April 19, 2011
The New, New Opt-Out
As all class-action enthusiasts know, neither plaintiffs lawyers nor defendants like for class members to exercise their opt-out rights. Opting out from the plaintiffs' attorneys' perspective diminishes their fee award and undermines their ability to deliver total peace to the defendant; the defendant wants finality and closure, which opt outs undermine. So, lawyers developed mechanisms to thwart class members from opting out, such as including walk-away provisions, liens on the defendants' assets in favor of those remaining in the class, and most-favored-nation provisions in the settlement.
Recently, attorneys have begun settling mass-tort cases outside of the class-action process. (As most of you know, CAFA makes it increasingly difficult to certify mass-tort cases as Rule 23(b)(3) class actions--not that they were ever easy.) Merck settled the Vioxx litigation by contracting with the plaintiffs' attorneys and requiring those law firms to recommend the deal to 100% of their clients (with the caveat that the plaintiffs' attorneys deemed the settlement in their clients' best interests), and to withdraw from representing those clients who refused. Moreover, Merck could walk away from the deal if fewer than 85% of the claimants signed on. Thus, while claimants technically opted "into" the settlement offer, realistically claimants had to opt out of their lawyer-client relationship if they didn't want to settle.
Yesterday's article in the NY Times by John Schwartz and Cambell Robertson, "Many Hit by Spill Now Feel Caught in Claims Process," illustrates the new, new opt out: plaintiffs' lawyers are claiming to represent clients who have never consented to an attorney-client relationship. Consider this excerpt from the article:
Last summer and fall, numerous Vietnamese households — including some who say they were not even affected by the spill — received letters signed by Mr. Watts, of San Antonio. The letters, in Vietnamese, addressed some recipients by name and others as: “Dear Client.” The letters directed people to send their financial records and added, “Do not sign anything from BP or anyone else except Watts Guerra Craft,” the name of the firm.
“As far as I know almost every other house got it,” said Felix Cao, a law student at Loyola University in New Orleans. “I don’t know how they even found my address.”
Mr. Cao said he did not know whether he had become a client or simply a marketing target. He said he was not affected by the spill.
Nor was Nga Nguyen, who lives in New Orleans and also received one of the letters. “I think they just went through the phone book,” she said.
Let me be clear: the Gulf Coast Claims Facility is a private compensation scheme set up by BP. The claims pending before Ken Feinberg are NOT class actions. Thus, no attorney-client relationship exists absent either class certification and a judicial determination that lawyers are adequately representing absent clients (in the MDL pending before Judge Barbier) or an individual's affirmative consent to enter into an attorney-client relationship.
Yet, if this is what attorneys are doing, the new, new opt-out requires "clients" to opt out of an attorney-client relationship they never formed. The result is nothing short of lawless.
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