I Cut, You Choose: The Role of Plaintiffs' Counsel in Allocating Settlement Proceeds

Abstract

This article examines the role that attorneys for plaintiffs can properly play in structuring settlements of cases that involve numerous clients or absent class members. The practical points of departure are (1) the U.S. Supreme Court's decision in Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997), which sets out due process standards for adequate representation in class actions, and (2) ethics rules such as the aggregate settlement rule that govern the conduct of attorneys with multiple clients. The analytical centerpiece is the insight that all multiple-client representations and class action involvements require plaintiffs' attorneys to incur and resolve conflicts of interests on many occasions. Conflicts arise when attorneys are developing claims for litigation and when they are negotiating settlements. Because conflicts are inevitable, the authors contend that Amchem's "no conflicts" rule sets an impossible standard for adequacy of representation. An alternative "mimic the market" approach would allow class counsel to incur and resolve conflicts in class actions in the same circumstances where attorneys do so in mass actions where they represent clients subject to engagement agreements. This implies, among other things, that class counsel should have reasonable discretion to negotiate and propose plans for allocating settlements among absent plaintiffs.

Keywords: class actions, aggregate settlements, conflicts of interest

JEL Classification: K1, K10, K13, K20, K39, K40, K41