class actions settlements

• In Lonardo v. Travelers Insurance, our objection resulted in a $2 million improvement in the settlement. We maintained the objection, and the court approved the settlement; we straightforwardly acknowledged that the court "could" approve the improved settlement (where the attorneys got nearly as much as the class as opposed to more than twice as much) under its discretionary powers, but "shouldn't," and the court found that offensive for some reason. To add insult to injury, the court preemptively made findings that we weren't entitled to even ask for attorneys' fees for our role in improving the settlement. On a motion to reconsider, the court begrudgingly awarded attorneys' fees, and then proceeded to come up with bad dicta that suggests that objectors are obligated to engage in expensive discovery about settlement negotiations before they are completed. (The scenario where a settlement is improved by 71% on the eve of the fairness hearing is rare enough that one hopes that does not matter; it's pretty clear that settling parties would object to the discovery that would produce the evidence that the Lonardo court says is required.) The $40,000 in fees is nice, but it was unfortunate that the court felt the need to insult us along the way; we made it clear that there was substantial work we performed on the case for which we were not seeking fees, and the court repeatedly implied that the only thing we did were the few dozen hours we requested fees for. We did get the court to acknowledge that Perdue v. Kenny A. applies to class-action attorney-fee requests (though that does not explain why the court awarded a 1.4 multiplier to the plaintiffs' attorneys). If those opinions were issued today, when we have a diversified donor base, we would have appealed. At the time, we were low on funds, and had to make a triage decision to save our powder for more egregiously bad decisions. Judging by Google hits, class members have started to receive their checks, which are 71% larger than they would have been without our objection.
• In the Sears case, the court denied our motion to dismiss and our motion to intervene, the latter because we sought to appeal, and therefore were "obstructive." That reasoning begs the question when one is entitled to move to intervene for purposes of appeal; the court did not cite the leading Seventh Circuit case on the issue. We will appeal: we believe Devlin gives us standing to do so, and, in any event, the denial of the motion to intervene was clearly erroneous. I am excited about this appeal, as it will give the Seventh Circuit the chance to clarify the law of derivative shareholder lawsuits and whether it is appropriate to bring them for the primary purpose of extracting attorneys' fees.
• I'm also enthused about our chances in the Dewey v. Volkswagen appeal to the Third Circuit. The plaintiffs have requested a punitive appeal bond, and the district court will rule on that in October. I'll have a post about that later in the week.
• Alas, I will not be participating in another appeal I was confident about, the Ninth Circuit Yahoo! appeal.  As you know, the Center for Class Action Fairness refuses to settle a class action objection unless the withdrawal of the objection results in a settlement that is fair, adequate, and reasonable. Our clients disagreed with that approach, and we have withdrawn as counsel. We did not ask for and will not accept any fees in that representation.

CCAF filed its reply brief today in the Nachshin v. AOL appeal.

The principal-agent problem does not just affect class action plaintiffs' attorneys enriching themselves at the expense of their putative clients. I see it far too often in the case of class action defense attorneys beholden to the billable hour at the expense of their clients. I've had securities defense attorneys admit to me sotto voce that they don't want to see securities law reformed, because they're making money off the status quo. If I were a defense client, I'd worry about attorneys like that; they might prefer to lose their 12(b)(6) motion in the hopes of churning some billable hours in discovery disputes. In a notorious example, attorneys from defense firms lobbied the ABA to release a statement opposing preemption—something that would hurt their clients, though would certainly increase the demand for lawyers' services. (I once had a lunch date with a pharmaceutical defense attorney who made a disparaging comment to me about "you people" believing in federal preemption. That second-person-plural mystified me: she was making a lot more money arguing in favor of preemption in court on behalf of her clients than I was making writing about preemption on public-policy grounds. If one's that offended by preemption, one should go work for a plaintiffs' firm where one can make more money in the long run: it's stupid to be selling out one's principles for less than one's opportunity cost of adhering to them.)

I've long felt that general counsels should do more to insist that their outside defense firms are really defense firms that believe in their clients' rights, rather than mercenary law firms that happen to represent defendants because their lawyers don't have the entrepreneurial courage to be contingent-fee plaintiffs' attorneys.  Top-of-the-line plaintiffs' attorneys are the best trial lawyers in the business: they don't get paid if they don't win, but they're the ones with the Gulfstream jets and 5000-person Christmas parties.  If a defendant responds by hiring a coddled Ivy-League defense attorney that's afraid of the inside of a courtroom and goes home at night feeling vaguely guilty that he's working for The Man, that defendant is going to get his head handed to him nine times out of ten.  That sort of ideological accounting is surely more important to the bottom line than the racial-diversity accounting many Fortune 500 companies insist upon in their outside law firms, but it happens far less than it should.

Anyway, in response to CCAF's opening brief in the Nachshin v. AOL case, the settling parties apparently agreed that AOL's defense attorneys would do all the briefing, and the plaintiffs' attorneys would simply free ride off the finished product:

• AOL response brief.
• Plaintiffs' response brief.

The plaintiffs couldn't even be bothered to cite their roman numerals in consecutive order.

For the life of me, I can't imagine why a defense attorney with the best interests of his client in mind wouldn't simply say: "You sued us, you defend the settlement. We're paying you hundreds of thousands of dollars to go away. My client shouldn't have to pay another penny into this case." But that would mean foregoing some fees. And why would a defendant's brief say something as vapid as "Both class actions and legal aid funds facilitate the supply of justice to those who cannot otherwise afford it" (p. 25)?  Trial lawyers, come sue AOL! According to AOL's brief, you're just facilitating the supply of justice when you do! (I was similarly amused that AOL of all parties would snark about the supposed fact that our opening brief would cite "online articles." That was especially ironic given that AOL pays writers to produce online articles for them.) I briefly worked at the same firm as Paul Cappuccio, a hard-nosed lawyer's lawyer who went on to become the general counsel of AOL before he escaped on a life-raft to keep the Time Warner general counsel job.  I cannot begin to imagine a general counsel's office supervised by Cappuccio permitting a brief like this to be filed, but perhaps I'm being naive.

As you can tell for yourself, these were exceedingly weak response briefs that never really engaged with our opening brief's argument against the conflict-of-interest problems in cy pres distribution, so I'm feeling good about our reply brief and about our chances.