f/k/a . . . the archives

June 26, 2003

Class Action Attorneys vs. Clients (Leary’s Leery)

Filed under: pre-06-2006 — David Giacalone @ 7:42 pm

In a speech to the Class Action Litigation Summit in Washington, DC, today, FTC Commissioner Thomas B. Leary pledged that the Federal Trade Commission would continue to keep a watchful eye on class-action settlements, to ensure that the interests of consumers are adequately represented.  Leary argued that the interests of class action attorneys are not always aligned with those of their clients.   Today’s FTC Press Release summarized Leary’s address and you can find the full text here.

Com’r Leary’s main points were:

  • “We depend on private litigation to supplement our [FTC] efforts, and, therefore, we have a direct interest in the way that class actions are administered.”
  • One unintended consequence of 1966 changes in federal procedure rules that authorized “opt out” classes [in which all injured consumers, except those that affirmatively "opt out," become members of the class] was to make class action lawyers themselves, rather than their nominal clients, the real parties in interest. This potential conflict-of-interest, which is more or less pronounced in different cases, can compromise the class action mechanism’s ability to achieve its two main goals of compensating consumers and deterring similar conduct in the future.
  • Some courts are granting certification with increasing ease, leading to dramatic consequences in today’s massive, multi-state class actions — because certification of a class almost always puts a case on a settlement track, regardless of the merits of the underlying claims.  In too many cases, the resulting bargain represents the interests of the settling defendants and the class action lawyers rather than the interests of the class members, he said.


Com’r Leary concluded his remarks by describing the FTC’s recent efforts to combat these problems in the class action area.

2 Comments

  1. Isn’t the system set up this way for a reason? If AT&T or IBM or Toyota is cheating just a little – so that one million customers are losing $3 a month apiece there has to be an incentive for someone to step in.

    The fact that the companies are not fighting is either short-sighted on their part or indicates that they believe that in the majority of the cases they will lose. They could always use AllState’s tactics and fight everything. Word spreads about that and then cases become more sparse.

    I would support some sort of legislation which required settlements to be submitted to the FTC to make sure whatever problem is present is actually fixed rather than hushed up.

    Comment by ken — June 29, 2003 @ 8:56 pm

  2. The class action system itself makes good sense, in order to motivate bringing cases where each customers damaged in a relatively small amount. I’d like to think that the judge will make sure that the fees for class counsel fairly reflect the risks and efforts taken and the benefits achieved for the plaintiff class. If we give a supervisory role to the FTC, its budget better be increased to cover the workload.

    The serial objectors problem is greatly increased when the arrangements with class counself are “hushed up.” The plaintiff class and other interested parties need to see those agreements in order to judge whether the objectors have earned a piece of the fee pie or are merely being paid off (out what must have been excessive fees)to silence them. I’m sick of the buzzword “transparency” but that’s what we need here.

    Comment by David Giacalone — June 30, 2003 @ 10:55 am

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