1. Ethics in Class Actions
ACI’s 2nd Cross Industry Interdisciplinary Summit on Defending and Managing Class Actions
April 3-4, 2017
Ethics in Class Actions
Van Beckwith
Partner
Baker Botts, LLP
Hannah Chanoine
Counsel
O'Melveny & Myers LLP
Tweeting about this conference?

2. Ethical Considerations for:
Adding members to your class
through advertising
through Internet outreach
through networking
in other jurisdictions
Communicating with class members
before and after class certification
Settling the class action
Determining attorney's fees
Note: Please include explanatory notes here 2

3. Adding Members to Your Class
Note: Please include explanatory notes here
Different rules apply before and after Class Certification 3

4. Adding Members to Your Class Through Advertising
Zauderer v. Office of Disciplinary Counsel, 471 U.S (1985)
Zauderer advertised his legal services in 36 newspapers. The ad targeted women who suffered injuries from an IUD. A complaint was filed and the Ohio Supreme Court issued a public reprimand to the attorney.
Zauderer appealed, and the Supreme Court analyzed the advertising rules as a restriction on his free speech.
the speech must concern lawful activity and not be false, deceptive, or misleading; there must be a substantial government interest; the restriction must directly advance the government interest; and the restriction must be drawn no more extensively than necessary (Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980))
Note: Please include explanatory notes here 4

5. Adding Members to Your Class Through Advertising
Zauderer holding:
“An attorney may not be disciplined for soliciting legal business through printed advertising containing truthful and nondeceptive information and advice regarding the legal rights of potential clients.”
But, you still need to follow local ethical rules as to form and boundaries
Note: Please include explanatory notes here 5

6. Adding Members to Your Class Through Advertising: Applicable Rules
Model Rule 7.1: A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.
Model Rule 7.2(a): Subject to the requirements of Rules 7.1 and 7.3, a lawyer may advertise services through written, recorded or electronic communication, including public media
Note: Please include explanatory notes here 6

7. Adding Members to Your Class Through Advertising: Applicable Rules
Model Rule 7.3(c): Every written, recorded or electronic communication from a lawyer soliciting professional employment from anyone known to be in need of legal services in a particular matter shall include the words "Advertising Material" on the outside envelope, if any, and at the beginning and ending of any recorded or electronic communication
Note: Please include explanatory notes here 7

8. Adding Members to Your Class Through the Internet
When is it safe to respond to Internet queries?
Model Rule 7.3: Direct contact with prospective clients in real-time is prohibited unless you have a personal or prior professional relationship with the person
Note: Please include explanatory notes here 8

9. Adding Members to Your Class Through the Internet
It is probably safe to respond to messages on message boards which are not “live”
As always, statements must be truthful and complete or you risk violating Model Rule 7.1
"A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading"
If you solicit employment as part of the response, be sure to preface and conclude it with the words “Advertising Material”
Note: Please include explanatory notes here 9

10. Adding Members to Your Class Through the Internet
It is less safe to respond to messages in chat rooms where you would be talking in real time with a potential client
Potential violation of Model Rule 7.3
"Direct contact with prospective clients in real-time is prohibited unless you have a personal or prior professional relationship with the person"
Note: Please include explanatory notes here 10

11. Adding Members to Your Class Through the Internet: New York
NY State Bar Association Ethics Opinion 1049
If a potential client posts a message asking to be contacted by a lawyer, a New York lawyer may respond via the same method of communication the client used
If the individual tweets, you may tweet back.
If the individual requests contact by , you may (but not call)
If you do more than answer the question (like describing the services you or your firm could provide), you are now advertising and need to comply with Rule 7.1
A NY attorney may post on a website soliciting plaintiffs, but only if the post is general (not referring to a specific incident for PI or wrongful death cases) and only after the cooling off period in 7.3(e) of the NY Rules of Professional Conduct
Note: Please include explanatory notes here 11

12. Adding Members to Your Class Through Networking
Utilize your network
Potential class members may mistakenly reach out to a defense attorney who can pass that call on to you if you have made yourself known
Attorneys who are not class action attorneys may bring you in when they realize their client’s problems are not unique
Other class action attorneys may add you to large cases that accommodate multiple representation
Note: Please include explanatory notes here 12

13. Adding Members to Your Class From Other Jurisdictions
Rule 5.5(c): “A lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services on a temporary basis in this jurisdiction . . .”
(1) in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter;
(2) are reasonably related to a pending or potential proceeding, if the lawyer, or a person the lawyer is assisting, is authorized by law or order to appear in such proceeding or reasonably expects to be so authorized;
(3) reasonably related to a pending or potential ADR proceeding in this or another jurisdiction, if the services arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission; or
(4) catchall: arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted to practice.
Note: Please include explanatory notes here 13

14. Adding Members to Your Class From Other Jurisdictions
Rule 5.5 [Cmt. 6]: “There is no single test to determine whether a lawyer’s services are provided on a “temporary basis” in this jurisdiction, and may therefore be permissible under paragraph (c). Services may be “temporary” even though the lawyer provides services in this jurisdiction on a recurring basis, or for an extended period of time, as when the lawyer is representing a client in a single lengthy negotiation or litigation.”
Note: Please include explanatory notes here 14

15. Adding Members to Your Class From Other Jurisdictions
Rule 5.5(a): “A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.”
Rule 5.5 [Cmt. 2]: “The definition of the practice of law is established by law and varies from one jurisdiction to another. Whatever the definition, limiting the practice of law to members of the bar protects the public against rendition of legal services by unqualified persons.”
“Although no exact line can be drawn between legal information and legal advice, both the context and content of the information offered are helpful in distinguishing between the two.” ABA Ethics Formal Opinion (Aug. 5, 2010)
Note: Please include explanatory notes here 15

16. Adding Members to Your Class From Other Jurisdictions
Rule 5.5 [Cmt. 21]: “Paragraphs (c) and (d) do not authorize communications advertising legal services in this jurisdiction by lawyers who are admitted to practice in other jurisdictions. Whether and how lawyers may communicate the availability of their services in this jurisdiction is governed by Rules 7.1 to 7.5.”
Note: Please include explanatory notes here 16

17. Communicating with Class Members
Note: Please include explanatory notes here
Different rules apply before and after Class Certification 17

18. Communicating with Class Members Before Class Certification
Gulf Oil v. Bernard, 452 U.S. 89 (1981)
Lower court's order banned all communications between parties and actual or potential class members unless the court approved
Supreme Court adopted a three-part test for class action communication orders:
Determine if the limiting order is consistent with FRCP Rule 23
Determine if the order is the least restrictive means available in terms of limiting speech
Determine if order is based on clear and specific findings balancing need for limitation with interference of parties’ rights
blanket prohibitions on lawyer communications not allowed
Public policy strongly favors settlement (Weight Watchers of Phila., Inc. v. Weight Watchers Int’l, Inc., 455 F.2d 770 (2d Cir. 1972) (no legal basis for prohibiting defendants from communicating with absent class members to negotiate settlement before certification))
For safety, could seek protection of court approval 18

19. Communicating with Class Members Before Class Certification: Applicable Rules
Generally, the attorney-client relationship between putative class members and counsel does not arise until the class has been certified and until the period for opt-outs has expired
Model Rule 4.3: “In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested.”
Note: Please include explanatory notes here 19

20. Communicating with Class Members Before Class Certification: Considerations for Defense Attorneys
Always keep in mind that the general rule is not a universal rule
For example, Pennsylvania courts bar defense attorneys from contacting current or former class members regarding the lawsuit prior to certification
If you are working on a class action that spreads across multiple states, or splinters into several class actions, make sure you familiarize yourself with all local ethics rules
The best course of action could involve obtaining separate local counsel in jurisdictions with different views on communication
See Philadelphia Bar Association Professional Guidance Committee Opinion 20

21. Communicating with Class Members After Class Certification: Applicable Rules
Model Rule 4.2: “In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.”
Note: Please include explanatory notes here 21

22. Settling the Case Note: Please include explanatory notes here
Different rules apply before and after Class Certification 22

23. Settling the Case
"[T]he law quite rightly requires more than a judicial rubber stamp when the lawsuit that the parties have agreed to settle is a class action. The reason is the built-in conflict of interest in class action suits."
Redman v. RadioShack Corp., 768 F.3d 622, 629 (7th Cir. 2014) 23

24. Settling the Case: Applicable Rules
Model Rule 1.7(a): “A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless (1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and (2) each client consents after consultation.”
Named plaintiffs owe a fiduciary duty to class members, so anything that benefits the named plaintiff to the detriment of the class is a breach of fiduciary duty
Model Rule 1.8(g): need informed consent to the settlement agreement in a writing signed by the client
Federal Rule of Civil Procedure 23(e): “The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval.”
Model Rule 5.6: A lawyer cannot agree to an arrangement prohibiting plaintiffs’ counsel from representing future clients for money
Note: Please include explanatory notes here 24

25. Settling the case: Rewarding Named Plaintiffs
Caution: Offers to reward class representatives for serving as named plaintiffs are dangerous
Model Rule 5.4(a): “A lawyer or law firm shall not share legal fees with a nonlawyer . . .”
Note: Please include explanatory notes here 25

26. Determining Attorney's Fees
Note: Please include explanatory notes here
Different rules apply before and after Class Certification 26

27. Attorney's Fees
New York Code: “A lawyer shall not accept or continue employment if the exercise of professional judgment on behalf of the client will be or reasonably may be affected by the lawyer’s own financial, business, property, or personal interests, unless a disinterested lawyer would believe that the representation of the client will not be adversely affected thereby and the client consents to the representation after full disclosure of the implications of the lawyer’s interest.”
Note: Please include explanatory notes here 27

28. Attorney's Fees: Cautionary Tale
Rodriguez v. Disner, 688 F.3d 645 (9th Cir. 2012)
Plaintiffs' firm entered into incentive payment agreements with five plaintiffs
After a settlement agreement was reached, independently represented class members objected to the incentive fee agreements
The 9th Circuit stated disapproval for the incentive fee agreements because the structure of the agreements created a disincentive for the named plaintiffs to proceed to trial or settle the case for a higher amount
After remand and further appeal, the 9th Circuit affirmed the district court's decision to deny all fees to class counsel
Note: Please include explanatory notes here 28

29. Takeaways When in doubt, read your local ethics rules
Courts are becoming increasingly suspicious of perceived conflicts of interest, so take care to avoid the appearance of impropriety
Better to spend time reading the rules than forfeit your hard-earned settlement or fees 29