Class Actions-some Selected Problems
| Publication year | 1978 |
| Pages | 700 |
| Citation | Vol. 7 No. 5 Pg. 700 |
1978, May, Pg. 700. Class Actions-Some Selected Problems
In 1966, F.R.C.P. 23 was amended to broaden the availability of the class action suit as a remedy for large numbers of claimants, primarily by requiring that putative members of the class must elect to "opt-out" or be automatically included in the class. Previously, the statute required claimants to "opt-in" or be excluded from the class. Because of this amendment, the number of class action suits has increased greatly.
The class action suit can be a valuable tool in many cases. However, it has often been abused and misused by lawyers and sorely treated by the courts, particularly by judges who have developed, perhaps with good reason, a strong distaste for such cases. Judges, lawyers, and even the litigants themselves, often find class action suits burdensome in many ways. This article attempts to point out several of the special problems which consistently arise in handling class action cases.
In deciding whether or not to handle a class action allegation, a lawyer must seriously consider several personal and ethical ramifications.
If certification as a class action is obtained, and particularly if the case is complex and involves "serious money," a lawyer for a plaintiff who undertakes a class action has literally made a decision which could change his way of life for several years. When the stakes are high, the defense is aggressive, extensive and expensive. The lawyer himself may be subject to discovery proceedings as to his fee arrangement with the clients and his ability to represent the class. The clients, both named and unnamed, may also be the subject of extensive discovery proceedings. Extensive depositions will be required. Travel across the country and even internationally may be necessary. Thousands of documents may have to be inspected and copied. Constant appearances may be required before judges, some of whom are not only unsympathetic to class actions in the first place, but who are also overworked.
Defendants normally team up and take turns filing motions or taking the lead in opposing motions so that no one defendant can be accused of being non-cooperative before a judge who is daily confronted with more important matters. Various defendants often file motions either together or on an agreed schedule which will give the plaintiff's attorneys, usually vastly outnumbered, no opportunity to properly research and prepare pleadings. In summary, the demands of a class action suit may cause an attorney to turn down other cases and may set back
the ordinary growth of his law firm by a number of years.
In addition to all the normal considerations an attorney must take into account before accepting a case, class action cases create special ethical problems.
First, is a class action the best remedy for the client? An attorney who brings a class action case must have a client who wants the action brought, who is interested in the relief obtained, and will agree to pay the costs in connection with the litigation. However, where the client has a substantial interest in recovery (i.e., where there is an investment of several thousand dollars, and the source from which recovery may be obtained is limited), the client may be much better off suing for his own recovery and not representatively for others. The amount of the claim, though large, may not justify the extensive discovery and research that would be required against defendants who may wage an especially vigorous defense in the hope of obtaining a favorable decision and of heading off the potential claimants by stare decisis, if not res judicata. It should be noted that if the attorney chooses not to file the action as a class action, someone else may file as such and thus take control of the litigation away from the attorney and his client.
Interestingly, the size of the investment of the plaintiff is often taken into account by the courts in determining whether or not a plaintiff is an adequate representative for the class, i.e., "truly interested." Yet, in some cases, the size of the investment is a consideration in not approving a class action on the theory that the claim will be pursued in any event.
Where, however, the interest of the client, though large in his view, is very small in comparison with the amount of damages suffered by those similarly situated, and after taking into account the size of the funds available to satisfy all the claims, the class action may very well be the only remedy with enough clout to justify the expenses required for discovery, research and preparation for and through the trial and appellate stages. In this situation, it is important that the interests of the particular client be considered from the viewpoint of maximizing his recovery.
Another ethical consideration is the source for payment of costs of litigation, which can be astronomical. For example, in one case(fn1) handled by this author, the costs incurred at the time of the attorney's fee hearing were in excess of $290,000. Mailed notices were ordered to be sent to members of the class three times (the class consisted of some 16,000 persons) and each time publication in the national edition of the Wall Street Journal along with publication in the Denver Post and Rocky Mountain News was required. Several hundred thousand documents were examined and many were copied; deposition costs on the part of the plaintiffs alone were in the tens of thousands of dollars.
A.B.A. Informal Ethics Opinion number 1283, dated November 20, 1973, considered the question of a plaintiff's attorney advancing costs and concluded as follows:
The lawyer may ethically advance the costs out of his pocket, reimbursing himself out of any Judgment rendered for the class action Plaintiffs. Indeed, the Federal Rules of Civil Procedure, particularly Rule 23, permit class actions in appropriate cases. In order to make such a policy effective, the Federal Rules approved by the Supreme Court of the United States have by implication determined that advancing such costs under proper circumstances is not unethical. However, if the client
does not agree to be ultimately responsible for costs so advanced, or authorize the lawyer to proceed with the suit as an individual one, the lawyer should withdraw.
Defendants continuously attempt to inquire into the relationship between the plaintiff and his attorneys in an attempt to show unethical conduct, among other things. The leading case in the Tenth Circuit, and perhaps the United States, is the Sanderson(fn2) case where the trial court permitted discovery of the tax returns and other financial information of the plaintiffs on the theory that plaintiffs might not be able to respond in the event the...
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