Attorneys representing aggrieved consumers in a class-action lawsuit against a window manufacturer reached a “scandalous” settlement in the case that benefited themselves at the expense of their clients, a federal appeals court has held.
In throwing out the settlement agreement Monday, the 7th U.S. Circuit Court of Appeals cited a laundry list of what it said were conflicts of interest on the part of the plaintiff lawyers and inequities in the agreement itself.
The inequities, the court wrote, include the fact that the attorneys would receive $11 million in fees while their clients would get, at most, $8.5 million — and likely much less.
“Class counsel sold out the class,” Judge Richard A. Posner wrote for a three-member panel of the court.
Lead counsel for the class included Paul M. Weiss and the firm he helped found, Complex Litigation Group LLC in Highland Park.
The panel also directed fire at U.S. District Judge James B. Zagel.
Zagel approved the settlement, the panel wrote, despite the presence of “almost every danger sign” that courts “have warned district judges to be on the lookout for.”
The panel sent the case back to Zagel for further proceedings.
Weiss and Complex Litigation Group will not be involved in those as the panel ordered that they be replaced as class counsel.
The panel ousted Leonard E. Saltzman, Weiss’ father-in-law, as a named plaintiff. It also discharged four other people as named plaintiffs and reinstated the original plaintiffs they had replaced.
The class-action suit alleged that casement windows manufactured between 1991 and 2006 for Pella Corp.’s “Pro-Line Series” had a design defect.
Attorneys for Pella and the class members ultimately negotiated a settlement they said was worth $90 million to the class. The agreement called for the plaintiffs’ attorneys to be paid $11 million.
Zagel approved the settlement over the objections of some class members.
In overturning Zagel’s decision, the 7th Circuit panel rejected the value the attorneys placed on the settlement.
Also, the panel wrote, the settlement “strews obstacles in the path” of any class member seeking damages.
Those obstacles include complicated claim forms and a requirement that certain class members arbitrate their claims, the panel wrote.
The panel also criticized the removal of four of the original named plaintiffs.
And the panel said it was improper for Weiss’ father-in-law to act as a named plaintiff.
Saltzman had a conflict of interest in acting as class representative because a generous fee for class counsel — which could take money away from class members — would benefit his daughter and son-in-law, the panel wrote.
Weiss’ wife, Jamie E. Weiss, is a founding attorney of Complex Litigation Group.
And the panel wrote that the Weisses “may well have had an acute need for an infusion of money.”
Paul Weiss’ former firm, Freed & Weiss LLC, dissolved a few years ago. Weiss and his former partners are battling in court over financial matters.
Weiss’ current situation is not helped by the disciplinary proceedings he is facing, the panel wrote.
Last month, an Attorney Registration & Disciplinary Commission Hearing Board recommended that Weiss be suspended for 30 months. In the Matter of Paul M. Weiss, No. 08 CH 116.
The board found that Weiss sexually harassed four female employees and exposed himself to two other women outside of work. Most of the misconduct occurred more than 10 years ago, the board found.
Joining the 7th Circuit’s opinion were Judges Ann Claire Williams and John Daniel Tinder. Kent Eubank, et al., and Leonard E. Saltzman, et al. v. Pella Corp., et al.; Appeals of Ron Pickering and Michael J. Schulz, Nos. 13-2091, 13-2133, 13-2136, 13-2162 and 13-2202.
Jeffrey A. Leon of Complex Litigation Group argued the case before the 7th Circuit on behalf of Saltzman and the class.
David M. Oppenheim of Anderson & Wanca in Rolling Meadows argued the case on behalf of class members who oppose the settlement.
Attorneys for the class members either declined to comment or could not be reached.
But in briefs filed in the case, the attorneys said Zagel found the settlement was worth $90 million after reviewing evidence presented by the parties.
The attorneys for the class also said Zagel held a daylong hearing before rejecting allegations that Saltzman’s status as a named plaintiff and Weiss’ status as a class counsel created a conflict of interest.
And the attorneys noted that four firms in addition to Weiss’ represented the class in negotiations that led to the settlement.
Aaron D. Van Oort of Faegre, Baker, Daniels in Minneapolis argued the case on behalf of Pella.
James O’Neal of the same firm said Pella “respectfully disagrees” with the 7th Circuit’s ruling.
While only a very small minority of consumers were unhappy with their windows, O’Neal said, Pella concluded that the settlement was “an efficient way to settle a very complex case.”
Theodore H. Frank of Washington, D.C., who argued the case on behalf of a class member who objected to the settlement, said he is pleased with the court’s ruling.
The 7th Circuit’s criticisms were warranted, Frank said. He said more courts should reject settlement agreements that do not benefit class members as much as their attorneys.
“I think this is the appropriate level of outrage,” he said. “Certainly, district court judges and a lot of appellate court judges are a lot more tolerant of this sort of abuse.”