These remarks are based on a paper that I wrote with Professor George Cohen of the University of Virginia Law School, which is entitled, "Under Cloak of Settlement." What we mean by that is that in the class action settlement process some illegal cesspool-like activity is occurring. We believe some lawyers are committing fraud, committing gross malpractice, committing violations of the antitrust laws, and that this behavior is going unregulated, unpunished and unchecked by law.
Before any class action may be settled a court must determine that the settlement is fair and reasonable and that class counsel adequately represented the class. To make these determinations the court generally conducts, what is called, a fairness hearing. In this fairness hearing, the court is supposed to make a finding that the settlement is not a product of collusion, which sounds like the court is supposed to determine whether class counsel and the defendant conspired to commit fraud on the class by presenting a settlement that serves class counsel's interests and the defendant's interests but not the interests of the class. But the "collusion" finding is empty: courts almost never define what behavior constitutes collusion, and a finding of "no collusion" is as close to a sure thing as one can ever come in law. Finding a court decision that concludes that a class settlement was the product of collusion is like finding a needle in a haystack. Moreover, courts have no duty and make no attempt to determine during a fairness hearing whether the conduct of the negotiations, the manner in which class counsel surfaced to represent the class, or the terms of the settlement itself violate other provisions of law, like the antitrust laws, for example. And there are good reasons why courts should not attempt to make definitive determinations on such matters in fairness proceedings.
Koniak, Susan P.
"Class Action Against Class Counsel,"
Journal of the Institute for the Study of Legal Ethics: Vol. 1
, Article 15.
Available at: http://scholarlycommons.law.hofstra.edu/jisle/vol1/iss1/15