No Freeloading Allowed

Should opt-out plaintiffs be forced to contribute to the attorneys fees of the lawyers running the class action? According to a recent article in the Legal Intelligencer (via – free regist. required), a federal judge has ruled that a group of plaintiffs who recently opted out of a class action antitrust case to pursue their own claims must set aside a percentage of any recovery to compensate the class action plaintiff lawyers. The case is Re: Linerboard Antitrust Litigation and is being heard before Senior District Judge Dubois in the E.D. of Pa.

The Linerboard plaintiffs had been litigating the case for five years, and were just about to conclude discovery, when a group of big-name plaintiffs decided to opt out of the class and file their own lawsuits. Judge Dubois “found that the opt-out plaintiffs have benefited from the years of work already done by the lead lawyers on the case and therefore must pay for that benefit.”

Judge Dubois’ opinion may have ripple effects in other areas of class action law. The recent decision by a few public entities to bring separate suits in prominent securities fraud cases, for example, certainly raises the possibility that the class attorneys in the relevant class actions will attempt to achieve a similar recovery of fees. (The 10b-5 Daily has posted about the bringing of separate suits by Ohio and California here and here.) Stay tuned.

Quote of note: “‘This is the rare antitrust case in which major entities and their counsel awaited the development of the case by designated counsel and only filed suit on the eve of the conclusion of discovery,’ DuBois wrote. DuBois ordered the lead lawyers and opt-out lawyers to meet and attempt to reach an agreement on the percentage of funds that should be sequestered from the opt-out plaintiffs’ recoveries.”

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