from the familiar axiom that [in deciding whether to approve this settlement proposal,] a bad settlement is almost always better than a good trial." In re Warner Communications Sec. Litig., 618 F.Supp. 735, 740 (S.D.N.Y. Aug. 21, 1985) (Keenan, J.).
  4. ^ "[Complicity among the participants] can produce settlements that ... create little value for class members or society. For class counsel, the reward are fees disproportionate to the effort they actually invested in the case. For defendants, the rewards are a less expensive settlement than they may have anticipated, given the merits of the case.... For society, however, there are substantial costs; lost opportunities for deterrence ..., wasted resources ..., and – over the long run – increasing amounts of frivolous litigation...." (Deborah R. Hensler, et al., Class Action Dilemmas: Pursuing Public Goals for Private Gain RAND Inst. for Civ. Just., Executive Summary, 1, 10 (1999)).
  5. ^ "Professor" is in quotes to highlight Professor Rubenstein's numorous moonlighting activities.
  6. ^ See In re Google Buzz Privacy Litigation, No. CV 10-00672-JW (N.D. Cal., San Jose Div.) (Consolidated and Amended Complaint).
  7. ^ Trial Lawyers, Inc.: A Report on the Lawsuit Industry in America 2003, available as of 9/21/11 at http://www.manhattan-institute.org/pdf/triallawyersinc.pdf, at 2 n.4.
  8. ^ "Such leverage can essentially force corporate defendants to pay ransom to class attorneys by settling – rather than litigating – frivolous lawsuits." Class Action Fairness Act of 2005 (hereinafter "CAFA"), S. REP. 109-14, 109 Cong., 1st Sess., Calendar No. 1 (Feb. 28, 2005), at 20 (emphasis added (hereinafter "e.a.").
  9. ^ "Proponents of the Reform Act argued that these abuses resulted in extortionate settlements...." Merrill, Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 80, 81 (Mar. 21, 2006) (hereinafter Merrill Lynch); e.a.
  10. ^ "California's unfair competition law ... has degenerated into nothing but a feeding frenzy for attorneys who use the law to shake down California businesses and chase jobs out of California.... To award $3 million in attorney fees ... is to confirm everything that the law's critics have been saying about it, namely that the law really is a way for underemployed lawyers to create business for themselves by harassing California businesses on the basis of some de minimis, putative nonconformance with some regulation or law." Benson v. Kwikset Corp., et al., 120 Cal.App.4th 301, 325, 332, 15 Cal.Rptr.3d 407, 425, 429 (4th Dist., Div. 3, June 30, 2004) (no longer citable).
  11. ^ "Congress enacted the PSLRA to prevent the filing of 'strike suits'...." Ohio Public Employees Retirement System, etc. v. Federal Home Loan Mortg. Corp., etc., et al., No. 4:08CV0160, 2010 U.S. Dist. LEXIS 51212, *8 (N.D. Ohio, Eastern Div., Apr. 22, 2010) (e.a.).
  12. ^ "[A]busive class actions which are brought with the hope that the expense of litigation may force defendants to settle despite the actions' lack of merit." See id. at *8 (e.a.).
  13. ^ "[I]t is not uncommon for defendants and their insurers to choose to settle, rather than to litigate, as a means of containing costs, notwithstanding the conviction that the action is frivolous." Robbins v. Alibrandi, 127 Cal.App.4th 438, 451, 25 Cal.Rptr.3d 387, 396 (1st App. Dist., Div. 1, Feb. 4, 2005) (e.a.).
  14. ^ "[P]laintiffs' risk of losing the case on the merits was quite high; defendant had an unbroken history of prevailing in discrimination cases." Staton v. Boeing, 327 F.3d 938, 962(9th Cir. at Seattle Apr. 29, 2003) (e.a.).
  15. ^ Congress observed the nature of these lawsuits whereby a case can settle "even if it is meritless and has only a five percent chance of success." CAFA, supra note 10, at 21 (e.a.).
  16. ^ "Nevertheless, systemic pressures, limited information, and the persuasive efforts of defense and class counsel all combine to lead judges to approve inadequate settlements." Christopher R. Leslie, The Significance of Silence: Collective Action Problems and Class Action Settlements, 59 FLA. L. REV. 71 (No. 1, Jan. 2007), at 129 (e.a.).
  17. ^ "$15 to $30 now or in the future, ... is such a trivial amount of money even to a person who is usually strapped for funds." Reynolds v. Beneficial National Bank, et al., 288 F.3d 277, 285 (7th Cir. 2002) (e.a.).
  18. ^ A shareholder in the Enron settlement received $6.79 a share for each share that she paid $70 to purchase while her lawyers were seeking nearly $700 million in attorneys' fees, with one requesting a multiplier that would pay him nearly $3,000 an hour for his efforts. In re Enron Corporation Sec. Derivative & ERISA Litig., MDL No. 1446, Civ. No. H-01-3624 (S.D. Tex., Houston Div.).
  19. ^ "Today [class actions] are too often used to efficiently transfer large fee to a small number of trial lawyers, with little benefit to the plaintiffs." Fears v. Wilhelmina Model Agency, Inc., et al., 2005 U.S. Dist. LEXIS 7961, at *15 (S.D.N.Y. May 5, 2005) (citation omitted) (e.a.).
  20. ^ In re Initial Public Offering Sec. Litig., 671 F.Supp.2d 467 (S.D.N.Y. Oct. 6, 2009).
  21. ^ Steve Tilghman, a class action settlement administrator who has handled over 175 settlements, has testified that where settlements require filing a claim form, less than ten percent of class members participate. Sylvester v. Cigna Corp., 369 F.Supp.2d 34, 44 (D. Me. Aug. 23, 2005).
  22. ^ Ten percent is indeed on the high end when you consider the Ford Explorer case mentioned above where only 148 people out of one million redeemed their coupon – a meager .0148% (less than 1/10th of 1 percent) of class members!
  23. ^ "[S]trict eligibility conditions or cumbersome claims procedures [mean] that many [class] members will be unlikely to claim benefits...." MANUAL FOR COMPLEX LITIGATION 4TH, § 21.61, at 311 (e.a.).
  24. ^ "[T]he plaintiffs' lawyers from the DuPont case will wreak enormous economic harm on West Virginia's economy. They will collect millions in fees and return to their out-of-state residences leaving the West Virginia economy in shambles." In Perrine v. E.I. DuPont de Nemours and Co., et al., Nos. 34333, 34334, and 34335 (Supreme Ct. of Appeals, W. Va.), Ketchum, J., Dissenting Opinion at 8-9 (e.a.).
  25. ^ "[This class action lawsuit] conjures up visions of American manufacturers doing business in shark infested waters. Here, law firms, licking their chops at the smell of money in the water, swim over, under and around every deep pocket waiting to initiate costly debilitating litigation in hopes of picking off a few million here and again without regard to the short or long-term deleterious effect of their actions on American commerce and the public good." In re Schering-Plough/Merck Merger Litig., No. 09-1099 (DMC)(MF) (D.N.J.), Dkt. 65-1, filed 3/3/10, at 7 (e.a.).
  26. ^ The court "identified ways in which the class action device was being used to injure 'the entire U.S. economy.'" Merrill Lynch, supra note 5, at 81 (e.a.) (citing H. R. Conf. Rep. No. 104-369, p. 31 (1995)).
  27. ^ "In the decades since the 1966 revision of Rule 23, class action practice has become ever more adventuresome as a means of coping with claims too numerous to secure their 'just, speedy, and inexpensive determination; one by one." Amchem Products, Inc. v. Windsor, et al., 521 U.S. 591, 617-18 (June 25, 1997).
  28. ^ "[I]f not adequately contained, [class action litigation] can be employed abusively to impose substantial costs on companies and individuals whose conduct conforms to the law." Tellabs, Inc. v. Makor Issues & Rights Ltd., et al., 551 U.S. 308, 313 (June 21, 2007) (e.a.).
  29. ^ "[The court noted that] nuisance filings, targeting of deep-pocket defendants, vexatious discovery requests, and manipulation by class action lawyers of the clients whom they purportedly represent had become rampant in recent years." Merrill Lynch, supra note 10, at 81 (e.a.).
  30. ^ "[T]he Committee is concerned about class actions that do little to benefit — and sometimes actually harm — the class members who are supposed to be the beneficiaries of such cases, while enriching their lawyers." CAFA, supra note 9, at 29 (e.a.).
  31. ^ "[J]udges routinely approve class action settlements that often make the class worse off than no settlement at all." Leslie, supra note 17, at 71 (e.a.).
  32. ^ " When the potential loss is stratospheric, a rational defendant will settle even the most unjust claim." Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1245 (9th Cir. Feb. 6, 2007) (Opinion withdrawn) (no longer citable) (Kleinfeld, C.J., dissenting) (e.a.).
  33. ^ "This case poses a considerable risk of enriching undeserving class members and counsel.... [T]hat women injured by sex discrimination will have to share any recovery with women who were not. Women who were fired or not promoted for good reasons will take money from Wal-Mart they do not deserve, and get reinstated or promoted as well. Dukes v. Wal-Mart, Inc., supra note 33, at 1244, 1249 (e.a.).
  34. ^ "[The settlement] is not fair, first and foremost, because it does not comport with the most elementary notions of justice and morality.... [I]t proposes that the shareholders who were the victims of the Bank's alleged misconduct ... pay the penalty for that misconduct..... Obviously, a proposal that asks the victims to pay a fine for their having been victimized is, for all the reasons already given, as unreasonable as it is unfair." Securities and Exchange Commission v. Bank of America Corp., No. 09-civ-6829 (JSR) (S.D.N.Y.), Memorandum Order Sept. 14, 2009, at 4 and 8 (e.a.).
  35. ^ "But since the fine is imposed, not on the individuals putatively responsible, but on the shareholders, it is worse than pointless: it further victimizes the victims." Securities and Exchange Commission v. Bank of America Corp., supra note 35, at 11 (e.a.).
  36. ^ "A person who seeks out opportunities to sue could do so in ways that injure other class members.... Such a person could be tempted to file suits designed to extract payoffs from the corporation even if the average investor will lose in the process." Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. Jan. 17, 2006) (e.a.).
  37. ^ "FTC Commissioner Thomas B. Leary said these settlements still hurt consumers. If the case is meritless, and class members were never really harmed, he wrote in a paper on the subject, then the class action is frivolous. The unnecessary cost of defending against it will ultimately lead to higher prices, he said." Tyler Cunningham, Coupon Deals May Get Snipped, S.F. Chronicle, 2/17/05, p. 1 (e.a.).
  38. ^ "These [class actions] are considered easy or routine because they frequently involve complaints with boilerplate allegations, similar class certification arguments, and standard settlements." Thomas E. Willging, et al., Empirical Study of Class Actions in Four Federal District Courts: Final Report to the Advisory Committee on Civil Rules 29-31 (Fed. Jud. Center 1996), at 16 (e.a.).
  39. ^ "Where available refunds afford class members a comparable or even better remedy than they could hope to achieve in court, a class action would merely divert a substantial percentage of the refunds' aggregate value to the class lawyers. For this reason, among others, rational class members would not choose to litigate a multiyear class action just to procure refunds that are readily available here and now." In re Aqua Dots Products Liab. Litig., MDL No. 1940, No. 08-C-2364, 2010 U.S. Dist. LEXIS 105788 (N.D. Ill., Eastern Div., Oct. 4, 2010), at *19 (e.a.).
  40. ^ "Nonetheless, fully knowing that this refund program was already well underway, the Milberg Weiss law firm filed a class action lawsuit charging that Ford had committed fraud. Even worse, it asked the court immediately to enjoin Ford from continuing its refund efforts — presumably so that the lawyers could get a cut of the refund money." CAFA, supra note 9, at 21 (e.a.).
  41. ^ "[Class actions] provide a tempting arena for litigation for the sake of generating attorney fees." Robbins v. Alibrandi, 127 Cal.App.4th 438, 451, 25 Cal.Rptr.3d 387, 396 (1st App. Dist., Div. 1, Feb. 4, 2005) (e.a.).
  42. ^ "Yet another common abuse is the filing of "copy cat" class actions (i.e., duplicative class actions asserting similar claims on behalf of essentially the same people)." Class Action Fairness Act of 2000, 106th Cong., 2d Session, Senate Report No. 106-420 (Sept. 22, 2000), at 19 (e.a.).
  43. ^ A case where over 30 putative class action complaints were filed in a securities class action. The court noted that "duplicative [complaints] can artificially increase the number of plaintiffs and attorneys involved in the litigation. Such overlap may be of questionable benefit to the class." Victor v. Argent Classic Convertible Arbitrage Fund L.P., et al., No. 08-4904-cv (2d Cir., decided 10/14/10), at 7 (e.a.).
  44. ^ "Several attorneys have told this author that they have seen settlements postponed until sufficient billable time was generated.... One federal trial judge has indicated to the author that it is often clear to the court when this is occurring, because disputes cease, the parties begin to cooperate, and yet no settlement is immediately forthcoming." John C. Coffee Jr., Rescuing the Private Attorney General: Why the Model of the Lawyer as Bounty Hunter is Not Working, 42 MD. LAW. REV. 215, 247 n.75 (1983).
  45. ^ Here's how one objector presented the issue. "I'd like to read to you [what U.S. District Court Judge William Alsup, Northern District of California, said in] the Peoplesoft case ..., which I believe is relevant to this point. [A] case in which 200 [timekeepers] — 84 partners, 58 associat[es], 86 legal assistants – worked on a case in which the judge remarked: 'In this court's experience of 25 years in large scale litigation, this case comfortably could have been handled through trial [and the case in question settled without a trial] – by 10 or fewer timekeepers, five lawyers and five legal assistants.'" In re Vitamin Cases, No. A098354 (1st App. Dist., Div. 2, San Francisco), Fairness Hr'g Tx. 1/18/02, at 28:26-28; 29:1-5) (e.a.).
  46. ^ The judge said the expert "had no education, training, or experience in medicine or human toxicology. He is a soil scientist with a degree in agronomy." The expert "was plainly not qualified to give human toxicology and medical opinions.... Under the plaintiffs' logic, the local shoeshine boy who played with an erector set as a child can opine on quantum physics...." Perrine v. E.I. duPont de Nemours and Co., et al., 225 W. Va. 482, 583 (S.Ct. of Appeals) (Ketchum, J., dissenting) (e.a.).
  47. ^ Judge Ketchum wrote that "Retained expert witnesses are like eggs. You can buy them by the dozen - they are just more expensive." Perrine v. E.I. duPont de Nemours and Co., et al., supra, 225 W. Va. at 582 (Ketchum, J., dissenting) (e.a.).
  48. ^ "Class action lawyers are expanding their employment of law professors and retired judges to testify in supporting plaintiffs' lawyers' attorneys' fee requests, although this does not reflect a conventional use of expert witnesses. An attorney seeking a fee award for his or her own work looks self-serving. Law professors and retired judges often testify about the reasonableness of the proposed fee percentage or of the hours spent accomplishing legal tasks on behalf of the class. Retaining a law professor or retired judge as an expert [allows the judge to rely on someone other than the self-interested lawyer, particularly where the] fee is paid from the class members' recovery, and yet there is unlikely to be any opposition to the fee request." See William B. Rubenstein, Analysis & Perspective, 6 Expert Evidence Report 561 (No. 20, Oct. 23, 2006) (e.a.).
  49. ^ In re Charles Schwab Corp. Sec. Litig., No. 08-01510 WHA (N.D. Cal. San Francisco), edited Letter (e.a.).
  50. ^ William B. Rubenstein, The Fairness Hearing: Adversarial and Regulatory Approaches, 53 UCLA L. Rev. 1435, 1459 (2006) (citations omitted).
  51. ^ Id at 10.
  52. ^ Id at 18.
  53. ^ "In March 1995, a computer manufacturer settled multiple state court class actions alleging a chip flaw that would arise only once in 27,000 years for the average spreadsheet user." CAFA, supra note 10, at 19.
  54. ^ Id at 44.
  55. ^ Id.
  56. ^ Id at 40.
  57. ^ Id at 46.
  58. ^ Id at 47.
  59. ^ Id at 50.
  60. ^ Id at 38.
  61. ^ Id at 28.
  62. ^ "Representative plaintiffs and their lawyers may be imperfect agents of the other class members--may even put one over on the court, in a staged performance." Kamilewicz v. Bank of Boston Corp., 100 F.3d 1348, 1354 (7th Cir. 1996) (emphasis added (hereinafter "e.a."))
  63. ^ Id at 36.
  64. ^ "[C]onstitutional due process rights are often ignored in class actions." CAFA, supra note 10, at 14.
  65. ^ Id at 51.
  66. ^ Id at 43.
  67. ^ Id at 46.
  68. ^ Id at 25.
  69. ^ Id at 17. See also Id at 10.
  70. ^ Id at 21.
  71. ^ Class action lawsuits "have made more overnight millionaires [of lawyers] than almost any other business." Lawyers have become "business partners of plaintiffs in seeking large-dollar recoveries rather than act[ing] as objective servants of the law." U.S. Supreme Court Justice Sandra Day O'Connor (e.a.).
  72. ^ "No opening generalization about the modern class action is sounder than the assertion that it has long been a context in which opportunistic behavior has been common...." John C. Coffee Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 905 COLUM. L. REV. 1343, 1347 (1995) (e.a.)
  73. ^ Id at 42.
  74. ^ "Everybody was paying plaintiffs so they could bring their cases. I thought I had to do it, too." Josh Gerstein, Lerach Says Payoffs Were Widespread, The New York Sun, Feb. 11, 2008, available at http://www.nysun.com/national/lerach-says-payoffs-were-widespread/71046/, and Bill Lerach, former Milberg partner and participant in the criminal conspiracy for paying kickbacks to lead plaintiffs, stated in an interview that paying "kickbacks to plaintiffs were 'industry practice.'" Patrick Dillon and Carl M. Cameron, Circle of Greed, Broadway Books, p. 454, 2010.
  75. ^ Id.
  76. ^ Sherman Joyce, "Congress Overlooks Plaintiff-Lawyer Abuses," The Hill, April 22, 2008.
  77. ^ See "How Trial Lawyers, Inc. Became Washington’s Most Influential Business Lobby", available at http://www.triallawyersinc.com/kstreet/kstr02.html#notes.
  78. ^ 15 U.S.C. §§77z-1(a)(4)-(7), 78u-4(4)-(7).
  79. ^ . Rep. 109-14, 109 Cong., 1st Sess. 1 (Feb. 28, 2005).
  80. ^ "Through several hearings over the past several years, the Committee has become aware of numerous class action settlements approved by state courts in which most – if not all – of the monetary benefits went to the class counsel, rather than the class members those attorneys were supposed to be representing. These settlements include many so-called 'coupon settlements' in which class members receive nothing more than promotional coupons." Class Action Fairness Act of 2005 (hereinafter "CAFA"), S. Rep. 109-14, 109 Cong., 1st Sess., Calendar No. 1 (Feb. 28, 2005), at 15 (emphasis added (hereinafter "e.a.").
  81. ^ "The first such abuse involves settlements in which the attorneys receive excessive attorneys' fees with little or no recovery for the class members themselves [in short, the clients are marginally relevant at best]." CAFA, supra note 10, at 14, 4 (e.a.).
  82. ^ "[A]buses that threaten to undermine [the class action's] usefulness … [include] overly generous attorney's fee stipulations." Barbara J. Rothstein & Thomas E. Willging, Managing Class Action Litigation: A Pocket Guide for Judges (Federal Judicial Center 2005), at 1, 2, 5, and 8 (e.a.).
  83. ^ "Be aware that the adversarial clashes usually end with the settlement. Indeed, most settlements preclude the parties and attorneys from opposing the settlement's provisions, especially the stipulations about attorney fees. Thus, you need to take independent steps to get the information you'll undoubtedly need to review a settlement agreement." (e.a.).
  84. ^ "[A]ttempt to resolve the competition by "private ordering," that is, by agreeing to divide the labor, expenses, and fees. To safeguard the interests of the class and to prevent unnecessary litigation and overstaffing, you may want to review those agreements (which will be subject to disclosure upon settlement in any event). MCL 4th § 21.272.... Rule 23(g)(2)(C) explicitly permits you to include in the order of appointment "provisions about the award of attorney fees or nontaxable costs." Few judges have unilaterally imposed strict limits on fees in the order of appointment." (e.a.).
  85. ^ "And, once the adversaries agree on a settlement, you must decide — largely without any clash of views from class counsel, class representatives, or the defendant — whether that settlement is fair, reasonable, and adequate to satisfy the interests of the class as a whole.... [Y]ou cannot rely on adversaries to shape the issues that you must resolve in the class context." (e.a.).
  86. ^ MANUAL FOR COMPLEX LITIGATION (4th ed.), § 21.61, at 310.
  87. ^ "[S]uch as discount coupons for more of defendants' product, while granting substantial monetary attorney fee awards." MANUAL FOR COMPLEX LITIGATION (4th ed.), § 21.61, at 310.
  88. ^ "[S]uch as medical monitoring injunctions or coupons, or calculating the fee based on the allocated settlement funds, rather than the funds actually claimed by and distributed to class members." MANUAL FOR COMPLEX LITIGATION (4th ed.), § 21.61, at 310.
  89. ^ In re Zoran Corp. Derivative Litig., No. C06-05503 WHA (N.D. Cal., San Francisco Div.), 2008 U.S. Dist. LEXIS 48246 (N.D. Cal., San Francisco Div., Apr. 7, 2008) (Order Denying Preliminary Approval of Proposed Settlement of Derivative Action (Dkt. 164)).
  90. ^ "The Court only discovered the true date of the repricing upon review of supplemental information. None of the briefing filed before the hearing on the motion for preliminary approval ever indicated the true date the options were repriced." Zoran, supra, at *27 (e.a.)
  91. ^ The value of the repriced options has been exaggerated." Zoran, supra, at *28 (e.a.).
  92. ^ Interestingly, the MOU provided the individual defendants "will return, cancel, or reprice options," not that they had already done so (Farris Decl. Exh. D) (emphasis added). After the MOU, the parties seem to have chosen to pass off the 2006 repricing as part of this undertaking. Zoran, supra, at *27-*28 (e.a.).
  93. ^ "Also troubling, however, is the fact that five of the reforms listed in the proposed settlement were already adopted by Zoran's board well before the parties even sat down to discuss settlement terms (Farris Decl. ¶ 17)." Zoran, supra, at *32 (e.a.).
  94. ^ "Precisely because the adversarial system recedes, counsel have an enhanced duty of candor to lay out the weaknesses as well as the strengths. It is unfair to try to slip a weak or collusive settlement past the judge, hoping he or she will simply sign off or will not stumble upon the right questions.... Counsel are excellent lawyers. The Court needs their help. They must try harder to meet their obligations as officers of the court." Zoran, supra, at *36, *37 (e.a.).
  95. ^ Id.
  96. ^ "A person who seeks out opportunities to sue could do so in ways that injure other class members." Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir. Jan. 17, 2006).
  97. ^ "[C]onstitutional due process rights are often ignored in class actions." CAFA, supra note 10, at 14.
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