Opinion ID: 2275905
Heading Depth: 1
Heading Rank: 9

Heading: Class Counsel's conflict

Text: The conflict of interest suffered by Class Counsel is clear. Class Counsel accepted a substantial amount of money from potential defendants to initiate a class action lawsuit only against other defendants. Class Counsel was and is not able to exercise independent professional judgment on behalf of the class in considering whether a claim should be asserted against Underwriter and/or the brokers. The underlying facts are complex. The second amended petition contains sixteen counts against six defendants. Several of the defendants have filed third party claims. Simply stated, the lawsuit alleges claims against the existing defendants concerning the misuse of bond monies and continued bond sales thereafter. Plaintiffs specifically allege that Underwriter's counsel had knowledge of the alleged misuse, informed other defendants of the misuse, but that bonds continued to be sold. Class Counsel realized that a potential claim might be asserted against Underwriter and/or the brokers but did not investigate or consider any such claim against Underwriter and/or the brokers in light of the ongoing assistance we anticipate, as well as the funding they have contributed. This arrangement was made prior to Class Counsel being retained by any member of the class. This arrangement does not comply with Rule 4-1.7 or Rule 4-1.8. Rule 4-1.7 prohibits representation of a client that may be materially limited by the lawyer's responsibilities to another client or to a third person or by the lawyer's own interests, unless: (1) the lawyer reasonably believes the representation will not be adversely affected.... It is impossible for Class Counsel to satisfy this condition because the engagement letter acknowledges that class counsel would not be in a position to consider or pursue claims against the funding parties who are potential defendants in the action. Similarly, Rule 4-1.8 prohibits an attorney from accepting compensation from third parties unless there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship. Again, Class Counsel's letter clearly reflects the inability to exercise independent professional judgment regarding the assertion of claims against Underwriter and/or the brokers who have contributed to the fees and expenses of the lawsuit. Class Counsel maintains that the named representatives and the members of the class are counsel's only clients, not Underwriter or the brokers. However, Underwriter and the brokers do not have to be clients in order for Class Counsel to have a conflict of interest. It is sufficient to establish a conflict of interest that Class Counsel's independence of professional judgment as well as counsel's relationship with his potential clients were affected by the funding and the implicit understanding that resulted. It is significant to note that the financial arrangements and the corresponding understanding were reached before a single representative of the class was identified. This arrangement was not made after consultation with any client, but was made solely by Class Counsel with the Underwriter and the brokers and was a precondition to any subsequent attorney-client relationship between class counsel and the class representatives. This is particularly troublesome in two respects. First, Class Counsel acknowledges that he did not investigate or consider the potential claims that might have been asserted against Underwriter and/or the brokers. Thus, it is impossible for Class Counsel to ascertain or to adequately consult with his subsequently acquired clients whether the amount of the financial and other assistance was appropriate consideration for not filing claims against Underwriter and/or the brokers in the class lawsuit. Second, the timing of the arrangement makes absolutely clear that it is Class Counsel and Underwriter and the brokers, not the class representatives, that are controlling the lawsuit in fact. They, not the class representatives, have determined the manner in which the dispute is being litigated: who pays the class fees and expenses and who is and who is not sued. This shift in the control of the lawsuit is inappropriate in any situation, but especially in a class action context. See In re Mid-Atlantic Toyota Antitrust Litigation, 93 F.R.D. 485, 490 (D.C.Md.1982). It should be acknowledged that to some extent this type of problem is inherent in all class action lawsuits. There is often a wide disparity between the financial interests of the individual clients and the financial interests of class counsel. A class-member client's individual claim may be worth $50 or $5,000. The lawyer, who has advanced many thousands of dollars in litigation expenses, however, may hope for compensation in the millions. [7] In such situations, the lawyer's own interests may greatly exceed those of any claimant. 7A Wright, Miller & Kane, Federal Practice sec. 1769.1 (Civil 2nd ed.1986). That is why Rule 52.08 gives overall responsibility to the trial judge to protect the members of the class. A trial court has a continuing duty in a class action case to scrutinize the class attorney to see that he or she is adequately protecting the interests of the class. 4 Herbert Newberg & Alba Conte, Newberg on Class Actions sec. 13:20 (4th ed.2002). [8] Because of the trial judge's responsibility, class actions are different. In individual actions the client is entitled to make decisions as to the course of the litigation including the terms of settlement. In a class action, by contrast, this is not so simple. In a class action what is protected is not primarily the autonomy of the client and the client's right to control the lawsuit, but the interests of the clients as a class. These lawsuits are designed to vindicate the rights of a class of persons; they are rarely driven by the particular motivations of an individual client. See id. at sec. 3:40.