Panel picks holes in class action process

By Jessica M. Karmasek | Nov 28, 2011


WASHINGTON (Legal Newsline) - Law professors, attorneys and the head of one non-profit seemed to agree at a panel held earlier this month that much of the problems with class action settlements could be resolved, or at least improved, through procedural changes.

The Litigation Practice Group hosted a panel entitled "Attorneys Fees in Class Actions" on Nov. 10 as part of this year's National Lawyers Convention, held in Washington.

Those participating in the panel included: Ted Frank, founder of the Center for Class Action Fairness; Alan B. Morrison, Lerner Family Associate Dean for Public Interest/Public Service at George Washington University's law school; Lester Brickman, professor of law at the Benjamin N. Cardozo School of Law at Yeshiva University; Brian Fitzpatrick, associate professor of law at Vanderbilt University's law school; and Jeffrey S. Jacobson, partner at Debevoise and Plimpton LLC.

Moderating the panel was Brett M. Kavanaugh, who serves on the U.S. Court of Appeals for the District of Columbia Circuit.

The courts, Frank said, are often the ones left with the job of policing attorneys fees in class action settlements.

"I'm not saying all judges are bad about this," he said. "But some awful settlements are approved."

Frank's Center for Class Action Fairness, a non-profit, represents class action members who object to proposed settlements, pro bono. Then, as Frank explained, "we refuse to let the class counsel to pay us to go away."

The center's goal, he said, is to create good precedents.

One example of the center's success: The U.S. Court of Appeals for the Ninth Circuit's decision in August to vacate a district court's approval of a settlement in a case that alleged that Bluetooth manufacturers knowingly failed to disclose the potential risk for hearing loss associated with extended use.

The settlement agreement in the products liability class action against GN Netcom Inc., Motorola Inc. and Plantronics Inc. provided the class $100,000 in cy pres awards and zero dollars for economic injury, while setting aside up to $800,000 for class counsel and $12,000 for the class representatives.

Under the legal doctrine of cy pres, a French term meaning "as close as possible," a court may order that the funds be used for grants to benefit the class members indirectly or as near as possible in order to remedy or compensate for the harm to the class members.

William Brennan and other class members, in this case the "objectors," challenged the fairness and reasonableness of the settlement and appealed both the approval and fee orders. The center argued on behalf of the objectors.

"You see it all the time -- judges rubber-stamping settlements," Frank said.

Fitzpatrick said judges are inclined to get settlements off their dockets and, because of that, they often approve whatever comes before them.

"Something needs to be done to have someone pushing back at the settlement stage to create more of an adversarial process," he said.

He suggested a special master, who would give the court a counter brief on why the settlement shouldn't be approved or why the attorneys fees are too high.

But not all the blame should be placed on class action lawyers, Fitzpatrick said.

"I think we've given them a little bit of a bad rap," he said.

Fitzpatrick said he looked at every class action settlement in federal court over a two-year period -- 2006 and 2007. Nearly 700 settlements were approved during that time, he said.

"That was $33 billion," he explained. "Of that, $5 billion was given to class action lawyers. That's about 15 percent of all that money."

That isn't "all that big" of a number, Fitzpatrick said.

"There are always some extreme cases. And there are always some cases where lawyers are abusing the system. There probably always will be," he said.

But to completely eliminate class actions wouldn't help either, he said.

"For some people, the optimal number of class actions is zero. That is, businesses," he said.

"Don't get me wrong, I'm a big fan of business. I'm a conservative Republican. But I don't agree that the optimal number of class actions is zero. That's not necessarily good for the rest of society.

"But I think the people with a vested interest in seeing zero class actions have made it sound a little worse than it really is."

Morrison agreed, saying class actions are "important engines in our society."

But like Frank, he is concerned some lawyers are bringing down the class action system.

However, he said some changes in procedures and timing could help.

"The parties come in, they've settled, they ask for a schedule and they work backwards," Morrison explained.

One thing that isn't included in the settlement process is time for objectors, he said. "The schedule is always very tight."

Another problem is lack of information or access to it.

"The (settlement) notice goes out, but it's just the notice. There's no copy of the settlement agreement or discovery, and definitely no copy of the initial complaint."

Jacobson agreed Morrison's suggestions could help.

"Let's do robust notice," he said. "Give people all the time they need to look at this settlement and make a clear decision."

But judges should do their part, Jacobson said.

In particular, he said they should have to ask two specific questions: 1) When did you realize that the case should be settled on these specific terms? 2) After that point, how much work did you do?

"I think I agree with my co-panelists that much of the problem here is that judges aren't asking questions, or they're not asking the right questions," he said.

Brickman, who recently wrote "Lawyer Barons: What Their Contingency Fees Really Cost America," also pointed to clear-sailing provisions as being a problem.

Such agreements or clauses are a compromise in which a class action defendant agrees not to contest the class lawyer's petition for attorneys fees.

Brickman argues that signing such a provision deprives judges of "critical information."

Still, no court has ever invalidated a settlement because of such an agreement, he noted.

Kavanaugh, who presided over the discussion, admitted that judges are "very focused" on moving their dockets along.

"When they hear the word 'settlement' -- that is a glorious word for many judges," he said.

"So I think that's something the people on the panel have rightly spotted as something judges do, but I would say it reflects a broader systemic issue, which is crowded dockets and the need to move things along."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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