The incentives of a class action

John O'Brien Apr. 11, 2010, 10:00am



CLARKSBURG, W.Va. (Legal Newsline) - When Harrison County Circuit Court Judge Thomas Bedell asked for any objections to $127 million being paid to attorneys in a class action lawsuit against DuPont during a 2008 hearing, no class member in attendance responded.

Two months later, those same attorneys asked Bedell if he would authorize $75,000 payments to the 10 lead plaintiffs in the case.

Despite the company's objection, Bedell eventually ordered $50,000 for each of the lead plaintiffs. The payments will come out of the attorneys fees.

Those payments are termed "incentive awards," but DuPont called them incentives for collusion.

"It is common. It is nothing that is promised," said Hill, whose firm Hill Peterson Carper Bee & Deitzler teamed with several other firms on the once-$381 million case. "In fact, the lead plaintiffs are specifically promised nothing."

The U.S. Court of Appeals for the Ninth Circuit ruled last year that incentive awards are fine, as long as the figure isn't tied by a prior agreement to the amount recovered.

DuPont initially succeeded in opposing the awards, but Bedell changed his mind after a motion to reconsider. DuPont contended state law did not recognize the awards and that it is improper to pay a witness.

"The class representatives may have had a greater interest in maximizing the amount of attorneys fees and expenses awarded to Plaintiffs' counsel than in maximizing the amount of recovery paid to absent class members," DuPont's attorneys wrote.

"These payments create a powerful incentive for improper collusion between class representatives and the class counsel who pays them."

DuPont, however, did not appeal the incentive awards to the West Virginia Supreme Court, which cut the $196 million punitive damages award in half on March 23 before shipping the case back to Harrison County for a jury trial to determine if the lawsuit was filed before the statute of limitations had expired.

The lawsuit alleged DuPont released arsenic, cadmium and lead into the environment around its Harrison County smelter. DuPont will pay $140 million in medical monitoring costs for the class members if it is found that the lawsuit was filed timely.

The 10 class representatives were subjected to multiple physical examinations, blood tests and depositions. The plaintiffs attorneys said in court documents that the representatives spent several hundred hours of their lives on the case.

Hill said any class member could have objected to the amount of attorneys fees being paid, not just the representatives. DuPont said the lack of objections meant the notice drafted by the attorneys and the manner it was delivered was inadequate, a claim the plaintiffs attorneys disputed.

"All class members have the opportunity to have an input on this," Hill said. "The incentive awards are just a recognition. They're not always awarded.

"It's a discretionary thing with the trial judge. In some cases, the lead plaintiffs, in the course of representing all other class members, have been put through the mill."

Hill said some of the class representatives in another lawsuit against DuPont, filed in Parkersburg, were subjected to jeers in public.

But DuPont said the request for incentive awards contradicted testimony by the class representatives.

"At trial, Plaintiffs' counsel asked class representative Rebeccah Morlock this question: 'Just so its very clear, are you asking, Ms. Morlock, anything for yourself beyond what you're asking for everybody in this courtroom.'

"Ms. Morlock gave this answer: 'No I'm not. I don't want anything.' Now Ms. Morlock wants $50,000 for herself.

"Similarly, at trial, class representative Lenora Perrine concluded her testimony by saying that she had been in court everyday to support and be a part of the proceedings voluntarily because 'I know it's not gonna help me much now... but i'm thinking of the young people,' and 'I just felt like that's what I needed to do.'

"Now Mrs. Perrine is asking for $50,000 for herself."

Tort reform advocate Ted Frank said large incentive awards, like $50,000, keep the class representatives from having the motivation to "act as monitors of the attorneys' fiduciary responsibility to the class."

Frank is the founder of the Center for Class Action Fairness. His organization files objections to proposed class action settlements, usually where he feels the attorneys are benefitting much more than the class members.

"The whole point of a class action is to generate efficiencies that wouldn't be possible in individual actions -- so why are the attorneys taking a one-third contingent fee instead of a much smaller percentage?" Frank said.

"Courts determining the adequacy of a class representative should do more to analyze whether the class representative controls the attorney or vice versa."

Hill can counter that a judge signed off on the order authorizing the payments.

"It's entirely up to the judge to say if they are appropriate. There is a range that is acceptable. There is case law on this," Hill said.

"There's a place for it. There are checks and balances on it. If a trial judge makes an award, its appealable. Even though sometimes the appeals process grinds slowly, it grinds."

From Legal Newsline: Reach John O'Brien by e-mail at

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