In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 19-3095

NICK PEARSON, et al.,

Plaintiffs-Appellees,

v.

TARGET CORP., et al.,

Defendants-Appellees,

v.

RANDY NUNEZ, et al.,

Objectors-Appellees,

APPEAL OF: THEODORE H. FRANK,

Objector.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:11-cv-07972 — John Robert Blakey, Judge.

____________________

ARGUED JUNE 4, 2020 — DECIDED AUGUST 6, 2020

____________________

Before ROVNER, WOOD, and HAMILTON, Circuit Judges.
2 No. 19-3095

HAMILTON, Circuit Judge. We address here a recurring 

problem in class-action litigation known colloquially as “objector blackmail.” The scenario is familiar to class-action litigators on both offense and defense. A plaintiff class and a defendant submit a proposed settlement for approval by the district court. A few class members object to the settlement but 

the court approves it as fair, reasonable, and adequate under 

Federal Rule of Civil Procedure 23(e)(2). The objectors then 

file appeals. As it turns out, though, they are willing to abandon their appeals in return for sizable side payments that do 

not benefit the plaintiff class: a figurative “blackmail” by selfish holdouts threatening to disrupt collective action unless 

they are paid off. See Brian T. Fitzpatrick, The End of Objector 

Blackmail?, 62 Vand. L. Rev. 1623, 1624 (2009).

That’s what happened here. Three objectors appealed the 

denial of their objections to a class action settlement and then 

dismissed their appeals in exchange for side payments. The 

last time this case was here, we called such “selfish” objector 

settlements “a serious problem.” Pearson v. Target Corp., 

893 F.3d 980, 986 (7th Cir. 2018) (Pearson II). The question before us now is whether, on motion of another class member, 

the district court had the equitable power to remedy the problem by ordering the settling objectors to disgorge for the benefit of the class the proceeds of their private settlements. The 

district court held that it did not, finding that the objectors 

had not intended or committed an illegal act nor taken money 

out of the common fund.

We reverse. Falsely flying the class’s colors, these three objectors extracted $130,000 in what economists would call rents 

from the litigation process simply by showing up and objecting to consummation of the settlement to slow things down 
No. 19-3095 3

until they were paid. We hold that settling an objection that 

asserts the class’s rights in return for a private payment to the 

objector is inequitable and that disgorgement is the most appropriate remedy. Objectors who settle their objections for 

amounts in excess of their shares as class members are, in essence, “not paid for anything they owned.” Young v. Higbee 

Co., 324 U.S. 204, 213 (1945) (reversing denial of remedy in 

comparable private settlement of class-based objections). The 

objectors’ settlement proceeds here belonged in equity and 

good conscience (ex aequo et bono, according to the old formula) to the class and ought to be disgorged. We therefore 

reverse the district court’s order denying disgorgement and 

remand for further proceedings.

I. Factual and Procedural Background

In November 2011 named plaintiffs filed a putative class 

action in federal district court in Illinois alleging that defendants had made false claims about certain dietary supplements 

they manufactured and distributed. In March 2013 the parties 

negotiated a settlement and asked the district court to approve it. Over the objection of class member Theodore Frank, 

the district court did so in January 2014. Frank appealed and 

we reversed. The settlement was plagued by “fatal weaknesses” and amounted to a “selfish deal” between class counsel and defendants that “disserve[d] the class.” Pearson v. 

NBTY, Inc., 772 F.3d 778, 787 (7th Cir. 2014) (Pearson I), discussing in greater detail plaintiffs’ claims and the terms of the 

disapproved “Pearson I settlement.” 

In April 2015 the parties negotiated and submitted to the 

district court for approval a new settlement known as “the 

Pearson II settlement.” The agreement provided for a common 
4 No. 19-3095

fund of $7.5 million and a permanent injunction against certain labeling statements. Before the district court, three class 

members objected to the Pearson II settlement: Randy Nunez, 

Steven Buckley, and Patrick Sweeney, who are all appellees 

here.

In March 2013 Nunez had filed his own putative class action against defendants in federal district court in California, 

two months before the Pearson I settlement was submitted for 

approval to the district court in Illinois. Nunez alleged defendants had made false claims about one of the supplements 

at issue in this case. Before defendants answered the complaint, Nunez was stayed pending the Pearson I settlement negotiations. After we vacated the Pearson I settlement, Nunez 

asked the district court in California to lift the stay and to

name his lawyers interim counsel of the Pearson subclass 

Nunez hoped to represent. The court granted both motions. 

The Pearson parties refused to include Nunez’s counsel in 

their negotiation of the Pearson II settlement. Nunez moved to 

intervene in Pearson, pointing to his counsel’s interim appointment order in Nunez. The district court denied intervention but invited Nunez to object to the forthcoming Pearson II

settlement when it was presented. Nunez accepted the invitation. In a four-page submission, he argued that his counsel 

was the only counsel “with authority” to settle his proposed 

class’s claims and that defendants should not be permitted to 

auction off the case to the cheapest class counsel (without giving any reason to believe that had actually happened with the 

Pearson II settlement). 

In another four-page submission, Buckley argued that 

class counsel were entitled to no more than 20 percent of the 
No. 19-3095 5

settlement fund in fees, not the 33 percent the proposed settlement promised them. According to Buckley, class counsel 

were impermissibly seeking to bill time spent negotiating and 

defending the inadequate Pearson I settlement, and also had 

more expensive partners bill too many hours as compared to 

less expensive associates and paralegals. 

Sweeney objected pro se. In his four-page submission, he 

suggested implementing several measures to improve oversight of the settlement distribution process. Sweeney 

acknowledged this was not “the ‘usual’ procedure” but urged 

its adoption nonetheless. He also advanced miscellaneous objections relating to class counsel’s fees, the notice of the proposed settlement, and defendants’ failure to admit liability 

under the Telephone Consumer Protection Act (which defendants were never alleged to have violated). 

The district court approved the Pearson II settlement. All 

three objectors appealed. All three dismissed their appeals before briefing began. The dismissals struck Frank as suspicious 

and possibly in bad faith. He sought to reopen the case in the 

district court by filing a motion for disgorgement of any payments made to objectors in exchange for dismissing their appeals. The district court denied the motion for lack of jurisdiction. Frank appealed again, precipitating our decision in Pearson II.

There, we described Frank’s theory of the objectors’ possible bad faith as follows: 

[A]n absent class member objects to a settlement 

with no intention of improving the settlement 

for the class. Instead, the objector files her objec-
6 No. 19-3095

tion, appeals, and pockets a side payment in exchange for voluntarily dismissing the appeal. A 

potential benefit for the class—a better settlement—is leveraged for a purely personal gain—

a side bargain.

893 F.3d at 982. We reversed, concluding that the district court 

had jurisdiction to entertain Frank’s motion and that Frank 

should have been allowed to pursue his theory. Id. at 983.

On remand, discovery showed that the three objectors had 

indeed all received side payments in exchange for dismissing 

their appeals—$60,000 each to Nunez and Buckley and 

$10,000 to Sweeney, totaling $130,000—while the class had received nothing. The district court, however, concluded that 

“the record failed to confirm suspicions of blackmail or other 

wrongdoing” and so denied disgorgement. Nunez, Buckley, 

and their counsel asserted that they had pursued their objections in good faith, not for the purposes of blackmail.1 The 

court could not say the same for Sweeney but found the question ultimately “irrelevant” because there was “no basis to 

conclude that the side settlements harmed the class” by taking 

money that had been earmarked for it. The district court 

therefore denied Frank’s motion. Frank has appealed, and 

Nunez and Buckley have appeared to defend their payments. 

1 The colloquial term “objector blackmail” can cause confusion that 

distracts from the relevant equitable principles. Proof of a crime or other 

statutory violation is not required. Similarly, Frank complains that he has 

been unfairly branded a “professional objector.” We have avoided that 

pejorative phrase because the merits of an objection are relevant, not amateurism or experience.
No. 19-3095 7

None of the original Pearson parties has participated in this 

appeal, and neither has Sweeney.

II. Analysis

A motion for disgorgement is addressed to the equitable 

discretion of the district court, and we review the court’s ruling on the motion for abuse of that discretion. FTC v. Febre, 

128 F.3d 530, 534 (7th Cir. 1997), citing Weinberger v. RomeroBarcelo, 456 U.S. 305, 320 (1982). A district court abuses its discretion by applying an incorrect legal standard or by reaching 

a clearly erroneous conclusion of fact. Salgado v. General Motors Corp., 150 F.3d 735, 739 (7th Cir. 1998). As explained below, in finding that the money defendants paid to objectors 

had not been earmarked for the class, the district court failed 

to address a critical piece of evidence. More fundamental, 

though, that factual question appeared relevant only because 

the district legally erred by requiring some positive statutory 

violation as a predicate for disgorgement.

A. Wrongfulness of Objectors’ Conduct

We base our decision here on long-established principles 

of equity. It has long been axiomatic “that no person shall 

profit by his own wrong.” Town of Concord v. Town of 

Goffstown, 2 N.H. 263, 265 (1820); see also Liu v. SEC, 140 S. Ct. 

1936, 1943 (2020) (same); Restatement (Third) of Restitution 

and Unjust Enrichment § 3 (Am. Law Inst. 2011) (same). The 

wrong may take any number of forms, of which fraud is perhaps the paradigm. See, e.g., Liu, 140 S. Ct. at 1941–42. 

A fiduciary’s self-dealing is treated as a “constructive” 

fraud. 1 Joseph Story, Commentaries on Equity Jurisprudence

304 (1836). As a general rule, “wherever confidence is reposed, and one party has it in his power, in a secret manner, 
8 No. 19-3095

for his own advantage, to sacrifice those interests, which he is 

bound to protect, he shall not be permitted to hold any such 

advantage.” Id. at 320; see also, e.g., Snepp v. United States, 

444 U.S. 507, 515 (1980) (same); Restatement (Third) § 43 

(same). We have little difficulty applying these principles to a 

private payment made to an objector in exchange for withdrawing the appeal of an objection asserting the interests of 

the class.

1. Young v. Higbee Co.

Seventy-five years ago, the Supreme Court applied these 

ancient principles to class litigation in Young v. Higbee Co., 

324 U.S. 204 (1945). In that case, Potts and Boag, two preferred 

shareholders of the bankrupt Higbee Company, objected to 

confirmation of the company’s bankruptcy plan. Id. at 206. 

They argued that the company’s preferred shareholders 

should have been given priority over a junior debt held by 

Bradley and Murphy, two of the company’s directors. Id. The 

district court confirmed the plan over their objection, and 

Potts and Boag appealed. Id. While their appeal was pending, 

they sold their preferred shares along with the appeal to Bradley and Murphy for seven times the shares’ market value. Id.

at 207. Young, another preferred shareholder, moved in the 

district court for an accounting of profits from the settlement. 

Id. at 207–08. The motion was denied and Young appealed. Id.

at 208. The Supreme Court reversed the denial, finding that 

Potts and Boag’s dismissal had been bought at the expense of 

the class of shareholders they purported to represent. Id. at 

214.

The Supreme Court based its decision not on formalistic 

details of procedure but on the substance of the rights Potts 
No. 19-3095 9

and Boag had asserted—on behalf of all shareholders similarly situated. Potts and Boag argued that because they had 

appealed as individuals, “they owed no duty to any stockholders but themselves.” Id. at 209. The Supreme Court disagreed. “Equity looks to the substance and not merely to the 

form.” Id. In substance, their appeal had been taken on behalf 

of all preferred shareholders, whose pro rata shares of the 

bankruptcy estate would have increased if their appeal had 

been successful. Id. As the only preferred shareholders to appeal confirmation of the plan, Potts and Boag had taken it 

upon themselves to decide the fate of every preferred shareholder, id., even the fate of the company’s entire reorganization. Id. at 212 n.12.

The critical step in the Court’s reasoning was to recognize 

that the appellants had taken on a fiduciary duty to the other 

shareholders similarly situated: “This control of the common 

rights of all the preferred stockholders imposed on Potts and 

Boag a duty fairly to represent those common rights.” Id. at 

212. It was a breach of this duty to “trade in the rights of others 

for their own aggrandizement,” as Potts and Boag had done 

by privately selling their appeal. Id. at 213. Their profits from 

that breach thus belonged in equity to all the preferred shareholders. Id. at 214. Finally, the Court concluded, the accounting remedy Young sought was well within the district court’s 

equitable powers. Id.

The private settlement of a class-based objection in Young

is not meaningfully different from the private settlements of 

class-based objections in this case. As in Young, the objections 

to the Pearson II settlement raised by Nunez, Buckley, and 

Sweeney alleged defects which, if genuine, would have in-
10 No. 19-3095

jured every member of the class by binding them all to an unfair, unreasonable, or inadequate settlement. Named plaintiffs “by definition” had renounced any defense of the class 

against such injuries. That’s why the three objectors were permitted to take their appeals in the first place. Devlin v. 

Scardelletti, 536 U.S. 1, 9 (2002). “The situation which enabled 

them to traffic in the interests of others was created by a [rule] 

passed to protect the interests of all of them.” Young, 324 U.S. 

at 212; see Devlin, 536 U.S. at 8–9, citing Fed. R. Civ. P. 23(e). 

These objectors were thus “bound to protect” the common interests of the class which the rule at their own behest had entrusted to them, but they “sacrifice[d] those interests” to their 

own advantage by selling their appeals without benefit to the 

class. 1 Story, supra, at 320. Equity does not permit them to 

keep that gain. Id.

As in Young, the three objectors’ “representative responsibility” to the class in this case was “emphasized” by the fact 

that they would have been entitled to seek compensation for 

their services if their appeals had succeeded. 324 U.S. at 212–

13; see 1 Story, supra, at 450–51, 482–83 (contribution for benefit to common fund) (“one shall not bear the burthen in ease 

of the rest”); Restatement (Third) § 29 (same). On the same 

principle, named plaintiffs each received $5,000 incentive 

awards under the Pearson II settlement, and Frank was 

awarded $180,000 in attorney fees for the substantial class 

benefits he had achieved by objecting to the Pearson I settlement. See Fed. R. Civ. P. 23(e)(5)(B) advisory committee’s note 

(“Good-faith objections can assist the court . . . . It is legitimate 

for an objector to seek payment for providing such assistance 

under Rule 23(h).”). 
No. 19-3095 11

As in Young, the objectors here had a duty to object only in 

“good faith,” 324 U.S. at 210–11 & n.9, that is, not for an improper purpose. See Vollmer v. Publishers Clearing House, 

249 F.3d 698, 709 (7th Cir. 2001) (finding evidence that putative intervenor-objector “was put forward by his attorneys 

solely to enable them to collect fees in this action”), applying 

Fed. R. Civ. P. 11(b)(1). Buckley attempts to distinguish Young

on the basis of this statutory requirement, and more generally 

as offering no more than a “narrow interpretation” of one section of the bankruptcy laws. The asserted distinction is not 

genuine and, as noted, Young’s reasoning was based not on 

the details of bankruptcy procedure but on the general equitable principles cited above. It is squarely on point here. 

Finally, in one important respect the facts here are even 

more egregious than in Young. There, the Court observed that 

the purposes of the bankruptcy laws would be flouted if Potts 

and Boag, by selling out for seven times the market value of 

their preferred shares, were allowed to receive “$7.00 for 

every $1.00 paid to other preferred stockholders.” 324 U.S. at 

210. Even less could the “fair, reasonable, and adequate” settlement demanded by Rule 23(e)(2) be achieved in this case. 

Sweeney’s settlement gave him $96, and Nunez and Buckley 

$577, for every $1 received by other class members—in exchange for absolutely nothing.2

We thus read Young to impose a limited representative or 

fiduciary duty on the class-based objector who, by appealing 

2 These estimates assume that every class member would receive $104, 

the maximum recovery possible under the agreement before adjusting for 

excess or deficiency of the settlement fund after all claims had been submitted. 
12 No. 19-3095

the denial of his objection on behalf of the class, temporarily 

takes “control of the common rights of all” the class members 

and thereby assumes “a duty fairly to represent those common rights.” 324 U.S. at 212.

This case turns on a simple either/or proposition whose 

logic flows directly from Young. These objectors made sweeping claims of general defects in the Pearson II settlement. Either those objections had enough merit to stand a genuine 

chance of improving the entire class’s recovery, or they did 

not. If they did, the objectors sold off that genuine chance, 

which was the property of the entire class, for their own, 

strictly private, advantage. If they did not, the objectors’ settlements of meritless claims traded only on the strength of the 

underlying litigation, also the property of the entire class, to 

leverage defendants’ and class counsel’s desire to bring it to a 

close. Either way, the money the objectors received in excess 

of their interests as class members “was not paid for anything 

they owned,” id. at 213, and thus belongs in equity to the class. 

Id. at 214.

The record here indicates that merit was a matter of indifference to these objectors. Compare what they said to what 

they did. What they said was that the Pearson II settlement 

was either entirely worthless or a collusive reprise of the Pearson I settlement. In his objection, Nunez asserted that his 

counsel had “sole settlement authority” to settle the claims of 

the Pearson subclass he sought to represent in Nunez. That 

would have meant the Pearson II settlement was at best unenforceable as to that subclass and at worst void in its entirety. 

See Brewer v. Nat’l R.R. Passenger Corp., 649 N.E.2d 1331, 1333–

34 (Ill. 1995) (settlement unenforceable if negotiated without 

authority); Kepple and Co. v. Cardiac, Thoracic and Endovascular 
No. 19-3095 13

Therapies, S.C., 920 N.E.2d 1189, 1193 (Ill. App. 2009) (entire 

contract void if essential term unenforceable). Only a little less 

sweepingly, Buckley contended that class counsel were being 

overcompensated at the class’s expense to the tune of 13 percentage points of the common fund, or $975,000, in part as a 

result of billing for hours spent defending the same “selfish 

deal” we vacated in Pearson I. 772 F.3d at 787. 

What the objectors did, however, was to advance these superficially plausible objections in the space of four pages each, 

light on citations to law and fact, and to sell them—before 

speaking a word in their defense—at discounts from face 

value ranging from 94 percent (Buckley) to 99.2 percent 

(Nunez). For his part, Sweeney could not even correctly identify the subject matter of the litigation. The objectors’ conduct 

testifies that, whatever merit their objections might have had, 

the objectors themselves did not believe them or take them 

seriously, from the day they were filed to the day they were 

settled.

2. Nunez’s Arguments

Nunez’s arguments against disgorgement are not persuasive. He chiefly argues that his situation is unlike Buckley and 

Sweeney’s because he was settling both his objection to the 

Pearson II settlement and his own Nunez action in California. 

If Nunez were right, he might be entitled to a more precise 

accounting of his settlement proceeds that reflects the value 

of any individual claim he might have been asserting. See 

Safeco Ins. Co. of America v. AIG, Inc., 710 F.3d 754, 757 (7th Cir. 

2013) (approving objector side deal where only objector’s individual claims were settled), discussed further in Pearson II, 

893 F.3d at 985–86; compare Young, 324 U.S. at 209 (“The appeal here . . . was not from a denial of any individual claim of 
14 No. 19-3095

Potts and Boag.”), 214 (Potts and Boag liable to account only 

for “money paid in excess of the stock value”). The problem 

for Nunez is that the value of the Nunez action at the time it 

was settled was zero.

Nunez was himself a member of the Pearson class. His opportunity to opt out had already passed when he filed his objection to the Pearson II settlement. By settling that objection, 

Nunez ensured the Pearson II settlement would finally bind 

him just as it bound every other class member. Maintaining 

Nunez thereafter would have been sanctionably frivolous. In 

any event, after the Pearson II settlement, securing dismissal 

with prejudice of Nunez required only that defendants take 

the basically ministerial steps of pleading accord and satisfaction and moving for judgment on the pleadings. See Walton v. 

United Consumers Club, Inc., 786 F.2d 303, 306–07 (7th Cir. 

1986). Nunez’s argument that he was leveraging the class’s 

claims to settle his own worthless case for $60,000 impairs rather than improves his position.

Nunez argues further that we have “no jurisdiction” to interfere with his settlement of Nunez. It is not clear what kind 

of jurisdiction he supposes us to lack but the supposition is 

groundless. Nunez brought these issues before this court in 

the first instance by filing his objection and appealing its denial. Under Federal Rule of Appellate Procedure 42(b), we 

had (but regrettably did not exercise) authority to scrutinize 

Nunez’s dismissal of his appeal. See Pearson II, 893 F.3d at 987. 

And the district court had jurisdiction to decide whether that 

dismissal was part of a “class sellout.” Id. at 986. If Nunez had 

wanted to avoid this scrutiny, he might have settled Nunez as 

the entirely separate concern he now insists it was. We have 

already suggested the likely reason he did not do so: after the 
No. 19-3095 15

Pearson II settlement, the Nunez case was a dead letter, so 

Nunez’s only settlement leverage, like Buckley and 

Sweeney’s, was the value of being a nuisance, getting in the 

way of defendants’ and other plaintiffs’ desires to put Pearson

itself to rest.

3. Buckley’s Arguments

Buckley’s arguments are also unpersuasive. He argues 

first that Frank lacks standing to appeal. His theory is that because the district court found “nothing untoward about the 

objector settlements,” Frank cannot “pursue the matter further.” This argument confuses standing with the merits. Contra, e.g., Arreola v. Godinez, 546 F.3d 788, 794–95 (7th Cir. 2008), 

among many others. We would have little business as an appellate court if a party’s loss in the district court showed lack 

of standing to appeal.

Buckley does no better to argue Frank never had standing 

to file his motion in the first place. Frank had standing in the 

district court and has standing now for the same reason that 

Buckley and the other objectors had standing in the appeals 

that precipitated Frank’s motion: a class member has standing 

to defend the class, whose interest he shares, against sell-outs 

by the self-appointed representatives who control the interests of all. See Devlin, 536 U.S. at 6–9; Young, 324 U.S. at 212 

(without addressing standing); In re Subway Footlong Sandwich 

Litig., 869 F.3d 551, 556 (7th Cir. 2017) (“as a class member 

who is bound by the settlement, Frank clearly has standing to 

appeal”). An equitable remedy for breach of the objectors’ 

limited representative, fiduciary duty is just one instance of 

the “[m]any traditional remedies,” “such as for . . . unjust enrichment,” which “are not contingent on a plaintiff’s allegation of damages beyond the violation of his private legal 
16 No. 19-3095

right.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1551 (2016) 

(Thomas, J., concurring).

Buckley argues further that his fee-only objection would 

not have increased defendants’ liability even if it had been 

successful. That is correct, and it raises the question: why did

defendants pay Buckley to settle his objection? He pleads ignorance, but there is only one reasonable answer: the value to 

defendants in paying off Buckley lay in finally being rid of the 

Pearson litigation as a whole. And even if class counsel instead 

of defendants had been the ones to settle with Buckley (on 

which more in a moment), Buckley’s responsibility to the 

class depended not on whether defendants would have been 

required to pay more but on whether the class would have 

been entitled to receive more. See Young, 324 U.S. at 212 (“the 

appeal was taken on the assumption[] that the less the junior 

claimants were awarded the more all the preferred stockholders would receive”). It would have, as Buckley himself 

demonstrated by appealing the denial of his objection. See 

Pearson I, 772 F.3d at 786 (“If the class cannot benefit from the 

reduction in the award of attorneys’ fees, then the objector, as 

a member of the class, would not have standing to object”). 

That is because the Pearson II settlement took class counsel 

fees out of the common fund, a feature correctly advertised at 

the time of settlement approval as an improvement over the 

Pearson I settlement. See id. (faulting earlier reversion clause 

providing that “if the judge reduces the amount of fees . . . the 

savings shall enure not to the class but to the defendant” as “a 

gimmick for defeating objectors”). Sustaining Buckley’s objection would have directly benefited the class. 

Buckley argues along parallel lines that defendants independently paid him from their own pockets, without dipping 
No. 19-3095 17

into the common fund. The district court relied heavily on this 

contention in denying Frank’s motion. It would not alter our 

analysis if it were true. (In Young, neither Potts nor Boag directly picked the pockets of the other preferred shareholders; 

they held what was not theirs to hold. 324 U.S. at 213–14.) But 

it is not true as a matter of fact. In the district court, class counsel acknowledged that they had paid $22,500 out of their own 

fees toward the total of $130,000 paid to settle with the three 

objectors. Again, under the Pearson II settlement these fees 

were taken from the common fund. Money that class counsel 

were willing to part with to finally resolve the litigation consisted of savings that ought to have enured to the class—not 

to defendants, the three objectors, or their lawyers. See Pearson I, 772 F.3d at 786.

B. Remedy

We now turn to the question of remedy in this case, which 

poses a practical challenge. Buckley makes the poison-pill argument that rescission of the entire settlement is the only appropriate remedy in this case. That is certainly one remedy 

Frank might have sought, perhaps if he thought there was real 

merit to the objections. Buckley provides no support for his 

claimed right, as the wrongdoer, to force an election under 

these circumstances. See 2 Story, supra, at 506 (“where a trustee, or other person, standing in a fiduciary relation, makes a 

profit out of any transactions within the scope of his agency 

or authority, . . . the beneficiary[] . . . has . . . an option to insist 

upon taking the property; or he may disclaim any title thereto, 

and proceed upon any other remedies”). So long as Frank did 

not “insist upon opposite and repugnant rights,” id. at 507, the 

choice was his or, more likely, the court’s. Rescission of the 
18 No. 19-3095

entire Pearson II settlement also would have punished the 

wrong parties.

A more intricate question is the proper form of the disgorgement remedy Frank did seek. As the Supreme Court observed in Liu, its most recent word on the traditional powers 

of federal equity courts, the term “disgorgement” is of “relatively recent vintage.” 140 S. Ct. at 1940 n.1. It is perhaps best 

understood not as a freestanding remedy but as the last step 

in a larger remedial process. See id. at 1942–46 (discussing historical variety of settings and labels for orders to disgorge). 

Like Young’s, Frank’s motion to discover the objectors’ books 

and to wrest from them whatever settlement proceeds were 

found there fits most comfortably within the framework of an 

accounting for profits. See Young, 324 U.S. at 214; Newby v. Enron Corp., 188 F. Supp. 2d 684, 706 (S.D. Tex. 2002) (“accounting for profits developed . . . as a restitutionary remedy to 

avoid unjust enrichment by reaching money owed by a fiduciary . . . , including profits that should in ‘equity and good 

conscience’ belong to the plaintiff”) (collecting authorities); 

Restatement (Third) of Restitution and Unjust Enrichment 

§ 51(4).

In theory, the best remedy for the objectors’ private appropriation of value that belonged to the class would be to pay 

those sums into the common fund for direct distribution to all 

class members. In this case, however, there is a practical problem. The parties appear to agree that distribution of the 

$130,000 in settlement proceeds to their equitable owners, the 

class, is no longer possible or would be self-defeating because 

the administration costs would swallow the benefits. Liu
No. 19-3095 19

asked but did not answer “what traditional equitable principles govern when . . . the wrongdoer’s profits cannot practically be disbursed to the victims.” 140 S. Ct. at 1948–49. 

This wrinkle, along with the fact that Frank has already 

discovered specific funds wrongfully held by the objectors, 

leads us to conclude that the appropriate remedial framework 

here is the constructive trust. See Liu, 140 S. Ct. at 1944; In re 

Mississippi Valley Livestock, Inc., 745 F.3d 299, 304–05 (7th Cir. 

2014); Newby, 188 F. Supp. 2d at 703 (“A constructive trust has 

long been used as a remedy for unjust enrichment obtained 

from a fiduciary’s breach of duty.”) (collecting authorities); 

Restatement (Third) of Restitution and Unjust Enrichment 

§ 55. If disbursement of objectors’ proceeds to the class would 

produce no benefit to the class, the trust’s purpose may instead be accomplished as nearly as possible (cy pres) so that it 

does not fail. See, e.g., Tauber v. Commonwealth ex rel. Kilgore, 

562 S.E.2d 118, 128 (Va. 2002). As provided for by the Pearson II settlement, that would mean ordering payment to the 

Orthopedic Research and Education Foundation. 

Finally, neither objector argues that even if disgorgement 

were ordered, he would still be entitled to deductions for 

costs or attorney fees. This is a sound concession. See Liu, 

140 S. Ct. at 1945–46; Snepp v. United States, 444 U.S. 507, 510 

(1980) (no deductions) (“Snepp breached a fiduciary obligation and . . . the proceeds of his breach are impressed with a 

constructive trust.” (emphasis added)); Young, 324 U.S. at 214 

(no deductions) (“In the contemplation of the statute which 

authorized the appeal, its fruit properly belongs to all the preferred stockholders.” (emphasis added)).
20 No. 19-3095

C. Consequences for Good-Faith Objectors

Ours is an adversary system of justice. When defendants 

and class counsel seek to settle a class action, “the clash of the 

adversaries” on which our system depends is lost. Eubank v. 

Pella Corp., 753 F.3d 718, 720 (7th Cir. 2014). The district judge 

must act as “a fiduciary of the class” in deciding whether to 

approve a proposed settlement. E.g., Pearson I, 772 F.3d at 780. 

Yet even the most faithful exercise of this duty cannot in itself 

make up for the absence of adversary presentation. The judge 

must still rely on the now-allied adversaries “to generate the 

information that the judge needs to decide the case” faithfully. Eubank, 753 F.3d at 720. Genuine adversary presentation 

is supplied, if at all, only by objecting class members. See id.; 

see also Devlin, 536 U.S. at 9 (“once the named parties reach a 

settlement that is approved over petitioner’s objections, petitioner’s interests by definition diverge from those of the class 

representative”). It is therefore critical that class members not 

be deterred from raising reasonable and good-faith objections 

to a class settlement. See, e.g., Pearson I.

We do not expect reasonable and good-faith objections to 

be deterred or chilled by our holding here, particularly in 

light of the 2018 amendments to Federal Rule of Civil Procedure 23 addressing the problem of objector side deals. Rule 

23(e)(5)(A) now requires that an objection “state whether it 

applies only to the objector, to a specific subset of the class, or 

to the entire class, and also state with specificity the grounds 

for the objection.” New Rule 23(e)(5)(B)(ii) requires district 

court approval specifically for “forgoing, dismissing, or abandoning an appeal” of denial in exchange for “payment or 

other consideration.” If the appeal has already been docketed, 
No. 19-3095 21

under new Rule 23(e)(5)(C) the district court is to issue an indicative ruling under Rule 62.1. 

Good-faith objectors should be able to say specifically why 

the class or a part of it has been deprived of the fair, reasonable, and adequate settlement to which it is entitled. By definition, such objectors expect to be able to improve the class’s 

position, whether by compromise or favorable judgment, for 

which equitable compensation is available. See Fed. R. Civ. P. 

23(e)(5)(B) advisory committee’s note (“Good-faith objections 

can assist the court . . . . It is legitimate for an objector to seek 

payment for providing such assistance under Rule 23(h).”). 

We do not expect any good-faith objector will fail to bring her 

objection because she is prohibited from selling out the class 

in exchange for private payment, where she may choose instead not to sell out the class and still receive payment if she 

brings the class a real benefit. And we trust no district court 

will be misled by the facile expedient of dressing a class-based 

objection in individual clothing to avoid scrutiny under Young

and our decision here.

Conclusion

The judgment of the district court is REVERSED and the 

case is REMANDED for further proceedings consistent with 

this opinion. Circuit Rule 36 shall apply on remand.