Keeping the Flies out of the Ointment: Restricting Objectors to Class Action Settlements

By Greenberg, Bruce D. | St. John's Law Review, January 1, 2010 | Go to article overview

Keeping the Flies out of the Ointment: Restricting Objectors to Class Action Settlements


Greenberg, Bruce D., St. John's Law Review


It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doers of deed could have done better. The credit belongs to the man who is actually in the arena: whose face is marred by the dust and sweat and blood; who strives valiantly; who errs and comes short again and again . . . who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause; who, at the best, knows in the end the triumph of high achievement; and who, at the worst if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.1

INTRODUCTION

Most class actions are resolved by settlement. By rule, class action settlements must be approved by the court.2 When the parties to a class action and their respective counsel agree to settle the case, they join forces in presenting their settlement to the court and seeking approval of that settlement.

The settlement is agreed to, however, without direct involvement by members of the class that will be bound by the settlement. As a result, such "absent class members" are permitted to object that a proposed settlement is not fair, reasonable, and adequate.3

In theory, objectors can occasionally highlight aspects of a proposed settlement that are unreasonable or that expose conflicts among the interests of class members or between class counsel and the class.4 But in reality, all too frequently, objectors and their counsel see an opportunity to extract money from the parties or class counsel, whose efforts brought about the settlement, by threatening to upset or seriously detour the settlement. Objectors make arguments that are groundless yet sufficient to delay the settlement approval process for months or years unless class counsel or the parties agree to "buy off" the objector or the objector's counsel. Objector tactics can prove lucrative because the other parties may prefer to "buy off" the objectors rather than suffer the delay and additional expense necessary to defeat the objection.

Courts have been somewhat schizophrenic about objectors. A few cases have recognized that objectors can sometimes inform the court of problems with a proposed settlement that the parties, no longer adversaries, would not perceive or raise.5 Far more courts, however, have noted that many objections are groundless and filed for purposes of extracting unwarranted payments.6 Such objections are most often filed by "professional objectors"-attorneys who make their living by objecting to class action settlements and extracting a part of class counsel's hardearned attorney fees or a payment from the settling parties for compromising those objections.7

In at least two ways, professional objectors harm the class members whose interests they claim to represent. First, professional objectors' almost invariably groundless objections delay the provision of relief to class members who, in most instances, have already waited years for resolution. Second, by feeding off the fees earned by class counsel who took the risk of suing defendants on a purely contingent basis, as is the normal practice in class actions, professional objectors create a disincentive for class counsel to take on such risky matters. That disincentive clashes with the public interest, repeatedly recognized by courts, to incentivize class counsel to handle such cases.

This Article proposes changes in the way courts evaluate objections and the persons who bring them. It also suggests a return to fundamental principles of the law governing attorney fees for objector counsel. Restricting objector counsel fees would reduce their incentive to file groundless objections, by limiting fee awards to only those who raise valid problems with a settlement that the courts would not otherwise perceive. Reducing the ability of objectors, particularly professional objectors, to obtain a fee will concomitantly lessen the frequency of their objections, thus benefiting class members by reducing delays in the implementation of appropriate settlements. …

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