Soft Firm

Too often, the S.F. law firm of Lieff, Cabraser, Heimann & Bernstein strikes settlements that give the firm millions of dollars in legal fees -- and its class action clients too little

Even when the firm's arguments to the contrary are taken into account, some Lieff, Cabraser cases seem, to me, to have greed as a primary element.

In one recent case, Lieff, Cabraser received a fierce scolding from a federal judge who ruled that the firm had used the class action mechanism to undermine its own client.

In 1999, owners of the company that bottled now-defunct Cobb Mountain Spring Water hired Lieff, Cabraser to sue competitors Crystal Geyser and Great Springs Water on the grounds that they allegedly drove Cobb Mountain out of business by selling cheap "spring water" that actually came from a well. Lieff, Cabraser proceeded to recruit a former employee of its own law firm to stand in as a "class member," and then filed a separate class action lawsuit against Crystal Geyser and Great Springs, with the lawyers eventually pocketing $2 million in settlement fees. The Cobb Mountain owners at one point stood to get $4.8 million, the judge wrote. Thanks to Lieff's allegedly conflicted handling of the case, the clients got just $245,000.

"In this case, the law firms themselves concocted the class action and created the dual representation out of greed," wrote Judge Jaroslovsky, who ordered Lieff, Cabraser to forfeit the Cobb Mountain fees in a January ruling. "These lawyers clearly placed their desire for class action fees above their loyalty to their client, and deceived the court in the process."

Not true, says Bernstein, who was counsel of record on the water case.

"We think the judge is wrong," Bernstein says. "It's just not supported by the facts, or the evidence, or the record."

In December, Massachusetts Attorney General Tom Reilly described Lieff, Cabraser and a Boston law firm as "absolutely disgraceful" after they jointly sued the state government in hopes of adding $527 million to $333 million in tobacco-settlement attorneys' fees they were already due, according to the Associated Press. In Illinois, meanwhile, lawmakers have passed legislation aimed at keeping Lieff, Cabraser and three other firms from adding $780 million to the $121 million they have already been awarded in that state's tobacco litigation, according to the Chicago Daily Law Bulletin.

Once again, Bernstein urged me to focus on the awards Lieff, Cabraser won for plaintiffs.

"I was wondering if you were going to mention the $209 billion tobacco settlements we won for plaintiffs," Bernstein says.

As for the nationwide criticism Lieff, Cabraser has received for its high tobacco-settlement attorneys' fees, Bernstein has this to say: "That's very interesting, because they wouldn't risk a single dollar of taxpayer money to pursue those cases. They contracted with us to do it, and then, when we succeeded beyond their wildest dreams, complained about the contracts they entered into."

Please don't mistake my criticisms of Lieff, Cabraser for the sort of Republican-driven program of "tort reform" that would stifle citizens' ability to gain redress from corporate abusers. Actually, I'm complaining about a corporations-and-attorneys-first approach to litigation that needs to be stopped before it undermines the ability of the American legal system to fight for the little guy.

When they enter into the type of settlement I've described, large corporate defendants create the appearance that they've been cowed into paying for their wrongdoing -- but they actually are getting off cheap. The settlements grant companies expansive protection from real lawsuits. They benefit lawyers by generating fees gladly paid by defendants to dispose, with finality, of troublesome claims. But they leave consumers, employees, shareholders, and other class action plaintiffs with the moral equivalent of small-potatoes coupons.

Dane S. Ciolino, a law professor at Loyola University in New Orleans, believes this sort of abuse reverberates well beyond the courtroom. "Harm from these class action fees is diffuse," he says. "But even though it's diffuse, it really is harmful, because of the damage it does to the legal profession. Somebody, somewhere, is paying people -- whether it's consumers, injured class members, shareholders at companies with stock in 401Ks -- somebody's paying. And when you've got lawyers walking away with hundreds of millions of dollars in fees, and clients walking away with coupons in their pockets, someone's paying."

These settlements too often let powerful interests cooperate in complicated, mutually beneficial ways, while leaving ordinary people unprotected.

Judges -- who are theoretically required to act as surrogates for victimized class members by rejecting bogus class action settlements -- routinely sign off on softie deals between attorneys and corporations. In many of these cases judges are harried, or aren't accustomed to considering class action settlements, or erroneously believe that, if both sides agree, a settlement must be fair. Perhaps more important, judges, attorneys all, don't necessarily share the layman's view that lawyer profiteering is a form of social malaise.

State bar associations, meanwhile, fail to sanction law firms that specialize in coupon-heavy settlements, even when plaintiff attorneys act against their clients' interests. Bar associations are, after all, lawyers' guilds; they receive little public attention and limited government oversight.

Politicians, for their part, have consistently failed to pass laws that would limit class action abuse.

Legal experts say a simple procedural change would greatly reduce the probability of class action settlement abuse. As it is, millions of people are automatically made class members in class action lawsuits, unless they specifically "opt out" by mailing in a letter saying they wish to be excluded. As a result, attorneys negotiate on behalf of classes of clients who don't know, and may not care, what the lawyers are doing on their behalf. These clients don't protest when they're sold down the river in cozy settlement deals, and they don't mind when their lawyers bill exorbitant fees.

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