Tuesday, August 11, 2009

Move Over Public Citizen...

Ted Frank, formerly a fellow at the American Enterprise Institute, has moved into the business of objecting to consumer class action settlements.  Here is a link to an interview with him on Above The Law.

So much has been written on objectors to class actions I hardly know where to begin.  First there was the thought (espoused by Mr. Frank in the interview) that objectors can protect the class by representing their interests as opposed to the conflicted interests of their lawyers.  People were concerned that plaintiff-side class action lawyers would be tempted to sell out the class in order to obtain a bigger or faster fee.  Academics wrote about "reverse auctions" where the class counsel would compete to provide defendants with the cheapest settlement in a friendly jurisdiction, in exchange for the lucrative fees.   So the idea is that if objectors could be paid for their time and effort in ferreting out settlements that did not benefit the class, then both the system and class members would benefit.

But then came second order problems. If objectors were getting paid, wouldn't they object to good settlements merely to earn a fee?  Courts started to crack down on objectors, ordering them to pay substantial penalties if the court found that the objectors were objecting merely to scuttle a good settlement in exchange for some fees of their own -- sometimes called "objector blackmail." 

Traditionally, the best objectors have been public interest organizations.  Brian Wolfman of Public Citizen did some excellent work objecting to flawed settlements (such as the GM Coupon settlement in the Third Circuit.)  That doesn't mean they shouldn't get paid - after all, these organizations need to survive.  But judges may feel more comfortable that the money is going to the organization to do more of the same work, rather than to line an individual's pocket. 



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