Who will Regulate Class Action Lawyers?

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In 2003, I published an article entitled “Who Should Regulate Class Action Lawyers?”1 In that article, I defended the decision of the American Bar Association’s (“ABA”) Commission on Evaluation of the Model Rules of Professional Conduct (the “Ethics 2000 Commission”), for which I was Chief Reporter, not to propose any substantial amendments to the ABA Model Rules of Professional Conduct (“Model Rules”) concerning the ethical conduct of class action lawyers.2

There are many ethical issues that confront class action lawyers.3 In my 2003 article, I focused on conflicts of interest—an issue that courts and commentators have had difficulty resolving and a subject on which I have frequently written.4 My defense of the Ethics 2000 Commission’s decision began with an attempt to narrow the scope of the problem. First, I argued that the class should be viewed as a type of entity client, rather than an aggregation of individual clients or quasiclients with actual or potentially conflicting interest.5 If the client is the class itself, then the class lawyer can ignore intra-class conflicts that might otherwise pose an ethical problem under conflict of interest rules, such as Model Rule 1.7.6 Of course, intra-class conflicts do raise important questions concerning the adequacy of representation under Rule 23 of the Federal Rules of Civil Procedure,7 but they do not, and should not, come within the purview of Model Rule 1.7.

Second, to further narrow the scope of the problem, I argued that conflict of interest rules like Model Rule 1.7 do not address the type of conflict inherent in all principal-agent relationships; that is, the lawyer’s temptation to favor her own interest in securing a large fee at the expense of the client’s—in this case the class’s—interest in recovering a large damage award.8 These “agency problems”9 are endemic to all lawyer-client relationships and are addressed by other ethics rules, such as Model Rule 1.5, which requires reasonable legal fees.10 These problems are also addressed whenever a court determines what fee to award a lawyer representing a class.11 Model Rule 1.7, however, is reserved for conflicts that arise with respect to a particular lawyer; for example, a lawyer who represents individual clients whose interests may conflict with the interest of the class as a whole.12

At this point in my 2003 article, having narrowed the scope of the problem to those types of class counsel conflicts that ordinarily present conflict of interest problems under ethics rules such as Model Rule 1.7, I considered a typical conflicts problem in which a lawyer simultaneously represents a plaintiff class and individuals either inside of or outside of the class with interests that might differ from the class as a whole.13 For example, in Georgine v. Amchem Products, Inc., class counsel represented individual clients who were not part of the class but who had similar claims against the defendants.14 A material limitation conflict existed because the lawyer’s duty to increase the amount paid to the non-class, individual clients conflicted with the lawyer’s duty to increase the amount available to the class.15

Concerning the risk to the individual clients, I argued that Model Rule 1.7 should apply in full force.16 In other words, if there is a significant risk that the lawyer’s duty to the class will materially limit the lawyer’s representation of the individuals, then the individuals are entitled to full disclosure of the existence and implications of the conflict.17 Of course, under Model Rule 1.7, the individual clients are entitled to give their informed consent to the conflict, in which case the lawyer may proceed with the conflicted representation.18

The problem concerning the risk to the class, however, is that no mechanism currently exists by which the lawyer may inform the class of conflicted representation and receive its consent.19 If Model Rule 1.7 applies to this aspect of the conflict, then the most likely answer is that the representation simply cannot proceed because the class client has not given its informed consent.20 But in my view this is not a satisfactory solution because often the conflict is minimal, and there may be advantages to proceeding with that particular lawyer; for example, the lawyer’s familiarity with the underlying facts and legal questions as a result of her existing representation of the individual clients may offer a significant benefit to the class.2

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