Who Should Regulate Class Action Lawyers

Abstract

Ethical issues arise frequently in class action litigation. These issues include conflicts of interest, solicitation, application of the no-contact rule, the reasonableness of attorneys' fees, and the attorney-witness rule. There has been considerable difficulty applying existing rules of conduct to these situations, partly because of confusion regarding the relationship among class counsel, the named class representatives and absent members of the class. Thus as to conflicts of interest - perhaps the most pressing problem facing class action lawyers - it has been said that a "strict reading of the conflict of interest rules in class actions should be tempered, because the very nature of a class action is to combine many divergent interests." Despite the frequency with which the propriety of lawyers' conduct is litigated in class action lawsuits, the Ethics 2000 Commission - which recently proposed comprehensive amendments to the ABA Model Rules of Professional Conduct - declined either to adopt a separate class action rule or to add extensive commentary addressing the application of the rules to class action lawsuits. The purpose of this article is to explain and defend the Commission's decision, focusing on the issue that dominates many discussions of ethics and class actions - the difficulty of applying current conflict-of-interest rules to the myriad of conflicting interests that commonly arise in these lawsuits, including conflicts among class members, as well as between the lawyer and the class and between the class and third persons. Parts I and II of the article demonstrate that the scope of the problem is not nearly as large as it is commonly thought to be. Part I argues that the class should be viewed as an entity client, in which case it becomes clear that conflict of interest rules simply do not apply to conflicts within a class. Part II eliminates from consideration those conflicts - like conflicts arising from the size of the lawyer's fee - that are not addressed by conflict-of-interest doctrine because they are not unique to particular lawyers but are rather a type of agency problem that is endemic to legal practice. Parts III and IV of the article then turn to the types of conflicts that would be addressed by a "strict reading" of the conflict-of-interest rules. These conflicts include those arising from the lawyer's duties to other current clients, both inside and outside the class, as well as former clients. Part III argues that from the point of view of the non-class client, there is no reason to relax the current conflict rules. These clients are entitled to full disclosure of the conflict and an opportunity to find independent counsel. Part IV addresses these conflicts from the point of view of the class itself. Here it is argued that relaxation (or special application) of the conflict rules may be warranted in some cases, but that it makes sense to leave these issues to be resolved under class action law - under the rubric of a further elaboration of the adequacy of representation requirement of Rule 23 of the Federal Rules of Civil Procedure - rather than by amendments to the rules of professional conduct.