Class Action Attorneys – Not necessarily the whistleblower’s friend

money on tableI’ve had my fill of class action attorneys for some time now.  Abuse of plaintiffs by class action attorneys is what motivated me to go to law school, and while I am never surprised by some of the stunts pulled by class action counsel, those stunts continue to disappoint me.  The abuses I see most commonly fall into three categories:  stealing a claim from the whistleblower, failure to keep class members informed, and disproportionate rewards.  Things are going to get worse for a time because the class action attorneys are scrambling for business.  I write this in the hopes of preventing whistleblowers from falling into the class action trap.

Stealing a Claim from a Whistleblower

I’ve had a few savvy whistleblowers tell me stories of how they went to a class action attorney because the attorney was good at shareholder actions.  The whistleblowers reasoned that the same expertise would be critical for shepherding a whistleblower claim through the SEC’s program.  A few months later, they found that the class action attorney went out and recruited five to ten shareholders and then filed a class action lawsuit using the whistleblower’s information.  The whistleblowers didn’t find out until the class action was announced in the press.  Whistleblowers need to be aware that they can be taken advantage of by a class action firm in this way.  There isn’t much I can do about the problem, except to warn whistleblowers that it happens more than anyone would like.

Not Knowing my Rights were being Negotiated

I’ve personally had my son’s rights negotiated away without knowing he was a member of a class.  I was hyper vigilant about his rights and knew of the class action, but never knew he was affected until a few years after the settlement agreement was approved.  The class attorneys and the lead plaintiffs did a terrible job of making sure class members knew about the lawsuit and what was being negotiated.  Though a lot of people have been included in a lawsuit’s class for one reason or another, few people realize that in a class action, the class attorneys and the lead plaintiffs have the obligation of making sure class members are informed and appropriately represented. In my case, I met with all kinds of resistance when I tried to share information and to hold class representatives accountable.  I’ve come to the sad conclusion that while the idea of class litigation is a good one, the execution is typically very poor.

Disproportionate Rewards

Class action attorneys make millions, and the class members make squat.  In looking at class actions more closely, I realized that class action firms often create huge litigation machines that need a lot of money to keep them running.  Boutique whistleblower firms, on the other hand, are usually very lean organizations.  Qui tam actions can result in big payoffs to the whistleblower, who deserves the money.  The same cannot be said in class actions.  I’ve seen lead plaintiffs get up to 30k while members of the class simply lost their rights to sue for five years.  I’ve seen lead plaintiffs get nothing, while the attorneys walk away with a fortune. Of course, we’re all aware of the two dollar check that MIGHT be sent if you, as a class member, fill out a ton of paperwork and jump through a bunch of hoops.  Again, this aspect of the system just seems wrong to me.  Why the disparity?

The Takeaway

Sure, there are probably some good class action firms out there, and I just want whistleblowers to understand the risk they take when they approach a class action firm about their claim.  Particularly with securities whistleblower claims, those who want help navigating through the SEC’s whistleblower system need to make sure that whatever firm they choose is not going to simply take their claim, and exorbitant fees, while giving the whistleblower nothing in return.

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