Serial Class Objectors Reprehensible, but Not Criminals

By Perry Cooper

Serial objectors holding up approval of class settlements for their own financial gain is “vexing” and “distasteful,” but not criminal racketeering, a federal court said Feb. 6.

Imposing liability on professional objectors under a federal criminal conspiracy statute could chill good-faith objections from class members with legitimate concerns, Judge Rebecca R. Pallmeyer wrote for the U.S. District Court for the Northern District of Illinois.

The court dismissed claims filed under the federal Racketeering Influenced and Corrupt Organizations Act by plaintiffs’ firm Edelson P.C.

But not before it meted out some harsh words for objectors like Christopher A. Bandas, whom the Edelson firm accused of regularly shaking down settlement parties for “greenmail.”

The plaintiffs have 21 days to convince the court it retains jurisdiction over the remaining state-law claims.

Fight Isn’t Over

Bandas told Bloomberg Law he’s grateful for the decision, “which was entirely correct in dismissing the baseless RICO claims.”

“There were no criminal activities that were conducted at any time as the court correctly determined,” he said. “We look forward to contesting the remaining state law claims in court, and we fully expect to be vindicated.”

Jay Edelson, whose firm sued the objectors, called the decision “the most thorough judicial condemnation of objector blackmail to date.”

“The court explained that, based on our allegations as well as its own experiences with some of the defendants, the behavior at issue is, in the court’s words, ‘reprehensible,’” Edelson told Bloomberg Law.

Edelson’s firm is considering whether to pursue the state-law claims in federal court, refile in state court, or appeal the decision. Edelson said they “remain committed to this case and these issues more generally.”

Ending Greenmail

The suit alleges frequent objectors Bandas, Darrell Palmer, Jeffery Thut, and others file frivolous objections to hold up the class settlement process. They then attempt to extort a payment to withdraw the objection without any changes to the settlement agreement.

Edelson P.C., which focuses on technology and privacy, filed the suit on behalf of itself and other firms that have agreed to pay fees to the defendants. These fees are sometimes referred to as “greenmail.”

Chilling Effect

The court was sympathetic to the Edelson firm’s allegations. “Gaming the rules of the legal system solely for personal self-enrichment wastes the time and money of courts and attorneys, wrests funds away from deserving litigants, and tarnishes the public’s view of the legal process,” the court said.

“Yet it is not clear that defendants’ conduct violates any of RICO’s predicate criminal statutes,” the court said.

Courts don’t like to treat abusive litigation tactics as criminal activity because they don’t want to chill valuable litigation activity, the court said.

“Plaintiff has not explained why bad-faith objectors are so different from bad-faith litigants generally that the former’s conduct should be criminalized while the latter’s is not,” the court said.

It cited objections made by frequent objector Ted Frank, of The Competitive Enterprise Institute Center for Class Action Fairness in Washington, as good-faith, even when they are not successful.

Edelson P.C. represented itself.

Freeborn & Peters LLP represented Bandas and the other objectors.

The case is Edelson P.C. v. The Bandas Law Firm P.C. , 2018 BL 40022, N.D. Ill., No. 16-11057, 2/6/18 .

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bloomberglaw.com

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