Tuesday, July 25, 2006

From Cavity-Filling to Root Canal: Defense Group Prepares to Challenge Claims

Several weeks ago, as we were exposing the scandal of the low-balled $10.76 million number presented in the settlement parties' appellate briefs as the sum of "prima facie valid claims," LexisNexis lawyer Charles Sims made a point that is worth reflecting on.

The claims administration process, Sims told objectors' attorney Charles Chalmers, "is not nearly sufficiently advanced to draw any reliable conclusions whatever about whether, as you put it, 'the C Reduction has in fact been triggered,' or even whether that 'is likely.' Claims have not even been passed to the defendants and publishers for review, and we are some months from that happening, since the work required by the Claims Administration Memorandum is very far from completion."

This is technically -- and frighteningly -- true.

Let's say that the current claims pool winds up totaling $15 million. (That is a wildly random number, for illustration purposes only.) Let's say that when the claims administrator is finished bumping back up to A and B status all the registered claims that were erroneously accounted for as C's, and correcting other mistakes, claims are not $1-plus million under, but $3-plus million over, the $11.8 million cap that would trigger the C Reduction. What's next?

What's next, under the Claims Administration Memorandum, is that the Defense Group (database companies and first-print publishers) gets to take a hack at challenging claims. And who will be advocating for the claimants whose potential settlement awards are being attacked? Why, the plaintiffs' lawyers, of course.

If those lawyers do their job with appropriate care and aggressiveness, then the disputed claims will be upheld and the settlement fund will be busted.

If those lawyers ease up, in order to rescue their discredited argument that the possibility of a C Reduction was "absurd," then they will not have discharged their fiduciary duty to the class.

The finest legal minds tell me that this is what is known as a conflict of interest. It is one more reason why the C subclass needed its own representation in this case. The lawyers, the writers' organizations, and the named plaintiffs never had an economic incentive to watch the backs of the C's. On the contrary, they were motivated to screw the C's. Which they did.


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11:39 PM  

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