When I read the New York Times op-ed, "Why I'm Leaving Goldman Sachs," I was immediately struck by what the author said about client interests being sidelined in order to increase Goldman's profits. It got me thinking about what I do every day as a plaintiff's class action lawyer. The similarities between the fate of Goldman's clients, (and, from the comments to that article, financial services industry clients generally) and class members in class actions are remarkable. Clients' interests in the class action system are also marginalized so that we lawyers can get our millions, tens of millions, and hundreds of millions of dollars in attorney's fees.
The Goldman "confession," highlighted the fact that clients' concerns had become secondary to the interests of the firm. Likewise, in class action litigation, what undoubtedly started out as a noble idea to protect consumers has been turned into a conspiracy against the very people it was designed to help. It has been transformed into a scheme where lawyers are using the misfortunes of consumers and shareholders to get fabulously rich with little regard for the the public good.
At Goldman, executives try to sell any high cost, low performing investment product with a "three-letter acronym," whether it was good for the client or not. For the financial services industry it's "any three-letter acronym," for class action lawyers it's the "fair, adequate, and reasonable" mantra. My colleagues and I stand before judges across America selling class action settlements, regardless of whether the class members will actually be getting something useful. We argue to courts with straight faces and much passion that coupons class members will never use, extended warranties they don't need, and, in the case of securities class actions, mere pennies in recoveries for each dollar of damage they are alleged to have suffered, are "benefits" justifying my fees. It's not too difficult to sell almost any settlement as "fair, adequate, and reasonable," using these generalities, particularly in a judicial culture in which settlement is always the best solution. Class members getting the short end of the stick -- no problem.
The Goldman author says that it made him "ill how callously people talk about ripping their clients off." Well, at least they have real clients to deal with. Our clients are a mass of unknown and unknowing class members conscripted by the legal system to enhance our bottom line. The greater the number of class members, the greater the defendant's desire to settle and the larger the attorney's fee we can command. Indeed, former celebrity class action lawyer, and now convicted felon, Bill Lerach, was quoted in Forbes magazine stating that "I have the greatest practice of law in the world, I have no clients." In fact, we doubly exploit consumer misfortunes, real or merely alleged. First we use them as bait to convince rich defendants or insurance companies to pay us to go away. Then we use them as fodder manipulating settlements in order to grab as large a fee from their recovery as the judge will allow.
The author knew he had to leave Goldman when he could no longer look people in the eye and sing their praises. Now I know that I have to leave the plaintiff's class action bar. I can no longer look judges in the eye and tell them I am entitled to millions in fees for so-called class member "benefits" which I believe actually harms the interests of class members, consumers, and society in general. Yes, I know judges approve these scams, but I'll leave it to one of them to write, "Why I Am Leaving... the Bench."
*Because it is highly unlikely that any class action lawyer will spill the beans on this lucrative shakedown racket, the task has been left to the nation's most notorious class action objector.
ever collected, but society is not at all indifferent to the public ramifications of the defendants' action because of the enormous social loss incurred. Such situations can be handled by suits brought using the class action procedure. Mr. Schonbrun ignores this reality. He will not be missed.
Class actions are the only realistic means of controlling systemic corporate abuse of consumers. No one is going to sue AT&T to get back a $30 overcharge, but class action lawyers will take on a case when they can represent 1,000,000 people, who were each overcharged $30. If the case is successful, each class member will get back some money, and AT&T will be punished for it's illegal conduct. And if the lawyers get paid several million dollars for a 5-10 year legal battle, why is that wrong. In every other facet of law and commerce, the people doing the work get paid, often a great deal. Why shouldn't lawyers who risk years of time and hundreds of thousands of their own money, also be compensated.
Of course, our Supreme Court has now made it easy to for corporations to block class actions, by forcing consumers to go to arbitration, not court, where no class actions are allowed. So the AT&T customer, who was ripped off for $30, now has to go to a private judge, who relies on AT&T to be paid, to get his or her $30 back.
If the SEC were better funded, it could sue more companies who cause financial harm to investors. But that would be socialism.
There are plenty of diligent, hard-working attorneys in this country doing everything they can to represent the interests of their clients--including the interests of absent class members. And, of course, the class action device is frequently the only realistic way to curtail obviously fraudulent conduct in the marketplace.
Mr. Schonbrun's disingenuous posturing, however, does not even rise to the level of a principled polemic of that system, much less offer any useful insight or guidance to anyone with a sincere interest in improving the fairness of class action litigation. Based upon my own experience, I disagree with Mr. Schonbrun's view of the social value of class action litigation. Of course, in a free society, there is nothing wrong with disagreement. But this useless drivel might have been less offensive if it had involved less dishonesty.