CHICAGO – An attorney whose practice focuses on helping defend complex class action lawsuits said the rise of class action objectors milking the litigation system for quick payoffs has become a thorn in the side of businesses and attorneys attempting to settle lawsuits.
“Professional objectors troll the dockets for class settlements, then object to the settlement and threaten an appeal,” Michael L. DeMarino of Seyfarth Shaw in Chicago told the Cook County Record. “By appealing, serial objectors know they can potentially delay a settlement pay day for years. Because class counsel is paid out of a settlement fund, they are often forced to settle out with these objectors or face additional costs and delays.”
An illustrative example is the case involving two lawyers described as “professional objectors” who face a hearing and possibly disciplinary action over an alleged attempt to secure a payoff of hundreds of thousands of dollars in a class action.
On Nov. 26, the Illinois First District Appellate Court in a three-justice panel judgment released a Nov. 20 that overturned a decision of Cook County Judge Pamela McLean Meyerson, who had blocked an attempt by lawyers from the Chicago-based law firm Edelson PC to impose sanctions against attorneys Christopher Bandas and Jeffrey Thut.
The pair had represented a California man who objected to a settlement Edelson secured for a class of plaintiffs.
Meyerson granted a motion preventing Edelson attorneys from presenting evidence alleging a pattern of abuse by Bandas and Thut representing objectors simply to leverage payoffs in exchange for withdrawing objections and letting class actions settle.
The case had its origins in 2016 when a $13.8 million settlement was reached in a class action against Gannett Co., a Virginia newspaper publisher, over alleged violations of the Telephone Consumer Protection Act (TCPA).
As part of the settlement, Cook County Judge Kathleen Kennedy awarded the Edelson firm more than $5.3 million, approximately 39 percent of the total award.
However, Thut, representing California resident Gary Stewart, filed an objection contending the attorney payoff was too high and that class members were not informed properly of the settlement.
Thut was accused of acting in concert with Bandas, a Texas attorney not authorized to practice law in Illinois. Bandas allegedly authored the objection by Stewart and passed it to Thut, who filed it without review with the Cook County Circuit Court.
Edelson attorneys said Bandas contacted them and requested mediation offering to drop the objection if he and his client were paid. The law firm agreed to pay $225,000 but later filed suit in a Chicago federal court against Thut and Bandas alleging racketeering and extortion.
The racketeering charge was dismissed. The case remains pending, and Bandas has now filed counterclaims against Edelson, alleging fraud, conspiracy and breach of a confidentiality agreement.
Stewart was found in contempt of court after failing to show up for a hearing.
Justices looking into the case alleged that Bandas, Thut and Stewart had been involved in 15 other cases in which they frivolously objected to court settlements to settle out of court.
DeMarino said the Illinois Appellate Court decision is important because it seeks to deter serial objectors.
“Objectors have historically been major obstacles to class action settlements,” he said.
An objection period allowed during a class action suit is designed to allow time to challenge a settlement that benefits a plaintiff’s counsel, but doesn’t provide a suitable benefit to the class of plaintiffs.
“Serial objectors abuse this process to hold a settlement hostage until they are paid off,” DeMarino explained.
The Illinois appellate decision, DeMarino said, is an indication the courts are cracking down on such conduct.
“If the serial objectors continue with their M.O., we can expect to see more decisions like this around the country,” he said.
Justices ordered Cook County courts to reopen a hearing on the matter and allow Edelson attorneys to introduce evidence. In addition, they asked the Illinois Attorney Registry and Disciplinary Commission to determine if disciplinary action should be taken against Thut and Bandas.
DeMarino said a further appeal in the Edelson class action case is unlikely.
“The objector’s attorneys will likely want the courts to forget about this decision,” he said. “Then again, this decision is so damaging they may have no choice but to appeal particularly if they plan to continue representing objectors.”