The end of objector blackmail?

Vanderbilt Law Review

Volumn 62, Issue 6, 2009, Pages 1623-1666

  Fitzpatrick, Brain T ^a  

^a VANDERBILT UNIVERSITY LAW SCHOOL   (United States)

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EID: 74549211903     PISSN: 00422533     EISSN: None     Source Type: Journal    
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References (248)

1. See, e.g., Edward Brunet, Class Action Objectors: Extortionist Free Riders or Fairness Guarantors, 2003 U. CHI. LEGAL F. 403, 438-42 (providing a summary of several scholarly and judicial commentaries on objector "
2. blackmail").
3. See, e.g., STEVEN SHAVELL, FOUNDATIONS OF ECONOMIC ANALYSIS OF LAW 124-25 (2004) (discussing holdout problem in the context of eminent domain).
4. See, e.g., Vaughn v. Am. Honda Motor Co., Inc., 507 F.3d 295, 300 (5th Cir. 2007) ("In some circumstances objectors may use an appeal as a means of leveraging compensation for themselves or their counsel."); PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION § 3.08 (Proposed Final Draft, Apr. 1, 2009) (expressing concern with "fees paid to objectors' counsel not because of valid objections but because objectors have threatened to prolong the process by appealing the settlement.. thereby delaying distributions to.. class counsel");
5. id. flisting citations to commentators who have discussed "the improper role that objectors sometimes play in holding up legitimate settlements").
6. Although the term is figurative, I will follow the conventional terminology and refer to the holdout phenomenon in class action litigation as objector "blackmail."
7. See infra text accompanying notes 68-70.
8. Barnes v. FleetBoston Fin. Corp., No. 01-10395-NG, 2006 U.S. Dist. LEXIS 71072, at *3-4 (D. Mass. Aug. 22, 2006) ("[P]rofessional objectors can levy what is effectively a tax on class action settlements, a tax that has no benefit to anyone other than to the objectors.").
9. See infra notes 58-62.
10. See infra notes 63-67.
11. Brunet, supra note 1, at 472.
12. See infra text accompanying notes 75-76, 110-25.
13. This dataset is described in more detail in my forthcoming article, Brian T. Fitzpatrick, An Empirical Study of Class Action Settlements and their Fee Awards (Univ. of S. Cal. Law Sch., Conf. on Empirical Legal Stud., Working Paper 2009) (on file with author).
14. See, e.g., Ian Ayres &Kristin Madison, Threatening Inefficient Performance of Injunctions and Contracts, 148 U. PA. L. REV. 45, 55 (1999);
15. Guido Calabresi &A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089, 1001 (1972);
16. Michael Heller, The Boundaries of Private Property, 108 YALE L.J. 1163, 1201-02 (1999);
17. Lee Anne Fennell, Adjusting Alienability, 122 HARV. L. REV. 1403, 1441-47 (2009).
18. See Fennell, supra note 12, at 1412 (noting one reason for "blocking the A to B transfer would be to alter the upstream course of events by influencing whether and how parties initially acquire. the entitlement").
19. See, e.g., STEVEN SHAVELL, FOUNDATIONS OF ECONOMIC ANALYSIS OF LAW 403 (2004) ("[A] mutually beneficial settlement exists as long as the plaintiffs estimate of the expected judgment does not exceed the defendant's estimate by more than the sum of their costs of trial.").
20. See FED. R. CIV. P. 23(e)(5) ("Any class member may object to the proposal if it requires court approval under this subdivision.. the objection may be withdrawn only with the court's approval.");
21. FED. R. CIV. P. 23(e)(4)(B) 2003 advisory committee's note (revised and renumbered as 23(e)(5)).
22. See, e.g., Emery Lee &Thomas E. Willing, Impact of the Class Action Fairness Act on the Federal Courts: Preliminary Findings from Phase Two's Pre-CAFA Sample of Diversity Class Actions 11 (Federal Judicial Center 2008) ("Every case in which a motion to certify was granted, unconditionally or for settlement purposes, resulted in a class settlement.");
23. ROBERT H. KLONOFF & EDWARD K.M. BILICH, CLASS ACTIONS AND OTHER MULTI-PARTY LITIGATION: CASES AND MATERIALS 362 (2002) (noting that only "a handful" of class actions under Rule 23 have ever been tried to conclusion);
24. Tom Baker &Sean J. Griffith, How the Merits Matter: D&O Insurance and Securities Settlements 20, 755 U. PA. L. REV. (forthcoming, 2009), available at http://papers.ssrn.com/ sol3/papers.cfm?abstract-id=1101068# (noting that, with respect to securities fraud class actions, "[t]rial. is virtually unheard of).
25. I chose to focus on federal class action settlements both because most of the commentary regarding objector blackmail has been in reference to federal settlements and because it is much easier to gather data on federal litigation.
26. See FED. R. CIV. P. 23(e) ("The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval.").
27. See FED. R. CIV. P. 23(g)(1) ("Unless a statute provides otherwise, a court that certifies a class must appoint class counsel.").
28. See FED. R. CIV. P. 23(h) ("In a certified class action, the court may award reasonable attorney's fees."). In securities fraud class actions filed after the Private Securities Litigation Reform Act of 1995, some courts have begun to presume that the fees they award should be based on the arrangement struck between class counsel and the lead (usually institutional) plaintiff.
29. See, e.g. In re Cendant Corp. Litig., 264 F.3d 201, 282 (3d Cir. 2001) ("We therefore believe that, under the PSLRA, courts should accord a presumption of reasonableness to any fee request submitted pursuant to a retainer agreement that was entered into between a properly- selected lead plaintiff and a properly-selected lead counsel.").
30. See Theodore Eisenberg &Geoffrey P. Miller, Attorney Fees in Class Action Settlements: An Empirical Study, 1 J. MPIRICAL LEGAL STUD. 27, 31-32 (2004) [hereinafter Eisenberg &Miller, An Empirical Study] (discussing the fee percentage and lodestar methods of awarding attorneys' fees in the context of class action settlements).
31. The prevailing method for determining the appropriate fee to award class counsel from a settlement they negotiated (i.e., so-called "common fund" cases) is to select a percentage of the settlement based on a multi-factor test,
32. see, e.g., Varacallo v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207, 250 (D.N.J. 2005) Gisting seven "standards" to use "[i]n awarding attorneys' fees using the percentage-of-recovery method in a common fund class action"), which, as with most multi-factor tests, leaves courts with a great deal of discretion. Some courts of appeals have tried to confine this discretion somewhat by adopting a presumption that 25 percent is an appropriate award in common-fund cases.
33. See, e.g., Staton v. Boeing Co., 327 F.3d 938, 968 (9th Cir. 2003) ('This circuit has established 25% of the common fund as a benchmark award for attorney fees."); Camden I Condo. Ass'n, Inc. v. Dunkle, 946 F.2d 768, 771 (11th Cir. 1991) (establishing "bench mark" percentage of 25 percent, "which may be adjusted up or down based on the circumstances of each case"). In cases where fees are paid directly by defendants and in common-fund cases where district courts do not use the percentage-of-the- settlement approach, district courts reward class counsel using the fee 'lodestar" enhanced by a discretionary multiplier.
34. See Eisenberg &Miller, An Empirical Study, supra note 21, at 31 ("Under the lodestar method,.. courts multiply the reasonable number of hours expended by counsel by a reasonable hourly rate and then adjust the product for various factors."). The discretionary multiplier gives district courts considerable latitude to set fees even in these cases.
35. See, e.g., John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 COLUM. L. REV. 370, 371-72 (2000) (acknowledging the "standard depiction" of a class action attorney "as a profit-seeking entrepreneur, capable of opportunistic actions and often willing to subordinate the interests of class members to the attorney's own economic self-interest");
36. John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U. CHI. L. REV. 877, 883-84 (1987) (stating that "[i]t is no secret that substantial conflicts of interest between attorney and client can arise in class action litigation" and then detailing some of the ways in which these conflicts manifest themselves).
37. See, e.g., Christopher R. Leslie, A Market-Based Approach to Coupon Settlements in Antitrust and Consumer Class Action Litigation, 49 UCLA L. REV. 991, 1065 (2002) ("Congress required judicial approval of class action settlements precisely because the class counsel might make agreements that maximize their personal gain at the expense of absent class members.").
38. See, e.g., Theodore Eisenberg &Geoffrey P. Miller, The Role of Opt-Outs and Objectors in Class Action Litigation: Theoretical and Empirical Issues, 57 VAND. L. REV. 1529, 1531 (2004) [hereinafter Eisenberg &Miller, The Role of Opt Outs] ("In theory, the right to object to a settlement provides a check on reasonableness: the court can look to the views of class members as a counterweight to the views of counsel and the representative parties, who may be biased in favor of approval.").
39. FED. R. CIV. P. 23(e) ('The court must direct notice [of a proposed settlement] in a reasonable manner to all class members who would be bound by the proposal.. Any class member may object to the proposal if it requires court approval under this subdivision (e)..");
40. FED. R. CIV. P. 23(h) ("Notice of the motion [for an award of attorneys' fees] must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner. A class member, or a party from whom payment is sought, may object to the motion.").
41. See Brunet, supra note 1, at 439-43 (noting that many courts have commented on the important role objectors can play in class action settlements).
42. Eisenberg &Miller, The Role of Opt Outs, supra note 25, at 1546 (reviewing 236 state and federal class action settlements).
43. See, e.g., Christopher R. Leslie, The Significance of Silence: Collective Action Problems and Class Action Settlements, 59 FLA. L. REV. 71, 73 (2007) ("For individual class members, objecting does not appear to be cost-beneficial. Objecting entails costs, and the stakes for individual class members are often low.");
44. id. at 91 (noting that "even those class members who believe that the proposed settlement is inadequate may remain silent because they (correctly) calculate that the costs of objecting exceed the expected benefits of doing so").
45. See, e.g. In re Pharm. Indus. Average Wholesale Price Litig., 520 F. Supp. 2d 274, 278 (D. Mass. 2007) (describing "one-sentence" objection);
46. Brief for Respondents at 31, Devlin v. Scardelletti, 536 U.S. 1 (2002) (No. 01-417) (citing examples of objectors who "file a piece of paper containing some variant of T object' or 'This is a terrible deal'").
47. See MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.643 (2004) (providing a summary of the rights of an objector in a class action to seek discovery, introduce expert testimony, and file motions (including motions to intervene) as part of the objection).
48. See id. at § 21.641 ("In evaluating the settlement, the court should take into account not only the presentations of counsel, but also information from other sources, such as.. presentations by objections.").
49. See Leslie, supra note 29, at 114 ("[CJourts rarely reject proposed settlements in response to objections.");
50. Thomas E. Willging, Laural L. Hooper &Robert J. Niemec, An Empirical Analysis of Rule 23 to Address the Rulemaking Challenges, 71 N.Y.U. L. REV. 74, 140- 41 (1996) (reporting that, out of all class actions filed in four federal district courts over a two- year period, "about half of the settlements that were the subject of a [settlement approval] hearing generated at least one objection" and that "[approximately 90% or more of the proposed settlements were approved without changes in each of the four districts").
51. See Michael A. Perino, The Milberg Weiss Prosecution: No Harm, No Foul? 1, 59 (St. John's Legal Studies Research Paper No. 08-0135, 2008), available at http://ssrn.com/ abstract=l 133995 ("In more than half the cases [out of 687 studied], judges award plaintiffs' attorneys precisely the fee they requested. When judges do award less than what was requested, those downward departures tend to be quite small. On average, judges awarded plaintiffs' attorneys 90% of the fees they requested.").
52. 536 U.S. 1 (2002).
53. See Scardelletti v. Debarr, 265 F.3d 195, 208-10 (4th Cir. 2001);
54. Cook v. Powell Buick, Inc., 155 F.3d 758, 761 (5th Cir. 1998);
55. Felzen v. Andreas, 134 F.3d 873, 874 (7th Cir. 1998);
56. Shults v. Champion Int'l Corp., 35 F.3d 1056, 1061 (6th Cir. 1994);
57. Gottlieb v. Wiles, 11 F.3d 1004, 1008-09 (10th Cir. 1993);
58. Croyden Assocs. v. Alleco, Inc., 969 F.2d 675, 678-80 (8th Cir. 1992);
59. Guthrie v. Evans, 815 F.2d 626, 628-29 (11th Cir. 1987).
60. See Devlin, 536 U.S. at 15 (Scalia, J., dissenting) (stating that "the 'parties' to a judgment are those named as such - whether as the original plaintiff or defendant in the complaint giving rise to the judgment, or as 'one who [though] not an original party. becomes a party by intervention.'" and "the class representatives").
61. This, of course, is not true with respect to the fee award, which class counsel will sometimes appeal. Moreover, on rare occasions, the representative plaintiffs will oppose the settlement negotiated on their behalf. See, e.g., Lazy Oil Co. v. Witco Corp., 166 F.3d 581, 583 (3d Cir. 1999).
62. See, e.g., Guthrie v. Evans, 815 F.2d 626, 628-29 (11th Cir. 1987) (holding that "non- named[ ] class members do not have standing to appeal" if they do not intervene).
63. See In re PaineWebber Inc. Ltd. P'ships Litig., 94 F.3d 49, 53 (2d Cir. 1996);
64. Carlough v. Amchem Prods., Inc., 5 F.3d 707, 710 (3d Cir. 1993);
65. Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1176 (9th Cir. 1977).
66. See Devlin, 536 U.S. at 14 (holding that "nonnamed class members.. who have objected in a timely manner to approval of the settlement at the fairness hearing have the power to bring an appeal without first intervening").
67. See id. at 7-9 (acknowledging that "only parties to a lawsuit. may appeal an adverse judgment" (citing Marino v. Ortiz, 484 U.S. 301, 304 (1988)) but explaining that an objector "will only be allowed to appeal that aspect of the District Court's order that affects him-the District Court's decision to disregard his objections").
68. Although Devlin was technically a case involving an appeal only from a settlement and not an award of attorneys' fees, its holding has been extended to appeals from fee awards.
69. See, e.g., In re Synthroid Mktg. Litig., 325 F.3d 974, 976-77 (7th Cir. 2003).
70. See, e.g., Brunet, supra note 1, at 429 (arguing that "Devlin may have raised the ante for class action objectors by legitimizing their efforts to appeal from district court approvals of settlements").
71. See Brief for Citibank (South Dakota), N.A., as Amicus Curiae Supporting Respondents at 18, Devlin v. Scardelletti, 536 U.S. 1 (2002) (No. 01-417) (arguing that, if permitted to appeal settlements, objectors may "attempt to take personal advantage" of the "delay" caused by the appeal, and thereby create "great pressure" to "pay substantial amounts of 'ransom' to such objectors");
72. Brief for Respondents at 31, Devlin, 536 U.S. 1 (arguing that if objectors are permitted to appeal a settlement some class members will attempt "to simply extract a fee by lodging generic, unhelpful protests" (quoting Shaw v. Toshiba Am. Info. Sys., Inc., 91 F. Supp. 2d 942, 973 (E.D. Tex. 2000))).
73. See Devlin, 536 U.S. at 22 n.5 (Scalia, J., dissenting) (warning of " 'canned' objections filed by professional objectors who seek out class actions to simply extract a fee by lodging generic, unhelpful protests" (quoting Shaw, 91 F. Supp. 2d at 973-74 &n.18)).
74. See, e.g., SHAVELL, supra note 2, at 124-25 (noting the problem as a justification for eminent domain: "In the building of a road, for example, the ability of essentially any individual on its planned path to prevent the project from going forward could cause serious bargaining problems for a government agency that must acquire land through purchases").
75. PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION, supra note 3, § 3.08 cmt. b ("A baseless objection, followed by an appeal after the objection is rejected, can delay the finalization of a settlement for months or even years.");
76. Brunet, supra note 1, at 429 ("The ability to appeal after filing an objection in the district court-now firmly established after Devlin-slows down the class action's progress considerably.").
77. See PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION, supra note 3, § 3.08 cmt. a (noting that objectors who appeal class action settlements "delay distributions to.. class counsel");
78. Geoffrey P. Miller &Lori S. Singer, Nonpecuniary Class Action Settlements, 60 LAW & CONTEMP. PROBS. 97, 120 n.64 (1997) (explaining that objectors "can appeal the settlement.. and during the appeal process, the settlement will be in limbo. Class counsel will not be paid and class members will not receive their benefits. The prospect of delaying a settlement for months or years by taking an appeal is the realistic threat that objectors hold over the heads of the settling parties.");
79. William B. Rubenstein, TTie Fairness Hearing: Adversarial and Regulatory Approaches, 53 UCLA L. REV. 1435, 1449 (2006) (noting that objectors can "forc[e] the class attorneys to pay them to go away lest the class attorneys' own fee be held up through appeals").
80. See, e.g., Allapattah Servs., Inc. v. Exxon Corp., 454 F. Supp. 2d 1185, 1239-43 (S.D. Fla. 2006) (awarding $333,719,569);
81. In re AOL Time Warner, Inc. Sec. and "ERISA" Litig., No. 02-5575, 2006 WL 3057232, at *2 (S.D.N.Y. Oct. 25, 2006) (awarding $147,500,000);
82. In re Royal Ahold N.V. Sec. &ERISA Litig., 461 F. Supp. 2d 383, 387 (D. Md. 2006) (awarding $130,647,868);
83. Spartanburg Regl Health Servs. Dist, Inc. v. Hillenbrand Indus., Inc., No. 03- 2141, slip op. at 11 (D.S.C. Aug. 15, 2006) (awarding $117,157,800).
84. Brunet, supra note 1, at 429.
85. See SHAVELL, supra note 2, at 403 (setting forth the conventional settlement theory that litigants decide to settle litigation based on their "estimate[s] of the expected judgment" and their costs of litigating).
86. See supra notes 48-49.
87. See, e.g., PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION, supra note 3, § 3.08 cmt. a (noting that class members file objections that are "insubstantial" or "not objectively reasonable" in order to extract a "side deal").
88. See supra notes 48-49 and infra notes 57-67.
89. See, e.g., Stipulation of Settlement at 8, New England Health Care Employees Pension Fund v. Fruit of the Loom, Inc., 234 F.R.D. 627 (W.D. Ky. 2006) (No. 98-99) ("The [Settlement Fund] shall be transferred by the Defendants' insurers. to the Escrow Agent within ten (10) days following the entry by the Court of an Order.. preliminarily approving this settlement..").
90. See, e.g., Vaughn v. Am. Honda Motor Co., 507 F.3d 295, 299 (5th Cir. 2007) (noting that the settlement agreement in that case "ma[de] no provision for the payment of pre-judgment interest. and [did] not become effective. until the appeals [were] concluded").
91. Barnes v. FleetBoston Fin. Corp., No. 01-10395, 2006 U.S. Dist. LEXIS 71072, at *3-4 (D. Mass. Aug. 22, 2006).
92. Shaw v. Toshiba Am. Info. Sys., Inc., 91 F. Supp. 2d 942, 973-74 &n.18 (E.D. Tex. 2000).
93. Snell v. Allianz Life Ins. Co., No. 97-2784, 2000 WL 1336640, at *9 (D. Minn. Sept. 8, 2000);
94. see also, e.g., Varacallo v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207, 240 (D.N.J. 2005) (noting that '"[fjederal courts are increasingly weary of professional objectors"' (quoting O'Keefe v. Mercedes-Benz USA, LLC, 214 F.R.D. 266, 295 n.26 (E.D. Pa. 2003)));
95. In re Holocaust Victim Assets Litig., 311 F. Supp. 2d 363, 365 (E.D.N.Y. 2004) (characterizing notice of appeal as "an unsuccessful attempt to extort a significant cash award from the settlement fund");
96. In re Compact Disc Minimum Advertised Price Antitrust Litig., 216 F.R.D. 197, 218 n.52 (D. Me. 2003) (complaining of "professional objectors" in class action litigation);
97. O'Keefe, 214 F.R.D. at 295 n.26 (noting that "some of the objections were obviously canned objections filed by professional objectors who seek out class actions to simply extract a fee by lodging generic, unhelpful protests" (quoting Shaw, 91 F. Supp. 2d at 973)).
98. Vaughn, 507 F.3d at 300.
99. Duhaime v. John Hancock Mut. Life Ins. Co., 183 F.3d 1, 6 (1st Cir. 1999);
100. see also, e.g., Vollmer v. Publishers Clearing House, 248 F.3d 698, 709 (7th Cir. 2001) (characterizing appeal by objectors as one "solely to enable themselves to receive a fee").
101. The reporters of the A.L.I, project are Professors Samuel Issacharoff, Robert H. Klonoff, Richard A. Nagareda, and Charles Silver.
102. PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION, supra note 3, § 3.08 cmt. a.
103. Rubenstein, supra note 49, at 1449.
104. Geoffrey P. Miller, Competing Bids in Class Action Settlements, 31 HOFSTRA L. REV. 633, 635 (2003);
105. see also Richard A Nagareda, Administering Adequacy in Class Representation, 82 TEX. L. REV. 287, 375 (2003) (noting "the current phenomenon of 'professional objectors'-a term used colloquially to describe plaintiffs' law firms that threaten objections largely as a means to obtain side payments for themselves in exchange for their agreement either to drop the objections or not to raise them in the first place").
106. Brunet, supra note 1, at 409, 426, 429;
107. see also, e.g., MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.643 (2004) ("Some objections. are made for improper purposes, and benefit only the objectors and their attorneys (e.g., by seeking additional compensation to withdraw even ill- founded objections).");
108. Susan P. Koniak &George M. Cohen, In Hell There Will Be Lawyers Without Clients or Law, 30 HOFSTRAL. REV. 129, 155 (2001) ("[OJbjectors. are often motivated not by the chance to protect the class from a sellout settlement but by the prospect of being paid off by class counsel and/or the defendant to drop their objections and walk away.");
109. Leslie, supra note 29, at 129 n.353 (noting that "[i]t is.. possible that a class member objects to a proposed settlement.. because she is trying to extort a more profitable side deal from the defendants");
110. Miller &Singer, supra note 49, at 120 (noting that "objectors have become a major force in class action settlements,. in part because [they] sometimes earn a great deal of money by intervening");
111. Patrick Woolley, Rethinking the Adequacy of Adequate Representation, 75 TEX. L. REV. 571, 618 (1997) (explaining that, "[b]y filing or threatening to file an objection to the settlement, a class member may be able to 'extort' a settlement that represents a disproportionate amount of the settlement fund");
112. Richard B. Schmitt, Objecting to Class Action Pacts Can Be Lucrative for Attorneys, WALL ST. J., Jan. 10,1997, at Bl (describing the practice of objecting to class action settlements in order to extract a sizeable fee from class counsel).
113. See, e.g., Brunet, supra note 1, at 437 n.150 (describing "professional objectors" as "attorneys in private practice who have a specialty in filing objections in class action cases, usually after a proposed settlement has emerged, and always to collect a fee"). It may be easier for professional objectors to operate in securities fraud class actions because they can team up for this purpose with individuals or entities that buy small numbers of shares of stock in a number of publicly traded companies.
114. See, e.g., Brian Anderson, Remarks from Panel 2: Tools for Ensuring that Settlements Are "Fair, Reasonable, and Adequate," at the FTC Workshop on Protecting Consumer Interests in Class Actions (Sept. 13, 2004), in 18 GEO. J. LEGAL ETHICS 1197, 1204 (2005) (noting that, "as is often the case when we have multiple class actions filed around the country on the same issue," class counsel can be blackmailed by "lawyers who are prosecuting other lawsuits and.. have been left out of the settlement tent, often because their fee demands were exorbitant").
115. See Nagareda, supra note 66, at 342-47.
116. See Brunet, supra note 1, at 439-43 (noting that many courts have commented on the important role objectors can play in class action settlements).
117. See id.
118. See, e.g., PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION, supra note 3, § 3.08(d) &cmt. a ("If the court concludes that objectors have lodged objections that are insubstantial and not reasonably advanced for the purpose of rejecting or improving the settlement, the court should consider imposing sanctions against objectors or their counsel.").
119. See infra text accompanying notes 111-19.
120. See id.
121. See infra note 120.
122. See, e.g., Alan B. Morrison, Must the Interests of the Client Always Come First?, 53 MEL. REV. 471, 479 (2001) (noting that class counsel "believe it is proper to buy off these objectors because they think the settlement is a good settlement, and the class is going to get the money sooner that way").
123. See, e.g., Duhaime v. John Hancock Mut. Life Ins. Co., 183 F.3d 1, 2 (1st Cir. 1999) (noting that objectors settled their appeal on "very, very good" terms);
124. Brunet, supra note 1, at 429-30 (noting that "[t]he size of these fees [extracted by objectors] can be considerable" and discussing one million dollar fee extracted by objectors in class action suit against Louisiana- Pacific).
125. Professor Brunet seems to believe the number is small, see Brunet, supra note 1, at 437 ("[T]he quantum of attorney-led free-riding objection activity. is probably a low percentage of all class action objections."), but he notes that others believe differently, see id. at 437 & nn.151- 53;
126. see also 5 ALBA CONTE & HERBERT B. NEWBERG, NEWBERG ON CLASS ACTIONS § 15:37 (4th ed. 2002) ("[OJbjections in 'boilerplate' form filed by 'professional objectors' often delay and unnecessarily complicate class proceedings by requiring court review of purported issues with no colorable merit.").
127. This dataset is described in more detail in a forthcoming article, An Empirical Study of Class Action Settlements and their Fee Awards. Fitzpatrick, supra note 11. The dataset includes all class actions settled in 2006, as measured by the date of the district court's written order granting final approval of the settlement. As there is no single repository of all federal class action settlements, I consulted a variety of sources to identify these settlements. For securities fraud cases, there is a list of settlements generally regarded as comprehensive maintained by Risk Metrics, a for-profit organization that assists institutional investors in making claims in such settlements. In order to obtain a list of non-securities cases and to catch any securities cases that might have been missed by RiskMetrics, I supplemented its list with several broad Westlaw searches, three reporters of class action settlements-BNA Class Action Litigation Report, Mealey's Jury Verdicts and Settlements, and Mealey's Litigation Report-and a web site that maintains an impressive collection of class action settlements, Class Action World. I also obtained a list from the Administrative Office of Courts of all district court cases coded as class actions that terminated by settlement in 2006. To my knowledge, this dataset is the most comprehensive set ever compiled of federal class action settlements in any given year.
128. Prior to 2003, objector blackmail may have occurred even before the appellate stage because class counsel could pay class members to withdraw their objections from the district court.
129. See, e.g., Brunet, supra note 1, at 426-27 & n.98; Woolley, supra note 67, at 618. Although class counsel can technically still do so, in order to discourage such side settlements, the Rules of Civil Procedure were amended in 2003 to require disclosure of these payments to the court.
130. See FED. R. CIV. P. 23(e)(5);
131. FED. R. CIV. P. 23(e)(4)(B) 2003 advisory committee's note (revised and renumbered as 23(e)(5)). Although it is theoretically possible that class counsel could pay off class members even before they file their objections with the district court, this strikes me as somewhat implausible.
132. Besides class members, settlements were occasionally appealed by class counsel unhappy with the fees awarded by the district court and by non-settling defendants concerned about the effect the settlement with the other defendants would have on their cases.
133. Stipulation and Agreement of Compromise, Settlement and Release of Sec. Action, at 22-23, In re Aspen Tech., Inc. Sec. Litig., No. 04-12375 (D. Mass. Feb. 27, 2006).
134. See SHAVELL, supra note 2, at 403 (setting forth the conventional settlement theory that litigants decide to settle litigation based on their "estimate[s] of the expected judgment" and their costs of litigating) (emphasis omitted).
135. See id.
136. Although some class action firms are very well capitalized, not all of them are. See, e.g., Jeffrey L. Rensberger, Asbestos and the Limits of Litigation, 44 S. TEX. L. REV. 1013, 1018 (2003) (noting that "at the end of the twentieth century," the plaintiffs' bar "had the intellectual and financial capital to inflict bankruptcy or a near-equivalent on a major industry");
137. Stephen Yeazell, Re-financing Civil Litigation, 51 DEPAUL L. REV. 183, 210-11 (2001) (noting that the "securities bar. is an outlier. in terms of. financial capital" because it has "sufficiently deep capital to withstand the expectable procedural motions and the duration of discovery, including the ability to finance credible experts, and the financial and transactional sophistication to create elaborate settlements").
138. See SHAVELL, supra note 2, at 406 ("When we introduce risk aversion into the basic model, we see that it leads to a greater likelihood of settlement.").
139. Interestingly, there is a similar practice in eminent domain proceedings known as "quick take," which permits governments to take property before the condemnation litigation has concluded. See, e.g., Declaration of Taking Act, 40 U.S.C.A. § 3114(a);
140. JULIUS L. SACKMAN, NICHOLS ON EMINENT DOMAIN 24.10[2] (2008). Quick-take laws serve a similar purpose as quick-pay provisions: preventing holdouts from using delay to extract premiums above the fair market value of their property. See, e.g., MODEL EMINENT DOMAIN CODE Art. VI, Refs & Annos, prefatory cmt. (1) (2002).
141. One might argue that quick-pay provisions may not reduce the blackmail threat because, even with these provisions, class counsel will still desire to buy off meritless objector appeals in order to accelerate the final resolution of the settlement for the benefit of class members. Given, however, that blackmail bounties come from the pockets of class counsel and not from those of class members, one making this argument would have to believe that class action lawyers are willing to impoverish themselves in order to enrich their clients. Many commentators believe that this is a naively magnanimous view of class action lawyers. See supra notes 23-24 and accompanying text.
142. The relevant language indicating when class counsel received their fees was almost always found only in the settlement agreements themselves; only occasionally was it found in the court orders.
143. In some of these settlements, the quick-pay terms did not execute automatically but were left to the option of the class action defendants once the settlement was approved.
144. See Settlement Agreement at 4, 32-33, Smith v. Flanagan, No. 03-2895 (D. Md. Feb. 17, 2006);
145. Stipulation of Settlement with Ernest & Young LLP at 16-17, 19-20, In re Cendant Corp. Litig., No. 98-1664 (D.N.J. Aug. 15, 2000).
146. On occasion, courts will postpone the award of all or (more commonly) a portion of attorneys' fees until the settlement proceeds have actually been distributed to class members (a process that can take several months or years). It is unclear how quick-pay provisions would interact with postponed fees; presumably, quick-pay provisions would apply only to the portion of fees that is not postponed by the court.
147. Amended Stipulation of Settlement at 8-9, 22-23, In re DVI, Inc. Sec. Litig., No. 03- 5336 (E.D. Pa. Nov. 17, 2006).
148. In fifteen settlements, the agreements set forth the traditional practice that class counsel were to receive their fees only once the settlement became "final" and all appeals were exhausted, but the agreements went on to define "final" in a way that seemed to exclude appeals that challenged only the fees awarded to class counsel.
149. See, e.g., Stipulation of Settlement of Securities Action at 7, 18, Ohio Public Employees Retirement Sys. v. Freddie Mac, MDL No. 1584 (S.D.N.Y. Oct. 26, 2006) ("Any attorneys' fees and expenses awarded by the Court. shall be paid. to Lead Counsel.. within three (3) days after the Judgment becomes Final. Any appeal or proceeding seeking subsequent judicial review pertaining solely to the Court's approval of.. the award of attorney's fees or expenses shall not affect the time set forth above for the Judgment to become Final."). In four agreements, class counsel were permitted to receive early any portion of their fee awards that were not challenged on appeal.
150. See, e.g., Stipulation of Settlement at 6-7, 18-21, Levitan v. McCoy, No. 00-C-5096 (N.D. 111. Mar. 16, 2006) ("If a Class Member or other Person appeals the Fee Award, payment of any uncontested amount shall not be stayed, but instead shall be paid as provided herein as if no appeal had been taken. The contested amount shall remain in the Settlement Fund, but shall not be paid to anyone until and unless a final order is issued by the Court in relation to any contest. To the extent such appeal is unsuccessful, any attorney's fees, costs or expenses found to have been properly awarded but not yet paid shall immediately be paid, but not before the Effective Date."). In these nineteen settlements, it seems fairly clear that class members could structure their objections in a way to delay the distribution of fees to class counsel.
151. This is less clear in the remaining nine settlements. The agreements in these settlements set forth a date certain on which class counsel would receive their fees and did not address what might happen to that date if appeals were filed. See, e.g., Stipulation and Agreement of Settlement at 14-15, Hanley v. Warburg Pincus Capital Co., L.P., No. 96-390 (D. Ariz. Apr. 24, 2006) ("Attorneys' fees.. shall. be advanced by the Settling Defendants to Plaintiffs Lead Counsel within ten (10) days of Court approval of the Settlement and the award of counsel fees and expenses.."). It is not clear whether class members could have delayed the distribution of fee awards to class counsel in these nine settlements.
152. See supra note 68.
153. Indeed, sometimes they are required to do so even before the settlement has received final approval.
154. See, e.g., Stipulation of Settlement at 8, New England Health Care Employees Pension Fund v. Fruit of the Loom, Inc., 234 F.R.D. 627 (W.D. Ky. 2006) (No. 98-99) ("The [Settlement Fund] shall be transferred by the Defendants' insurers. to the Escrow Agent within ten (10) days following the entry by the Court of an Order.. preliminarily approving this settlement.").
155. Indeed, class action lawyers have reported to me that defendants occasionally demand such onerous terms to guarantee repayment (e.g., letters of credit, etc.) that they sometimes drop their demand for quick-pay provisions.
156. It is common for class counsel to receive their fees before class members actually receive compensation from settlements because it can take many months or even years to distribute settlement proceeds to class members. But quick-pay provisions take this phenomenon several steps further by permitting contingency-fee lawyers to receive their fees even before their clients' cases are over, that is, before their clients are even legally entitled to receive compensation from defendants.
157. See Charles Silver, A Restitutionary Theory of Attorneys' Fees in Class Actions, 76 CORNELL L. REV. 656, 657 (1991).
158. For example, the predominant justification for class action litigation is the utilitarian goal of forcing defendants to fully internalize the costs of their activities.
159. See Myriam Gilles & Gary B. Friedman, Exploding the Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers, 155 U. PA. L. REV. 103, 105 (2006) ("There is but one true objective here-one valid normative measure by which to gauge any class action procedure or practice, or any proposed reform. All that matters is whether the practice causes the defendant-wrongdoer to internalize the social costs of its actions.");
160. Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform, 58 U. CHI. L. REV. 1, 8 (1991) (explaining that "[i]n the absence of a class action device, [certain widespread, but small] injuries would often go unremedied because most individual plaintiffs would not themselves have a sufficient economic stake in the litigation to incur the litigation costs"). On this view, the fact that class action lawyers are not already fully incentivized to bring every possible class action-insofar as contingency-fee lawyers bear the full risk of the class action yet reap only a fraction of the settlement award,
161. see, e.g., Alon Klement, Who Should Guard the Guardians? A New Approach for Monitoring Class Action Lawyers, 21 REV. LITIG. 25, 34 (2002) ("Class action attorneys bear all these costs [of litigation], yet enjoy only part of the returns.")-might speak in favor of any measure-including quick-pay provisions-that makes class representation more lucrative. On the other hand, a utilitarian might worry that, despite the fact that class action lawyers are not fully incentivized, they still might be filing too many class action cases on account of the fact that they can extract a premium from defendants who, eager to avoid either the considerable costs of litigating,
162. see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S. Ct. 1955, 1967 (2007) (noting in a class action case that "the threat of discovery expense [can] push cost-conscious defendants to settle even anemic cases"), or the risks of an outlier jury verdict, will settle cases for more than their expected value,
163. see In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir. 1995) (noting that defendants in class actions can come under "intense pressure to settle" and might "be forced by fear of the risk of bankruptcy to settle even if they have no legal liability"). A utilitarian might also worry that some causes of action, such as those which provide for extra- compensatory statutory damages, were not intended to be fully enforced; as such, further inducing class action lawyers to bring such cases might result in (even more) overdeterrence.
164. See Richard A. Nagareda, Aggregation and its Discontents: Class Settlement Pressure, Class-Wide Arbitration, and CAFA, 106 COLUM. L. REV. 1872, 1878 (2006) ("[C]lass settlement pressure is most troubling when aggregation would not merely enable the enforcement of cost-prohibitive claims, but in addition, would distort the underlying remedial scheme. The most glaring of these situations arises when a class action would aggregate statutory damages that have been decoupled from claimants' actual losses specifically in order to enable individual litigation. Aggregation of statutory damages in this setting would make for a kind of double counting discordant with the underlying remedial scheme.").
165. See supra note 22.
166. See, e.g., Vanessa O'Connell, Tobacco Firms Exposed to New $200 Billion Claim-Kraft Spinoff Faces Delay After 'Light Cigarette' Suit Gets Class Action Status, WALL ST. J., Sept. 26, 2006, at A3 (reporting that pending $200 billion class action against Philip Morris "will delay an expected plan by Philip Morris USA parent Altria Group Inc. to spin off its Kraft Foods Inc. unit").
167. Another potential solution to the blackmail problem might be to use expedited review of appeals brought by class members. But insofar as avoiding delay is only one of the reasons class counsel are willing to pay objectors to drop their appeals, this solution, like quick-pay provisions, would not completely solve the blackmail problem. Moreover, it is unclear whether appeals by class members have any better claim to expedited treatment than other civil appeals that could also benefit from such treatment.
168. See supra note 73 and accompanying text.
169. See supra notes 74-76 and accompanying text.
170. See, e.g., John C. Coffee, Jr., Understanding The Plaintiffs Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 COLUM. L. REV. 669, 714 n.121 (1986) ("Although the case law may require full and elaborate judicial review before a settlement is approved, it is doubtful that courts have much incentive to be very demanding. Their deferential attitude is probably best expressed by one recent decision which acknowledged that: 'In deciding whether to approve this settlement proposal, the court starts from the familiar axiom that a bad settlement is almost always better than a good trial.'");
171. Susan P. Koniak & George M. Cohen, Under Cloak of Settlement, 82 VA. L. REV. 1051, 1122-24 (1996) (arguing that class actions "magnify" district courts' "strong disposition toward settlements" because "the alternatives-trying the class action or, worse yet, trying the multitude of suits that make up the class action individually-are particularly burdensome alternatives," and noting that a study by the Federal Judicial Center "shows that the average fairness hearing takes up about 40 minutes of court time").
172. See, e.g., In re Heritage Bond Litig., No. MDL 02-ML-1475 DT, 2005 WL 2401111, at *5 (CD. Cal. Sept. 12, 2005) (noting that one argument on appeal would be "that the attorneys' fees in this case should have been capped at the 25% benchmark").
173. See supra note 22 (discussing the methods used to award fees to class counsel and the discretion courts exercise under these methods).
174. See supra note 27 and accompanying text (noting role of objectors in providing adversarial testing of class action settlements).
175. FED. R. APP. P. 7.
176. See, e.g. In re Am. President Lines, Inc., 779 F.2d 714, 716 (D.C. Cir. 1985) ('The costs referred to [in Rule 7] are simply those that may be taxed against an unsuccessful litigant under Federal Appellate Rule 39, and do not include attorneys' fees that may be assessed on appeal.");
177. A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE & PROCEDURE § 3953 (4th ed. 2008) (surveying relevant case law and observing that Rule 7 costs are generally those taxable under Appellate Rule 39 but that circuits are split as to whether Rule 7 costs include attorney fees).
178. See FED. R. APP. P. 39 (setting forth rules for taxation of costs on appeal).
179. See, e.g., In re Cardizem CD Antitrust Litig., 391 F.3d 812, 815, 817 (6th Cir. 2004) (affirming Rule 7 bond that included "$123,429. 00 in incremental administration costs" because the state law on which the suit was based required plaintiffs to pay "damages" to defendants for filing frivolous litigation);
180. In re Pharm. Indus. Average Wholesale Price Litig., 520 F. Supp. 2d 274, 279 (D. Mass. 2007) (including in Rule 7 bond "administrative costs attributable to delay in [settlement] distribution");
181. In re Compact Disc Minimum Advertised Price Antitrust Litig., No. MDL 1361, 2003 WL 22417252 (D. Me. Oct. 7, 2003) (granting Rule 7 appeal bond and taking into account plaintiffs' claim that appeal was frivolous and requests for reproduction costs, attorneys' fees, and various other administration costs);
182. In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 124, 129 (S.D.N.Y. 1999) (including $50,000 in Rule 7 bond for "damages resulting from the delay and/or disruption of settlement administration").
183. See NASDAQ Market-Makers, 187 F.R.D. at 128 (citing plaintiffs' argument that distribution delays cause "waste" to settlement funds as "the processing of claims is interrupted and restarted, with additional expenses necessarily incurred in extending the leases on office space and the leases on equipment, extending insurance and website maintenance, picking up mail and answering inquiries about the status of claims administration during its hiatus, and rehiring and retraining of the claims administration staff).
184. See, e.g., id. at 128 ("Plaintiffs aver that the disruption costs resulting from even a six- month shut-down of settlement administration would total approximately $526,100.").
185. See, e.g., Barnes v. FleetBoston Fin. Corp., No. 01-10395-NG, 2006 U.S. Dist. LEXIS 71072, at *8-9 (D. Mass. Aug. 22, 2006) (including in Rule 7 bond "5.15% interest on a settlement of $12.5 million. for one year" or $643,750);
186. Conroy v. 3M Corp., No. C 00-2810CW, 2006 U.S. Dist. LEXIS 96169, at *6, *11 (N.D. Cal. Aug. 10, 2006) (including in Rule 7 bond "$239,667 in anticipated post-judgment interest to compensate for the delayed distribution of the $4.1 million cash portion of the settlement").
187. See, e.g., Compact Disc Minimum, 2003 WL 22417252, at *1 (including attorneys' fees on appeal in Rule 7 bond because a "Rule 7 bond can cover damages assessed under FED. R. App. P. 38");
188. Vaughn v. Am. Honda Motor Co., 627 F. Supp. 2d 738, 751 (E.D. TEX. Sept. 28, 2007) (including attorneys' fees because "amount of bond should reflect the significant possibility that any objector's appeal will be subject to FED. R.App. P. 38"), rev'd by 507 F.3d 295 (5th Cir. 2007);
189. cf. Cardizem, 391 F.3d at 817 (affirming Rule 7 bond that included $50,000 in attorneys' fees because the state law on which the suit was based required plaintiffs to pay "damages" to defendants for filing frivolous litigation).
190. See, e.g., In re Heritage Bond Litig., No. MDL 02-ML-1475 DT, 2005 WL 2401111, at *5 n.8 (CD. Cal. Sept. 12, 2005) (including attorneys' fees on appeal in Rule 7 bond because the Private Securities Litigation Reform Act "permits attorneys' fees to a prevailing plaintiff'), vacated, 2007 WL 1340633 (9th Cir. May 8, 2007);
191. NASDAQ Market-Makers, 187 F.R.D. at 128 (including $50,000 in attorneys' fees on appeal in Rule 7 bond because the Clayton Act permits plaintiffs to recover the "cost of suit, including a reasonable attorney's fee").
192. See Heritage Bond, 2005 WL 2401111, at *5 ("P]n full view of the frivolousness and disingenuous nature of the appeal.. this Court finds that two times the requested amount, or $208,000, is appropriate."), vacated on other grounds, 2007 WL 1340633 (9th Cir. May 8, 2007).
193. See, e.g., Vaughn, 627 F. Supp. 2d at 721 (requiring objector to post Rule 7 bond for $150,000);
194. Allapattah Servs., Inc. v. Exxon Corp., No. 91-0986-CrV, 2006 WL 1132371, at *18 (S.D. Fla. Apr. 7, 2006) (requiring objector to post Rule 7 bond in the amount of $13,500,000 for "damages, costs and interest that the entire class will lose as a result of the appeal");
195. Carnegie v. Household Bank (N.D. 111. Nov. 8, 2006) (requiring objectors to each post Rule 7 bonds of $1,479,295);
196. Barnes, 2006 U.S. Dist. LEXIS 71072, at *8-9 (requiring objector to post Rule 7 bond of over $645,000);
197. Conroy, 2006 U.S. Dist. LEXIS 96169, at *11 (requiring objector to post Rule 7 bond of $431,167);
198. Heritage Bond, 2005 WL 2401111, at *9 (requiring one set of objectors to post Rule 7 bond for $208,000 and another objector to do so for $228,000);
199. Downey v. Mortgage Guar. Ins. Corp., No. Civ.A 100-108, 2001 WL 34092617 (S.D. Ga. Oct. 1, 2001) (requiring six objectors to post Rule 7 bond in the amount of $180,000).
200. See In re Heritage Bond Litig., 233 FED. App'x 627, 631 (9th Cir. 2007) (vacating bond for similar reasons). The Federal Appellate Rules Standing Committee recently considered amending Rule 7 to make clear that its costs bonds should not include attorneys' fees.
201. See Minutes of the Standing Committee on the Federal Rules of Practice and Procedure (Jan. 2008) (reporting that the Advisory Committee on the Federal Rules of Appellate Procedure had recommended such an amendment because of "the risk that large appeal bonds could chill meritorious appeals"). However, the Committee ultimately decided not to act on the amendment in light of disagreements over its potential effects and whether it should apply to both class and non-class litigation.
202. See id. (Jan. 2009) (reporting that Advisory Committee had removed the amendment to Rule 7 from its agenda).
203. See In re Diet Drugs Prods. Liab. Litig., No. 99-20593, 2000 WL 1665134, at *2-3 (E.D. Pa. Nov. 6, 2000) (denying large bond on this basis).
204. For example, on the question of whether class members can be required under Rule 7 to post a bond for projected attorneys' fees, compare In re Cardizem CD Antitrust Litig., 391 F.3d 812, 817 (6th Cir. 2004) (permitting the practice) with Vaughn, 507 F.3d at 299 (rejecting the practice) and Heritage Bond, 233 FED. App'x at 631 (same). On the question of whether class members can be required under Rule 7 to post a bond for expenses related to a delay in settlement administration, compare Cardizem, 391 F.3d at 817 (permitting the practice) with Diet Drugs, 2000 WL 1665134, at *3-5 (construing Third Circuit case law to reject the practice). Finally, on the question of whether class members can be required under Rule 7 to post a bond for interest that will accrue on the settlement or attorneys' fees, compare Barnes, 2006 U.S. Dist. LEXIS 71072, at *8-9 (D. Mass. Aug. 22, 2006) (interpreting First Circuit case law to permit the practice) with Vaughn, 507 F.3d at 299 (rejecting the practice at least where the settlement agreement does not call for it).
205. See Vaughn, 507 F.3d at 300.
206. See, e.g., Cardizem, 391 F.3d at 814-16 (consolidating appeal from bond order with appeal from class action settlement).
207. It should be noted that, although I believe ex post sanctions and large appellate bonds are inferior to quick-pay provisions as solutions to the blackmail problem, in settlements where defendants are unwilling to agree to quick-pay provisions, these solutions may be the only ones available to the district court. As such, it is possible that these solutions are preferable to doing nothing at all.
208. See Devlin v. Scardelletti, 536 U.S. 1, 11 (2002);
209. id. at 22 (Scalia, J., dissenting).
210. See id. at 12 (noting that the federal government argued that "such a limited purpose intervention generally should be available to all those.. whose objections at the fairness hearing have been disregarded").
211. In Devlin, the federal government argued that class members would be permitted to intervene as of right, id., but Justice Scalia argued in his dissent that, even still, the district court might be able to serve a gate-keeping function by denying intervention to the most obvious blackmail artists,
212. see id. at 22 (Scalia, J., dissenting) (noting that the district court could rule on whether "the objections to the settlement were procedurally deficient, late filed, or simply inapposite to the case").
213. See id. at 17 ("[T]here is no dispute that [a class member can] appeal the District Court's collateral order denying his motion to intervene..");
214. Marino v. Ortiz, 484 U.S. 301, 304 (1988) ("[S]uch motions are, of course, appealable.").
215. See FED. R. CIV. P. 23(f) ("A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 10 days after the order is entered. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.").
216. On this point, it may be worth noting that the only federal court with a docket that is almost entirely discretionary is the United States Supreme Court and its docket has significantly declined in size in recent decades.
217. The first treatment of inalienability rules was the famous article by Guido Calabresi and Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089 (1972). Although Professor Calabresi and Mr. Melamed did not discuss inalienability rules in the contexts of holdouts and blackmail specifically, subsequent scholars have done so. See, e.g., Ayres & Madison, supra note 12;
218. Heller, supra note 12; Fennell, supra note 12.
219. See Calabresi & Melamed, supra note 12, at 1092 (noting that property rides "let each of the parties say how much the entitlement is worth to him").
220. See Fennell, supra note 12, at 1423-27, 1438-39 (noting that a "paradigmatic source of inefficiency is the costly wrangling associated with bilateral monopoly," including "blackmail," and the related problem of "the possibility that a party whose entitlement is crucial to the necessary assembly will attempt to 'hold out' for a larger share of the assembly surplus").
221. See id. at 1423 (noting that the risk of "wasteful negotiation" is high when an entitlement "has an idiosyncratically high value for a single buyer while remaining worthless, or very nearly so, to everyone else").
222. See Calabresi & Melamed, supra note 12, at 1106-07 (noting that if society can accurately gauge the value of entitlements, then "the holdout problem is gone" and "an argument can readily be made for moving from a property rule to a liability rule");
223. Fennell, supra note 12, at 1439 (noting that the problem of holdouts is "usually approached. through liability rules").
224. See Calabresi & Melamed, supra note 12, at 1108 ("We cannot be at all sure that [the landowner] is lying or holding out when he says his land is worth $12,000 to him.")
225. See id. at 1111 ("While at first glance efficiency objectives may seem undermined by limitations on the ability to engage in transactions, closer analysis suggests that there are instances, perhaps many, in which economic efficiency is more closely approximated by such limitations. This might occur when a transaction would create significant externalities.");
226. Fennell, supra note 12, at 1440 ("Alienability restrictions more straightforwardly select against those whose primary value is in reselling.").
227. See Fennell, supra note 12, at 1412-13 (noting "inalienability's impact on ex ante incentives to acquire and use goods that are not deemed intrinsically unsuited for market transfer").
228. id. at 1420.
229. See id. at 1424 (noting that an inalienability rule can be a "mechanism for filtering out.. transactions [that are] worthless intermediations that introduce bargaining dilemmas without any countervailing social benefits").
230. See Randy J. Kozel & David Rosenberg, Solving the Nuisance-Value Settlement Problem: Mandatory Summary Judgment, 90 VA. L. REV. 1849 (2004).
231. See id. at 1860-64 (discussing authors' proposed model for deterring frivolous litigation or "nuisance-value strategies" in the class action context).
232. See id. at 1904-05 (explaining how sanctions for frivolous litigation are inferior to inalienability rules).
233. See, e.g., Fennell, supra note 12, at 1420 ("Driving out transactions is usually a bad idea.").
234. See id. at 1454-55 ("Alienability restrictions could screen out those building [spite fences] for strategic reasons.. [but] by blocking potential bargains, such rules risk leaving in place inefficiently ugly but earnestly constructed fences.").
235. See SHAVELL, supra note 2, at 403, 406 (discussing extent to which, in the litigation context, parties are likely to prefer settlement rather than prolonged litigation).
236. See Kozel & Rosenberg, supra note 143, at 1876 ("[Application of [mandatory summary judgment] to the separate action process has the potential to add expense to the settlement of non-nuisance-value cases.").
237. This is the case when fee awards come from the corpus of the settlement rather than from the defendant pursuant to a fee-shifting statute. In the case of fee-shifting statutes, neither the objector nor any other class member stands to gain personally from a lower fee award; nonetheless, class members may enjoy the right to appeal those awards.
238. See, e.g., In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 727-32 (3d Cir. 2001) (holding that class members had standing to appeal fee award even though any reduction in the award would go to the defendant rather than class members).
239. Sometimes class members raise objections to settlements that go to the propriety of certifying the class in the first place as opposed to merely reallocating the settlement proceeds away from class counsel or other class members.
240. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (vindicating objector appeals complaining that the class was certified in violation of the Rule 23 requirement that the lead plaintiff and class counsel adequately represent absent class members). One might argue that other class members benefit from settling such appeals because permitting them to go forward might scuttle the settlement altogether, thereby leaving the other class members with nothing at all. But, if Rule 23 would not permit a piece of litigation to proceed as a class action, then it probably should not proceed as a class action;if the Rule is preventing socially useful class actions from going forward, then it strikes me that the better course is to rework the Rule rather to permit class action lawyers who think they know better to circumvent it. In addition, I am skeptical that very many of these objectors seek to scuttle settlements altogether. For example, in the Amchem litigation, although the objectors complained that the prerequisites to certification had not been satisfied, the gravamen of their complaint was that some class members (those with present injuries) were getting more than others (those with future injuries).
241. See id. Many such complaints can be fixed by revising the settlement or at least renegotiating it under a different structure of class representation; to the extent that such problems cannot be solved in light of Rule 23, then, again, it would seem that the proper course would be to rework Rule 23 rather than allow class counsel to circumvent it.
242. See, e.g., Koniak & Cohen, supra note 67, at 132 ("Paying objectors and their counsel to drop their challenges to class settlements is, at best, legally questionable behavior and, at worst, evidence of collusion and inadequate representation.");
243. Katherine Ikeda, Note, Silencing The Objectors, 15 GEO. J. LEGAL ETHICS 177, 203-04 (2001) (discussing problems with judicially endorsed practice of side settlements between class counsel and class objectors and arguing that courts should require class counsel to disclose side settlements for review).
244. See FED. R. CIV. P. 23(e)(4)(B) 2003 advisory committee's note (revised and renumbered as 23(e)(5)).
245. See FED. R. CIV. P. 23(e)(5).
246. It is important to note that an inalienability rule should not simply push back the period in which side settlements are negotiated to the thirty days during which an objector must file a notice of appeal. As Kozel and Rosenberg explain in the context of their mandatory-summary- judgment inalienability rule, because blackmail-minded, nuisance litigants lose all of their leverage once they file their suits (in this case, their appeals), their negotiating opponents can "costlessly and credibly" reject any pre-filing settlement demand "with a dismissive, 'See you in court.' " Kozel & Rosenberg, supra note 143, at 1863-64. On the other hand, because legitimate objectors can credibly threaten to file an appeal and see it through to fruition, it may be possible for legitimate objectors to collect a premium over the expected value of their appeals in exchange for refraining from filing their appeals during the thirty-day period. To this extent, even an inalienability rule cannot completely eliminate class counsel's incentives to pay premiums to avoid appeals.
247. Kozel and Rosenberg's analysis shows that any ability an objector might have to "throw" an appeal in exchange for later collecting a settlement from class counsel would be thwarted by the unenforceability of any such agreement: once the objector lost his or her appeal, class counsel would have no incentive to pay the agreed sum because the agreement could not be enforced by the objector.
248. See Kozel & Rosenberg, supra note 143, at 1864-66 (making a similar argument for why plaintiffs will not "throw" summary judgment motions).