Insights

Folks go to law school for a variety for reasons. I remember on my first day of law school orientation, the dean asked for a show of hands for some of these reasons, which included public service, making the world a better place, money, and because there was nothing better to do. I raised my hand in the last category since we were in the middle of a recession, jobs were scarce, and I knew how to do school. I figured law school would be a good place to hide for three years while I figured out what I wanted to be when I grew up. Like many in my profession, I’m still working on that one 20 years later.

Not too many folks raised their hands for ‘public service,’ but some of those who did have been involved in various aspects of politics and other public interest fields. ‘Money’ was the number one reason most of my classmates attended law school, although hands were raised only after the dean opined that it was just as noble a reason as any. To this day, I applaud the integrity of those who were unabashed in giving that honest answer. I liked the idea of money as well (still do), but, on balance, I was looking for a place to hide at the time.

I’m guessing that a fair number of those in our profession who would have raised their hands for ‘making the world a better place’ ended up being plaintiffs’ attorneys. I haven’t done a survey, but my recollection is that over the three years of law school, my classmates in this category turned out to be some of the most argumentative and aggressive in the school (I’m sure other law schools were the same). Some were like a dog with a bone, feeling so passionately about something that it took a while for reason and logic to set in. But to say this group lacked any self-confidence would be an understatement galore.

I don’t litigate, so I have little day-to-day contact with plaintiffs’ attorneys. More of my time is spent dealing with enforcement attorneys from various agencies. Their roles are similar, the major difference being that agency attorneys don’t need to drum up business in order to get a paycheck, at least not the way a private attorney does. By and large, the agency attorneys are pleasant folks with whom we have polite disagreements from time to time, but, in general, they tend to look to redress wrongs while staying out of the way of the things that are going right. In my experience working with financial services clients for the last 20 years, I see too many plaintiffs’ counsel looking to line their pockets first and redress alleged wrongs second.

It’s not unusual for one of my clients to receive a form letter from a plaintiffs’ attorney containing a demand for a few thousand dollars for some alleged wrong done to his or her client. While many clients will fight these allegations on principle (assuming, of course, the allegations are false), these counsel know that some percentage of financial services providers will just pay up on the grounds that it’s cheaper to do so than to waste resources having a battle. For a plaintiffs’ counsel, a $4,000–5,000 payday is not bad for simply writing a letter.

Other plantiffs’ counsels actively seek big paydays. They’ll advertise on TV (would anyone who didn’t have mesothelioma even know what it is otherwise?), put ads in the paper, or send out targeted mailings. They’ve targeted the financial services and auto dealer industries for years, looking for even the most minor of violations that can be turned into a profitable class action claim, always confident in their being “right.” The thing that’s always bothered me is that most of the money a losing defendant has to pay tends to go to attorneys’ fees. Many clients will settle claims even if they did nothing wrong when the price tag starts reaching seven figures. A number of years ago, in a well-known fair lending case where there was no evidence of wrongdoing on the part of the defendant finance companies, class counsel made millions while the class got coupons to use towards financing a new car.

Don’t get me wrong – there are lots of plaintiffs’ attorneys who do a lot of good for the clients they represent, and I wouldn’t want to imagine a world without them. A lawsuit can sometimes be the only effective form of redress for a certifiable wrong. But I am embarrassed for my profession by those who go in search of harmless errors in order to collect big paydays.

What is your defense against these predators? The old cliché that “a good offense is the best defense” has merit. You won’t make the plaintiffs’ attorneys stop looking for lawsuits, but effective compliance policies and procedures that are well implemented and periodically audited can go a long way towards waving off questionable claims. In addition (and contrary to popular belief), arbitration agreements are an acceptable and valid means of permitting individual consumer harm to be redressed without the cost and expense of a class action. They are also a buzz-kill for most plaintiffs’ counsel. Time spent tightening up your compliance management and crafting a good arbitration agreement will pay dividends in the form of lower litigation costs.

For the record, I expect plaintiffs’ counsel of the more predatory type would have raised their hands for “making the world a better place.” I guess the only question is, “For whom?” They would have shown far more integrity had they joined the ‘money’ group.

Michael A. Benoit is a partner in the Washington, D.C., office of Hudson Cook, LLP. Michael can be reached at 202.327.9705 or by email at mbenoit@hudco.com.