Informal Aggregate Settlements

The blogosphere is talking about a recent decision by the United States Court of Appeals for the Second Circuit: Johnson v. Nextel Communications, Inc. (pdf). In Johnson, the Second Circuit allowed clients to sue their own attorney - and even the defendant - for breach of fiduciary duty in entering a settlement agreement. Never certified as a class action, the plaintiff's counsel had reached an aggregate settlement agreement with Nextel for various discrimination claims

As Adam Zimmerman wrote on ADR Prof:

The settlement agreement in Johnson created a dispute resolution process for a large group of clients, represented by the same law firm, who commenced similar employment discrimination claims against Nextel. Among other things, the agreement included tight time frames for claimants to participate and resolve their claims; the agreement even reduced plaintiff counsels’ fee awards, on a sliding scale, when they failed to persuade clients to meet those deadlines or participate in the settlement. By entering into the deal, according to the Second Circuit, the plaintiffs’ former lawyers “violated [their fiduciary] duty to advise and represent each client individually, giving due consideration to differing claims, differing strengths of those claims, and differing interests in one or more proper tribunals in which to assert those claims.” . . . [T]he plaintiffs’ law firm also agreed to take on a multi-million dollar consulting agreement with defendants after all the individual claims finally settled

Mass Torts Profs and ADR Prof both have coverage.

- SBS