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Proposed class action settlements are often rejected by judges. But one particular class action settlement was so bad, a federal appellate judge threw both the lead plaintiff and his counsel out of the case.
The case before the 7th U.S. Circuit Court of Appeals was a class action settlement over allegedly leaky windows manufactured by the Pella company, reports Forbes. What irked Judge Richard Posner was that Paul Weiss, lead counsel for the plaintiffs, inserted his father-in-law as a named plaintiff and negotiated himself a $2 million advance on his fees.
What other shady dealings did Posner take issue with?
Conflicts of Interest
Weiss had installed his father-in-law as lead plaintiff in the class action suit against Pella, which may not necessarily have been a problem. Even with complicated family situations (e.g., a son representing his father in a divorce case), there is not necessarily a conflict of interest.
However, Weiss' father-in-law Leonard Saltzman stood to not only gain a $10,000 payout for agreeing to the settlement, but his daughter and son-in-law would have had the benefit of millions of dollars in attorneys' fees if the deal had been accepted.
It turns out that Weiss was in a bit of a hurry to approve the deal and collect his attorney's fees -- totaling $11 million for him and his co-counsel -- because of pending ethics charges. Judge Posner's legal eagle-eye pierced the fog of Weiss' shenanigans and tossed both Weiss and Saltzman from the case.
An Acceptable Settlement
As Judge Posner was not shy to point out in his ruling, this case had all the "red flags" of an improper and unfair class action settlement. Class action settlements may not always seem fair to plaintiffs, but they must be approved by a judge as being met in good faith and fairness.
Federal district court Judge James Zagel had approved the Pella settlement before there had even been notice sent to the various class members. If a judge believes there won't be enough money to pay the class action claimants, then a settlement can be axed. But Judge Zagel had no idea even how many claimants there might be before signing off on the Pella settlement.
Judge Posner calculated that the plaintiffs actually stood to be paid $17 million (or less) while Weiss and his team would be paid $11 million. That's one of the many reasons the settlement was thrown out and the case remanded to the district court.