Highly Experienced Class-Action Litigator
For 26 years, I worked with America’s leading plaintiffs’ side class-action law firms on cases that, as in the In re Enron Securities Litigation, produced some of the largest settlements in American legal history.
I have been to trial litigating federal securities-fraud claims, and have handled dozens of appeals in federal securities, antitrust, and other class actions.
As a consequence of my extensive experience I have a deep understanding of class-action litigation in the United States.
The Power of Class-Action Litigation
When the government or large corporations operate illegally and violate people’s rights, class-action litigation can be anextraordinarily powerful tool for obtaining justice. An individual who has been wronged can file an action not just on behalf of herself but also on behalf of all others who have been, or are being, similarly injured. Litigating on behalf of a class of thousands makes it possible to pursue claims that are too small to be litigated individually, because the class-action device produces tremendous economies of scale while spreading the cost of litigation.
In order to facilitate litigation asserting certain kinds of claims, some statutes authorize courts to shift a prevailing plaintiffs’ litigation expenses, including attorney fees, to the defendants who broke the law. Even in the absence of a fee-shifting statute, if a named plaintiff and her lawyers obtain a substantial monetary judgment, lawyers’ litigation expenses and their fees can be paid from the money recovered under what’s called the common-fund (or equitable-fund) doctrine that the United States Supreme Court recognized in the 1880s.
Some class actions produce excellent results. Civil-rights class actions often have changed how the government and businesses operate. Antitrust and securities class actions sometimes secure substantial relief. In the Enron securities-fraud class action, in which I was privileged to serve as an appellate lawyer, the settlements eventually totaled more than $7 billion.
But class actions can be abused. Too often they are prosecuted for the benefit of the named plaintiffs’ lawyers, rather than for the benefit of the class members whose interests the lawyers (and named plaintiffs) are supposed to represent. In many instances where those lawyers secure only a nominal recovery for other class members, they nonetheless seek thousands of dollars in “incentive awards” to reward the named-plaintiff class representatives who consent to settlements, obtaining little for the class.
It is important, in prosecuting any class action, to retain legal counsel who will put the interests of the class first.
Certain areas are particularly prone to abuse.
Recent scholarship shows that when publicly traded companies are acquired in a tender offer or merger, class-action plaintiffs’ lawyers file suit alleging that the price paid to the acquired company’s shareholders is too low, but then settle the class action in return for minor (often trivial) “supplemental disclosures” – with hundreds of thousands of dollars in attorney fees going to class-action counsel who achieved little or nothing of value for the shareholders. [See Jill E. Fisch, Sean J. Griffith & Steven Davidoff Solomon, Confronting the Peppercorn Settlement in Merger Litigation: An Empirical Analysis and a Proposal for Reform, 93 Texas Law Review 557 (2015).]
Consumer class actions also can be problematic. Some are prosecuted under provisions requiring culpable defendants to pay statutory damages for each violation of the law. Thus, for example, a defendant who violates the Fair and Accurate Credit Transactions Act by printing too many digits of its customers’ credit card numbers on retail receipts may be required to pay from $100 to $1,000 for each violation. One who violates the Telephone Consumer Protection Act with proscribed robocalls, spam texts, or junk-fax transmissions may be required to pay $500 to $1,500 per violation. Those violations can add up – in some cases to hundreds of millions or even billions of dollars.
Class-action lawyers know that corporations facing massive claims like that may even exceed their net worth, can be counted on to pay nuisance-value settlements amounting to hundredths of a cent on the dollar. The class-action lawyers take generous attorneys’ fees from the settlement fund and arrange for their named plaintiffs to receive thousands of dollars in “service awards” or “incentive bonuses,” while members of the class receive next to nothing for the release of valuable claims. In some instances, named plaintiffs who have suffered no injury at all receive thousands of dollars for agreeing to settlements releasing other class members’ claims for real injuries they may suffer from identity theft resulting from the defendants’ statutory breaches.
Taking a case to trial always involves some risk of loss. But class-action lawyers know that they can avoid much of that risk by settling high-stakes cases for nuisance value.
Class-action lawyers also know that they are apt to be paid far more generously if they settle high-stakes cases for paltry sums than if they actually litigate the cases to win them. When federal statutes authorize courts to require losing defendants to pay winning plaintiffs’ attorney fees, the winning lawyers ordinarily will receive only their reasonable hourly rates. But if they arrange to settle valuable claims for a fraction of their value, the plaintiffs’ lawyers can apply for (and often receive) attorney fees amounting to substantial multiples of their reasonable hourly rates.
As a consequence of these grave conflicts of interest, far too many cases settle on terms that recover far too little for members of the plaintiff class while generously compensating the lawyers who agree to low-ball settlements.
Sometimes it’s worth the trouble to object to such settlements and attorney fee awards, and I’m happy to represent objectors in the right cases. But please note – and this is important – I desire only to represent objectors who seek to obtain better results for the entire class, rather than to obtain special treatment for themselves. Raising the quality and integrity of class-action practice should be the goal.