Civ
Pro 2 Notes
What
happened to Zahn (every member of the
class must meet the amount in controversy requirement)? The Circuits were split. The Supreme Court granted cert on more than
one case to decide whether Zahn is
preserved or is gone.
Settlement of class actions
How
do we end class actions? How do lawyers
get paid? This is the issue that has
created the most controversy behind class actions. There is the perception that the lawyers get
lots of money but the class itself gets next to nothing. Lawyers could get an hourly rate or work on
contingency. But if the class is highly
nebulous, the named plaintiffs don’t want to bear this burden. You can’t enter a contingency agreement with
an unknown class. So here we have the
common fund doctrine, which allows for the lawyers to be paid out of the pool
of money that they are able to acquire for the class itself. As they create a fund for the relief of the plaintiff
class, they get paid out of it. This
arrangement has a contingency “flavor” to it.
Typically, the common fund doctrine uses the lodestar: a calculation of how
many hours one would reasonably expect to spend on the litigation times a
reasonable hourly rate.
Say
we have a solo practitioner working for a class of automobile consumers who
have been overcharged. He spends three
years on the case and gets a $100,000 settlement on the behalf of the class. He works 1500 billable hours over those three
years. As a solo practitioner, he wouldn’t
have charged as much as an experienced attorney, but an experienced attorney
would have done it faster. We will give
him $75 because that’s what he’s worth.
How many hours will we credit him for?
It would have taken the experienced attorney less time. If we had $75 times 1300 hours, we would have
to pay the lawyer just under $100,000.
The plaintiffs would only get $12.50 each! That’s stupid.
What
if we have a 500 person class suing some defendant? The defendant makes a settlement offer that
will give $95,000 to the lawyer and $5,000 to the class. Should the court approve it? Does it just look at a bribe to the lawyer? The class plaintiffs would probably
object. The Rules have been recently
amended to empower the court to do specific things in this situation. Rule 23(h) is brand new and talks about attorneys’
fees in class actions. The court may
award reasonable attorneys’ fees. It
must be done by motion under Rule 54.
Notice of that motion must be served on all parties in a reasonable manner.
The class must be told about the settlement! Then they have the chance to come and object. The court can hold a hearing if they want to. At the class counsel appointment stage at the
beginning of the class action, the court can request the different lawyers
competing to be class counsel to bid against one another. But will this really happen? Could it be good for the class?
What
are settlement class actions? They are
class actions where the complaint, answer, class certification and settlement
are filed simultaneously. The parties
have already worked out all the details.
This is like the Amchem
case. This is a framework that is a
target of criticism. It “reeks of
collusion”! Both sides have already
agreed how to settle the suit, and the terms are usually highly favorable to
the lawyers. Under the old Rule 23,
there were a series of “trash for the class” settlement class actions where the
lawyer would get a settlement offer that essentially bought off the lawyer. Sometimes the named plaintiff would get an “incentive
award” that comes out of the attorneys’ fee award. How do mass small wrongs get righted? The 2002 reforms make it a bit tougher to get
such a high level of inequity. But have
the new rules done much? Almost no one
will opt out of class litigation because their stake is so small. The tradeoff is between trying to redress many
small grievances and giving a windfall to the attorneys.
Anchem
Products, Inc. v.
This
is all about asbestos. There is lots of
procedure here. Amchem started out by
trying to find “global peace” for the asbestos companies. They don’t get it, but that was their
plan. Asbestos lawsuits are filed all
over the place. Lots of people have
cancer. Procedurally, the court uses a consolidation
device that allows you to move cases around in the federal courts for
efficiency reasons. All of the litigation
goes to
An
administrative plan was proposed that would pay exposure-only plaintiffs in a
similar way to workers’ compensation.
Such a scheme would be cheaper for the asbestos companies than lawsuits. It is proposed as a settlement class action
with all of the terms included. Both plaintiff
classes and the attorneys will get paid.
The District Court of Pennsylvania certifies the class as a (b)(3). The Third Circuit says it’s not fair. The Supreme Court upholds the Third Circuit
and says you can’t do it. What’s the
ethical situation here? You couldn’t
agree not to represent future clients in return for settling a case. The ABA Rules forbid so-called “lock-out
agreements”. A lawyer can’t agree to
restrict his own right to practice law.
What if they plan on settling all present and future cases? This seems substantially similar, but it’s
not technically a lockout agreement. The
global solution would be to bind everyone, which requires the use of
administrative settlement procedure. The
questions of law and fact in common must predominate. The district court found that the shared
experience in asbestos exposure and interest in receiving money is what predominated. Ginsburg says Congress should create the
asbestos fund, not courts.
Notice
that the current plaintiffs get money, and the exposure-only plaintiffs get an
administrative settlement procedure only (just the possibility of money). Here, the lawyers are representing two
different groups with different interests.
The inventory plaintiffs want money now, the exposure-only plaintiffs
want money later. They could have
remedied this by having separate counsel to represent each of the different
groups. But that probably also would
have blown up the global settlement: the exposure-only lawyers never would have
agreed to such a scheme.