Ethics In Class Actions

Ethics in Class Actions Reed R. Kathrein, Partner Lerach Coughlin Stoia Geller Rudman & Robbins LLP Mealey’s Teleconference June 11, 2006

Introduction
Learn and examine how the Model Rules of Professional Conduct regulate attorney conduct in Class Actions
Reed Kathrein has practiced law for almost 30 years and almost exclusively in the area of class actions for the past 18 years.

Topics of Discussion
Solicitation of Class Members by Plaintiffs and Defendants
ABA Model Rule 7.1 through 7.3 Advertising, Referrals and Direct Contact
Conflicts of Interest
ABA Model Rule 1.7 Current Clients
ABA Model Rule 1.8(e) Financial Assistance
ABA Model Rule 1.8(g) Aggregate Settlements
Contact with class representatives and members by plaintiffs and defense counsel
ABA Model Rule 1.2 Allocation of Authority
ABA Model Rule 1.4(a) Communications
ABA Model Rule 4.2 and 4.3 Dealing with Represented and Unrepresented Persons
Settlement, reverse actions, coupon & non-pecuniary redress
ABA Model Rule 1.4(b) Explaining Matters and Withholding Information
ABA Model Rule 1.1 Competence
ABA Model Rule 8.3(a) Reporting Misconduct
Attorney’s fees
ABA Model Rule 1.5 (a)-(c) Fee Arrangements
ABA Model Rule 1.5 Fee Determination vs. new Fed.R.Civ.P 23(h)
ABA Model Rule 1.8(i) Proprietary Interests in Case
ABA Model Rule 1.5(e) Division of Fees

Other Questions
Conflict of interest - How to take into account the concerns of a large group of class members versus a single plaintiff.
Communications with class members - What must counsel do to keep the class informed, and how to comply with information requests from members.
Decisions regarding settlement - How much information must you give class members so they can make an informed decision. How to handle attorney misconduct.
Compensation of class counsel - When to use the various methods, contingency fees vs. the lodestar method. How to divide fees among multiple law firms.
Uniformity and diversity in treatment of class members in settlement - How to adjudicate formulas for dealing with different groups within the class.

History of Class Action Ethics Rules
Neither the Model Code of Professional Responsibility nor the Model Rules of Professional Conduct deal specifically with the ethics of class action lawyers. See Nancy J. Moore, “WHO SHOULD REGULATE CLASS ACTION LAWYERS?”, BOSTON UNIVERSITY SCHOOL OF LAW WORKING PAPER SERIES, PUBLIC LAW & LEGAL THEORY WORKING PAPER NO. 02-08.
The Model Code of Professional Responsibility was replaced by the Model Rules of Professional Conduct (1981) in 1983. See generally CHARLES W. WOLFRAM, MODERN LEGAL ETHICS § 2.6.4 (1986).
MODEL RULES OF PROF’L CONDUCT (2001) (previous version of the Model Rules prior to extensive amendments in February 2002 resulting from the recommendations of the Ethics 2000Commission).

What are the Ethical Issues
Ethical issues arise frequently in class action litigation.These issues include:
conflicts of interest,
solicitation,
application of the no-contact rule,
the reasonableness of attorneys’ fees,
and the attorney-witness rule.

Primary Sources of Information
ABA Model Rules of Professional Conduct (2001) and comments.
“ WHO SHOULD REGULATE CLASSACTION LAWYERS?”, Nancy J. Moore. This paper can be downloaded without charge at:
The Boston University School of Law Working Paper Series Index: http://www.bu.edu/law/faculty/papers
The Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/abstract=316639
Brian V. Waid, Ethical Problems of the Class Action Practitioner: Continued Neglect by the Drafters of the Proposed Model Rules of Professional Conduct , 27 LOY. L. REV. 1047, 1047–48 (1981).
HERBERT B. NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS § 15 (3d ed. 1992) (section entitled “Class Action Abuses and Legal Ethics”).

Are the Ethics Rules Relevant to Class Actions?
There has been considerable difficulty applying existing rules of conduct to these situations, partly because of confusion regarding the relationship among class counsel, the named class representatives and absent members of the class. Moore, supra at 102. See, e.g. , Waid, supra note 1, at 1048.
Thus, it is often said that “the ethics rules cannot be mechanically applied to class actions.” Moore, supra at 102. Koniak, supra note 2, at 1121 (referring to this statement as an “oft-made remark”); see also, e.g. , Lazy Oil Co. v. Witco Corp., 166 F.3d 581, 589–90 (3d Cir. 1999) (both citing and quoting Agent Orange and Judge Adams’s concurring opinion in Corn Derivatives ); In re Agent Orange Prod. Liab. Litig., 800 F.2d 14, 19 (2d Cir. 1986) (“[T]he traditional rules that have been developed in the course of attorneys’ representation of the interests of clients outside of the class action context should not be mechanically applied to the problems that arise in the settlement of class action litigation.”); In re Corn Derivatives Antitrust Litig., 748 F.2d 157, 163 (3d Cir. 1984) (Adams, J., concurring) (“[C]ourts cannot mechanically transpose to class actions the rules developed in the traditional lawyer-client setting context . . . .”).

Are the Ethics Rules Relevant to Class Actions?
Nancy J. Moore , at Moore, supra., who acted as Chief Reporter of the Ethics 2000 Commission, argues that the Commission’s decision not to draft rules directly addressing the ethics of class action litigation was appropriate.
Focusing on the problem of conflicting interests, she argues that the confusion surrounding the ethics of class action lawyers can be significantly reduced by recognizing, first, that the class itself is the client and, second, that much of what are currently described as “conflicts of interest” were never meant to be addressed by traditional conflict-of-interest doctrine.
Even if there are some situations in which relaxation of the ethics rules may be justified in order to accommodate class actions, these situations are better addressed by case law interpreting Rule 23 of the Federal Rules of Civil Procedure.
Moore argues that in addressing adequacy of representation issues under Rule 23, courts should still take into account many of the principles and concerns motivating Model Rules of Professional Conduct Rule 1.7.

Specific Model Rules and Their Application to Class Actions
Solicitations of Class Members by Plaintiffs and Defendants
Contact with class representatives and members by plaintiffs and defense counsel
Settlement, reverse actions, coupon & non-pecuniary redress
Attorney’s fees

Solicitation of Class Members by Plaintiffs and Defendants
Rule 7.1 Communications Concerning a Lawyer's Services
Rule 7.2 Advertising
Rule 7.3 Direct Contact with Prospective Clients

Rule 7.1 Communications Concerning a Lawyer's Services
A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.

Rule 7.2 Advertising
(a) Subject to the requirements of Rules 7.1 and 7.3 , a lawyer may advertise services through written , recorded or electronic communication, including public media.
(b) A lawyer shall not give anything of value to a person for recommending the lawyer's services except that a lawyer may
(1) pay the reasonable costs of advertisements or communications permitted by this Rule;
(2) pay the usual charges of a legal service plan or a not-for-profit or qualified lawyer referral service. A qualified lawyer referral service is a lawyer referral service that has been approved by an appropriate regulatory authority; and
(3) pay for a law practice in accordance with Rule 1.17 ; and
(4) refer clients to another lawyer or a nonlawyer professional pursuant to an agreement not otherwise prohibited under these Rules that provides for the other person to refer clients or customers to the lawyer, if
(i) the reciprocal referral agreement is not exclusive, and
(ii) the client is informed of the existence and nature of the agreement.
(c) Any communication made pursuant to this rule shall include the name and office address of at least one lawyer or law firm responsible for its content.

Rule 7.3 Direct Contact with Prospective Clients
(a) A lawyer shall not by in-person, live telephone or real-time electronic contact solicit professional employment from a prospective client when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless the person contacted:
(1) is a lawyer; or
(2) has a family, close personal, or prior professional relationship with the lawyer.
(b) A lawyer shall not solicit professional employment from a prospective client by written , recorded or electronic communication or by in-person, telephone or real-time electronic contact even when not otherwise prohibited by paragraph (a), if:
(1) the prospective client has made known to the lawyer a desire not to be solicited by the lawyer; or
(2) the solicitation involves coercion, duress or harassment.
(c) Every written , recorded or electronic communication from a lawyer soliciting professional employment from a prospective client known to be in need of legal services in a particular matter shall include the words "Advertising Material" on the outside envelope, if any, and at the beginning and ending of any recorded or electronic communication, unless the recipient of the communication is a person specified in paragraphs (a)(1) or (a)(2).
(d) Notwithstanding the prohibitions in paragraph (a), a lawyer may participate with a prepaid or group legal service plan operated by an organization not owned or directed by the lawyer that uses in-person or telephone contact to solicit memberships or subscriptions for the plan from persons who are not known to need legal services in a particular matter covered by the plan.

Comment to Rule 7.2
[4] Neither this Rule nor Rule 7.3 prohibits communications authorized by law, such as notice to members of a class in class action litigation.

Conflicts of Interest ABA Model Rule 1.7 Current Clients
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal ; and
(4) each affected client gives informed consent , confirmed in writing .

Conflicts of Interest ABA Model Rule 1.7 Current Clients
Comment to Rule
“ [25] When a lawyer represents or seeks to represent a class of plaintiffs or defendants in a class-action lawsuit, unnamed members of the class are ordinarily not considered to be clients of the lawyer for purposes of applying paragraph (a)(1) of this Rule. Thus, the lawyer does not typically need to get the consent of such a person before representing a client suing the person in an unrelated matter. Similarly, a lawyer seeking to represent an opponent in a class action does not typically need the consent of an unnamed member of the class whom the lawyer represents in an unrelated matter.”

Conflicts of Interest-ABA Model Rule 1.8(e) Financial Assistance
(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and
(2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.

Conflicts of Interest-ABA Model Rule 1.8(e) Financial Assistance
Miller, Payment of Expenses….

Conflicts of Interest-ABA Model Rule 1.8(g) Aggregate Settlements
(g) A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement as to guilty or nolo contendere pleas, unless each client gives informed consent , in a writing signed by the client. The lawyer's disclosure shall include the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.

Aggregate Settlements Comment
[13] Differences in willingness to make or accept an offer of settlement are among the risks of common representation of multiple clients by a single lawyer. Under Rule 1.7 , this is one of the risks that should be discussed before undertaking the representation, as part of the process of obtaining the clients' informed consent . In addition, Rule 1.2(a) protects each client's right to have the final say in deciding whether to accept or reject an offer of settlement and in deciding whether to enter a guilty or nolo contendere plea in a criminal case. The rule stated in this paragraph is a corollary of both these Rules and provides that, before any settlement offer or plea bargain is made or accepted on behalf of multiple clients, the lawyer must inform each of them about all the material terms of the settlement, including what the other clients will receive or pay if the settlement or plea offer is accepted. See also Rule 1.0(e) (definition of informed consent). Lawyers representing a class of plaintiffs or defendants, or those proceeding derivatively, may not have a full client-lawyer relationship with each member of the class; nevertheless, such lawyers must comply with applicable rules regulating notification of class members and other procedural requirements designed to ensure adequate protection of the entire class.

Geoffrey P. Miller , Conflicts of Interest in Class Action Litigation: An Inquiry into the Appropriate Standard, New York University, Center for Law and Business,Working Paper #CLB 03-16.
Proposes a simple approach to guide analysis: a conflict of interest should be deemed impermissible if a reasonable plaintiff, operating under a veil of ignorance as to his or her role in the class, would refuse consent to the arrangement . The standard proposed here can be termed a “hypothetical consent” principle.
Under Model Rule 1.7(b), multiple representation can go forward if the lawyer reasonably believes that the representation will not be adversely affected and if “the client consents after consultation.” The rule goes on to specify that when undertaking the representation of multiple clients in a single matter, “the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.”
Issues of aggregate settlements can also be overcome by obtaining consent. Model Rule 1.8(g) permits aggregate settlements if “each client consents after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.”
For judicial recognition that conflicts of interest rules cannot be simplistically applied to classactions, see, Miller, supra at note 14.
This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at http://papers.ssrn.com/abstract=446942

Contact with class representatives and members by plaintiffs and defense counsel .

Contact-ABA Model Rule 1.2 Scope of Representation, Allocation of Authority
Rule 1.2: Scope of Representation and Allocation of Authority between Client and Lawyer
(a) Subject to paragraphs (c) and (d), a lawyer shall abide by a client's decisions concerning the objectives of representation and, as required by Rule 1.4 , shall consult with the client as to the means by which they are to be pursued. A lawyer may take such action on behalf of the client as is impliedly authorized to carry out the representation. A lawyer shall abide by a client's decision whether to settle a matter...
(c) A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent .
(d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent , but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

Contact-ABA Model Rule 1.2 Scope of Representation, Allocation of Authority
The decision whether to bring an individual action or a class action should be viewed as an “objective”of the representation, as to which agreement by the client, and not merely consultation, is required. See id. R. 1.2(a) (2002), Moore at note 122.
In J. Moore’s view, the better view is that the class itself is an entity client, just as corporations, partnerships, and other voluntary (and even involuntary) associations may be entity clients under Rule 1.13.44. This view has not been explicitly adopted except by a handful of commentators, but Moore believes that it has the best fit with class action caselaw4 and provides the most workable solution for purposes of applying the ethics rules. Moore at 109-110.
Indeed, it fits nicely with recently amendments to FRCP Rule 23, under which a new paragraph (g) clearly states that “[a]n attorney appointed to serve as class counsel must fairly and adequately represent the interests of the class.” As further explained in the Committee Note, this provision “articulates the obligation of class counsel to represent the interests of the class , as opposed to the potentially conflicting interests of individual class members.” Id.

Contact-ABA Model Rule 1.4(a) Communications
(a) A lawyer shall:
(1) promptly inform the client of any decision or circumstance with respect to which the client's informed consent , as defined in Rule 1.0(e) , is required by these Rules;
(2) reasonably consult with the client about the means by which the client's objectives are to be accomplished;
(3) keep the client reasonably informed about the status of the matter;
(4) promptly comply with reasonable requests for information; and
(5) consult with the client about any relevant limitation on the lawyer's conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.
(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

Commenta
[3] Paragraph (a)(2) requires the lawyer to reasonably consult with the client about the means to be used to accomplish the client's objectives. In some situations — depending on both the importance of the action under consideration and the feasibility of consulting with the client — this duty will require consultation prior to taking action. In other circumstances, such as during a trial when an immediate decision must be made, the exigency of the situation may require the lawyer to act without prior consultation. In such cases the lawyer must nonetheless act reasonably to inform the client of actions the lawyer has taken on the client's behalf. Additionally, paragraph (a)(3) requires that the lawyer keep the client reasonably informed about the status of the matter, such as significant developments affecting the timing or the substance of the representation.
[4] A lawyer's regular communication with clients will minimize the occasions on which a client will need to request information concerning the representation. When a client makes a reasonable request for information, however, paragraph (a)(4) requires prompt compliance with the request, or if a prompt response is not feasible, that the lawyer, or a member of the lawyer's staff, acknowledge receipt of the request and advise the client when a response may be expected. Client telephone calls should be promptly returned or acknowledged.
Explaining Matters
[5] The client should have sufficient information to participate intelligently in decisions concerning the objectives of the representation and the means by which they are to be pursued, to the extent the client is willing and able to do so. Adequacy of communication depends in part on the kind of advice or assistance that is involved. For example, when there is time to explain a proposal made in a negotiation, the lawyer should review all important provisions with the client before proceeding to an agreement. In litigation a lawyer should explain the general strategy and prospects of success and ordinarily should consult the client on tactics that are likely to result in significant expense or to injure or coerce others. On the other hand, a lawyer ordinarily will not be expected to describe trial or negotiation strategy in detail. The guiding principle is that the lawyer should fulfill reasonable client expectations for information consistent with the duty to act in the client's best interests, and the client's overall requirements as to the character of representation. In certain circumstances, such as when a lawyer asks a client to consent to a representation affected by a conflict of interest, the client must give informed consent, as defined in Rule 1.0(e).

The lawyer is obligated is to consult with the clients to determine whether they agree to participate in a class action. The consultation should include a full description of the extent to which the clients will be relinquishing control of the litigation once the class complaint is filed. Moore at 122-123.
Class counsel can recommend a settlement over the objection of the named representatives. Note, Developments in the Law—Conflicts of Interest in the Legal Profession , 94 HARV. L. REV. 1244, 1450 (1981)

Contact- ABA Model Rule 4.2 and 4.3 Dealing with Represented and Unrepresented Persons
Rule 4.2 Communication with Person Represented by Counsel
In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.
Rule 4.3 Dealing with Unrepresented Person
In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

Contact- ABA Model Rule 4.2 Dealing with Represented Persons
Application of Rule 4.2 merely requires identification of which members of the class constitute the client for purposes of the rule precluding an adversary from contacting the client without the consent of the class attorney. See MODEL RULES OF PROF’L CONDUCT R. 4.2 cmt. 7 (2002) (applying Rule 4.2 in the case of an organization client like a corporation)
Comment 7. In the case of a represented organization, this Rule prohibits communications with a constituent of the organization who supervises, directs or regularly consults with the organization’s lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. Consent of the organization’s lawyer is not required for communication with a former constituent.

Contact- ABA Model Rule 4.3 Dealing with Unrepresented Persons
Moore states that it is critically important to determine which, if any, of those class members are or will be individual clients of the lawyer. In cases involving trivial amounts of money that it makes no sense to bring the action except as a class action,the lawyer is unlikely to want to represent any of the class members individually, including the named representatives. Moore at 121.
Because these individuals may be confused about the lawyer’s role, however, Model Rule 4.3 requires the lawyer to make reasonable efforts to correct any misunderstanding. Id.
Such efforts should include a clear statement that the lawyer will represent the class as a whole, not any individual member, as well as an explanation of the role of both the lawyer and the individual members at various stages of the proceedings. Id.

Settlement, Reverse actions, Coupon & Non-pecuniary Redress
(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.
a) A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.

Settlement, Reverse actions, Coupon & Non-pecuniary Redress
The Use of “Coupon” Compensation and Other Non-Pecuniary Redress
when and under what conditions are non-pecuniary settlements appropriate, and adequate to redress consumer harm;
coupon settlements – redemption rates and empirical data (e.g., what data on redemption rates is currently available? if there is a lack of good data, what institutions/sources are likely to have better data? given its unique focus and information-gathering resources, what data should the FTC be seeking?);
injunctive only relief;
issues attendant to use of discounts, rebates, and free product vouchers; and
cy pres payments.

Attorney’s fees

Attorney’s fees - ABA Model Rule 1.5 (b)-(c) Fee Arrangements
(b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing , before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.
(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

Attorney’s fees - ABA Model Rule 1.5(a) Fee Determination vs. new Fed.R.Civ.P 23(h)
1.5 (a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
Comment. Disputes over Fees [9] If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer must comply with the procedure when it is mandatory, and, even when it is voluntary, the lawyer should conscientiously consider submitting to it. Law may prescribe a procedure for determining a lawyer's fee, for example, in representation of an executor or administrator, a class or a person entitled to a reasonable fee as part of the measure of damages. The lawyer entitled to such a fee and a lawyer representing another party concerned with the fee should comply with the prescribed procedure.

Attorney’s fees - ABA Model Rule 1.5(a) Fee Determination vs. new Fed.R.Civ.P 23(h)
(h) Attorney Fees Award. In an action certified as a class action, the court may award reasonable attorney fees and nontaxable costs authorized by law or by agreement of the parties as follows:
(1) Motion for Award of Attorney Fees.
A claim for an award of attorney fees and nontaxable costs must be made by motion under Rule 54(d) (2), subject to the provisions of this subdivision, at a time set by the court. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner.
(2) Objections to Motion.
A class member, or a party from whom payment is sought, may object to the motion.
(3) Hearing and Findings.
The court may hold a hearing and must find the facts and state its conclusions of law on the motion under Rule 52(a) .
(4) Reference to Special Master or Magistrate Judge.
The court may refer issues related to the amount of the award to a special master or to a magistrate judge as provided in Rule 54(d) (2)(D).

Attorney’s fees - ABA Model Rule 1.8(i) Proprietary Interests in Case
(i) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may:
(1) acquire a lien authorized by law to secure the lawyer's fee or expenses; and
(2) contract with a client for a reasonable contingent fee in a civil case.

Attorney’s fees - ABA Model Rule 1.5(e) Division of Fees
(e) A division of a fee between lawyers who are not in the same firm may be made only if:
(1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;
(2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing ; and
(3) the total fee is reasonable .

Attorney’s fees - ABA Model Rule 1.5(e) Division of Fees
Comment. Division of Fee
[7] A division of fee is a single billing to a client covering the fee of two or more lawyers who are not in the same firm . A division of fee facilitates association of more than one lawyer in a matter in which neither alone could serve the client as well, and most often is used when the fee is contingent and the division is between a referring lawyer and a trial specialist. Paragraph (e) permits the lawyers to divide a fee either on the basis of the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole. In addition, the client must agree to the arrangement, including the share that each lawyer is to receive, and the agreement must be confirmed in writing . Contingent fee agreements must be in a writing signed by the client and must otherwise comply with paragraph (c) of this Rule. Joint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership. A lawyer should only refer a matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the matter. See Rule 1.1 .

Attorneys Fee’s – Negotiating and Conflicts
There is a fear that counsel might reach a “sweetheart” settlement, in which defendant pays a small amount to plaintiff and high amount in attorneys’ fees. This concern is greatest in class actions, where counsel are less likely to consult plaintiffs during settlement negotiations. The Third Circuit recommended a procedure to safeguard against this problem: “trial courts [can] insist upon settlement of the damage aspect of the case separately from the award of statutorily authorized attorneys’ fees. Only after court approval of the damage settlement should discussion and negotiation of appropriate compensation begin. This would eliminate the situation . . . Of having, in practical effect, one fund divided between the attorney and client.” Prandini v. National Tea, 557 F.2d 1015, 1021 (3d Cir. 1975).
But in Evans v. Jeff D . 475 U.S. 717 (1986), the Supreme Court said courts may not require this approach, 475 U.S. 717, 738 n.30 (1986), and another Third Circuit panel and a Third Circuit task force expressed concern that the approach is unenforceable and discourages settlement. El Club del Barrio v. United Community Corp., 735 F.2d 98, 101 n.3 (3d Cir. 1984); Report of the Third Circuit Task Force, “Court Awarded Attorney Fees,” 108 F.R.D. 237, 267–68 (1985). The task force suggested appointing a disinterested person to protect the interests of class members or unrepresented beneficiaries. Id . at 256. See infra note 440 (discussing several judges’ use of this procedure).
Newberg on Class Actions Section 15:31- 15:35
Conflict and Solidarity: The Legacy of Evans v. Jeff D., GEORGETOWN JOURNAL OF LEGAL ETHICS, THE , Spring 2004 by Nazer , Daniel

Additional Sources
Model Rules of Professional Conduct
http://www.law.cornell.edu/ethics/aba/current/ABA_CODE.HTM
Federal Rule of Civil Procedure 23
http://www.law.cornell.edu/rules/frcp/ACRule23.htm

Newberg on Class Actions
Class Action Abuses and Legal
Ethics
§ 15:1 Ethical aspects of class actions: Introduction
§ 15:2 .Class action abuses, conficts of interest, and ethical
violations compared
§ 15:3 Relationship between class representative or counsel and
absent class members
§ 15:4 Solicitation in class action litigation
§ 15:5 Attorney communications with class members or potential class
members: Introduction
§ 15:6 .No restrictions on communications by laypersons or
organizations with potential or actual class members
§ 15:7 Early restrictions on attorney communications to prevent
potential abuses
§ 15:8 Gulf Oil Co v. Bernard requires good cause before
noncommunication order is issued
§ 15:9 Effects of Gulf Oil Co. v. Bernard
§ 15:10 Potential communications restrictions as aected by litigation
stage
§ 15:11 .Prelitigation communications by party opposing class
§ 15:12 .Precerti.cation communications by class counsel
§ 15:13 .Precerti.cation communications by class representatives
§ 15:14 .Precerti.cation communications by party opposing class
§ 15:15 Communications after class certication but before expiration
of exclusion period

Newberg on Class Actions
§ 15:16 Communications with class members after expiration of
exclusion period by class counsel
§ 15:17 Communications after expiration of exclusion period by class
representatives
§ 15:18 Communications after expiration of exclusion period by party or
counsel opposing class
§ 15:19 Solicitation by defense counsel of exclusions and individual
settlements
§ 15:20 Solicitation by class counsel of contributions for expenses
§ 15:21 Advancement by plaintiff’s counsel of litigation costs
§ 15:22 Class counsel as representative plaintiff
§ 15:23 Attorney as witness
§ 15:24 Simultaneous or subsequent representation of adverse clients
§ 15:25 .Simultaneous or subsequent representation of opt-outs and
class members
§ 15:26 Class action abuse involving settlements
§ 15:27 .Preferential settlement benefits for class representative
§ 15:28 .Individual settlement after denial of class certification
§ 15:29 .Strike suits
§ 15:30 Discovery abuses in challenges to adequacy
§ 15:31 Contemporaneous negotiations for settlement and fees as
creating conflict of interests
§ 15:32 .Simultaneous merits and fee settlement negotiations proper
in statutory fee cases
§ 15:33 .Fee conflict avoidance and the practice of joint hearing for
settlement approval and fee award
§ 15:34 .Fee conflict avoidance and the practice of defendants
agreement to pay fees awarded by the court and not to object
up to a certain amount
§ 15:35 .Fee conflict avoidance and interpretation of settlement
agreement that is silent as to fees
§ 15:36 .Inapplicability of Rule 68 offer of judgment in a class action
context

Ethics In Class Actions

by Reed Kathrein on Jul 24, 2009

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Ethics In Class Actions — Presentation Transcript

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