Seyfarth Synopsis: Professional class settlement objectors can be a thorn-in-the-side for employers and class counsel attempting to settle class actions. Their M.O. is often the same — frivolously object, appeal its denial, settle out of court, and withdraw. It is already hard enough to obtain court approval of a class-based settlement without adding into the mix such tactics undertake by objectors. But the good news for employers is that courts are closely reviewing conduct of objectors to determine if sanctions are appropriate.
That is exactly what happened in Clark v. Gannett Co., No. 1-17-2041 (Ill. App. Nov. 20, 2018). Clark is a good reminder for employers who are seeking class settlement approval to not lie down for serial objectors. Rather, employers should take the fight to objectors, who are increasingly being met with skepticism and ire from courts around the country,
Background
In Clark v. Gannett Co., No. 1-17-2041 (Ill. App. Nov. 20, 2018), the plaintiff alleged that Gannett Co. violated the Telephone Consumer Protection Act by making unsolicited phone calls. The parties reached a $13.8 million settlement, of which $5.4 million went to class counsel. Before final approval, however, Gary Stewart (the sole objector) filed an objection to the settlement, claiming that class counsel's fees were excessive. The trial court overruled Stewart's objections.
A month later, class counsel moved for sanctions against Stewart's counsel, arguing that they filed Stewart's objection for improper reasons — namely, to elicit attorneys' fees. The trial court declined to grant class counsel's motion for sanctions and found that the objection was not filed for an improper purpose. In the course of that ruling, the trial court excluded evidence of counsel's pattern of conduct in representing objectors in other class action lawsuits. Class counsel appealed the trial court's denial of sanctions to the Illinois Appellate Court.
The Decision Of The Illinois Appellate Court
On appeal, the Illinois Appellate Court reversed the trial court's decision to exclude the pattern of conduct of Stewart's counsel. The Illinois Appellate Court explained, "[t]he pattern of conduct engaged in by [Stewart's counsel] is relevant to the objection's possible improper purpose of seeking attorneys' fees with the bare minimum of effort, expense, and time." Id. at 17. In reaching that decision, the Illinois Appellate Court noted that Stewart's counsel has used this strategy in multiple cases in different states and that various courts had admonished counsel's conduct. In fact, as the Illinois Appellate Court emphasized, one federal judge described one of Stewart's attorneys as '"a known vexatious appellant.'" Id. at 18. Based on these facts, the Illinois Appellate Court vacated the order denying sanctions and directed the trial court to conduct a new hearing with evidence of similar conduct in other cases to determine whether the objection was filed for an improper purpose.
But the Illinois Appellate Court did not stop there. Because one of Stewart's attorney's was an out-of-state attorney who used a local attorney for filing the objection, it considered whether the duo engaged in the unauthorized practice of law. There was evidence that Stewart's local attorney did not review any of the objection papers, all of which were prepared solely by Stewart's out-of-state counsel. The Illinois Appellate Court explained that by "not applying and appearing pro hac vice" Stewart's out-of-state counsel sought to "escape responsibility by appearing not to practice law in this jurisdiction." Id. at 21. "Both attorneys," the Illinois Appellate Court concluded, "have engaged in fraud on the court." Id. at 25. As a result, it then directed the clerk to forward a copy of the order to the ARDC to determine whether disciplinary action should be taken.
Implication For Employers:
This ruling in Clark demonstrates that now, more than ever, courts are scrutinizing the purpose behind an objection to a class-based settlement, particularly when the objector is represented by counsel with history of hijacking class settlements. Employers confronted with a hold-up by a professional objector should work with class counsel to aggressively oppose the objector's extortionist bid for fees. This might mean some short term pain and associated costs, but in the long run hopefully objectors will get the message that gone are the days where parties will roll over and pay their fees.
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