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Speaker's Resource: 7. Class Actions, p 5

 

 

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Key Reference Citations (KRC)

Attorneys’ Fees

  • “The claim is not that it takes a lawyer to bring a class action — that is self-evident — but rather that class actions turn our whole concept of civil litigation on its head.  Instead of an injured individual finding a lawyer to help her obtain a legal remedy, and paying that lawyer for his time and expenses, the lawyer looks for instances in which individuals may have been injured, finds a representative plaintiff, and files a class action to obtain fees for himself, giving short shrift to the question of whether the claims he brings have merit.” (KRC: Hensler, “Class Action Dilemmas…” p. 402, referencing  Andrew Leigh, “Being a Plaintiff Sometimes Amounts to a Profession,” Investor’s Business Daily, Nov. 1, 1991, at 8; and Karen Donovan, “Bloodsucking Scumbag,” Wired 4.11: Electrosphere (Nov. 1996), available on the internet at http://www.wired.com/wired/4.11)

  • “There have been too many settlements made where the attorneys took far too much of the proceeds, and the aggrieved consumers received but a pittance. . .”

    • (KRC: Hensler, “Class Action Dilemnas…”, p. 33, quoting Howard Metzenbaum, Chair, Consumer Federation of American, 2 Working Papers of the Advisory Committee, supra note 13, at 755 (citing various sources for the views quoted, as follows:  John P. Frank, “Response to 1996 Circulation of Proposed Rule 23 on Class Actions: Memorandum to My Friends on the Civil Rules Committee,” (Dec. 20, 1996), in Administrative Office of the U.S. Courts, 2 Working Papers of the Advisory Committee on Civil Rules on Proposed Amendments to Rule 23 266 (1997) (hereinafter Working Papers of the Advisory Committee). Another member of the 1966 Committee, William T. Coleman, rejects the implication that the 1966 Committee intended to facilitate “private attorneys general” class actions for the purposes of regulatory enforcement: “I respectfully submit that back in 1966, that was not an intended purpose of Rule 23(b)(3). If there is interest in deputizing all attorneys everywhere to enforce our laws, that’s a matter that should be decided by Congress, not through the class action provisions in the Federal Rules of Civil Procedure.” 4 Working Papers of the Advisory Committee, at 456. The use of private class actions for regulatory enforcement is discussed further in Chapter Three.)

  • “The disproportion of the returns to members of the class and the returns to the lawyers who represent them is often grotesque. In many cases, the individual members of the class are entitled to receive at most a dollar or two, while the attorney who secured this benefaction for them can retire on his share of this victory. “

    • (KRC: Hensler, “Class Action Dilemmas…” p. 83, quoting John Frank, “Response to the 1996 Circulation of Proposed Rule 23 on Class Actions: Memorandum to My Friends on the Civil Rules Committee” (Dec. 20, 1996), in 2 Working Papers of the Advisory Committee, supra note 2, at 277.)

  • “In many instances, the value of recovery to the individual class member is so negligible that it fails to offset the associated cost imposed on the defendants and the judicial system. Those types of claims only enrich the few counsel whose fees are based on the total aggregation with little or no benefit for the individual class member.”

    • (KRC: Hensler, “Class Action Dilemmas…”, p. 33, quoting Dudley Oldham, Lawyers for Civil Justice, 4 Working Papers of the Advisory Committee, supra note 13, at 505, as follows:  John P. Frank, “Response to 1996 Circulation of Proposed Rule 23 on Class Actions: Memorandum to My Friends on the Civil Rules Committee,” (Dec. 20, 1996), in Administrative Office of the U.S. Courts, 2 Working Papers of the Advisory Committee on Civil Rules on Proposed Amendments to Rule 23 266 (1997) (hereinafter Working Papers of the Advisory Committee). Another member of the 1966 Committee, William T. Coleman, rejects the implication that the 1966 Committee intended to facilitate “private attorneys general” class actions for the purposes of regulatory enforcement: “I respectfully submit that back in 1966, that was not an intended purpose of Rule 23(b)(3). If there is interest in deputizing all attorneys everywhere to enforce our laws, that’s a matter that should be decided by Congress, not through the class action provisions in the Federal Rules of Civil Procedure.” 4 Working Papers of the Advisory Committee, at 456. The use of private class actions for regulatory enforcement is discussed further in Chapter Three.)

 

Class Action Fee Examples

  • “Increasingly, the end result [of class action litigation] is huge fees for the lawsuit industry — an average of over $1,000 per hour according to Class Action Reports —but relatively tiny awards for individual plaintiffs.  For example, in one Texas case, lawyers sued two auto insurers for overbilling because the insurers rounded up premium bills to the next dollar (a practice that was sanctioned by the state insurance department) and pocketed almost $11 million; policyholders got a paltry $$5.50 each.” (KRC: Manhattan Institute, Trial Lawyers, Inc., p. 8, citing 24 Class Action Rep. 197 (Mar.- Apr. 2003) (showing hourly class action fee of $1509.77 from 2001-2003; Victor E. Schwartz, Mark A. Behrens & Leah Lorber, Federal Courts Should decide Interstate Class Actions: A Call for Federal Class Action Diversity Jurisdiction Reform, 37 Harvard J. On Legis. 494, 490-92 (2000); Class Action Lawsuits: Hearing Before the House Comm. On the Judiciary (May 15, 2003) (statement of Lawrence H. Mirel, commissioner of insurance and securities for the District of Columbia))

  •  “And with mass torts, very much as with class actions, policing attorneys’ loyalty to their clients turns out to be no easy task.  A suit on behalf of flight attendants who said they’d been harmed by smoke in airliner cabins (when smoking was still permitted) ended in a deal in which class members got zero dollars and zero cents, tobacco companies agreed to waive certain defenses against individual suits and set aside $300 million for a newly formed charity to be run under the lawyers’ supervision, and $46 million in legal fees went to the lawyers themselves…” (KRC: Olson, “The Rule of Lawyers”, p. 93)

  •  “In a class action against Cheerios over a food additive – with no evidence of injury to any consumers – lawyers were paid nearly $2 million in fees, which worked out to approximately $2,000 per hour.  Consumers in the class received coupons for a free box of cereal”.  “That’s some hourly fee.” (www.instituteforlegalreform.com/ , as accessed on September 27, 2005)

 

Conflicts of Interest

  • “The role of plaintiff attorneys in damage class actions has long attracted scrutiny. The central fear of critics is that these attorneys, unregulated in any real way by clients, and subject to the attractions of large fee awards, will fail to prosecute claims fully and will agree to settlements that better serve their own interests—and the defendants who should be their adversaries—than those of class members.” (KRC: Hensler, “Class Action Dilemmas…”, p. 79)

  • "A related fear is that if plaintiff attorneys secure settlements that are financially attractive without having to engage in serious investigation and vigorous prosecution of their claims, then, over the long run, they will bring increasing numbers of nonmeritorious suits, knowing they are likely to benefit from them. Over the long run, a process that encourages and rewards filing nonmeritorious suits and that permits settlement of meritorious suits for less than their true value will undercut the potential deterrence value of litigation and bring the legal system into disrepute.” (KRC: Hensler, “Class Action Dilemmas…”, p. 79)

  • “Even more remarkable than the coupon settlement ploy is a technique developed by class action lawyers some time around the early 1900s . . . the class action fee separately negotiated with, and paid by, the opponent…Wouldn’t clients and bystanders be justified in questioning the implicit trade-off going on in such negotiations: lower settlement sums for higher attorneys’ fees?...To hear the lawyers tell it, there’s no conflict of interest at all in this type of negotiation.”  (www.manhattan-institute.org , Lawrence W. Schonbrun, “Class Actions: The New Ethical Frontier”, Civil Justice Memo, No. 30, November 1996)

  • “The potential for self-dealing and collusion posed by traditional damage class actions is often attributed to their “headless” nature and the fact that in many such actions, individual class members have little to gain or lose, in an immediate sense, from the case. It is only when there are “real” plaintiffs, with “real” losses, some critics charge, that incentives for abuse are curbed.” (KRC: Hensler, “Class Action Dilemmas…”, p. 99)

  • “A different predicament arises in non-cash, or coupon class actions, as there often is no settlement fund or pool from which the plaintiffs’ lawyers can draw their contingency fee.  Thus, plaintiffs’ lawyers must receive their compensation from the defendants.  The conflicts of interest inherent in this situation present a challenging issue for courts overseeing the litigation.  As [one judge] wrote…”

It is hard to see how cutting plaintiffs’ attorneys’ fees can do [the plaintiff] any good.  He gets the same money whether the fee is cut or not—none…[but a plaintiff] who employs a lawyer to litigate against a third party has a legitimate interest in having his lawyer refrain from taking the third party’s money in exchange for throwing the fight.  (Zucker v. Occidental Petroleum Corp., 192 F.3rd, pp. 1326-27)

 

 

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Please Note:  The material presented in this Speaker's Resource has been collected from a wide variety of sources.  You are welcome to use this material for quotations and factual material in your speeches, presentations and articles.  To the best of our ability, we have provided original citations so that you can document the comments you use.  If you become aware that any of the citations or facts presented in this collection are inaccurate or outdated by newer information, please send an email to Speakers@lawexec.com to tell us so that we can update this material.  The materials cited are generally copyrighted by the original author and when you quote from their material, you should include the original attribution to acknowledge their role as authors.  Original material © 2005 American Justice Partnership.