curious-george: David M. Nieporent:now you’ve got me curious. How does this work? Let’s say in my case, I had only one client, my dad. We file an objection, which the court rules on. Is there some provision that I, as counsel for an objector, get paid out of the total settlement fund? That would seem odd.It seemed to me that the only money I, or my dad, would see, is if I filed an objection and the lawyers would agree to a higher payout for my dad just to avoid having to defend the justness of the entire settlement.

I myself am not a (so-called) “professional objector,” but I have had served as local counsel for some for years, so I have had an opportunity to observe the “game” up close. There are a few ways:

1) Get paid by the class counsel. Professional class counsel view all professional objectors as trying to “extort” money from them — as looking to be “bought off” to drop the objection. (The big threat from objectors is the threat of appeal, because an appeal can delay the payday for class counsel for a very long time.)

2) Have the court award fees, out of the total attorney fee portion of the settlement, if the court deems that the objections were meritorious and the settlement is improved for the class as a result.

3) Or move to intervene and then negotiate with the defendants directly.

now you’ve got me curious. How does this work? Let’s say in my case, I had only one client, my dad. We file an objection, which the court rules on. Is there some provision that I, as counsel for an objector, get paid out of the total settlement fund? That would seem odd.

It seemed to me that the only money I, or my dad, would see, is if I filed an objection and the lawyers would agree to a higher payout for my dad just to avoid having to defend the justness of the entire settlement.

curious-george: How would one go about “making money” by objecting to a class-action settlement?

As an individual, you can’t, except to the extent you improve the settlement for the class, and benefit as all class members do; as an attorney, you can.

David Nieporent:
You’re thinking of federal law. State laws don’t all have the same limitations.

There are states that don’t require injury in fact for standing? What will they think of next???

Steve: One of the easiest ways to make money in the class-action arena without doing much work is becoming a professional objector.Smart guy, Ted Frank.I hope he generates a lot of value for class members and makes a lot of money for himself along the way.

How would one go about “making money” by objecting to a class-action settlement?

My dad asked me to look into one of these settlements in a securities case; he didn’t know about the case until the opt-out period arose, and didn’t like the lawyers’ recovery vs. what the ‘plaintiffs’ got.

I didn’t know, however, what good it would do to file an objection for him.

Did I leave money on the table here? What did I do wrong?

Martinned: If there are no injured parties, no one has standing to sue. Textbook unmeritorious suit. Whether de minimis injury suffices is something you’ll have to take up with the (Lujan) Court.

You’re thinking of federal law. State laws don’t all have the same limitations.

David Nieporent:
A case may fall within the bounds of a law — a consumer fraud law, for instance, that bars misleading statements by corporations to consumers — and thus not be technically meritless.However, there may be no injured parties and no actual consumers complaining as a result of a particular alleged violation.A suit about that particular alleged violation would be meritless; the only reason it’s being brought is because the applicable consumer fraud law is a fee-shifting statute providing for attorneys fees for the prevailing plaintiff.(I have avoided the term “frivolous” because that word has a narrow technical meaning in the law.)

If there are no injured parties, no one has standing to sue. Textbook unmeritorious suit. Whether de minimis injury suffices is something you’ll have to take up with the (Lujan) Court.

Suits have merit, or they don’t.

A case may fall within the bounds of a law — a consumer fraud law, for instance, that bars misleading statements by corporations to consumers — and thus not be technically meritless. However, there may be no injured parties and no actual consumers complaining as a result of a particular alleged violation. A suit about that particular alleged violation would be meritless; the only reason it’s being brought is because the applicable consumer fraud law is a fee-shifting statute providing for attorneys fees for the prevailing plaintiff.

(I have avoided the term “frivolous” because that word has a narrow technical meaning in the law.)

David M. Nieporent:
I didn’t say that the case wasn’t meritless; I said it wasn’t technically meritless. Big difference. The “law under which the case has been brought” may simply be a law against fraud. But the specific “fraud” in this case may be something so trivial that it does not, in fact, deserve “spanking.”

I detect a certain lawyer/non-lawyer disconnect. Which is strange, because AFAIK you do have a law degree. Law works on black and whites. Someone broke the law or they didn’t. Something is constitutional or it is not. The only problem is that in many situations it is difficult to say, which is why we have courts to decide once and for all. (The Supreme Court isn’t the highest court in the land because they’re always right. They’re always right because they’re the highest court in the land.) So the idea that something is only “technically” illegal doesn’t fit with the nature of the law. That doesn’t mean it isn’t a meaningful concept, but only outside the law.

You can’t amend the law to provide a category of “technically meritless” suits. (Although the Scottish possibility of the jury returning a “not proven” verdict comes pretty close.) If the result of a finding of “technically meritless” is that the suit is thrown out, that means the suit wasn’t “technically meritless” at all, it was completely meritless. If, for example, one were to allow the judge to throw out cases upon a finding that, on the balance of equities, the greater good requires the case to be dismissed, that just creates an additional category of meritless suits. Suits have merit, or they don’t.

(The question of what constitutes a “frivolous suit” is a separate problem, with a different legal question being asked to a different person with a different legal standard. But there, again, in the end the suit is determined to have been frivolous or not. There’s no such category as “technically frivolous”, at least not in the law.)

Martinned: Hang on: If the case is not meritless, and you don’t have a problem with the law under which the case has been brought, why would you have a problem with outcome 2)? The defendant broke the law, and now they’re getting spanked for it.

I didn’t say that the case wasn’t meritless; I said it wasn’t technically meritless. Big difference.

The “law under which the case has been brought” may simply be a law against fraud. But the specific “fraud” in this case may be something so trivial that it does not, in fact, deserve “spanking.”

David M. Nieporent:
The relevant difference between the class action and the individual one is that the problematic class actions tend to be ones where individuals would never bring suits in the first place.They “could, theoretically” bring their own suits, but they wouldn’t.“Tort reform” is an independent issue; yes, it’s also important, and Ted has worked on that as well, but it’s not an answer here, because many of these cases aren’t literally meritless; they’re just trivial.You need to look at the cases to which Ted is objecting, instead of talking about “class actions” generally, as if he were objecting to all of them.These are cases where the class counsel settles for essentially no relief to the class, but a big payout to the lawyers.That means that either:1) The lawyers are selling out their clients, taking a bad settlement in order to boost their own fees; or
2) The case was a trivial case that involved no real damages to class members, and would never have been brought but for the instigation of lawyers who saw a chance to transfer money from a corporation’s pocket to their own.

Hang on: If the case is not meritless, and you don’t have a problem with the law under which the case has been brought, why would you have a problem with outcome 2)? The defendant broke the law, and now they’re getting spanked for it.

NickM: On a settlement, how do you measure quality other than by the results obtained for the clients?Nick

You don’t.

Martinned: Well, that’s in the nature of a settlement. You settle for less than you might like, in order to avoid the cost of going ahead with the litigation.As for the topic of the OP, I’m having trouble seeing what the down side is, at least for the members of the class. Given that, at worst, they get something worthless, the only victim here is that poor, discriminated against corporation, victimised as usual by evil, socialist lawyers.

…and their customers, who will bear some of the costs that have to be passed on by the corporation.

Martinned: From the point of view of the economy as a whole, there is still no relevant difference between a class action and an individual one. The whole point of a class action is to bundle together a whole bunch of people who could, theoretically, each bring their own suit. If you have a problem with frivolous law suits, why not talk about tort reform (including Twombly/Iqbal pleading requirements) and changes in the substantive laws these suits are often brought under?

The relevant difference between the class action and the individual one is that the problematic class actions tend to be ones where individuals would never bring suits in the first place. They “could, theoretically” bring their own suits, but they wouldn’t.

“Tort reform” is an independent issue; yes, it’s also important, and Ted has worked on that as well, but it’s not an answer here, because many of these cases aren’t literally meritless; they’re just trivial.

You need to look at the cases to which Ted is objecting, instead of talking about “class actions” generally, as if he were objecting to all of them. These are cases where the class counsel settles for essentially no relief to the class, but a big payout to the lawyers. That means that either:

1) The lawyers are selling out their clients, taking a bad settlement in order to boost their own fees; or
2) The case was a trivial case that involved no real damages to class members, and would never have been brought but for the instigation of lawyers who saw a chance to transfer money from a corporation’s pocket to their own.

Nick

NickM:
Why should the amount of work the lawyers did be determinative? Contingency fee actions don’t pay lawyers except to the extent the client recovers, and hourly fees are usually far lower than what lawyers are being awarded in settlements of this nature — not to mention that few plaintiffs pay a lawyer hourly except when they’re fairly sure of a strong likelihood of recovery.

I said: “it depends on the work they did”, not “it depends on the amount of work they did”. It also depends on the quality of their work.

Martinned: Whether they should or not depends on the work they did. The point is merely that the members of the class aren’t being victimised here. (Well, to the extent that the current rules for opt-out and judicial scrutiny of the settlement work as they are supposed to.) If the class member doesn’t have a sufficient stake in the suit to make it worth their while to opt out, the suit doesn’t really affect them one way or another. They are not a victim. If the settlement causes a significant disadvantage for class members, in the sense that the payment they’re receiving is too small relative to the claim they’re giving up, the current opt-out rules should be enough.

Why should the amount of work the lawyers did be determinative?

Contingency fee actions don’t pay lawyers except to the extent the client recovers, and hourly fees are usually far lower than what lawyers are being awarded in settlements of this nature – not to mention that few plaintiffs pay a lawyer hourly except when they’re fairly sure of a strong likelihood of recovery.

Nick

LTEC: I’m sure that many — if not most — class action suits are merely scams run by lawyers.However, Frank seems to think that any class action suit in which the members of the class get essentially nothing and the lawyers get millions, is a bad thing.Not necessarily.It is easy to imagine a case where the members are happy just to see a fraudulently or dangerously run company penalized, just as a warning to other similar enterprises.For example, say that a bank is stealing one dollar from each customer each month for many years.No individual is being badly harmed, yet it is the sort of activity we would want banks not to be able to get away with, even if in the process we enrich lawyers.

I am willing to bet – Dis guy is a class action/ trial lawyer

John Moore: Martinned says:
The other victim is the entire economy, damaged by our ridiculous class action system.Why a center to focus on it? Because class action abuse is rampant, due to the deep pockets of and hence high profits available from the victimdefendant.

From the point of view of the economy as a whole, there is still no relevant difference between a class action and an individual one. The whole point of a class action is to bundle together a whole bunch of people who could, theoretically, each bring their own suit. If you have a problem with frivolous law suits, why not talk about tort reform (including Twombly/Iqbal pleading requirements) and changes in the substantive laws these suits are often brought under?

The only possible victim of a (frivolous) class action is the defendant. And from the defendant’s point of view, there isn’t much difference between a class action and any other suit. So I’m not sure why it is necessary to create a center focusing solely on “class action fairness”.

The other victim is the entire economy, damaged by our ridiculous class action system.

Why a center to focus on it? Because class action abuse is rampant, due to the deep pockets of and hence high profits available from the victimdefendant.

1. True; my comment here was directed more appropriately at objecting than at opting out.
2. When the claims aren’t legit anyway, or the individual damages are small, then there won’t BE individual claims, so of course the costs if the class action are greater than the costs of individual actions. (If the claims are legit, then they don’t fall into the category of cases we’re discussing, because those claims don’t get settled with no recovery for the class.)
3. You’re conflating the issue of the legitimacy of the particular settlement at issue with the merits of the actual case. I specifically said if the claim itself is legit.

David Nieporent:
Not at all.For one thing, it may well cost more to opt-out ($0.44), plus your time, than the recovery is worth to you.For another, the class action is imposing a cost on the defendant, which will, at least in part, be passed onto consumers, including those who “opt out.”For a third, opting out only preserves your own individual claim.A settlement, no matter how bad, effectively prevents you from bringing your own class action, which means you’d have to bring an individual action to pursue your own claim, which means you lose the class action leverage.So to the extent a class action is legitimate in a particular situation, then approval of the settlement hurts you.For a fourth, abusing the legal system is offensive on its own merits, whether or not it personally affects me.

(1) If the costs of opting out outweigh the recovery, then why the angst over someone else “settl[ing] on [your] behalf?” You’ve identified the cost of a stamp and the time to fill out a form, lick and envelope, and walk down the driveway to put it in the mailbox (although I suspect that a lot of opt-outs can be handled electronically these days). If even this de minimus effort and expense outweighs whatever value you place on you claim, then it hardly seems like you value your claim enough to get upset over.

(2) Assumes that the cost of defending and settling the class action is greater than the costs of defending (and likely settling) individual actions. This might be the case sometimes, but it’s definitely not categorically true. There’s a reason the asbestos manufacturers tried to shoehorn all existing and potential claimants into one ginormous (technical term) class about 15 years ago: it would have been cheaper that way.

And if the complaint here is that the underlying action is without merit, then the complaint lies not with the class action remedy, but with whatever substantive law is at issue.

(3) So in a post complaining about others asserting your rights via class action, your complaint is that doing so deprives you of the ability to assert the rights of others via class action. Seems quite incongruous. That being said, if you want to preserve the class action remedy for yourself in a meritorious claim, then file your own suit first. Or move for appointment as class counsel or lead plaintiff. Or define a class that is different for whatever reason than the first one. You’ve got options here.

(4) May be. I wrote only in response to your original comment, which seemed to be limited to the personal effect on you, not on a broader sense of societal well-being.

If I want to sue someone, as part of a class, I should be required to notify the lawyers that I want to be part of the suit. I should NOT be required to opt out of something that I never wanted anything to do with in the first place.

If a genuine scam is at work, there are sufficient criminal laws to deal with it and target the actual offenders. If it’s a question of a shady business practice, such as charging you $10/transaction for out-of-network ATMs while disclosing the fee in print that cannot be read without the aid of powerful optics, I’m not sympathetic to the notion that the bank should pay out more than the net value of the grievance, when punative action should rightfully be targeted at the person(s) responsible for the policy. And if it’s a grievance that the weather stripping on the front door makes the width of the opening 3/16″ too narrow for ADA compliance, then I vote for Lawyer Season.

NickM: Martinned — if the class as a whole gets something worthless, why should the lawyers get a large sum of money?

Whether they should or not depends on the work they did. The point is merely that the members of the class aren’t being victimised here. (Well, to the extent that the current rules for opt-out and judicial scrutiny of the settlement work as they are supposed to.) If the class member doesn’t have a sufficient stake in the suit to make it worth their while to opt out, the suit doesn’t really affect them one way or another. They are not a victim. If the settlement causes a significant disadvantage for class members, in the sense that the payment they’re receiving is too small relative to the claim they’re giving up, the current opt-out rules should be enough.

The only possible victim of a (frivolous) class action is the defendant. And from the defendant’s point of view, there isn’t much difference between a class action and any other suit. So I’m not sure why it is necessary to create a center focusing solely on “class action fairness”.

Nick

LTEC: David Nieporent –In my eyes, the evil in your last example is not that a class member receives a worthless coupon instead of $5 cold cash, but rather that the bank only loses less than 1/5 of its actual profit from its scam, rather than much more than its profit.

Well, that’s in the nature of a settlement. You settle for less than you might like, in order to avoid the cost of going ahead with the litigation.

As for the topic of the OP, I’m having trouble seeing what the down side is, at least for the members of the class. Given that, at worst, they get something worthless, the only victim here is that poor, discriminated against corporation, victimised as usual by evil, socialist lawyers.

In my eyes, the evil in your last example is not that a class member receives a worthless coupon instead of $5 cold cash, but rather that the bank only loses less than 1/5 of its actual profit from its scam, rather than much more than its profit.

Of course it is. There are no lawyers who care about stopping fraud or compensating injured people. They’re all mustache-twirling villains, motivated 100% by pure greed.

CMH: Then opt-out of the class. Outrage averted.

Not at all. For one thing, it may well cost more to opt-out ($0.44), plus your time, than the recovery is worth to you.

For another, the class action is imposing a cost on the defendant, which will, at least in part, be passed onto consumers, including those who “opt out.”

For a third, opting out only preserves your own individual claim. A settlement, no matter how bad, effectively prevents you from bringing your own class action, which means you’d have to bring an individual action to pursue your own claim, which means you lose the class action leverage. So to the extent a class action is legitimate in a particular situation, then approval of the settlement hurts you.

For a fourth, abusing the legal system is offensive on its own merits, whether or not it personally affects me.

paul yamada says:
Mr Volokh, if you believe ANYONE at AEI is actually a “scholar”, rather than a corrupt/corrupted hired gun, you are a moron.

Yes, yes, yes, we’ve heard this type of BS from every leftist who comments here, over and over and over and over, ad nauseum.

Any source of anything whatsoever not on the left is a partisan hack, bought out by somebocdy or other. Anyone who is an AGW skeptic is a shill for Exxon. Anyone who is against Obama for any reason is a racist.

Conversely, all leftists good.