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Court Remands Attorney Fee Case Challenged by PJC

December 8, 2005

Boyd v. Bell Atlantic-Maryland, Inc. No. 11, Court of Appeals of MD, Sept. 2005 Term
The PJC and Professors Michael Ambrosio, Robert Dinerstein, James McCall, Michael Meltsner, Vanessa Merton, and Ellen Yaroshefsky, experts from across the nation on legal ethics and professional responsibility, filed an amicus brief in this class action litigation, which involves tens of millions of dollars in illegal late fees charged by Bell Atlantic Maryland, now Verizon, over a period of years.  In this case, objecting class members challenged the adequacy of a settlement approved by the Circuit Court for Prince George’s County in which, under the terms of the agreement, class counsel will receive nearly fifty percent of the total payout in attorneys’ fees (in other words, class counsel would get $12.5 million on what the objectors believe is a $26.2 million settlement).  This second settlement was reached only after the Circuit Court rejected an initial settlement that would have paid out $13 million in attorneys’ fees and only $155,000 in direct relief to class members.
PJC’s amicus brief detailed the demonstrated ethical breaches by class counsel in this case, in particular based on their negotiation of two separate settlements that included patently excessive attorneys’ fees but little direct relief to the class.  The brief asked the Court of Appeals to remove class counsel, based on the Court’s fiduciary duty to protect class members from collusive and abusive settlements and its inherent authority to regulate the profession.  Amici argued that the removal of class counsel in this case is necessary to preserve the integrity of the legal profession and to prevent abuse of the class action mechanism, which is so vital to the protection of low income consumers.  Amici also proposed general guidelines for the Court of Appeals to adopt concerning attorneys fees agreements and cy pres awards in class action settlements.
On December 8, 2005, the Court of Appeals reversed the judgment of the Court of Special Appeals, and remanded this action to the circuit court for further proceedings.  The Court of Appeals held that the Circuit Court’s order failed to constitute an appealable final judgment.  In particular, the Court of Appeals emphasized that because the trial court has not entered a final order allocating the $12.5 million among counsel for the class, counsel for the various objectors, and the cy pres group, there can be no reasonable determination of fairness and adequacy until that determination is made.  Nevertheless, in a footnote, the Court of Appeals accepted objectors’ and amici’s calculation of the overall benefit of the settlement to the class and noted that if Bell Atlantic were successful in recouping its $26 payout from its ratepayers, the actual value of the settlement would be close to zero.  Thus, the Court rejected Bell Atlantic’s contention that the settlement was worth $52 million dollars to the class.
As to the Circuit Court’s directive that class members were barred from pursuing claims encompassed by the settlement in any other forum, the Court of Appeals found that the trial court had abused its discretion and vacated that part of the Circuit Court order.   The Court of Appeals reasoned that the trial court’s directive was unnecessary – as the directive was in effect an implementation of res judicata or the allied doctrine of release and settlement – because Bell Atlantic could successfully implement those defenses in another forum.  PJC Director of Appellate Advocacy, Suzanne Sangree, served as counsel for amici.

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