Lieff Cabraser Heimann & Berns v. Labaton Sucharow LLP

U.S. Court of Appeals for the First Circuit February 9, 2022

Opinion

United States Court of Appeals For the First Circuit

No. 21-1069

ARKANSAS TEACHER RETIREMENT SYSTEM, on behalf of itself and all others similarly situated; JAMES PEHOUSHEK-STANGELAND; ANDOVER COMPANIES EMPLOYEE SAVINGS AND PROFIT SHARING PLAN; ARNOLD HENRIQUEZ; MICHAEL T. COHN; WILLIAM R. TAYLOR; RICHARD A. SUTHERLAND,

Plaintiffs,

STATE STREET CORPORATION; STATE STREET BANK AND TRUST COMPANY; STATE STREET GLOBAL MARKETS, LLC; DOES 1–20,

Defendants.

LIEFF CABRASER HEIMANN & BERNSTEIN, LLP,

Interested Party, Appellant,

LABATON SUCHAROW LLP; THORNTON LAW FIRM LLP; KELLER ROHRBACK LLP; MCTIGUE LAW LLP; ZUCKERMAN SPAEDER LLP,

Interested Parties, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Mark L. Wolf, U.S. District Judge]

Before

Thompson, Kayatta, and Barron, Circuit Judges. Samuel Issacharoff for interested party, appellant Lieff Cabraser Heimann & Bernstein, LLP.

Theodore H. Frank, with whom M. Frank Bednarz was on brief, for amicus curiae Hamilton Lincoln Law Institute.

February 9, 2022 KAYATTA, Circuit Judge. Lieff Cabraser Heimann &

Bernstein LLP served as one of the principal law firms representing

a class of investors in a very successful challenge to charges

imposed by State Street Bank and Trust Company on foreign exchange

products. This appeal arises from the post-settlement process of

apportioning a $300 million recovery between the class and its

lawyers. The district court ultimately awarded a handsome

$60 million fee to the lawyers representing the class. In so

doing, though, the district court opined that class counsel,

including Lieff's lawyers, engaged in misconduct. Specifically,

the court faulted Lieff for using a template for its fee

declaration that misleadingly indicated that it regularly charged

paying clients the rates supporting its lodestar, for failing to

exercise reasonable care in contributing to a suspect $4.1 million

payment to a lawyer in Texas, and for materially misrepresenting

a study regarding typical fees awarded in similar cases. For the

third misstep, the district court formally sanctioned Lieff under

Federal Rule of Civil Procedure 11(b), though without any monetary

penalty.

Lieff now appeals. For the following reasons, we affirm

the district court's Rule 11(b) sanction of Lieff. We otherwise

dismiss as unappealable Lieff's challenges to the district court's

criticisms of its actions.

- 3 - I.

In 2011, Lieff, along with Thornton Law Firm LLP and

Labaton Sucharow LLP, filed a class action complaint in the

District of Massachusetts on behalf of the Arkansas Teacher

Retirement System and other similarly situated institutional

investors, alleging that the investors' custodian bank overcharged

them for foreign currency exchange products in violation of the

bank's fiduciary, contractual, and statutory duties. The district

court appointed Labaton interim Lead Counsel for the plaintiff

class, see Fed. R. Civ. P. 23(g)(3), and deemed Thornton "liaison

counsel" and Lieff "additional [c]ounsel."

After five years of litigation and mediation, the

parties reached a settlement-in-principle for $300 million. In

2016, the district court preliminarily approved the settlement and

set a date for the final approval hearing. At that hearing, the

court certified the class and found that the settlement was "fair,

reasonable, and adequate." The court then turned to the subject

matter of this appeal: allocating a portion of the class recovery

to class counsel for costs and fees. Relying on representations

made by class counsel in briefings and at the hearing, the district

court decided to award class counsel nearly $75 million (plus

interest), equaling approximately 25% of the total recovery. The

court made that ruling after being assured by plaintiffs' counsel

that such an award was "right in line" with an empirical study by

- 4 - Professor Brian Fitzpatrick of Vanderbilt University that analyzed

the mean and median fee awards in hundreds of class actions. See

Brian T. Fitzpatrick, An Empirical Study of Class Action

Settlements and Their Fee Awards, 7 J. Empirical Legal Stud. 811,

835–36 (2010). The district court also considered the lodestar,

i.e., the reasonable value of the hours counsel worked on the case.

As support for a total lodestar of $41 million, each plaintiffs'

attorney, including Lieff, detailed for the court the hours its

attorneys had spent on the case and their hourly rates. Lieff's

portion of the lodestar came out to $9.8 million. A Lieff attorney

declared under penalty of perjury that the rates it provided were

"the same as [Lieff's] regular rates charged for their services,

which have been accepted in other complex class actions."

These representations by Lieff (and other class counsel)

turned out to be problematic. The first crack in the foundation

supporting the original fee award was exposed by the press. An

investigation by the Boston Globe Spotlight team revealed that

class counsel, including Lieff, had double-counted (using

different rates) the same hours billed by the same contract

attorneys in their lodestar calculations. Lieff tells us that the

amount of double counting was "negligible," but records show the

total double counting by the several firms was over $4 million.

Additional concerns were raised about the accuracy of the fee

representations made by class counsel. Trying to get ahead of the

- 5 - story, Labaton, on behalf of class counsel, filed a mea culpa

letter with the district court admitting to the double counting

but nevertheless maintaining that the 25% award was still

reasonable and should not be disturbed. (The letter did not

mention any of the other issues with the fee that came out later.)

The full Globe report was published the following month.

Confronted with the substantial double counting in the fee

submissions, the district court understandably lost confidence in

its ability to rely on class counsel's representations regarding

a reasonable fee award. So, with the consent of the parties, the

court appointed a special master to look into the matter.

The special master's investigation confirmed the gist of

the Globe's reporting. The investigation also revealed a second

major flaw related to the original award. The special master

learned that lead class counsel, Labaton (with contributions from

the others, including Lieff), had paid $4.1 million to a lawyer in

Texas, Damon Chargois, who appears to have been paid to entice

Arkansas public officials to retain Labaton as counsel to bring

this lawsuit. As the district court later summarized, Chargois

earned his $4.1 million piece of the pie through "considerable

favors, political activity, money spent and time dedicated in

Arkansas." This type of expenditure, the special master

concluded, violated ethics rules as applied in a class action (a

matter on which we need offer no opinion). Overall, the special

- 6 - master recommended that attorneys return between $7.4 and

8.1 million to the class, through various sanctions and fee

reallocation.

On a parallel track, the district court also asked an

amicus curiae to address the reasonableness of the $75 million

award. In addition to echoing most of the special master's

critique, the amicus flagged counsel's representations regarding

the Fitzpatrick study. The amicus contended that class counsel

had misled the court by stating that a 25% award was "right in

line" with the Fitzpatrick study's findings, when the reality was

quite different. While the study did state that attorneys' fees

are about 25% on average for all class action settlements analyzed,

Fitzpatrick found that "fee percentages tended to drift lower at

a fairly slow pace until a settlement size of $100 million was

reached, at which point the fee percentages plunged well below

20 percent." Fitzpatrick, supra, at 838. Accordingly,

Fitzpatrick concluded, "[f]ee percentage is strongly and inversely

associated with settlement size among all cases." Id. at 837.

For settlements between $250 million and $500 million, the study

found that the mean and median awards were 17.8% and 19.5%,

respectively. Id. at 839 tbl.11. Because 25% is not "right in

line" with these figures, the amicus argued that class counsel had

misrepresented the Fitzpatrick study.

- 7 - Understandably concerned that its initial award of

$75 million may have rested on suspect footings, the district court

vacated that initial fee award in order to redetermine the award

from scratch. It scheduled a three-day hearing to consider

whether the initial fee award was nevertheless reasonable and

whether class counsel's lodestar was accurate and reasonable. The

court identified specific issues to be addressed at that hearing.

As relevant to the issues now raised by Lieff in this appeal, the

court asked the parties to be prepared to address:

(1) . . . whether the initial fee award . . . is reasonable. Among other things, the participants shall be prepared to address whether Customer Class Counsel misrepresented [the Fitzpatrick] study in their memorandum in support of attorneys' fees. . . .

(2) . . . whether Customer Class Counsel's reported lodestar, not including double- counted time, is accurate and reasonable. Among other things, the participants shall be prepared to address whether: contract attorneys should be treated as an expense and, therefore, not be included in the lodestar; Customer Class Counsel reported reasonable rates for staff attorneys in their fee petition; and Customer Class Counsel made errors other than double-counting time in their fee petitions.

. . .

(4) . . . Damon Chargois . . . .

(internal footnotes omitted).

After further briefing and consideration, the court

again awarded a fee. The court found that an award between 20–30%

- 8 - of the roughly $300 million total recovery would be reasonable.

Within that range, it settled on 20% ($60 million) rather than the

previous award of 25% ($75 million). To justify the award, the

court considered the corrected lodestar and referred to the means

and medians shown in the Fitzpatrick study for settlements of the

size achieved in this case. The court also took "into account the

proven misconduct of certain counsel in deciding where within the

reasonable range to award such fees." In so doing, it referred

primarily to the conduct of Labaton and Thornton. It found that

while Lieff's conduct "was also deficient," it was "not as serious

as the misconduct" of the other two firms. The court faulted

Lieff for turning a blind eye to the Chargois payment; for using

a template for its fee declaration that misleadingly implied that

it actually charged paying clients the rates supporting its

lodestar (when it did not); for failing to review its co-counsel's

fee declaration to ensure the hours paid were not double counted

in its own declaration; and for permitting a misleading picture of

the Fitzpatrick study to be presented to the court under its name.

The court also declared, based solely on the statement concerning

the Fitzpatrick study, that Lieff violated Rule 11(b).

The district court then decided to exercise its

discretion to apportion the new fee among the firms representing

the class, something it had not done with the original $75 million

award. In so doing, it awarded Lieff a greater percentage of the

- 9 - total award than Lieff had been prepared to receive under its

arrangement with the other firms. All in all, though, because the

total award was about $15 million lower than the vacated award,

Lieff was awarded approximately $1.14 million less than it would

have received under the vacated award. Only Lieff appealed.

On appeal, Lieff asks us to reverse what it contends are

three findings by the district court criticizing its performance:

(1) that the firm violated Rule 11(b) by presenting the fee

memorandum containing the allegedly misleading representation of

the Fitzpatrick study; (2) that by using (without revising) a fee

template prepared by lead counsel, Lieff ended up making false and

misleading representations about the rates charged by its

attorneys; and (3) that Lieff by "its inaction and acquiescence

contributed to" the Chargois issue, and in so doing "facilitated

Labaton's violation of the Massachusetts Rules of Professional

Conduct." As to fees, Lieff explicitly disavows any challenge on

appeal to the total award. It also makes no argument that a

greater share of that total should be reallocated from the other

firms to Lieff. Rather, as we will discuss, it asks that up to

an additional $1.14 million be given to Lieff from any funds left

over after processing claims of class members.

The other firms opted not to participate in the appeal,

presumably because its outcome was of insufficient interest to

them given Lieff's assurance that it was not challenging the

- 10 - reasonableness of the total fee award or the allocation of that

award among the firms. Nor did any party seek to participate.

This led the district court itself to request to defend its ruling

and represent the interests of the class on appeal. The amicus

who participated below, under a new name, made a similar request.

We granted the amicus's motion to file a brief and denied the

district court's participation.

Amicus challenges Lieff's appeal on two fronts. First,

it claims we do not have appellate jurisdiction over Lieff's claims

to the extent that the district court merely criticized Lieff's

performance without imposing any sanctions. Second, it contends

that, on the merits, the district court's criticisms and Rule 11

sanction were appropriate.

II.

We start with our appellate jurisdiction. For reasons

that will become clear, we divide Lieff's challenges into two

categories: the district court's finding that Lieff violated

Rule 11, and the district court's statements -- unconnected to any

express finding of a Rule 11 violation -- that criticized Lieff

for the lack of accuracy in describing its lodestar amount and for

not having adequately investigated the basis for the large payment

to Chargois. As we will explain, we plainly have appellate

jurisdiction to review the formal finding of a Rule 11 violation.

The question, though, is whether we also have jurisdiction to

- 11 - review the latter group of criticisms unconnected to any such

finding.

Under controlling circuit precedent, a district court's

"findings [of attorney misconduct], simpliciter, are not

appealable." In re Williams,

156 F.3d 86, 87

(1st Cir. 1998). So

when attorneys seek to vacate "criticisms of the attorneys made in

the course of [a court's] opinion" and "nothing more," there can

be no appeal because such unadorned criticisms do not "comprise a

decision, order, judgment, or decree."

Id.

at 89 (citing

28 U.S.C. §§ 158

(d), 1291).

Discerning the line between non-appealable derogatory

comments about a lawyer's conduct and appealable findings of

misconduct is not easy conceptually. Certainly a patina of

formality adds to the brief for allowing an appeal because it

enhances the sense that the attorney has done something seriously

wrong. Perhaps for that reason, we have held that an explicit

"censure" and "admonition" are enough to obtain appellate review

even in the absence of an express Rule 11 finding. Young v. City

of Providence ex rel. Napolitano,

404 F.3d 33, 38

(1st Cir. 2005).

In this instance, however, the district court eschewed

any such formal declaration of censure, reprimand, or admonition

for any of Lieff's actions other than the description of the

Fitzpatrick study. We think it significant that the criticisms

of Lieff concerning the Chargois fee and the Labaton fee template

- 12 - are included in an opinion confirming formal Rule 11 sanctions

based on other conduct. That context makes clear to the reader

that the judge did not find Lieff's conduct concerning the Chargois

fee or the fee template as meriting any formal censure of any type,

rather he merely made the kind of "criticism" that we have deemed

not to be appealable.

Lieff suggests that the district court relied in part on

its criticisms of Lieff to calculate a fee award that was lower

than it otherwise would have been. If that were so, Lieff could

have simply appealed the fee award and, in so doing, secured review

of any findings -- including any criticisms -- upon which the award

rested. See In re Nineteen Appeals Arising Out of San Juan Dupont

Plaza Hotel Fire Litig.,

982 F.2d 603, 610

(1st Cir. 1992) ("[A]n

order which definitively resolves claims for attorneys' fees and

expenses payable out of a common fund is . . . appealable.").

Lieff, though, repeatedly assures us that it is not appealing the

court's total fee award. Nor does Lieff ask us to review the

apportionment of fees awarded each firm out of that fee award. To

the contrary, Lieff assures us -- and presumably co-class counsel

-- that it "does not seek any readjustment of fees awarded to

anyone else."

Lieff nevertheless asserts that if we set aside all of

the district court's criticisms of Lieff's conduct, Lieff might be

entitled to receive some money out of the funds awarded to the

- 13 - class if any such funds remain unclaimed by class members. But

this is classic doublespeak: Any additional payment to Lieff

would by definition increase the fee award and reallocate the

award. There is no third, "other" applicable option for approving

a payment to class counsel out of the settlement proceeds.1 And

having assured all interested parties that it is not appealing the

total fees awarded, or its share of the total, Lieff cannot now

seek both an increase in fees awarded and a greater share for

itself. In any event, it made no attempt to convince the district

court to apportion any "leftover funds" to it. Rather, it only

sought either a larger total award or a larger apportionment, both

of which it expressly disavows on appeal.

1 Lieff does not offer any support for the notion that any "unclaimed" settlement funds can go to counsel for the class as something other than an increase in the fee award. To the contrary, "[t]here are four common ways of distributing unclaimed funds": • Reversionary fund -- Unclaimed funds revert to the defendant. • Pro rata redistribution -- Unclaimed funds are redistributed among the class members who did file claims. • Escheat -- Unclaimed funds go to the state or federal government. • Cy pres -- Unclaimed funds are sent to a charity whose goals are consistent with the underlying causes of action.

4 Newberg on Class Actions § 12:28 (5th ed. Dec. 2021 Update).

- 14 - For all of these reasons, collectively, we find no basis

for deviating from our circuit's general rule that a district

court's criticism of counsel unconnected to any challenge to a

judgment or order on appeal is not itself reviewable on appeal.

See In re Williams,

156 F.3d at 87

. That being said, an "order

determining that [an attorney] committed Rule 11 violations" is

"appealable, being distinguishable from mere criticism." Young,

404 F.3d at 38

. So we turn now to Lieff's appeal of the Rule 11

sanction.

III.

Lieff raises three challenges to the district court's

finding that Lieff violated Rule 11 by misrepresenting the

Fitzpatrick study in class counsel's fee memorandum supporting its

requested attorneys' fees. First, Lieff claims that the district

court imposed the sanction without proper notice or an adequate

opportunity to respond, in violation of Rule 11 and due process.

Second, Lieff contends that it had no relevant Rule 11 obligation

because only Labaton as Lead Counsel "signed" the filing.

Finally, it defends its actions substantively, arguing that the

memorandum was not misleading and did not violate Rule 11.

This court reviews "Rule 11 orders . . . [for] 'abuse of

discretion' as to either violation or sanction; but both a mistake

of law and a clearly erroneous finding of fact constitute such an

abuse."

Id.

at 38 (citing Cooter & Gell v. Hartmarx Corp., 496

- 15 - U.S. 384, 402 (1990)). For the following reasons, we find that

none of Lieff's three challenges succeeds in establishing any such

abuse of discretion.

Rule 11(c)(1) provides, in general, that a sanction

under the rule can only issue "after notice and a reasonable

opportunity to respond." Rule 11(c)(3) more specifically provides

that a district court on its own initiative "may order an

attorney . . . to show cause why conduct specifically described in

the order has not violated Rule 11(b)," the substantive provision

of the rule. As the 1993 Advisory Committee Notes state, "The

power of the court to act on its own initiative is retained, but

with the condition that this be done through a show cause order."

The district court provided the following relevant

notice to Lieff:

• First, in a February 2017 order setting a hearing

to give class counsel the opportunity to object to

the appointment of the special master or to the

proposed terms of that appointment, the district

court explicitly stated -- twice -- that, after

receiving a report and recommendation from the

special master and providing counsel the

opportunity to be heard, the court would consider

- 16 - "if misconduct has been demonstrated [and] whether

sanctions should be imposed."

• After the hearing, in which Lieff did not object to

the appointment of the special master according to

those terms, the district court ordered the special

master to investigate, inter alia, "the accuracy

and reliability of the representations made by the

parties in their requests for awards of attorneys'

fees and expenses" and to consider "whether any

misconduct occurred in connection with such awards"

and, if so, "whether it should be sanctioned." The

court expressly cited Rule 11(b)(3) & (c).

• Two years later, after the report came in and the

amicus raised the issue with the Fitzpatrick study,

the court issued an agenda for three days of live

testimony. The first topic to be discussed

included "whether Consumer Class Counsel [including

Lieff] misrepresented a study in their memorandum

in support of attorneys' fees."

Lieff concedes that the foregoing put it "on notice of

the need to defend the fees as reasonable," but it claims that it

"had no notice that it needed to defend itself under Rule 11."

That distinction is untenable. The court repeatedly explained to

Lieff, over the course of two years, that it would consider whether

- 17 - any misconduct in the original fee application warranted sanctions

-- specifically flagging "the accuracy and reliability of the

representations" made by class counsel in its filings. It also

specifically warned class counsel that it would ask them to address

whether they "misrepresented" the Fitzpatrick study.

Lieff certainly responded as if it well understood what

was at stake. It defended its characterization of the study to

the fullest by hiring experts, submitting memoranda of law, and

arguing extensively in open court. In support of its position

that its description of the study was not misleading, Lieff

explained to the district court that it had given the court "a

copy of [the study] in full," that "there are any number of ways

one could cite to the Fitzpatrick study," that there were only

"eight data points" supporting the lower mean and median, that

they not only relied on the Fitzpatrick study, but also "gathered

together all of the 1st Circuit cases that were mega fund cases as

of that period in time," and that their statement was within one

standard deviation of the numbers in the Fitzpatrick study. On

that last point on statistics, Lieff had Professor Fitzpatrick

himself file a declaration supporting its position.

Each of these arguments was trained on rebutting the

district court's concern that the original fee memorandum

misrepresented the study. Had Lieff only believed it needed to

defend the fee, there would have been no reason to retain

- 18 - Fitzpatrick as an expert or to vigorously explain how it had

originally provided the court with context to the allegedly

misleading statement. That the district court found none of

Lieff's arguments persuasive (and declined to consider the

expert's declaration because the representation in the offending

memorandum spoke for itself) does not mean Lieff was not on notice

or did not have an opportunity to defend itself.

The worst that might be said of the notice given is that

it never included the words "show cause." But any lawyer reading

what the court did say would have known -- as Lieff clearly knew

based on its comprehensive response -- that it needed to

demonstrate why it should not be sanctioned for misrepresenting

the study. Lieff points to no precedent requiring the use of the

words "show cause." And were there such a magic-word requirement,

on this record Lieff can point to no harm at all due to the

"violation" of such a requirement.

For the foregoing reasons, we find that the district

court met the important requirement that it give both notice of

the basis for a possible sanction and a fair opportunity to show

why there should be no sanction, even though the court did not

invoke the rule's preferred terminology. Cf. In re Taylor,

655 F.3d 274, 286

(3d Cir. 2011) (holding that, under the bankruptcy

equivalent of Rule 11, an order that "was clearly in substance an

order to show cause, even if it was not specifically captioned as

- 19 - such," was sufficient as long as it gave "notice of exactly which

conduct was alleged to be sanctionable" (quoting Fellheimer,

Eichen & Braverman, P.C. v. Charter Techs., Inc.,

57 F.3d 1215, 1225

(3d Cir. 1995))); Kaplan v. DaimlerChrysler, A.G.,

331 F.3d 1251, 1257

(11th Cir. 2003) ("While formal compliance with [the

procedural requirements of] Rule 11(c)[] is the ideal, we apply a

flexible standard, so in many cases substantial compliance may

suffice." (internal citations omitted)); Precision Specialty

Metals, Inc. v. United States,

315 F.3d 1346, 1354

(Fed. Cir. 2003)

(declining to set aside a Rule 11 sanction based on a "technical

violation" of its procedural requirements because the attorney

"admit[ted] that, based upon the court's statements at the hearing,

she was aware that the imposition of sanctions was in the court's

mind").

Lieff's argument that it did not sign the memorandum in

support of the fee award, and thus cannot be liable for any

misrepresentations contained within, goes nowhere. Rule 11(b)

applies to anyone who "present[s]" a paper to a court "whether by

signing, filing, submitting, or later advocating it." Lieff

allowed its name and the names of three Lieff attorneys (including

Robert Lieff himself) to be placed on the signature page of the

challenged papers, which sought millions of dollars in fees for

Lieff. Lieff advocated that the court do as urged in the

- 20 - challenged writing. Indeed, at the hearing in which it was asked

to defend itself, Lieff repeatedly referred to what "we" said in

the memorandum. The absence of Lieff's penned signature provides

no defense to the finding that Lieff presented the problematic

assertion to the court.2

We turn, finally, to Lieff's contention that its conduct

in presenting and arguing in favor of the fee memorandum was not

sanctionable. As relevant here, Rule 11(b) "prohibits . . . the

assertion of factual allegations without 'evidentiary support' or

the 'likely' prospect of such support." Young,

404 F.3d at 39

But Rule 11 "is not a strict liability provision"; "[a] lawyer who

makes an inaccurate factual representation must, at the very least,

be culpably careless to commit a violation."

Id.

Although the

district court did not explicitly find that Lieff was at least

2 Our conclusion that all counsel listed on the signature page "presented" the memorandum is not to say that a lawyer's limited role as secondary counsel can never bear on the extent to which that lawyer must independently investigate the representations made in the document. See, e.g., Fed. R. Civ. P. 11 advisory committee's notes to 1983 amendment ("[W]hat constitutes a reasonable inquiry may depend on . . . whether [the lawyer] depended on . . . another member of the bar."). Although a particular lawyer's limited role in joining a presentation to the court is relevant to gauging the reasonableness of that lawyer's conduct, it does not inoculate the lawyer from Rule 11 scrutiny. And here, as discussed in the following section, in seeking to be awarded millions of dollars that would otherwise go to its clients, Lieff was plainly aware of both what the memorandum said about the findings of the Fitzpatrick study and what the findings were.

- 21 - "culpably careless" in presenting the fee memorandum, we read the

court's conclusion that Lieff violated Rule 11 as encompassing

such a finding. Lieff does not contest this point and, in fact,

reads the district court's opinion to have "found . . . intent to

mislead."

In conducting our review in this case, we begin with an

important point of context. Lieff's fee memorandum containing the

allegedly misleading statement concerning the Fitzpatrick study

was made ex parte, with the distinct possibility that no adversary

would ever offer any meaningful opposition. The defendant, having

bought peace, had no dog in the hunt for fees. Before the

pertinent hearing, the district court stressed this point

repeatedly, noting that once a settlement occurs "the adversary

system doesn't work," and that the court was therefore "relying

heavily on [counsel's] submissions."

The court's need to rely on counsel in this ex parte

proceeding left it vulnerable to being misled, whether by

affirmative misrepresentation or by half-truths that deceived

through their incompleteness. The applicable rules of ethics

called for an elevated level of candor as a result. See Mass. R.

Prof. C. 3.3(d) ("In an ex parte proceeding, a lawyer shall inform

the tribunal of all material facts known to the lawyer that will

enable the tribunal to make an informed decision, whether or not

the facts are adverse.");

id.

cmt. 14A (deeming a petition to

- 22 - approve a class action settlement to be an ex parte proceeding);3

Reference

Status: Published