Challenging Class Action Law’s ‘Professional Objectors’

Earlier this week the Center for Class Action Fairness filed a motion to intervene and seek disgorgement from for-profit “professional objectors” in Pearson v. NBTY, Inc., a case dealing with allegedly deceptive marketing practices by makers of health supplements.

The Center became involved in the case in 2014 when it objected to a class action settlement that would have provided attorneys $4.5 million but less than $900,000 to the class. On appeal, the Seventh Circuit agreed and reversed approval of the “selfish” settlement. Thanks to the Center’s objection, the parties negotiated a new settlement providing the class with more than $3 million additional recovery. The new settlement was approved August 25, 2016.

The new settlement was opposed by three professional objectors—that is, objectors who threaten to hold up class action settlements unless they are paid to go away. Courts and commentators have criticized professional objectors, who essentially demand blackmail from settling parties. In this case, defendants paid professional objectors to drop their appeals, which they did November 7.

The Center opposes professional objectors who provide no benefit to class members, so it filed a motion for CCAF Director Ted Frank to intervene and disgorge the objector blackmail. If the motion is granted, the quid pro quo payments to the three objectors in this case will be disbursed fairly to all class members.

Disgorgement will also deter professional objectors nationwide from bringing objections solely for their own personal profit with no benefit to the class. With fewer poorly-argued and unmeritorious objections brought by self-interested professionals, courts may better evaluate arguments by good-faith objectors—like the Center for Class Action Fairness.

For further information, see the December 7th Memorandum in Support of Motion to Intervene.