Lawyers

Requires Lawyer Range Unfold to Complicated Class Litigation – Bloomberg Regulation

A federal judge in California is stoking controversy by pressing leaders in a class action against Robinhood Financial LLC to diversify by including more women or persons of color as counsel.

It’s the latest effort to tackle what many advocates say is a persistent and significant problem in the profession–the predominance of mostly white male attorneys as lead counsel in lucrative or high-profile cases.

But the move has also attracted critics who question whether judges are empowered to take such actions, and if mandating racial and gender diversity in this way will improve outcomes for plaintiffs.

“This is the first time I have heard of this happening,” said Amy E. Keller, an attorney with Dicello Levitt Gutzler, who has served as lead counsel on class actions. “Judges have said beforehand they wanted attorneys to propose diverse slates, but this is the first time I have heard of a judge asking attorneys to go back to the drawing board when choosing lead counsel.”

‘Lack of Diversity’

Judge James Donato of the U.S. District Court for the Northern District of California declined to certify two firms, Kaplan Fox & Kilsheimer LLP and Cotchett, Pitre & McCarthy LLP, as interim co-lead class counsel in a securities action against Robinhood.

In a July 14 order, Donato cited “a lack of diversity in the proposed lead counsel,” noting that all four lead counsel were male, and been lead counsel in other cases, what legal experts refer to as “repeat players.”

Donato’s order gave voice to broader concerns about diversity within the legal field.

“There are really big structural issues in the profession and I think that clients need to play a role, judges need to play a role and law firms need to play a role,” said Roberta D. Liebenberg, a senior partner at Fine, Kaplan and Black, who co-authored a report about the need for more women as lead counsel.

Liebenberg and Stephanie A. Scharf, a lawyer at Scharf Banks Marmor LLC, analyzed cases in 2013 from the U.S District Court for the Northern District of Illinois that showed a disparity between men and women serving as lead counsel.

They found women didn’t have a leadership role in 70% of contract cases, 67% of torts, and 55% of labor cases. By contrast, men served as the lead in almost 80% of cases representing businesses.

Repeat Players

The lack of diversity is a particular problem because having the same group of attorneys, often white males, can harm litigants, Elizabeth Chamblee Burch, a law school professor at the University of Georgia said.

Burch and Margaret S. Williams, a senior research associate at the Federal Judicial Center, examined the issue of appointing the same attorneys in multi-district litigation and class actions in a research paper published in 2017.

Reviewing over 300,000 cases involving judicially appointed lead plaintiff and defense attorneys in product liability and sales practice multi-district litigation, they found that 63% of the leadership positions were given to repeat players on the plaintiffs’ side.

“You have repeat players and specialists in every kind of litigation,” said Burch. “The worry in this large scale litigation is that clients are typically less able to look over the shoulders of their lawyers and make sure they are acting in their best interest.”

Diverse Counsel Encouraged

Some judges say they are trying to address these issues by providing minorities and women with more opportunities to present in trials.

U.S. District Court Judge Virginia M. Kendall from the Northern District of Illinois said she will encourage female and minority attorneys to introduce themselves or present the case if they have the background, the knowledge, and the qualifications.

“There is great research that shows that diversity brings about better decision-making and avoids what has been called group think when everyone is the same,” Liebenberg said.

“I think this ruling demonstrates that judges really mean it when they say they want counsel to propose diverse slates to lead class and multidistrict litigation,” Keller said of Donato’s order.

Criticism From Alito

Others have criticized allowing judges to mandate more diverse counsel.

In 2010, Judge Harold Baer Jr. of the Southern District of New York asked lawyers to consider race and gender in selecting lead counsel in an antitrust class case he presided over. One of the class members in that case, Nicolas Martin, filed suit, challenging the class certification and eventual settlement to the U.S. Court of Appeals for the Second Circuit.

The appellate court set aside his challenge, finding Martin failed to allege injury by not claiming he received inadequate counsel.

Martin appealed to the U.S Supreme Court but the justices refused to hear the case. Justice Samuel Alito, however, said further review might be warranted if the judge continued to consider race and gender to pick class counsel.

“I am hard-pressed to see any ground on which Judge Baer’s practice can be defended,” Alito wrote.

“It seems quite far-fetched to argue that class counsel cannot fairly and adequately represent a class unless the race and gender of counsel mirror the demographics of the class,” he added.

Debate Over Rule

Federal Rule of Civil Procedure 23(g)(1)(B) says a judge “may consider any other matter pertinent to counsel’s ability to fairly and adequately represent the interests of the class.”

Ted Frank, director of litigation and senior attorney at the Hamilton Lincoln Law Institute, said Donato’s actions go beyond those guidelines.

“Discrimination is wrong,” he said. “It would be wrong if a judge said, ‘We only want Jewish attorneys to represent a Jewish class.’ It would be wrong if a judge said, ‘We only want white attorneys to represent a reverse discrimination class.’ ”

However, another lawyer said the rules give judges more discretion in class actions for making decisions about how to handle cases.

“It doesn’t prevent it,” said Laura E. Gómez, a professor at the UCLA School of Law. “The rule doesn’t circumscribe that.”

Fallout for Counsel

The impact of the Donato order is unclear, but one attorney said there could be ripple effects.

“I think that you may see some protest, so to speak, from other counsel who historically have been in a position to be certified in that court,” said Rashida MacMurray-Abdullah, an attorney who advocates for diversity.

MacMurray-Abdullah said some counsel “may start looking for other jurisdictions to bring up cases because they’re concerned that the judge is interfering with the representation of the class.”

The attorneys in the Robinhood case, though, say they are working to address the judge’s concerns.

“We appreciate the Court’s thoughtful comments and guidance, and we have filed a revised application which we believe addresses the Court’s concerns,” Matthew B. George, a lawyer with Kaplan Fox, told Bloomberg Law in an email.

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