Seeking justice, and payment, for plaintiffs in class action lawsuits

  • 31 October 2018
  • NormanL

You might get the notices in your mail: a law firm asking you to join a class action lawsuit against a company with the promise you will be paid damages if the suit is successful. Unfortunately, many of those lawsuits don't give plaintiffs much at all in the way of payment. Rather, the bulk of a setttlement goes to the lawyers, or other groups you probably never heard of.  It's a long-running scam, and now, someone is trying to stop it in the Supreme Court:

The Supreme Court faces a difficult question: What happens when there are 129 million winners in a class action lawsuit, each of whom stands to receive 4 cents?

Federal judges in California thought they had an answer. Faced with a privacy invasion lawsuit first filed against Google in 2010, they approved an $8.5 million settlement that split most of the proceeds among six universities and nonprofit groups researching internet privacy issues.

The plaintiffs' lawyers got more than $2 million.

Google users got nothing.

Enter Ted Frank, who directs the Center for Class Action Fairness at the Competitive Enterprise Institute, a free-market advocacy group. He objected to the settlement, as he has to numerous others. This time, he made it to the Supreme Court.

Frank's beef is simple: The deal approved by federal district and circuit court judges benefited the lawyers and recipients, including programs at universities the lawyers attended. Google was not required to change its search function practices despite the privacy intrusion. And the 129 million-member class remained largely clueless. 

"This whole system is ripe for corruption," Frank says. "The money belongs to class members."

Indeed it does. And Frank has had some success in seeing these corrupt settlements overturned:

Since Frank founded his center in 2009, it has won more than $100 million for class members by objecting to what it considers abusive class-action settlements.

His most recent example: a $12.5 million settlement approved this month by the U.S. Court of Appeals for the 9th Circuit, which to date has resulted in $225,000 for class members and as much as $8.9 million for lawyers' fees and costs.

If the justices don't find a way to block such settlements, Frank says, "We’ll see billions of dollars that go to consumers and shareholders in litigation now are going to be diverted to lawyers’ favorite charities."

The court may be wary about being too prescriptive, however. The justices aren't likely to go beyond setting broad standards for lower court judges to follow.

“The Supreme Court has the opportunity to encourage or discourage the use of this kind of remedy,” says Howard Erichson, a professor at Fordham University School of Law and an expert on class actions and legal ethics. "Whatever it says will be the go-to language for every district judge."

To make his case before the justices on Wednesday, Frank chose a lawyer who knew much about such third-party settlements: himself. That puts him in a select group of plaintiffs who have argued their own cases at the Supreme Court.

Here's hoping the Court decides to put the brakes on this legalized graft.