combating class settlement objectors: overview of proposed...

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Combating Class Settlement Objectors:Overview of Proposed Rule Amendments,Key Preventive Measures and TacticsMinimizing and Defending Against Challenges by Professional Objectors,Government Officials, and Public Interest Groups

THURSDAY, SEPTEMBER 29, 2016

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Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

Ross Good, Esq., Anderson + Wanca, Rolling Meadows, Ill.

Andrew J. Trask, Senior Counsel, McGuire Woods, Los Angeles

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ProfessionalObjectorswww.serialobjector.com

ProfessionalObjectorswww.serialobjector.comBy Ross GoodAnderson + [email protected]

Section I. ProfessionalObjectors Objections to class action lawsuits can serve a legitimate

purpose, but they also allow an individual to hold up class-wide settlements.

Often the goal for a Professional Objector is to lose at thefinal approval stage while preserving the ability to appeal.This enables the Professional Objector to bargain formoney by threatening to delay the appeals process for aslong as possible.

Professional Objectors typically attempt to get aconfidential payoff after their Notice of Appeal is filed butbefore doing substantive work on the appeal.

www.serialobjector.com Most Professional Objectors are fairly transparent about

their motivation to obtain a confidential payoff outside thecourtroom.

Objections to class action lawsuits can serve a legitimatepurpose, but they also allow an individual to hold up class-wide settlements.

Often the goal for a Professional Objector is to lose at thefinal approval stage while preserving the ability to appeal.This enables the Professional Objector to bargain formoney by threatening to delay the appeals process for aslong as possible.

Professional Objectors typically attempt to get aconfidential payoff after their Notice of Appeal is filed butbefore doing substantive work on the appeal.

www.serialobjector.com Most Professional Objectors are fairly transparent about

their motivation to obtain a confidential payoff outside thecourtroom.

6

Best Practices on HandlingProfessional Objectors Be proactive regarding the content of class notice

Disclosure of documentation evidencing membership of theobjector in the proposed class

Disclosure of all previous objections

In-person appearance of objector/counsel at Final ApprovalHearing

Background research using PACER, WestLaw/Lexis, andwww.serialobjector.com

Do the discovery: Get all retainer agreements

Depose objectors

Filings to Consider Motion to Strike

Appeal Bond

Expedited Appeal

DO NOT PAY!

Be proactive regarding the content of class notice Disclosure of documentation evidencing membership of the

objector in the proposed class

Disclosure of all previous objections

In-person appearance of objector/counsel at Final ApprovalHearing

Background research using PACER, WestLaw/Lexis, andwww.serialobjector.com

Do the discovery: Get all retainer agreements

Depose objectors

Filings to Consider Motion to Strike

Appeal Bond

Expedited Appeal

DO NOT PAY! 7

Retainer Agreements

The snapshot above is part of the retainer agreementbetween attorney Kirk Kennedy and A7 Realty LP d/b/aAustin Distributing Company for its objection to theobjection in Fauley v MetLife (Cir. Ct. Lake Co., IL, 14 CH1518).

Rule 5.4 of Illinois Rules of Professional Conduct states that“[a] A lawyer or law firm shall not share legal fees with anonlawyer”

Documentation of unethical agreements can be used tosupport final approval of the settlement, appeal bondsand expediting appeals.

Retainer agreements that violate the forum state’s Rules ofProfessional Conduct should be reported to the forumstate’s attorney disciplinary commission.

The snapshot above is part of the retainer agreementbetween attorney Kirk Kennedy and A7 Realty LP d/b/aAustin Distributing Company for its objection to theobjection in Fauley v MetLife (Cir. Ct. Lake Co., IL, 14 CH1518).

Rule 5.4 of Illinois Rules of Professional Conduct states that“[a] A lawyer or law firm shall not share legal fees with anonlawyer”

Documentation of unethical agreements can be used tosupport final approval of the settlement, appeal bondsand expediting appeals.

Retainer agreements that violate the forum state’s Rules ofProfessional Conduct should be reported to the forumstate’s attorney disciplinary commission.

The complete retainer agreement is available at http://www.serialobjector.com/cases/1

8

Depositions of objectors

Review past depositions of the objectors

Class Notice Questions

Settlement Questions

Retainer Agreement Questions

Marketing of attorney(s) for the objector beingrepresented

Goals for the objection

Review past depositions of the objectors

Class Notice Questions

Settlement Questions

Retainer Agreement Questions

Marketing of attorney(s) for the objector beingrepresented

Goals for the objection

9

Appeal Bond

FRAP Rule 7: “In a civil case, the district court mayrequire an appellant to file a bond or provide othersecurity in any form and amount necessary to ensurepayment of costs on appeal.”

The bond is permissive

Research your judge

Use the discovery on the objector(s) to support yourmotion

Use objector’s past objections to support your motion

FRAP Rule 7: “In a civil case, the district court mayrequire an appellant to file a bond or provide othersecurity in any form and amount necessary to ensurepayment of costs on appeal.”

The bond is permissive

Research your judge

Use the discovery on the objector(s) to support yourmotion

Use objector’s past objections to support your motion

10

Case Study #1: In Re: CheckingAccount Overdraft Litigation (USDistrict Court for S.D. FL, 09-md-02036)

Objection of Kirk A. Kennedy (Kennedy) et al. Doc.1920

Plaintiffs ask for appeal bond of $621,338 for all 49timely objectors. Doc. 2335

Order Mandating Appeal Bond of $616,338 for allobjectors to pay. Doc. 2473

Notice of Appeal of Objector Kennedy filed onDecember 9, 2011 by Elliot B. Kula and Daniel M.Samson of Kula & Samson, LLP. Doc. 2208

Appeal of Objector Kennedy voluntarily dismissed onJune 22, 2012.

Objection of Kirk A. Kennedy (Kennedy) et al. Doc.1920

Plaintiffs ask for appeal bond of $621,338 for all 49timely objectors. Doc. 2335

Order Mandating Appeal Bond of $616,338 for allobjectors to pay. Doc. 2473

Notice of Appeal of Objector Kennedy filed onDecember 9, 2011 by Elliot B. Kula and Daniel M.Samson of Kula & Samson, LLP. Doc. 2208

Appeal of Objector Kennedy voluntarily dismissed onJune 22, 2012.

http://www.serialobjector.com/cases/7

11

Case Study #1: Ancillary Proceeding:Sattiewhite and Kennedy v Kula &Samson (US District Court for S.D. FL,12-cv-24178) According to Kennedy, a settlement was reached with

class counsel on or about January 12, 2012. Doc. 128-3 Objectors Kennedy and Sattiewhite sue the attorneys

representing them on appeal (Kula & Samson) for In Re:Checking Account Overdraft Litigation.

The settlement amount was $1,100,000 which wastransferred to Kula & Samson’s Client Trust Account.Doc. 102-8

Kennedy claimed to have “an immediate right to atleast 40% of that money.” Doc 128-3

Documents available in this case are ordinarilyprivileged

According to Kennedy, a settlement was reached withclass counsel on or about January 12, 2012. Doc. 128-3

Objectors Kennedy and Sattiewhite sue the attorneysrepresenting them on appeal (Kula & Samson) for In Re:Checking Account Overdraft Litigation.

The settlement amount was $1,100,000 which wastransferred to Kula & Samson’s Client Trust Account.Doc. 102-8

Kennedy claimed to have “an immediate right to atleast 40% of that money.” Doc 128-3

Documents available in this case are ordinarilyprivileged

All filings are available for download at no cost at http://www.serialobjector.com/cases/7 underKennedy’s objection to In Re: Checking Account Overdraft Litigation. Click on the link for “Kennedyand Sattiewhite v. Kula & Samson.zip” 12

Case Study # 2: Dennings v.Clearwire Corporation (US DistrictCourt for W.D. WA, 10-cv-01859) District Court grants Final Approval of Class Settlement on

December 19, 2012. Doc. 98 Christopher A. Bandas filed Notice of Appeal on behalf of

his clients on January 18, 2013. Doc 101. District Court orders $41,150 appeal bond on March 11,

2013. Doc. 117. 9th Cir. Court of Appeals granted expedited appeal on

April 22, 2013. Doc. 126. 9th Cir. Court of Appeals issued Order Denying Motion to

Vacate Sanctions on July 26, 2013. Doc. 156. On August 20, 2013 the District Court ruled that the

appropriate sanction is to revoke Mr. Bandas' authorizationto practice in the Western District of Washington. Doc. 166.

District Court grants Final Approval of Class Settlement onDecember 19, 2012. Doc. 98

Christopher A. Bandas filed Notice of Appeal on behalf ofhis clients on January 18, 2013. Doc 101.

District Court orders $41,150 appeal bond on March 11,2013. Doc. 117.

9th Cir. Court of Appeals granted expedited appeal onApril 22, 2013. Doc. 126.

9th Cir. Court of Appeals issued Order Denying Motion toVacate Sanctions on July 26, 2013. Doc. 156.

On August 20, 2013 the District Court ruled that theappropriate sanction is to revoke Mr. Bandas' authorizationto practice in the Western District of Washington. Doc. 166.

http://www.serialobjector.com/cases/57

13

Case to Watch: Garber v.Commissioner of Baseball (US DistrictCourt for S.D. NY, 12-cv-03704)

Motion for Sanctions against Bandas filed April 28, 2016.Doc. 564

Hearing held before Judge on July 14, 2016. Doc. 591

On August 12, 2016 Bandas’s attorneys filedmemorandum on why Rule 11 sanctions should not beimposed on Bandas for representing the objector. Doc.599

This is an ongoing case that may decide the issue ofwhether an attorney representing an objector withoutan appearance on file can be sanctioned.

Motion for Sanctions against Bandas filed April 28, 2016.Doc. 564

Hearing held before Judge on July 14, 2016. Doc. 591

On August 12, 2016 Bandas’s attorneys filedmemorandum on why Rule 11 sanctions should not beimposed on Bandas for representing the objector. Doc.599

This is an ongoing case that may decide the issue ofwhether an attorney representing an objector withoutan appearance on file can be sanctioned.

14

Dr Jekyll and Mr Hyde: The Ted Frank Story Ted Frank is the founder and president of the Competitive Enterprise Institute’s

(CEI’s) Center for Class Action Fairness (CCAF). CCAF is a 501(c)(3) organization. CCAF files objections to class action settlements it thinks are unfair. CCAF is open

and transparent regarding the objections CCAF files and the results it obtains. According to Ted Frank, his annual pay from CCAF is $199,200. See Declaration of

Theodore H. Frank, In re Capital One, 7th Cir Ct. of Appeals, 15-1490, Doc. 56-2Page 22.

Saltzman v Pella (U.S. Dist. Ct. for N.D. IL, 06-cv-04481) is available athttps://www.serialobjector.com/cases/150 - My firm worked with Ted Frank onobjections to the settlement which ultimately led to the 7th Cir. overturning thesettlement.

In the past, Ted Frank has also performed work for professional objectorsindependent of CCAF: According to Ted Frank, he grossed about $253,000 from Bandas between 2013

and 2015 ”…and incurred about $32,000 of expenses on contract attorneys…” SeeDeclaration of Theodore H. Frank, In re Capital One, 7th Cir Court of Appeals, 15-1490, Doc. 56-2 Page 22. The website serialobjector.com has identified some ofthese cases including: Fauley v. Metropolitan Life (Cir. Ct. of Lake Co., IL, 14 CH 1518): On June 29, 2015, Ted Frank

said that he never made an appearance in this case nor is he working on this case now.https://www.serialobjector.com/cases/1

Fladell v. Wells Fargo Bank (US Dist. Ct. for S.D. FL, 13-cv-60721) is available athttps://www.serialobjector.com/cases/49

In re Certainteed Fiber Cement Siding Litigation (US Dist. Ct. for E.D. PA, 11-md-02270) isavailable at https://www.serialobjector.com/cases/129

In re Capital One Telephone Consumer Protection Act Litigation (US Dist. Ct. for N.D. IL, 12-cv-10064) and ancillary proceeding Chrisotpher A. Bandas v. Ted Frank (Nueces County, TXDist Ct. 2015DCV-2704-A) is available at https://www.serialobjector.com/cases/10

Ted Frank is the founder and president of the Competitive Enterprise Institute’s(CEI’s) Center for Class Action Fairness (CCAF). CCAF is a 501(c)(3) organization. CCAF files objections to class action settlements it thinks are unfair. CCAF is open

and transparent regarding the objections CCAF files and the results it obtains. According to Ted Frank, his annual pay from CCAF is $199,200. See Declaration of

Theodore H. Frank, In re Capital One, 7th Cir Ct. of Appeals, 15-1490, Doc. 56-2Page 22.

Saltzman v Pella (U.S. Dist. Ct. for N.D. IL, 06-cv-04481) is available athttps://www.serialobjector.com/cases/150 - My firm worked with Ted Frank onobjections to the settlement which ultimately led to the 7th Cir. overturning thesettlement.

In the past, Ted Frank has also performed work for professional objectorsindependent of CCAF: According to Ted Frank, he grossed about $253,000 from Bandas between 2013

and 2015 ”…and incurred about $32,000 of expenses on contract attorneys…” SeeDeclaration of Theodore H. Frank, In re Capital One, 7th Cir Court of Appeals, 15-1490, Doc. 56-2 Page 22. The website serialobjector.com has identified some ofthese cases including: Fauley v. Metropolitan Life (Cir. Ct. of Lake Co., IL, 14 CH 1518): On June 29, 2015, Ted Frank

said that he never made an appearance in this case nor is he working on this case now.https://www.serialobjector.com/cases/1

Fladell v. Wells Fargo Bank (US Dist. Ct. for S.D. FL, 13-cv-60721) is available athttps://www.serialobjector.com/cases/49

In re Certainteed Fiber Cement Siding Litigation (US Dist. Ct. for E.D. PA, 11-md-02270) isavailable at https://www.serialobjector.com/cases/129

In re Capital One Telephone Consumer Protection Act Litigation (US Dist. Ct. for N.D. IL, 12-cv-10064) and ancillary proceeding Chrisotpher A. Bandas v. Ted Frank (Nueces County, TXDist Ct. 2015DCV-2704-A) is available at https://www.serialobjector.com/cases/10 15

Serial Objector Indexwww.serialobjector.com This website seeks to identify attorneys and individuals

who repeatedly hold up settlements by objecting andappealing, often in the hopes of receiving confidentialpayoffs in exchange for dropping their objections.

Objectors

Signers

Attorneys

Documents available for download

This website seeks to identify attorneys and individualswho repeatedly hold up settlements by objecting andappealing, often in the hopes of receiving confidentialpayoffs in exchange for dropping their objections.

Objectors

Signers

Attorneys

Documents available for download

16

Section II. GovernmentalObjectors CAFA Notice

Heightened scrutiny under CAFA for couponsettlements

Figueroa v. Sharper Image Corp., 517 F.Supp.2d 1292(US District Court for S.D. FL, 2005-cv-21251): “Whatdistinguishes this case from other class actions,however, is the singular appearance of the AttorneysGeneral of thirty-five states and the District ofColumbia, representing hundreds of thousands, if notmillions, of eligible class members.”

CAFA Notice

Heightened scrutiny under CAFA for couponsettlements

Figueroa v. Sharper Image Corp., 517 F.Supp.2d 1292(US District Court for S.D. FL, 2005-cv-21251): “Whatdistinguishes this case from other class actions,however, is the singular appearance of the AttorneysGeneral of thirty-five states and the District ofColumbia, representing hundreds of thousands, if notmillions, of eligible class members.”

17

Click to edit Master title style

Combatting Class SettlementObjectors

www.mcguirewoods.com

Click to edit Master title style


Andrew Trask, Senior Counsel

[email protected]

III – Public Interest Group Objections

McGuireWoods | 19CONFIDENTIAL

The Boogeyman

• Ted Frank, Center for Class ActionFairness (CCAF)

– “[A]mong class action lawyers' mostfeared objectors.” - Alison Frankel,Reuters

• Representative cases– Jones v. GM Netcom, Inc., 654 F.3d 935

(9th Cir. 2011) (reverses settlement,court must look for signs of collusion).

– In re Dry Max Pampers Litig., 724 F.3d713, 715 (6th Cir. 2013)(vacatessettlement; counsel was overpaid; classreceived worthless injunctive relief)

– Redman v. Radio Shack Corp.,768 F.3d622 (7th Cir. 2014) (vacates couponsettlement).


• Ted Frank, Center for Class ActionFairness (CCAF)

– “[A]mong class action lawyers' mostfeared objectors.” - Alison Frankel,Reuters

• Representative cases– Jones v. GM Netcom, Inc., 654 F.3d 935

(9th Cir. 2011) (reverses settlement,court must look for signs of collusion).

– In re Dry Max Pampers Litig., 724 F.3d713, 715 (6th Cir. 2013)(vacatessettlement; counsel was overpaid; classreceived worthless injunctive relief)

– Redman v. Radio Shack Corp.,768 F.3d622 (7th Cir. 2014) (vacates couponsettlement).

Basics on Public-Interest Objectors

• Nonprofit entities

– Harder to buy off or deter

• Tend to object on principle

– i.e., are concerned about specificviolations or outcomes

– Want to change the law

• Usually transparent about criteria

– High fees compared to class payout

– Coupons (e.g., Feder v. Frank, 2013U.S. App. LEXIS 9744 (9th Cir. May15, 2013).)

– Misuse of cy pres

• Have strong ethos-based arguments

– “[O]bjectors play an essential role injudicial review of proposed settlementsof class actions … .” Pearson v. NBTY,Inc., 772 F.3d 778 (7th Cir. 2014)(Posner, J.) (CCAF).


• Nonprofit entities

– Harder to buy off or deter

• Tend to object on principle

– i.e., are concerned about specificviolations or outcomes

– Want to change the law

• Usually transparent about criteria

– High fees compared to class payout

– Coupons (e.g., Feder v. Frank, 2013U.S. App. LEXIS 9744 (9th Cir. May15, 2013).)

– Misuse of cy pres

• Have strong ethos-based arguments

– “[O]bjectors play an essential role injudicial review of proposed settlementsof class actions … .” Pearson v. NBTY,Inc., 772 F.3d 778 (7th Cir. 2014)(Posner, J.) (CCAF).

Caselaw produced by public interest objectors

• In re Walgreen Co. Stockholders Litig., No. 15-3799, 2016 U.S. App.LEXIS 14684 (7th Cir. Aug. 10, 2016) (reverses approval of disclosure-only settlement in merger class action; attorneys should not receive feesfor worthless disclosures) (Posner, J.) (CCAF).

• In re BankAmerica Corp. Secs. Litig., 775 F.3d 1060 (8th Cir. 2015)(reverses settlement with questionable cy pres component) (CCAF).

• Vassalle v. Midland Funding LLC, 708 F.3d 747 (6th Cir. 2013)(reverses approval of settlement that provided only “perfunctory relief”to class members) (National Consumer Law Center).

• Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468 (5th Cir. 2011)(reverses settlement with questionable cy pres component) (GeorgetownUniv. Law Center, Institute for Public Representation).


• In re Walgreen Co. Stockholders Litig., No. 15-3799, 2016 U.S. App.LEXIS 14684 (7th Cir. Aug. 10, 2016) (reverses approval of disclosure-only settlement in merger class action; attorneys should not receive feesfor worthless disclosures) (Posner, J.) (CCAF).

• In re BankAmerica Corp. Secs. Litig., 775 F.3d 1060 (8th Cir. 2015)(reverses settlement with questionable cy pres component) (CCAF).

• Vassalle v. Midland Funding LLC, 708 F.3d 747 (6th Cir. 2013)(reverses approval of settlement that provided only “perfunctory relief”to class members) (National Consumer Law Center).

• Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468 (5th Cir. 2011)(reverses settlement with questionable cy pres component) (GeorgetownUniv. Law Center, Institute for Public Representation).

IV – The Proposed Rule 23 Amendments


The proposed Rule 23(e)(5)

(5) Class-Member Objections.

(A) In General. Any class member may object to the proposal if it requires court approvalunder this subdivision (e); the objection may be withdrawn only with the court’s approval.The objection must state whether it applies only to the objector, to a specific subset of theclass, or to the entire class, and also state with specificity the grounds for the objection.

(B) Court Approval Required For Payment to an Objector or Objector’ s Counsel. Unlessapproved by the court after a hearing, no payment or other consideration may be provided toan objector or objector’s counsel in connection with:

(i) forgoing or withdrawing an objection, or

(ii) forgoing, dismissing, or abandoning an appeal from a judgment approving the proposal.

(C) Procedure For Approval After an Appeal. If approval under Rule 23(e)(5)(B) has notbeen obtained before an appeal is docketed in the court of appeals, the procedure of Rule 62.1applies while the appeal remains pending.


(5) Class-Member Objections.

(A) In General. Any class member may object to the proposal if it requires court approvalunder this subdivision (e); the objection may be withdrawn only with the court’s approval.The objection must state whether it applies only to the objector, to a specific subset of theclass, or to the entire class, and also state with specificity the grounds for the objection.

(B) Court Approval Required For Payment to an Objector or Objector’ s Counsel. Unlessapproved by the court after a hearing, no payment or other consideration may be provided toan objector or objector’s counsel in connection with:

(i) forgoing or withdrawing an objection, or

(ii) forgoing, dismissing, or abandoning an appeal from a judgment approving the proposal.

(C) Procedure For Approval After an Appeal. If approval under Rule 23(e)(5)(B) has notbeen obtained before an appeal is docketed in the court of appeals, the procedure of Rule 62.1applies while the appeal remains pending.

The Committee’s Thinking

• “An objector should be free to withdraw on concluding that an objection is notjustified. But Rule 23(e)(5)(B)(i) requires court approval of any payment orother consideration in connection with withdrawing the objection.”

• “Good-faith objections can assist the court in evaluating a proposal under Rule23(e)(2). It is legitimate for an objector to seek payment for providing suchassistance under Rule 23(h). …But some objectors may be seeking only personal gain, and using objections toobtain benefits for themselves rather than assisting in the settlement-reviewprocess. At least in some instances, it seems that objectors—or theircounsel—have sought to extract tribute to withdraw their objections ordismiss appeals from judgments approving class settlements. And classcounsel sometimes may feel that avoiding the delay produced by an appealjustifies providing payment or other consideration to these objectors.”


• “An objector should be free to withdraw on concluding that an objection is notjustified. But Rule 23(e)(5)(B)(i) requires court approval of any payment orother consideration in connection with withdrawing the objection.”

• “Good-faith objections can assist the court in evaluating a proposal under Rule23(e)(2). It is legitimate for an objector to seek payment for providing suchassistance under Rule 23(h). …But some objectors may be seeking only personal gain, and using objections toobtain benefits for themselves rather than assisting in the settlement-reviewprocess. At least in some instances, it seems that objectors—or theircounsel—have sought to extract tribute to withdraw their objections ordismiss appeals from judgments approving class settlements. And classcounsel sometimes may feel that avoiding the delay produced by an appealjustifies providing payment or other consideration to these objectors.”

How will it play out?

• Requiring sunlight onobjector deals may detersome professional objectors.– Less likely to bring

objections if can’t do easily.

• Likely won’t affect public-interest objectors.– They’re not in it for the

payoff.

• Some defendants concernedit will make settlement moredifficult in general


• Requiring sunlight onobjector deals may detersome professional objectors.– Less likely to bring

objections if can’t do easily.

• Likely won’t affect public-interest objectors.– They’re not in it for the

payoff.

• Some defendants concernedit will make settlement moredifficult in general

V- Best Practices for Objector-ProofingSettlements


Basic strategies

• Prevention

• Negotiation

• Litigation

• Coercion

NOTE – Each of following strategies discussed has actually beenemployed in cases.


• Prevention

• Negotiation

• Litigation

• Coercion

NOTE – Each of following strategies discussed has actually beenemployed in cases.

Prevention

• Objector-proof the settlement

• Show that settlement is good idea

• Works best with– Competitors

– Public Interest

– Can also mitigate professionals


• Objector-proof the settlement

• Show that settlement is good idea

• Works best with– Competitors

– Public Interest

– Can also mitigate professionals

Prevention – Settlement Structure

• Structure settlement to frustrate litigation over fairness

• Quick-pay provisions– pay plaintiffs’ counsel immediately, class after approval

• Brief objection periods

• Injunctive rather than monetary relief


• Structure settlement to frustrate litigation over fairness

• Quick-pay provisions– pay plaintiffs’ counsel immediately, class after approval

• Brief objection periods

• Injunctive rather than monetary relief

Prevention - Competitors

• Play fair with other counsel– Be transparent about

auctions

– Be “fair” in settlementallocations

– Don’t use bar provisionsthat will alienate co-defendants

• Drawbacks– Can lose advantage in

competitive settings

– Can annoy corporate clients


• Play fair with other counsel– Be transparent about

auctions

– Be “fair” in settlementallocations

– Don’t use bar provisionsthat will alienate co-defendants

• Drawbacks– Can lose advantage in

competitive settings

– Can annoy corporate clients

Prevention – Ideologues (Judge Alsup’s Red Flags)

• Due diligence• Cost-benefit for absent class

members• Scope of the release (larger than

complaint).• Expansion of class (started out

small, got big in settlement)• Reversions (favor defendants)• Claim procedure (if it

discourages claims)• Incentive payments (why does

the named plaintiff need morethan the class member?)

• Arellano v. T-Mobile USA,Inc., 2011 U.S. Dist. LEXIS21441 (N.D. Cal. Mar. 3,2011).


• Due diligence• Cost-benefit for absent class

members• Scope of the release (larger than

complaint).• Expansion of class (started out

small, got big in settlement)• Reversions (favor defendants)• Claim procedure (if it

discourages claims)• Incentive payments (why does

the named plaintiff need morethan the class member?)

• Arellano v. T-Mobile USA,Inc., 2011 U.S. Dist. LEXIS21441 (N.D. Cal. Mar. 3,2011).

Prevention – Other red flags

• Coupons– Feder v. Frank

• Excessive cy pres relief– In re Baby Prods. Antitrust

Litig., 708 F.3d 163 (3d Cir.2013).

• Subclasses with competinginterests– Dewey v. Volkswagen

Aktiengesellschaft, 681 F. 3d170 (3d Cir. 2012).


• Coupons– Feder v. Frank

• Excessive cy pres relief– In re Baby Prods. Antitrust

Litig., 708 F.3d 163 (3d Cir.2013).

• Subclasses with competinginterests– Dewey v. Volkswagen

Aktiengesellschaft, 681 F. 3d170 (3d Cir. 2012).

Negotiation

• Not all objectors are theenemy:– They are constituents of the

settlement, even if not themajority.

– They can help drive downfees in settlementnegotiations.

– May help strengthensettlement.

Drawbacks

• Annoys plaintiffs


• Not all objectors are theenemy:– They are constituents of the

settlement, even if not themajority.

– They can help drive downfees in settlementnegotiations.

– May help strengthensettlement.

Drawbacks

• Annoys plaintiffs

Negotiation

• Genuine compromise– Remove offending provisions

– Add value for class members

– Reduce fees


• Genuine compromise– Remove offending provisions

– Add value for class members

– Reduce fees

Negotiation - Buyoff

• Pay the objector to go away

– Competitors – may requirefees

– Professionals – will requirefees

– Public Interest– client cansometimes be induced tofold

• Drawbacks

– Can look like collusion

– May alienate ideologues


• Pay the objector to go away

– Competitors – may requirefees

– Professionals – will requirefees

– Public Interest– client cansometimes be induced tofold

• Drawbacks

– Can look like collusion

– May alienate ideologues

Litigation

• Discovery

• Sanctions

• Separate lawsuits

• Fight fees

• Appeals bonds


• Discovery

• Sanctions

• Separate lawsuits

• Fight fees

• Appeals bonds

Litigation - Discovery

• Depositions into adequacy

• Explore relationships withobjector counsel

• Information of objectionhistory.– DeHoyos v. Allstate Corp.,

240 F.R.D. 269, 316 (W.D.Tex. 2007) (disclosure ofattorneys’ objection historywould not chill objections).

• Drawbacks– Tensions with usual plaintiff

procedures.


• Depositions into adequacy

• Explore relationships withobjector counsel

• Information of objectionhistory.– DeHoyos v. Allstate Corp.,

240 F.R.D. 269, 316 (W.D.Tex. 2007) (disclosure ofattorneys’ objection historywould not chill objections).

Litigation - Sanctions

• Can deter some objectors– Turner v. Murphy Oil USA,

Inc., 582 F. Supp. 2d 797,806 n.32 (E.D. La. 2008)(objector withdrew motionafter sanction motionsfiled).

• Drawbacks– Courts may be reluctant to

grant

– Will make subsequentnegotiations more difficult


• Can deter some objectors– Turner v. Murphy Oil USA,

Inc., 582 F. Supp. 2d 797,806 n.32 (E.D. La. 2008)(objector withdrew motionafter sanction motionsfiled).

• Drawbacks– Courts may be reluctant to

grant

– Will make subsequentnegotiations more difficult

Litigation – Separate Lawsuit

• Bruce Greenbergrecommends

• If evidence allows:– RICO claim

• But see – Lexecon Inc. v.Milberg Weiss Bershad Hynes& Lerach, 523 U.S. 26 (1998).– Plaintiff’s firm filed lawsuit

against defendant expert

– Wound up losing hugeamount of money


• But see – Lexecon Inc. v.Milberg Weiss Bershad Hynes& Lerach, 523 U.S. 26 (1998).– Plaintiff’s firm filed lawsuit

against defendant expert

– Wound up losing hugeamount of money

Litigation - Opposition to fees

• Oppose fees entirely

• Require submission oftimesheets & expenses

• Require lodestar

• Drawbacks– Tension when plaintiffs’

counsel requests fees

– Not as effective against publicinterest


• Oppose fees entirely

• Require submission oftimesheets & expenses

• Require lodestar

• Drawbacks– Tension when plaintiffs’

counsel requests fees

– Not as effective against publicinterest

Litigation – Appeals bonds

• FRAP 7 – “In a civil case,the district court may requirean appellant to file a bond orprovide other security in anyform and amount necessaryto ensure payment of costson appeal. Rule 8(b) appliesto a surety on a bond givenunder this rule.”

• Language is permissive

• Means there may be inquiryinto equities of situation

• Courts generally reluctant


• FRAP 7 – “In a civil case,the district court may requirean appellant to file a bond orprovide other security in anyform and amount necessaryto ensure payment of costson appeal. Rule 8(b) appliesto a surety on a bond givenunder this rule.”

• Language is permissive

• Means there may be inquiryinto equities of situation

• Courts generally reluctant

Coercion

• Embarrassment

• Threats

• Payback


• Embarrassment

• Threats

• Payback

Coercion - Embarrassment

• Public embarrassmentrelated to settlement– Characterize as holdouts,

greedy, etc.

• Example: Letter to classmembers by plaintiffs inCobell v. Salazar.

• Unlikely to work with publicinterest– May dig in

• Requires “clean hands”

• May violate ethical rules


• Public embarrassmentrelated to settlement– Characterize as holdouts,

greedy, etc.

• Example: Letter to classmembers by plaintiffs inCobell v. Salazar.

• Unlikely to work with publicinterest– May dig in

• Requires “clean hands”

• May violate ethical rules

Coercion – Threats

• Public embarrassmentunrelated to settlement– Personal peccadilloes

• Litigation

• Any other leverage one mayhold

• Drawbacks– Potentially unethical

• Model Rule 3.4(e)

• Model Rule 3.6

– May backfire if used (cf.Lerach-Fischel feud)


• Public embarrassmentunrelated to settlement– Personal peccadilloes

• Litigation

• Any other leverage one mayhold

• Drawbacks– Potentially unethical

• Model Rule 3.4(e)

• Model Rule 3.6

– May backfire if used (cf.Lerach-Fischel feud)

Coercion – Payback

• Objectors may be repeatplayers

• Implicit threat of non-cooperation in subsequentcases

• Most effective against– Competitors

– Professionals


• Objectors may be repeatplayers

• Implicit threat of non-cooperation in subsequentcases

• Most effective against– Competitors

– Professionals

For more, see


Chapter 8 – Settlement tactics Chapter 3 – Multiple Parties

Questions or Comments?



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