Two lawyers, described as “professional objectors” to class action settlements, will need to face a hearing and perhaps state disciplinary action, over their alleged attempt to secure a payoff, as a state appeals panel said they had essentially hidden behind a narrow interpretation of a court rule to deflect attempts to sanction them for taking “advantage of a situation described as ‘murky’ and with ‘unpredictable’ or ‘sporadic’ enforcement” to win potentially hundreds of thousands of dollars at a time from other lawyers seeking to close the deal on their own million dollar paydays.
On Nov. 26, the Illinois First District Appellate Court released a decision from a three-justice panel, overturning the decision of Cook County Judge Pamela McLean Meyerson, who had blocked an attempt by lawyers with the firm of Edelson P.C. to win sanctions against rival attorneys Christopher Bandas and Jeffrey Thut for their representation of a California man who objected to a settlement the Edelson firm had secured on behalf of a class of plaintiffs.
The decision had been filed Nov. 20.
Justice Mary Anne Mason
Specifically, Judge Meyerson had granted a motion to prevent Edelson lawyers from introducing evidence they said would show a pattern by Bandas and Thut of representing objectors in class action lawsuits simply to secure a payoff in exchange for withdrawing their objections and allowing the case to settle.
The ruling comes amid an ongoing multi-jurisdiction feud between the Edelson firm and Bandas and Thut, dating back to 2016, centered on a $13.8 million settlement in a class action against Gannett Co. over alleged violations of the federal Telephone Consumer Protection Act.
A virtually identical case had been first filed against Gannett in New Jersey federal court in 2014. However, after two days of mediation, and shortly after the U.S. Supreme Court rewrote the rules on who has standing to bring such lawsuits, the case was voluntarily withdrawn in 2016. Shortly after, one of the same named plaintiffs, Dylan Schlossberg, and a new addition, identified as Ramona Clark, filed virtually the same lawsuit in Cook County Circuit Court, and the two sides moved quickly to settle.
“Although the mediation did not immediately produce a settlement, later negotiations resulted in an agreement in principle that called for the federal case to be dismissed and refiled in Cook County,” First District Appellate Justice Mary Anne Mason wrote in a special concurring opinion.
“Thus, before the case was filed here, the parties had agreed to settle it.”
In approving the settlement, Cook County Judge Kathleen Kennedy also awarded the Edelson firm more than $5.3 million in attorney fees, or about 39 percent of the total settlement funds.
However, before the settlement was finalized, Thut, on behalf of Gary Stewart, of Cardiff, Calif., filed an objection, saying he believed the attorney fee award was too high and class members weren’t sufficiently notified of the settlement.
According to court documents, Thut was acting as local counsel in partnership with Bandas, of Corpus Christi, Texas, who was actually representing Stewart, but is not licensed to practice law in Illinois. According to the appellate decision, Bandas authored Stewart’s objection and forwarded it to Thut, who then filed it without review in Cook County court.
After Judge Kennedy rejected Stewart’s objections and approved the settlement and Edelson’s fees, Edelson alleged Bandas contacted Edelson and requested a mediation session to resolve the matter. However, Edelson alleged Bandas merely offered to drop the matter and not appeal, if Edelson agreed to pay them. Ultimately, they agreed to pay $225,000.
Edelson then filed suit against Bandas and Thut in Chicago federal court, accusing the “professional objectors” of using the class action settlement objection settlement process to run a racketeering and extortion scheme. While a federal judge threw out the racketeering charges, the case remains pending.
In the meantime, in the Gannett case in Cook County court, Edelson asked the court to sanction Stewart, Bandas and Thut. While Judge Meyerson blocked the sanctions against Bandas and Thut, she found Stewart in contempt of court after Stewart failed to show up for a hearing on the matter.
Stewart then appealed Meyerson’s order, landing the matter before the First District Appellate justices.
In the Nov. 20 decision, the appeals justices upheld the contempt order against Stewart.
But the justices went further, overturning Judge Meyerson’s order blocking Edelson from introducing evidence against Bandas and Thut.
While Judge Meyerson had found Illinois courts couldn’t sanction Bandas under Supreme Court Rule 137 because he had not signed his name to the filed objection, the appeals justices said this conclusion would allow an out-of-state attorney to use a “frontman” to escape scrutiny when filing objections “for an improper purpose.”
The justices noted Bandas, Thut and Stewart have been implicated in at least 15 lawsuits since 2009 in which their “rent-seeking behavior” has followed “this same basic pattern – frivolously object, appeal its denial, settle out of court, and withdraw.”
“Bandas was named as Stewart’s counsel from the inception of proceedings,” the justices wrote. “This status never changed and presents this court with the conundrum of Bandas filing an objection to reap monetary benefits in an Illinois case, and doing all the substantive work, while hiding behind the cloak of Rule 137.”
Ultimately, the justices ordered the Cook County courts to reopen a hearing on the matter and allow Edelson to introduce the evidence previously barred. Further, the justices ordered the court clerk send the matter to the Illinois Attorney Registration and Disciplinary Commission “to determine whether disciplinary action should be taken against Bandas and Thut.”
Justice Michael B. Hyman authored the opinion, with Justices Mason and Carl Anthony Walker concurring.
While the justices unanimously endorsed the opinion, Justice Mason filed a special concurring opinion, specifically criticizing Judge Kennedy for approving the $5.3 million fee award for the Edelson attorneys.
Mason noted the manner in which the case moved from New Jersey federal court to Cook County Circuit Court, and Judge Kennedy’s unquestioning acceptance of the 39 percent fee request, which diluted the amount of money available for the class members, who would receive about $150 each.
“Gannett had no interest in opposing Edelson PC’s request for fees and given our conclusion that Stewart’s objection was motivated solely by his lawyers’ desire to extract a payment from class counsel and not to improve the terms of the settlement for the class, without the trial judge’s oversight, absent class members had no one looking out for their interests,” Mason wrote.
She said she doubted an examination of the fee request would have allowed the $5.3 million award to stand.
“The trial court’s uncritical acceptance of an award of 39 percent of the settlement fund to class counsel in a case in which the court had no prior involvement encourages the skepticism, cynicism, and distrust of our judicial system so prevalent in society today,” Mason wrote. “I strongly encourage trial judges in future cases to fulfill their critical role as the guardians of the interests of absent class members, to carefully analyze unopposed fee requests that diminish funds available to compensate class members, and to insist that a reviewable record be made of any hearing, including the court’s reasons for granting counsel’s fee request.”