This week, the class action bar and legal blogs have been abuzz with the news that famed plaintiffs' lawyer Stanley Chesley has been disbarred by the Kentucky Supreme Court, a development that will likely lead to his disbarment in his home state of Ohio as well. (PDF of opinion here.)
In the course of laying out its background facts, the opinion confirms several plaintiff firm practices I've documented in the past. Among them:
- Filing on top of other plaintiffs. Chesley's initial involvement with the case came when he was hired to consult on a national settlement. After he did that, he filed a companion fen-phen case and moved to have it consolidated with the larger lawsuit, a motion his eventual colleagues vigorously opposed. This is not an unusual tactic among plaintiffs' firms, but it's rare to see it confirmed in print.
- Division of labor. The various plaintiffs lawyers engaged in a division of labor among firms. One firm prepared for trial; another rounded up the clients: Chesley served as lead negotiator.
- Money undoes everything. According to the opinion, the whistleblowers in the fen-phen case were law-firm partners of several of the disbarred lawyers, who grew suspicious of the new income streams to firm. When the settlement gets too rich, there are usually people around who will scuttle it, either out of a sense of integrity, or because they aren't getting their cut.
But, in this case, far more important than confirming how plaintiffs lawyers litigate are the lessons defense lawyers can learn about how to negotiate class settlements. Lessons
- Do due diligence on the lawyers one faces. It can be tempting to deal with class action lawyers who are inexperienced or have reputations that suggest they will agree to settlement offers quickly. Doing so may effect a settlement quickly, but it does not guarantee a settlement that will stand up to Rule 23(e) scrutiny.
- Require confirmation that the client has received offer. The largest problem with fen-phen settlements was that the defendants made one offer, but the one communicated to the class members was different. To avoid prolonged litigation over a settlement, it makes sense for the defendant to require some assurance that its offers are communicated effectively. Among other ways to do this, one can ask to communicate the offer to the named plaintiff itself, or require the named plaintiff to be present at any mediation. Neither of these tactics interferes with the attorney-client privilege: the plaintiffs counsel can still confer with their client and provide their unvarnished opinion of the offer. It does, however, reduce the errors that might arise in translation.
- Watch out for settlement red flags. When the fees are higher than the relief the class receives, or much of the relief is an intangible injunction, a defendant might infer that counsel is more focused on their own cut than on the interests of the absent class members. Those settlements are the ones most likely to be undone later.
What each of these lessons boils down to is negotiating a settlement with integrity. There are often financial and institutional pressures to settling quickly and cheaply (and fast, inexpensive settlements can be very good for class members, too). But the best way for a defendant to make sure that a settlement does not result in criminal investigations or huge objections is to make sure that--at the very least--its side of the street is clean.