When I first started working on this paper, in the middle of 2013, I wanted to focus on the ethical questions that frequently seem to come up in class, multi-district, and other complex and consolidated cases, where the representation of plaintiffs is often effectively “split” between the lawyers who are appointed by the Court to advance and/or manage the litigation for plaintiffs collectively on the one hand, and the lawyers who might be hired by individual plaintiffs to advance and protect their own personal interests and claims on the other. In addition, the establishment of and controversy surrounding BP’s former Gulf Coast Claims Facility allowed me to also focus on the issues associated with the emergence of these voluntary settlement programs that seem to be more and more frequently established by a defendant, sometimes in conjunction with a governmental act or agency. In a nutshell, and from a policy standpoint, these types of programs raise general concerns about (i) the potential for, or at least potential appearance of, a system of “private justice”, and (ii) the protections which should arguably be afforded to potential beneficiaries, where the decision-makers are walking a vague and ambiguous line between a “independent” “administrator” making neutral and objective determinations and a “defense attorney” simply negotiating releases. The questions regarding BP’s conduct were, when I initially wrote the paper, almost an after-thought. But by the time I gave my first speech on the subject, in the fall of 2013, BP’s conduct had moved into the forefront. I have now given various forms of this speech for the past two years in a number of different formats and forums. While the written materials continue to address all three subjects, the speeches invariably seem to focus most prominently on the conduct of BP and/or its attorneys, having decided to try to back out of the landmark 2012 settlement. While such conduct arguably raises a number of different issues, the overriding questions that concern me from a policy standpoint are: (i) what, if anything, can or should be done about offending conduct that is committed by or through the corporation itself, or a non-lawyer corporate spokesperson, or a third-party group, as opposed to the actual counsel of record; and (ii) who, if anyone, and how do you regulate a litigant that is indifferent to, or perhaps even actively desires, sanction from the Court? Obviously there are First Amendment issues that need to be wrestled with; but where does the profession draw the line in protecting the sanctity of the judicial process and the integrity of an independent judiciary? In any event, you can access the most current version of the paper in PDF format by clicking below; and the text from a previous version is posted on this web page.
Ethical Questions Raised by the BP Oil Spill Litigation
As in many multi-district, consolidated, class and other complex cases, the Court’s appointment of a Plaintiff Steering Committee raises, from the outset, a number of ethical and professional questions regarding the representation of the plaintiffs. In the Deepwater Horizon Multi-District Litigation, (MDL No. 2179), Judge Barbier issued, in October of 2010, Pre-Trial Order No. 8, which appointed a fifteen-person Steering Committee, as well as a four-person Executive Committee (consisting of Co-Liaison Counsel and two Steering Committee Members), to coordinate and manage the litigation. Specifically, the appointed lawyers were asked to: (i) initiate, coordinate, and conduct all pretrial discovery on behalf of plaintiffs; (ii) examine witnesses and introduce evidence at hearings on behalf of plaintiffs; (iii) coordinate the trial team’s selection, management and presentation of any common issue, “bellwether” or “test case” trial; (iv) submit, argue and oppose motions; and (v) explore, develop and pursue settlement opportunities.i The utilization of such court-appointed attorneys, while for many reasons necessary, can significantly alter the traditional attorney-client construct, and raise questions regarding the extent to which an attorney appointed by the Court “represents” litigants who have never formally retained him or her, and the duties (if any) that are owed to individual plaintiff attorneys who have been hired by such litigants to represent them.
While, of course, the Steering Committee Member’s authority emanates from the Court, and can therefore be defined, and limited, as the Court sees fit, as a general proposition, the Steering Committee is traditionally responsible for advancing and protecting the common and collective interests of all plaintiffs, while the individual attorney (or pro se litigant) would be responsible for protecting and advancing what is unique or particular to his or her own claim. So, for example, while there will be some bodies of discovery or science that arguably fall into either or both categories, (i.e. “common” versus “individual”), as a general proposition, the Steering Committee would be responsible for “liability” and what is commonly referred to as “general causation”, while the individual plaintiff attorney (or pro se litigant) would be responsible for establishing “specific causation” and his or her own individual damages.
Does that mean that the Steering Committee Members “represent” all plaintiffs with respect to the common elements of their claims?
Or, perhaps a better way to frame the question: To what extent (if any) do Steering Committee Members “represent” plaintiffs with respect to the common elements of their claims?
One good summary of a partial answer to that question can be found in a presentation by Louisiana Disciplinary Counsel, Charles Plattsmier, and noted Louisiana ethics counsel, Richard Stanley and Leslie Schiff, who paraphrased the general state of the law as follows:
“[W]hile most courts have attempted, with varying degrees of success and stringency of application, to apply traditional rules and paradigms to the class action / mass tort context, almost all agree that said rules are simply not well-adapted for such application. As such, it would appear that the Rules of Professional Conduct, as presently written, are not strictly applied to the evaluation of conflicts of interest in class action or mass tort matters.”ii
In my experience, the application of the Rules generally turns on the nature of the duty at issue. For example, as noted in the commentary above, where traditional Rule 1.7 to 1.9 Conflicts of Interest are concerned,iii a plaintiff in an MDL is not generally considered to be the “client” of the Steering Committee.iv
On the other hand, where communications with plaintiffs are concerned, Courts have held that, once a case has been formally certified as a class action, the classmembers are generally considered to be “represented” by Class Counsel for Rule 4.2 purposes.v (Such communications, by both Class Counsel and Defense Counsel, are also subject to oversight and regulation by the Court, subject to First Amendment limitations, in connection with the formal Class Notice process under Rule 23(c) and/or the Court’s authority to enter appropriate orders for the management of the litigation and/or protection of the class under Rule 23(d).vi)
In the Deepwater Horizon Litigation in particular, some of the questions which were originally raised relative to the authority of the Steering Committee included:
- To what extent can a private lawyer be appointed by the Court to “represent” or otherwise direct material aspects of litigation on behalf of the United States? vii
- To what extent can a private lawyer be appointed by the Court to “represent” or otherwise direct material aspects of litigation on behalf of a State? viii
- To what extent (if any) can a private lawyer appointed by a Federal Court be awarded a common benefit fee on the recovery of a State?ix
Additional questions raised over the course of the Deepwater Horizon Litigation and associated settlement programs are outlined below.
Kenneth Feinberg and the Gulf Coast Claims Facility (“GCCF”)
BP, who had been designated the “Responsible Party” under the Oil Pollution Act of 1990,x hired Kenneth Feinberg to serve as the “independent” administrator of an extra-judicial settlement program funded by BP. While the Court ultimately enjoined Mr. Feinberg pursuant to its authority under Rule 23,xi the arrangement also presented a number of interesting ethical and professional issues:
- Can a licensed attorney effectively “opt out” of the Professional Rules by claiming that he is serving in the capacity of an “independent” “administrator” ?
- Assuming that the answer is (or might be) yes, what are the legal, contractual, procedural or structural formalities or safeguards (if any) that would be required?
- The absence of a conflict (or potential conflict) within the compensation structure?
- A formal trust agreement, with a defined set of benefits and beneficiaries, to whom a fiduciary duty is owed?
- Particularly in dealing with unrepresented claimants, is the lawyer bound by the limitations and requirements of Rule 4.3? xii
- With respect to represented claimants, can the lawyer contact such claimants directly without the plaintiff lawyer’s consent? xiii
Several plaintiff attorneys (as well as some public officials and CPAs) at the very least implied that they had “special relationships” with Mr. Feinberg or others at the GCCF, and could thereby obtain a faster or better result.
- Assuming that the implication were true, is it nevertheless unethical? xiv
- Assuming that the implication were false, and that no “special deals” were actually made:
- Would Mr. Feinberg fall within the definition of a “judge” or “adjudicatory officer” or “public officer” or “legal officer” within the meaning of Rule 8.2(a)? xv
- What if the false implication were made to the attorney’s own clients?xvi
- What if the implication were made to someone who was already represented by another plaintiff attorney, in order to induce him or her to switch counsel?xvii
- If the implications were made in the form of “earned media” (e.g. appearances or quotes in newspaper, radio or television stories), do they fall within the prohibitions of the Professional Rules on Advertising? xviii
- Can a mere implication or suggestion violate one or more of the Rules, or does there have to be an express representation or mis-representation?
Questions Regarding the Duties (if any) of Non-Steering Committee Member Attorneys Representing Plaintiffs in the MDL
The conduct outlined above raises the question of what, if any, duties or responsibilities a non-Steering Committee Member who nevertheless has clients in the MDL (or class) may have to cooperate with the Steering Committee (or class counsel), in order to protect and advance the interests of his or her own clients?
This inquiry will obviously be fact-specific, but some of the hypotheticals presented by the Deepwater Horizon Litigation include:
- What if an attorney purporting to represent numerous individual plaintiffs, and who purports to have retained experts of potential value with respect to common issues, indicates that he will prevent those experts from assisting the PSC if he is not provided with common benefit roles or assignments?xix
- What if an attorney purporting to represent numerous individual plaintiffs, and who purports to have valuable documents from a prior lawsuit, refuses to make such materials available to the PSC in a usable format unless he is provided with certain common benefit roles or assignments? xx
- What if an attorney who represents a material witness, and is dissatisfied with his lack of trial participation, encourages the witness not to appear and testify live at trial?
- Would it matter whether a video deposition were available to be placed into evidence in lieu of live testimony?
- What if such encouragement were not “unlawful” and/or there were legitimate reasons to discourage the client from testifying?xxi
- What if an attorney were to negotiate an “inventory” or other settlement with the defendant, and either directly or through his clients make it known to the clients of other plaintiffs’ counsel that a superficially favorable settlement had been reached, (thereby encouraging other plaintiffs to discharge their own attorneys and hire this counsel), yet omitting a material fact regarding the scope and effect of the release. Assume that this attorney, directly and/or through his clients, were to thereafter attack the class settlement reached by the PSC as purportedly less favorable, (thereby encouraging classmembers to opt out or object to the settlement and presumably hire him to continue to pursue their claims in litigation), without disclosing the scope, effect or significance of the release. Assume that, when pressed for a copy of the actual settlement terms and/or release, (so that a fair and transparent comparison could be made and communicated), the attorney claimed that the settlement agreement(s) and releases were “confidential”.
- Is this unethical if the attorney discloses and explains all material facts to his own clients and (at least in his own professional judgment and view) maximizes his own clients’ recoveries?
- Does it matter whether the attorney actively encourages his clients to publicize the settlement, (or simply expects that they will as a matter of experience and human nature) ?
- If the settling attorney earnestly believes, in his professional judgment, that he can and will achieve settlement terms that are more favorable to potential clients if they hire him and/or object to the class settlement and/or opt out, does it matter whether he was in express or implied “collusion” with the defendant in cloaking the settlement terms and/or scope of release behind a mask of confidentiality?
- What if the primary motivation was not the interests of his clients and/or potential future clients, but the settling attorney’s own personal hope of financial gain?
Conduct of the Litigation
In some circumstances, there are rules which are clearly intended to apply to a “mass tort” or other complex litigation. For example, Rule 1.8(g) requires the informed consent of all clients, with the disclosure of the existence and nature of all claims and the participation of other clients in the settlement. At the same time, however, it is doubtful that a separately represented or pro se plaintiff would be considered a “client” of the Steering Committee Member, and a certified class action settlement approved by the court is expressly exempt from the Rule.
The Court can also place formal distinctions or other limitations on the authority of the Steering Committee to affect individual claims. In Deepwater Horizon Pre-Trial Order No. 8, for example, the Court authorized the Plaintiff Steering Committee to negotiate and enter into “administrative” stipulations, but provided that all substantive stipulations could be objected to by individual plaintiffs or their counsel and would not be binding unless and until ratified by the Court.xxii
A question arises, in this regard, regarding the extent to which the Steering Committee can or cannot agree to the dismissal of a defendant?
- What if the Steering Committee and Trial Team attorneys who are most familiar with the litigation are convinced that a judgement against a minor defendant will have little, if any, legal or practical upside benefit; while continued litigation carries some legal, practical or administrative downside risk?
- What responsibility, if any, is there to continue to prosecute the case against the minor defendant?
- What authority is there to dismiss or abandon such claims?
Some attorneys have questioned, for example, the decisions made by the Steering Committee in responding to the claims of Federal Preemption and/or Derivative Sovereign Immunity advanced by the manufacturer of the controversial dispersant, Corexit, as well as other “Clean-Up” or “Responder” Defendants.
- Does the Steering Committee owe individual litigants and their counsel an explanation?xxiii
- What if the bases of those decisions stemmed from sensitive strategic work product and/or was provided to the Steering Committee on a privileged and/or confidential basis?
These types of issues raise the question of the extent to which the Steering Committee can, should or must provide information to suing plaintiffs and their individual attorneys.
The Steering Committee’s Duties to Disclose Information to Plaintiffs or their Counsel
Individual plaintiffs and their counsel often insist that the Steering Committee is required to provide all material information that might affect the status, disposition, or strategic decisions made by the individual plaintiff attorney and/or plaintiff in connection with his or her claim.
- Should such a plaintiff be considered the “client” of the Steering Committee Member? xxiv
- What if the information is subject to an express or implied obligation of confidentiality (e.g. information shared in the course of mediation or other settlement negotiations; highly sensitive material of a defendant or third party provided under a heightened duty of confidentiality; in-chambers discussions among liaison counsel and the Court) ?
- What if the information is strategically sensitive from an attorney work product standpoint?
- Does the extent (or timing) of the obligation depend on the circumstances of whether, when and/or how an individual plaintiff or his or her counsel could be expected to utilize the information?
(For example, at this time, for claims that fall outside either the Medical or Economic Settlements, there are, to my knowledge, no individualized, “inventory” or other settlement negotiations taking place; and every trial on the horizon is either a common issue or a test trial, which will be prepared and prosecuted by the Steering Committee; so (at least arguably) why does anyone need any information at this point in time? What would they do with it? There are few, if any, material litigation or settlement choices to be made.)
What is the extent to which a Steering Committee Member can, should or must provide information to an attorney or litigant whom he or she reasonably suspects might:
- breach a duty of confidentiality?
- utilize the information to leverage the personal or financial interests of such attorney?
- utilize the information to leverage the interests of such attorney’s clients and/or a pro se plaintiff?
- utilize the information in a way that is detrimental to what the Steering Committee Member believes to be in the best interests of the plaintiffs collectively?
- utilize the information in a way that is detrimental to the financial interests of the members of the Steering Committee?
Which raises the overarching question of whether and how the Steering Committee / Class Counsel can properly identify, evaluate and assess the common and collective interests of the plaintiffs or the class as a whole? xxv
Settlement of the Economic Class Claims
While neither the traditional Conflict Rules generally,xxvi nor Rule 1.8(g) in particular, have been mechanically applied in the class action context, the U.S. Supreme Court has established a number of general principles that are designed to provide “structural assurances” of adequate representation where class members (or groups of class members) are effectively competing with one another for a limited pot of money.xxvii
In the Economic & Property Damages Settlement, this type of potential conflict was avoided by negotiating separate types of damages frameworks that were each uncapped and negotiated separately, at arms length, with the full incentive to maximize recovery for those claimants and claims. (Adequate representation was further assured by the wide cross-section of claimants and claims represented by the members of the Plaintiff Steering Committee, as well as the fact that there were few, if any, identifiable discreet sub-groups, with a lot of cross-over between and among various different claimants with a hodgepodge of various different claims.)
The one potential exception was the $2.3 billion Seafood Compensation Program. Once BP insisted that the Fund, though guaranteed, would also be limited, the Steering Committee faced a number of potential choices to provide structural assurances of adequate representation. For a number of reasons, the attorneys negotiating for the Steering Committee felt that traditional sub-classes would not work, and opted, instead, for the appointment of an independent neutral who determined how to allocate the fund among eligible claimants.xxviii
Discontinuation of the Gulf Coast Claims Facility
When the Agreement-in-Principle between the Steering Committee and BP was reached, BP discontinued its Gulf Coast Claims Facility. BP agreed to convert existing GCCF offers into “transition payments” of 60%, without the requirement of a release, and thereafter affording eligible Class Members with the opportunity to collect either the remaining 40% of the GCCF offer or what he or she would be entitled to under the Court-Supervised Class Settlement, whichever is higher. BP, however, apparently withdrew Mr. Feinberg’s authority to negotiate with personal injury plaintiffs (who were excluded from the Economic Class) and discontinued the “Quick Pay” option under which the GCCF would pay some individuals $5,000 and businesses $25,000 with essentially “no questions asked”.
- Some claimants and plaintiffs’ counsel raised the question of whether the Steering Committee may have “violated” its (alleged) duties to personal injury or “Quick Pay” or other plaintiffs or claimants who allegedly would have or might have received better offers from the GCCF?xxix
Objections to the Settlement by Counsel Representing Other Clients with Claims in the Settlement
Unlike most class action settlements, BP agreed that the Deepwater Horizon Economic & Property Damages Court-Supervised Settlement would begin to accept, process and pay claims during the class approval process. Therefore, many attorneys found themselves in the unusual position where some of their clients were making claims in the Settlement Program, while other clients were formally objecting to (and/or appealing) final approval of the settlement.
- Is that a conflict of interest under Rule 1.7?
- If so, is such conflict cured or mitigated by the fact that, in the event the class settlement is not fully and finally approved, the Settlement Program will nevertheless continue to process and pay settlement claims submitted prior to that time?xxx
- What about classmember clients who might not be able to get their claims submitted to the Settlement Program before the entry of an order rejecting the class settlement?
What about the general ethics of a “professional objector” who lodges an objection with at least some motivation of attempting to leverage a “pay off” from one of the settling parties in return for withdrawing the objection? Even assuming arguendo that this conduct is not per se unethical, some of the objections asserted in connection with the two BP Class Settlements raise two significant questions in this regard:
- First, is the objecting attorney constrained by the objectors’ actual interests and desires, in terms of only objecting to those elements of the settlement that the objectors actually oppose? And/or that the objectors would actually be affected by? xxxi
- Or, once being engaged to lodge an objection to the settlement, is the objecting attorney free to advance any and all objections that he or she believes may be legally supportable and/or may advance the overall leverage of the objectors?
- For example, can an attorney object to an alleged “cy pres” distribution that the objector actually supports?
- Can an attorney object to an alleged “conflict” within the Seafood Compensation Program on behalf of an objector who only has a Coastal Property Claim (and no Seafood Claim) ?
- Can an attorney object to the alleged “insufficiency” of a proposed settlement payout where the objector himself has no intention of making a claim or availing himself or herself of even what the objector contends to be a “sufficient” pay-out on the claim? xxxii
Secondly, the ethical and legitimate bases to assert an objection – even a “professional objection” – would be to presumably either (i) advance the interests of the class as a whole by encouraging the defendant to improve the settlement by enhancing the benefits, and/or (ii) advance the financial interests of his or her own particular clients by leveraging a “pay off”. But what if, at some point, it becomes reasonably apparent (and in the case of the BP Settlements, in particular, abundantly clear) that the defendant will not increase the relief in order to save the settlement, either for the class as a whole or for the benefit of the individual objectors?
- Can the objecting attorney continue to place the objectors’ rights and interests in the settlement at risk?
- What if the objector actually desires the settlement benefits?
- What about the downside litigation risk to his or her own objector clients if the objection is successful in vacating the settlement?
Mass Opt Outs (or Objections)
Some attorneys seemed to admit in their filings that they could not obtain informed consent from some of their clients to either make claims in, object to, or opt out of the class action settlement. Purporting to act on behalf of a number of clients, (and contrary to a Court Order which required individual signatures on Opt Out Requests), at least one attorney first opted out, and then objected to, the class settlement en masse.
- Is the decision of whether to Opt Out of (or Object to) a Class Settlement governed by the requirements of Rule 1.2(a)? xxxiii
- Does the attorney have the obligation to communicate the “settlement offer” to the client under Rule 1.4?
Post-Settlement Conduct by BP
During the months after the Economic & Property Damages Settlement was finalized, executed, and preliminarily approved, BP supported the settlement and moved to have it finally approved. In these filings, and in connection with administrative discussions and proceedings regarding the implementation of the Settlement Agreement, BP consistently and repeatedly represented to the class, the public, and the Court that losses resulting from the spill would be determined objectively by mathematical formula, and without any inquiry into potential alternative causes of the loss.xxxiv Thereafter, however, BP’s lawyers and accountants apparently realized that they had under-estimated the value of the uncapped settlement by several billion dollars.
BP, at that point, challenged the interpretation of “variable profit” under the Business Economic Loss (BEL) Framework, arguing – not that the Program should undertake an inquiry or evaluation into potential alternative causes for a loss other than the Spill, but – that expenses from outside of the Benchmark and/or Compensation Periods should be “matched” to the Benchmark and/or Compensation Period revenue associated with those expenditures. Initially, the District Court ruled against BP on that issue,xxxv at which time BP: (i) appealed virtually every individual BEL determination made to a construction, professional service or agricultural business and/or in excess of $100,000; (ii) filed a series of complaints, motions and appeals against the Claims Administrator and the Class to reverse the Court’s ruling and/or to stay or suspend all payments or all BEL payments by the Program; and (iii) launched a full scale public media attack in the form of both earned media and paid ads, in which the company implicitly and/or explicitly criticizes the Claims Administrator, the District Court, Class Counsel, the Claimants, Plaintiff Lawyers, and the American civil justice system, (in some cases with confidential, false, misleading and/or materially incomplete information), establishing a “fraud hotline” and complaining about allegedly “fictitious” claims.
BP’s conduct, in this regard, raised a number of potential ethical questions, including, for example:
- Was it unethical for BP to continue to appeal settlement program claims on the basis that the damages were allegedly not caused by the spill, even though that issue had been repeatedly conceded by BP on a number of occasions?
- Was it unethical for BP, in its earned media and/or paid ads, to represent that losses which BP had agreed would be deemed to have been caused by the Spill were somehow “fraudulent” or “fictitious”? And/or to represent or imply that Class Members with eligible claims would or might be subject to prosecution?
- Was it unethical for BP, in its earned media and/or paid ads, to represent (or at least imply) that BP was appealing the “no alternative causation” issue, even though, that issue had already been conceded, and as Mr. Olsen expressly acknowledged before the Fifth Circuit, was not even before the Court?
- Was it unethical for BP counsel to press the causation issue before the U.S. Fifth Circuit and the United States Supreme Court after initially representing and acknowledging to the Court of Appeal that the causation issue was not being challenged on appeal?
- Was it unethical for BP to represent to the press, (or, at the very least, refuse to correct), material factual mis-statements regarding the Claims Administrator, his background, or how he was selected?
- Was it unethical for BP to accuse the Claims Administrator and/or the Court of “high-jacking” the Settlement?
- Was it unethical for BP to accuse the Claims Administrator and/or the Court of “willfully misinterpreting” the Settlement?
- Was it unethical for BP to file into the record – and actively publicize – frivolous actions and motions against the Claims Administrator for alleged “breach of fiduciary duty”?
- Was it unethical of BP to suggest (falsely) in one of its ads that the allegedly “fictitious” or “excessive” recoveries of some claimants would have an adverse effect on the rights or the claims of others?
- Do “Fraud Hotline” communications directly between BP and Class Members raise ethical concerns under Professional Rules 4.2 and/or 4.3?
- Was it unethical of BP to seek Rehearing En Banc from the U.S. Fifth Circuit and/or Certiorari from the U.S. Supreme Court on class settlement approval, after expressly warranting and representing that BP would take all reasonable steps to support the settlement thru final approval and to defend it on appeal?
- Was it ethical of BP’s counsel to instruct independent medical institutions administering public health grants made through the Medical Benefits Settlement not to file an amicus brief in support of the Medical Benefits Settlement?
While some of this conduct was undertaken or accomplished by and through non-lawyers, and while the company and its employees have rights under the First Amendment, it could be argued that some of this conduct might raise potential questions under not only Sections 9.1, 16.1 and 17.1 of the Economic Settlement Agreement and Sections XIII and XXVI of the Medical Settlement Agreement, (which, in my opinion, were clearly violated),xxxvi as well as Federal Rules of Civil Procedure 11 and 23, but also a number of the Rules of Professional Conduct, including potentially Rule 3.1, Rule 3.6(a), Rule 4.1, Rule 4.2, Rule 4.3, Rule 7.2(c)(1), Rule 8.2(a) or Rule 8.4(d).
[NOTE – This version of the paper is from a speech presented in August of 2014; the downloadable PDF (at top of page) is from an updated version, for the 16th Annual LSBA Complex Litigation Symposium in October of 2016.]