Blackmailing The Class: The Problem With Serial Objectors
Federal Rule of Civil Procedure 23(e) requires that, in the event of a settlement in a class action, notice of the settlement and the opportunity to object be given to class members. Too often, however, the opportunity to object is abused by serial objectors, causing significant delay and harm to the rest of the class.
While objectors can play a useful role in settlements, serial objectors – those individuals and/or their counsel who recycle meritless objections across various class actions – do not. Such objectors engage in economic blackmail by filing frivolous objections and pursuing them on appeal, thereby slowing down the distribution of settlement relief to the class. Serial objectors are able to leverage their position because it is often more cost-efficient to simply pay off an objector rather than wait for an appeal to be resolved.
The delay and cost to a settlement class as a result of serial objectors’ antics are not imaginary. For example, in In re Polyurethane Foam Antitrust Litigation
, No. 10-md-2196 (N.D. Ohio), a case in which this author is on the Executive Committee, a serial objector, who was not even a member of the settlement class
, held up a settlement for more than eight months. In sanctioning the objector, the Court stated:
[The objector’s] conduct has not only burdened Direct Purchasers and this Court with the task of responding to patently frivolous filings; settlement funds of $147 million, the product of four years of hard-fought litigation, have hung in limbo for more than eight months because a person who knows he has no right to object to the settlements nonetheless refuses to withdraw his meritless Objection. As a result, not a single class member has received a penny under either settlement; not a single attorney has been compensated under this Court’s fee award; the Direct Purchaser litigation common fund, a pool of money created by Plaintiffs’ lawyers to fund litigation expenses, remains depleted by $6.6 million; and [settling defendants] have not received the finality sought when they paid millions under the settlement agreements. All this delay has no purpose for anyone, not even for [the objector] -- Class Counsel affirmed on the record that they have no intention of paying off [the objector] (see Doc. 1926 at 3), and this Court expects Class Counsel will stand firm.
Docket No. 1970 at 9-10. In another recent case, the court criticized frivolous objections as delaying important safety benefits to settlement class members. Roberts v. Electrolux Home Prods
., Master File No. SACV12-1644, 2014 U.S. Dist. LEXIS 130163, at *32 (C.D. Cal. Sept. 11, 2014). Indeed, courts have long criticized
In an attempt to combat the problem of serial objectors, class counsel have turned to motions for sanctions (see above) and, more frequently, Federal Rule of Civil Procedure 7. Because Rule 7 permits a district court to order a party to post a bond to ensure payment of costs on appeal, class counsel effectively force serial objectors to “put their money where their mouth is” by seeking a bond. Moreover, it appears that, in every case where class plaintiffs have sought an appeal bond in response to a serial objector’s appeal in the last five years, the bond has been granted.
The most effective approach for dealing with serial objectors, of course, is simply to refuse to deal. Although such an approach is not always the most cost-effective option, an across the board refusal to deal with serial objectors’ demands by class plaintiffs is the only way to minimize frivolous objections from being filed in the first instance.