Exposing class action objectors: Lieff Cabraser, Ted Frank in ‘lurid’ dispute

June 22, 2015

Ted Frank of the nonprofit Center for Class Action Fairness (CCAF) requires his clients to pledge in their retainer agreements that they’re not looking for financial payoffs in bringing objections to proposed class settlements. As Frank explained earlier this month in an extraordinary declaration at the 7th U.S. Circuit Court of Appeals, the purpose of the provision is to distinguish Frank and his nonprofit from “professional objectors” – lawyers and clients who file objections to big class action settlements in the hope that class counsel will pay them to go away. Since founding the Center for Class Action Fairness in 2009, Frank has said his motive is to correct class action abuses for his clients and other class members, not to help clients win extortionate payoffs.

But filings this month at the 7th Circuit, in the appeal of a fee award in a $75.5 million settlement of allegations that Capital One violated the Telephone Consumers Protection Act in debt collection robocalls, reveal a closer business relationship than was previously known between Frank and Christopher Bandas of the Bandas Law Firm, a plaintiffs’ lawyer and frequent class action objector. Beginning in 2013, Frank has received regular fees from Bandas – a total of about $250,000, according to Frank’s declaration. At first, Frank contracted for a piece of Bandas’ share of proceeds from resolved cases in which Frank was a consultant. The two subsequently revised their agreement to provide Frank with a minimum monthly payment for his work on Bandas’ behalf.

Frank said he made the deal with Bandas, with the approval of his nonprofit’s board, because he believed it was in the Center’s interests, especially after Frank argued and won a 7th Circuit appeal in Eubank v. Pella, one of Bandas’ cases. “I took a pay cut from the Center and the Center used the savings to hire expert witnesses and attorneys to bring more ambitious objections,” Frank said in his declaration. “Mr. Bandas helped wrangle objectors in other CCAF cases to reduce cacophony in oral arguments, and, until this case, did not interfere with CCAF cases or clients. I understood that my pay from Mr. Bandas was made possible and would not have occurred without Mr. Bandas profitably settling cases where I was not counsel of record, but rationalized accepting that money because of the benefit to case law of victories like Eubank that might not have occurred if I was not assisting Mr. Bandas.”

Frank and Bandas have now parted ways, in a turn of events Frank called “lurid, complex and Grishamesque” in a June 10 filing at the 7th Circuit in the Capital One case. That description alone would justify this post – I’m a sucker for lurid – but there’s a more important reason to write about the Capital One appeal: It exposes secret dealmaking among plaintiffs’ lawyers that pretty much confirms the dark suspicions of class action detractors.

I should caution here that this story is still unwinding. On Friday, Bandas filed a petition for a temporary restraining order and preliminary injunction against Frank in state court in Texas. The Nueces County court docket indicates the TRO was granted but Bandas and his counsel didn’t respond to my requests to see the signed order. Frank said in an email that he plans to file a brief Monday night addressing the Bandas allegation. He declined additional comment except to say, “I’m quite confident that I’ve done nothing wrong.” Class counsel in the Capital One case, Lieff Cabraser Heimann & Bernstein, filed a brief Thursday defending the $75.5 million settlement and its $16 million fee award, but will respond specifically to Frank’s allegations later this week. Lieff partner Jonathan Selbin declined to comment in advance of that filing.

With the caveat that we still haven’t yet heard from the other players, here’s what Frank claims. His client in the Capital One case, Jeffrey Collins, was one of a handful of objectors who appealed approval of the settlement to the 7th Circuit. Two objectors protested the entire settlement. Three, including Frank’s client, objected only to Lieff Cabraser’s fee award. The other fee objectors were represented by Frank’s business partner Bandas and another serial objectors’ lawyer, Darrell Palmer, who has retained Frank to write briefs and present oral arguments. Bandas and Palmer joined Frank’s 7th Circuit brief protesting Lieff Cabraser’s fee award on May 4.

But then, according to Frank’s June 10 motion to withdraw as Collins’ counsel, Bandas approached a Lieff Cabraser lawyer, claiming he could settle all of the objectors’ appeals. On June 4, according to Frank’s motion, Lieff Cabraser made a settlement offer to Bandas, with whom the firm had previously made a deal to settle objectors’ appeals in another big TCPA case in April.

Bandas told Frank that Frank’s client would receive $25,000 if he agreed to drop his appeal. “I jokingly said to Mr. Bandas that I wondered whether this was a settlement offer coming from him, rather than from class counsel,” Frank said in his declaration. “He became very defensive, but also said that if the offer had been from him, he would have offered $100,000 to make sure there was no chance Mr. Collins would decline the offer.” Frank said Bandas’ comment led him to believe Bandas “is being offered at least $200,000, and likely much more, to dismiss his appeal.”

Frank said he terminated his own consulting arrangement with Bandas on June 4. His relationship with Collins, he said, was unraveling but after he received a written settlement offer of $25,000 from Selbin of Lieff Cabraser, Frank conveyed the offer to Collins. Frank called the settlement offer “repugnant” and said it breached Collins’ retainer agreement. Collins, however, wanted to take the money, and, according to Frank, legal ethics required him to accept the offer on his client’s behalf.

Frank said when he wrote to inform Selbin of Collins’ decision, “I noted to Mr. Selbin that his offer to Mr. Collins was unethical,” Frank said in his declaration. “He responded in writing that ‘I would be happy for every aspect of this to be reviewed by the 7th Circuit or district court, as we have done absolutely nothing wrong.’ In response, I asked Mr. Selbin to disclose what Lieff Cabraser had offered Mr. Bandas to settle his appeal in this matter. Mr. Selbin refused to disclose that information to me.”

Frank filed a motion at the 7th Circuit to dismiss Collins’ appeal, to withdraw as Collins’ counsel, and to be appointed as a guardian of the Capital One class. The following day, 7th Circuit Judge Michael Kanne ordered a response from Lieff Cabraser. Bandas, meanwhile, went to Texas state court to restrain Frank.

As I said, this story is going to continue to develop with additional filings this week. I’ll keep you posted.

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