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March 23, 2018 Articles

The Fine Line Between Proper Communication with Class Action Plaintiffs and Improper Solicitation

Learn the rules and see how courts have analyzed allegations of improper class action solicitation

By Wendy N. Enerson

Class action lawsuits promise the plaintiffs’ bar opportunities for the recovery of excessive attorney fee rewards. Indeed, the potential to recover millions of dollars in fees has been cited as the primary cause for the abuse of the class action device. Because the majority of class action lawsuits settle, class counsel are routinely criticized due to the gross disparity between the nominal amount (if any) each class member receives and the amount of the attorney fees recovered. This is especially true where the substantive nature of the class action is viewed as frivolous and the relief sought is de minimis. The prospect of excessive attorney fee awards has created a number of ethical issues surrounding the propriety of methods to solicit class action plaintiffs.

The clearest and most egregious example of improper solicitation is the payment of kickbacks to persons in exchange for their agreement to serve as class representatives. That practice led to the indictment and conviction of two partners of a prominent law firm in New York who allegedly paid millions to individuals to serve as lead plaintiffs in over 150 securities class actions. See United States v. Milberg Weiss Bershad & Schulman, LLP, No. CR 05-587(A) (C.D. Cal.).

Other forms of solicitation likewise run afoul of the rules governing lawyers’ professional responsibilities. Take Attorney Doe, a solo practitioner who holds himself out as experienced class action counsel. Doe has filed a number of class action suits based on technical violations of a city ordinance governing a landlord’s obligations to provide tenants a summary of their rights to recover interest on security deposits held by the landlord. The ordinance, on its face, does not exempt the landlord from complying with this obligation for those tenants who do not pay a security deposit. Doe needs plaintiffs to pursue these class actions, and so he distributes the following letter to tenants throughout the city:

My law firm represents tenants in the above lawsuits. They are suing your landlords for violations of an ordinance that protects tenants’ rights. If you have any interest in becoming involved, please contact me. Class representatives in these types of cases often receive $3,000 to $5,000.

What ethical rules, if any, has Doe violated? Is Doe’s statement regarding the amount class representatives “often receive” a veiled promise to compensate individuals who agree to serve as class representatives? Is such a statement “false and misleading”? The ABA Model Rules of Professional Conduct address some, but not all, ethical issues arising from Doe’s solicitation. A number of ethics opinions and cases lend guidance to practitioners.

The ABA Rules and Case Law Governing Attorney Solicitation

To protect against the potential for abuse, a lawyer may not directly solicit or advertise his or her services to a nonlawyer. Specifically, Model Rule 7.3 prohibits a lawyer from soliciting professional employment by “in‑person, live telephone or real-time electronic contact” when “a significant motive for the lawyer’s doing so is the lawyer’s pecuniary gain” unless the person solicited is a lawyer or has a close relationship with the soliciting lawyer.

The ABA rules permit lawyers to advertise their services through written, recorded, or electronic communication, including public media. See Model Rule 7.4 (Am. Bar Ass’n). The rules require, however, that such “communications soliciting professional employment” contain the words “Advertising Material.” Model Rule 7.3(c). In addition, a lawyer’s communications about his or her expertise or services offered must be truthful and not misleading. Model Rule 7.1. A statement about a lawyer’s service or outcome of a particular case, while truthful, may be deemed misleading if “presented so as to lead a reasonable person to form an unjustified expectation that the same results could be obtained for other clients in similar matters. . . .” See Model Rule 7.1 cmt. 3. Consequently, Attorney Doe’s statement that “class representatives . . . often receive $3,000 to $5,000” may be held to violate Rule 7.1 because it has the potential to mislead those reading it to believe that they too would recover a similar amount if they agree to serve as a class representative.

A California Court of Appeal decision found a similar communication misleading and in violation of the California Rules of Professional Conduct. See Sheller v. Superior Court, 158 Cal. App. 4th 1697 (Cal. Ct. App. 2008). There, a Texas lawyer, who was admitted pro hac vice to represent a class of policyholders against Farmers New World Life Insurance Co. and Farmers Group, Inc. (collectively Farmers) for excessive premiums charged, sent a letter to over 300 Farmers policyholders, seeking additional class representatives. The letter stated:

Attention Farmers Insurance Group Policy Holders!!! A potential class action lawsuit has been filed against [Farmers] in the State Court of Los Angeles County. . . . If you have purchased [a Farmers policy], we may be able to help you. We are looking for other people who have purchased such Farmers policies. If you have, you may be accepted as a class representative. If accepted, you are paid for your time in an amount set by the judge.

Farmers immediately filed a motion for a temporary restraining order preventing plaintiffs’ counsel from sending further communications to potential members of the class without prior court approval. Farmers argued that the flier violated the California State Bar’s Rules of Professional Conduct. The trial court granted the motion, finding the statement “If accepted, you are paid for your time in an amount set by the judge” false and misleading because class representatives are not always entitled to recover and, in fact, may be liable for court costs if the defendant prevails. The court also ordered the lawyer to reimburse Farmers its attorney fees related to the motion as a condition for retaining his pro hac vice status. In reversing the latter aspect of the trial court’s order, the appellate court stated:

While we conclude that the trial court lacked jurisdiction to impose the sanctions ordered, this should in no way be interpreted as our approval of Attorney Sheller’s conduct in this matter. Attorney Sheller mailed an advertising flyer to 350 of Farmers’s policyholders, seeking additional class representatives and informing them, “If accepted, you are paid for your time in an amount set by the judge.” This statement is completely false; it indicates to the policyholders that they would be paid “for [their] time,” in other words, that they would be paid regardless of the outcome of the action.

Id. at 1178.

The U.S. Supreme Court recognized the “opportunities for abuse” that are “associated with communications to class members” in Gulf Oil Co. v. Bernard, 452 U.S. 89, 99–100 (1981). Although the Court determined under the facts of that case that the district court exceeded its authority to prohibit counsel from communicating with putative class members, the Court noted a laundry list of potential abuses that may arise in the class context, including “heightened susceptibilities of nonparty class members to solicitation amounting to barratry,” “increased opportunities of the parties and counsel to ‘drum up’ participation in the proceedings,” and “[u]napproved communications to class members that misrepresent the status or effect of the pending action.” Id. at 101 n.12. The Court found, however, that the “mere possibility of abuses does not justify routine adoption of a communications ban that interferes with the formation of a class or the prosecution of a class action.” There must be clear conclusive evidence regarding the impropriety of counsel’s communications. Because the communications in Bernard were made for the purpose of advising putative class members about the status of the litigation, they were not held improper.

On the other hand, where the sole motive behind the communications is class counsel’s pecuniary gain, bans on future communications or sanctions against counsel may be imposed. For example, in Hamm v. TBC Corp., the court determined that a leading plaintiffs’ class action firm improperly solicited prospective plaintiffs in violation of the Rules Regulating the Florida Bar by telephoning employees and asking them if they would like to join a lawsuit for “money owed to them” for working through lunch. 597 F. Supp. 2d 1338 (S.D. Fla. 2009). The Florida rule at issue, Rule 4-7.4(a), prohibits lawyers or their employees from soliciting potential clients when a significant motive for doing so is pecuniary gain. The lead lawyer at the firm claimed that the calls were made for the purpose of obtaining information, not for solicitation. However, following an evidentiary hearing, at which the called individuals testified, the court found that none of them had been asked “witness-type” questions. The court concluded that the motive for the calls was to solicit the employees for pecuniary gain and entered an order barring the firm from representing any individuals who did not work with any of the named plaintiffs and from collecting any fees or costs for work performed representing any of these individuals. The court also required the firm to implement a formal written policy on solicitation. Finally, the firm was ordered to reimburse the defendants for all reasonable fees and costs incurred in connection with the motion for sanctions. In addition, the court forwarded its findings and recommendations to the Florida Bar for possible further action against the firm.

A virtually identical result was reached in Kaufman v. American Family Mutual Insurance Co., 2008 U.S. Dist. LEXIS 32497, at *14–16 (D. Colo. Apr. 21, 2008). Plaintiffs’ counsel contacted a number of putative class members whose identity was discovered from the defendants’ claims files that were produced for the limited purpose of discerning the viability of the class action. The court rejected counsel’s argument that the calls were made solely to inform individuals about the pendency of the class action. The court stated that

while solicitation of potential class members is not improper per se, particularly when done through “printed advertising containing truthful and nondeceptive information and advice regarding the legal right of potential claimants,” it is another matter when such solicitation violates orders of the court and/or other rules of ethical conduct. . . . [T]here is a significant difference between notifying potential class members of a pending action, including the desire to act as class counsel, and individually soliciting additional named plaintiffs to sign contingency fee agreements.


The court sanctioned plaintiffs’ counsel, ordered them to reimburse the defendants for all fees related to the motion for sanctions, and referred the matter to the court’s Committee on Conduct to determine whether counsel violated the Rules of Professional Conduct.

Accordingly, a fine line exists between soliciting class members for the lawyer’s pecuniary gain and simply advising them about the pendency and status of the litigation. Indeed, because the amount of class counsel’s fees is often tied to the size of the class, an argument can be made that all direct communications with putative class members are made for the sole purpose of enticing them to join the class. As for Attorney Doe’s letter above, a court would likely find that it violated the ABA Model Rules. The letter does not contain the phrase “Advertising Material”—a violation of Rule 7.3(c). In addition, the content of the letter would likely mislead a tenant to believe that the tenant would receive $3,000 to $5,000 for serving as a class representative. And, most important, what purpose does the letter possibly serve other than to drum up additional class members for Doe’s pecuniary gain? Doe and other class counsel should tread lightly when communicating with putative members to avoid ethics violations.

Wendy Enerson is a member with Cozen O’Connor in Chicago, Illinois.

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