Objector Blackmail Update: What Have the 2018 Amendments Done?
objector blackmail, class settlements, payments
Law | Securities Law
In 2012, I, along with Brian Wolfman and Alan Morrison, wrote a letter to the Federal Advisory Committee for the Rules of Appellate Procedure asking them to adopt a new rule to prohibit class members who file objections from dismissing their appeals in exchange for side settlements from class counsel...
The new rule does not go as far as our letter recommended: it does not prohibit side payments but, instead, allows side payments if the district court that approved the class settlement also approves the side payment.7 I was skeptical when the new rule was adopted that it would mitigate objector blackmail. But now that we have had over one full year of experience with the new rule, we can take a look to see what the new rule has actually done. In this Essay, I attempt to do just that. In Part I of this Essay, I describe the problem of objector blackmail, why prohibiting side payments to objectors would be the best way to screen blackmail-minded objections from other objections, and why I did not think the new FRCP 23(e)(5)(B) would do so as effectively. In Part II, I examine what district courts have done with their new side payment approval authority over the first sixteen months. I found six orders by district courts on whether to approve side payments: four approvals and two denials. Although this is not much data, qualitative review of the orders does not inspire confidence that district court judges will have the requisite backbone to reject blackmail- minded side payments. On the other hand, the approved side payments may be less lucrative under the new rule. In Part III, I try to assess how these two contrary forces might weigh against each other by studying empirically whether the new rule has discouraged class action objectors from taking appeals. Although my methods are crude, they suggest there has been no slowdown in these appeals in the first year of the new rule.
Brian T. Fitzpatrick,
Objector Blackmail Update: What Have the 2018 Amendments Done?, 89 Objector Blackmail Update: What Have the 2018 Amendments Done?. 437
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1178