Topic: Professions & Institutions
Go to the Head of the Class
In the category of innovative entrepreneurial lawyering, we have the example of the L.A law firm Westrup Klick & Associates. It has pioneered the concept of filing class action law suits in which one of its own lawyers (or their relatives or spouses) were also members of the class, or at least that’s what it had been doing until California’s 2nd District Court of Appeals, Apple Computer Inc. v. Superior Court, said, "Uh-uh!"
"Uh-uh!" is right. Class actions are the extremely lucrative (for attorneys) and occasionally necessary lawsuits in which a large number of plaintiffs with similar injuries or grievances against one defendant are collected in a single action. Courts like the arrangement because it is efficient, and a lot less time consuming and expensive than trying the same case over and over. Lawyer love to bring such cases because they can often get 40% or more of the total damages award, which is far more than any single plaintiff gets. The technical problem with having a member of one of the representing firm’s lawyers among the plaintiffs in the class is that it creates a conflict of interest. The firm is obligated to get all it can for the lawyer-plaintiff and the class, but also will try to get the court to approve the largest fee possible for itself. The lawyer-plaintiff has divided loyalties, and those loyalties, by law in California and through the ethics rules in most states, are imputed to his firm.
That’s not what’s really wrong with the Westrup Klick device, however. You see, a class action usually start with one complaining client going to a lawyer or a law firm and becoming the named client to start a class. Then the firm identifies a large group of similar clients with the same complaint and asks a court to certify that it can represent all the plaintiffs in a class action. The other potential plaintiffs are contacted by mail and told that they are part of the lawsuit (sometimes they can opt to leave the class and sue on their own.). But Westrup Klick hasn’t been waiting for the first client to come to it, no sir! It has manufactured its own class action suits, using its own lawyers and their families to make the initial complaint. From 2003 to 2004, the firm filed 10 other class actions in which an attorney for Westrup Klick or a relative was the named plaintiff. Undoubtedly, the initial complaints have been legitimate, but what does that mean? It means that a bunch of lawyers sat around a table and brainstormed about little, irritating ways companies had damaged consumers, and speculated on how many other consumers may have been similarly affected. The amount of the damage to any one individual may have been miniscule, but multiply it by thousands or hundreds of thousands, and that 40% fee got attractive fast.
In the Apple Computer case, each plaintiff’s damages were exactly 8 dollars.
Plaintiff’s attorneys are excoriating the Bush administration’s efforts to limit class actions as a blow to consumers, but the Westrup Klick tale shows one of the ways the device can be abused. Class actions are important; they have helped victims receive compensation in some horrendous examples of corporate negligence, such as the asbestos cases. Lawyers who attempt to manipulate the process for their own profit actually endanger it by tempting lawmakers to overreact with excessive restrictions.
Watch carefully to see if the legal establishment makes a genuine effort to police its own and curb unethical practices connected to class actions. If it does, its consumer advocacy will have a lot more credibility.