f/k/a archives . . . real opinions & real haiku

June 27, 2003

Objecting to “Serial Objectors” — parasites need oversight in class actions

Filed under: pre-06-2006 — David Giacalone @ 11:34 pm

Yesterday (6/26/03), Overlawyered.com spotlighted the often un$avory tactics of “serial objectors” in class action cases.  As described in a St. Louis Dispatch article, “professional” or “serial” objectors are “lawyers who make money by threatening to hold up class-action settlements in hopes that class-action lawyers will pay them to go away.” [“More lawyers cash in on class-actions,” by Trisha L. Howard (06/21/2003), stltoday.com]

The St.LD article tells of the serial slight-of-hand practiced last autumn at the Madison County Courthouse, where objecting attorneys said they could improve a a $350 million class-action settlement for AT&T customers who claimed the company had overcharged them for leasing telephones. “A few months later, they quietly dropped their objections to the settlement, leaving the settlement only slightly changed. Even so, they pocketed fees for their trouble.” The agreement reached by class counsel (paying the objectors out of their own fees) was confidential as to the amount paid and any changes made to the settlement to “improve” it.

One “frequent objector,” California attorney Lawrence Schonbrun, who has appeared in over 60 cases in that role, says that earning a living by objecting is “a niche where a certain limited number of lawyers who are crazy and have got nothing better to do can make some money.”  The St.LD article quotes Schonbrun saying that “I can’t listen to class-action lawyers saying objectors are doing it for the money when they are the epitome of lawyers who do things for huge sums of money.”

Two law professors help explain the issues for St.LD readers:

Objectors can range from the legitimate to the leech, said class-action expert Richard Nagareda, a professor at Vanderbilt University Law School in Nashville, Tenn.

In the best case, Nagareda said, an objector improves the terms of a settlement. But at their worst, objectors use criticism to block the settlement and shake down the lead lawyers for a cut of their fees, Nagareda said.

“What professional objectors have realized is that there are gains for both sides in settling any lawsuit,” Nagareda said. “They want to mooch on the gains.”

And, as to the secret agreements:

Such an agreement, cloaked in secrecy, should raise suspicion about the validity of the original settlement in the minds of the “clients” who belong to the AT&T class, said Kathleen Clark, who teaches legal ethics at Washington University School of Law.

Clark’s question: If the class counsel were so sure their settlement with AT&T was fair, why would they dig into their own pockets to keep the case out of appellate court?

That class has the right to know about a confidential side agreement between their lawyers and the objecting lawyers because it will help them evaluate whether their lawyers did a good job representing them,” Clark said.

I think it’s time for an ethicalEsq? moment. Who is looking out for the interests of the plaintiff clients?  Why aren’t judges closely scrutinizing the objections and resulting agreements?  What possible circumstances could warrant keeping the deals confidential?  Why are the organized bar and bar ethics counsel silent on this issue?

No, my move this week hasn’t made me extra grumpy.  I am extra tired, but I’m even more tired of hearing how embarrassed the legal profession is by the supposedly tiny part of the profession that is greedy and self-serving.  Rather than being embarrassed into paralysis — which suggests either tacit acceptance or irresponsible cowardice — members of the profession need to demonstrate our outrage through tough rules, commentary and oversight.  (Or, at least some stern CLE seminars!)

  • Two Cents from Jack Cliente: At the bar (tavern, that is), we guys sometimes bad-mouth buddies who cheat on their wives, but not too loudly if the philanderer’s too large.  Honestly, we’re also a little envious and fantasize it might happen to us someday.  Makes me wonder about the “proper” attorneys, who tsk-tsk over high-rolling plaintiffs lawyers but do nothing about them.  Maybe they’re really hoping one of their partners will strike it rich in the JD-Jackpot someday (or don’t want to derail the gravy train for defense lawyers).  And, maybe they’re afraid of retaliation from the big-bucks bar buccaneers.  Me, I hope that the abused clients will wake up to what’s going on someday, and react like the abused spouse — with frying pan, hatchet, or a good lawyer of their own.

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