One of the really fair aspects of the class action rules is that, if there is a settlement, members of the class must be notified of its terms and they have the right to object if they don’t think it is fair. The judge will consider the objection and either grant or deny it. Sometimes, objectors raised valid points that none of the lawyers ever considered and settlement terms are tweaked to make them a little better.
A cottage industry has grown in the class action profession which consists of what are known as professional objectors. These are lawyers who scour newspapers for announcements of settlements, find a “client” and file an objection on the client’s behalf. Ninety-nine times out of 100, the objection is overruled, but that is what the professional objector wants. When his or her objection is overruled, they then have the right to appeal final approval of the settlement. Since appeals can last anywhere from 9 months to 2 years, this means that payment to the class and to the lawyers for their attorney’s fees will be delayed at least that long. Usually, the case has taken 4 to 5 years to achieve the result. The class and the attorneys have gone all this time without being paid. Tremendous pressure is thus exerted on the attorneys to pay the objectors out of their own pockets to drop their appeal. This is how professional objector makes his money: he extorts it.
The lawyers for the class, of course, do have the choice not to pay the extortion. They can wait out the appeal and, if they win, the professional objectors get nothing. Every lawyer knows, however, that when a case is in play, no matter how good it is, and no matter how likely it is to survive an appeal, anything can happen. The mere existence of this risk typically ends up with the extortion being paid in order to protect the result achieved for the class.
In July of this year, the Third Circuit Court of Appeals struck down a $330 million class action settlement on grounds asserted by professional objectors who the class lawyers refused to pay. The basis on which the court reversed the settlement was the notion that a nationwide settlement class was inappropriate given the varying nature of the state laws asserted. This ground has been asserted by professional objectors and rejected by courts in appeal after appeal over an extended period of time. And, as can be seen by the result in this case, the objection serves not to increase the recovery for the class, but to destroy it altogether.
So it is quite sad what the Third Circuit has done. It has given a voice to lawyers whose only goal is not to maximize the benefits to those who have been injured by wrongdoing, but only to line their pockets. I remember when the United States ousted Iraq from its occupation of Kuwait. At that time, Saddam Hussein’s troops retreated, but while they did so, they lit the Kuwaiti oil fields on fire. It was as if they were saying:” if we can’t have them, you can’t either.” Unfortunately, professional objectors are acting in the same manner and leaving destruction in their wake. It is more than too bad that the Third Circuit has decided to give legitimacy to such despicable behavior.
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