Why Class Counsel Should Obtain Discovery From Objectors

by Zelle LLP
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Competition Law360 - November 6, 2012

[authors: Christopher T. Micheletti and Heather T. Rankie]

Allowing class members the opportunity to present objections to settlements provides an important safeguard against flawed settlements and ensures that trial courts consider all points of view. However, a troubling abuse of this procedure has emerged as certain lawyers repeatedly orchestrate canned objections that ultimately do not benefit settlement classes. Such objections are overruled by trial courts and objectors then appeal orders approving class action settlements.

As courts have observed, these “serial” or “professional” objector counsel can make a living by routinely filing meritless appeals and extracting payment from parties or counsel in return for a dismissal of any such appeal. If such “greenmail” is not paid, the appellate process substantially delays settlement execution, including delaying classes’ receipt of settlement benefits and payment of class counsel’s expenses and fees.

There is a recent trend toward federal courts supporting class counsel’s efforts to obtain discovery from objectors represented by serial objector counsel. In the past 14 months, three federal judges in the Northern District of California have granted class counsel’s motions to compel objectors’ deposition testimony and document production.[1] At least one other federal court has similarly allowed class counsel to seek objector discovery.[2]

Settlement objectors voluntarily appear and participate in litigation by objecting, and discovery from them is relevant to a court’s evaluation, implementation and administration of the settlement before it. Court-approved discovery topics tend to include the objectors’ standing as class members, the factual basis of their objections, and any past objections they have made. Indeed, class representatives are routinely required to address similar topics in connection with their efforts to represent the class.

Further, when class counsel provide facts suggesting that an objection by a purportedly “pro se” objector is likely orchestrated by counsel, discovery concerning the objector’s relationship with serial-objector counsel is permitted. Certain serial objector counsel have had less-than-flattering comments made about them by courts. As such, they may prefer to manipulate the objection process from behind the scenes, so as to minimize court scrutiny of their true motives.

The argument that “absent” class members should not be subjected to such discovery fails because the objector must be a class member and have standing to object to a settlement, and they have voluntarily appeared and injected themselves into the proceedings. As a result, objectors have been ordered to appear for depositions on the above topics, to produce in advance any responsive documents, and to produce detailed logs of any documents withheld on the basis of attorney-client privilege or work-product protection.[3]

Courts have shown little tolerance of serial objectors’ use of common gamesmanship tactics aimed at thwarting or delaying discovery. For example, objectors may initiate motion practice in the various districts from which subpoenas may have issued despite objecting to a settlement in a case proceeding in another district. This is often done even when the objection is to a settlement proceeding in a multidistrict litigation court after consolidation by the judicial panel on MDL.

Such gamesmanship may aim to create delay or inconsistent results among courts, or to curry some perceived home-court advantage. However, where motions to compel discovery from objectors are pending in an MDL court, other district courts have transferred motions to quash to MDL courts for reasons of judicial efficiency and consistency of rulings.[4] Similarly, courts have ordered post-judgment discovery from objectors who have filed notices of appeal over the objectors’ jurisdictional challenges to such discovery.

Despite strong judicial excoriations,[5] a small contingent of lawyers with a history of orchestrating baseless objections continue to make a living extracting greenmail from parties or counsel in exchange for dismissal of their appeals. Because multiple courts have now held that discovery from objectors regarding standing, the facts of their objections, and relationships with serial-objector counsel are relevant to a court’s evaluation of objections and oversight of a settlement before it, class counsel should consider pursuing such discovery.

--By Christopher T. Micheletti and Heather T. Rankie, Zelle Hofmann Voelbel & Mason LLP

Christopher Micheletti is a partner and Heather Rankie is an associate in Zelle's San Francisco office.

[1] In re Cathode Ray Tube (CRT) Antitrust Litig., 281 F.R.D. 531 (N.D. Cal. 2012); In re TFT-LCD (Flat Panel) Antitrust Litigation, MDL No. 1827, Dkt. 7011 (N.D. Cal.; Order filed 10/19/2012); In re Static Random Access Memory (SRAM) Antitrust Litig., MDL No. 1819, Dkt. 1393 (N.D. Cal.; Order filed 9/23/2011).

[2] Stern v. AT&T Mobility, No. CV 05-8842, Dkt. 344 (C.D. Cal.; Minute Entry filed Oct. 15, 2010).

[3] The authors are aware of two cases in which federal district courts have granted settlement objectors’ motions to quash subpoenas issued by class counsel. Daniels v. Lifelock Inc. Marketing and Sales Practices Litig., No. 10-cv-1554-IEG (POR), Dkt. 8 (S.D. Cal.; Order filed July 29, 2010) (quashing subpoena, inter alia, because the district court in which the underlying litigation was pending had not allowed discovery of objectors); Van Horn v. Nationwide, No. 1:08-CV-605, Dkt. 259 (N.D. Ohio; Order filed 12/8/2009) (summarily granting motion to quash without reasoning, and stating the class must show cause if they wanted the objectors’ depositions to go forward).

[4] See, e.g., In re TFT-LCD (Flat Panel) Antitrust Litigation, C.D. Cal. Case No. CV-12-8212-DMG (PLAx), Dkt. 15 (civil minutes transferring motion to quash to the MDL court; filed Oct. 11, 2012).

[5] In re Checking Account Overdraft Litig., 830 F. Supp. 2d 1330, 1362 n.30 (S.D. Fla. 2011) (“most if not all of the Objections are motivated by things other than a concern for the welfare of the settlement class. Instead, they have been brought by professional objectors and others whose sole purpose is to obtain a fee by objecting to whatever aspects of the Settlement they can latch onto.”); In re Initial Pub. Offering Sec. Litig., 721 F. Supp. 2d 210, 214 (S.D.N.Y. 2010) (“[T]here is evidence of bad faith or vexatious conduct by the Objectors. Other courts have found that counsel ... are serial objectors and have required them to post bonds in other actions.”); In re AOL Time Warner ERISA Litig., 02 CV. 8853 (SWK), at *3 (S.D.N.Y. Nov. 28, 2007) (“[T]he Objection contained arguments counterproductive to the resolution of the litigation. In this case, the Objection contained several arguments that were irrelevant or simply incorrect.”).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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