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Linda Dardarian expected an aggressive fight in her class action against Countrywide Home Loans—but she did not think it would be against another plaintiff lawyer trying to settle her case for half its worth. That was the battle she faced last year, when the law firm led by prominent attorney David Boies tried to settle a Los Angeles employment suit against Countrywide out from under her. “I was furious,” said Dardarian, a partner at Goldstein, Demchak, Baller, Borgen & Dardarian in Oakland, Calif. “My feeling was that they had used the other case as a way to stop the court in Los Angeles and interfere with my ability to represent my clients.” Dardarian experienced a rarity in employment cases, but it’s common enough in the class action bar that there’s a name for it: the reverse auction. In big cases, defendants facing multiple suits can pit plaintiff firms against each other in hopes of getting the cheapest-and most comprehensive-settlement. “When there are overlapping claims, the defendant can go and shop the deal for the lowest price,” said Samuel Issacharoff, a Columbia Law School professor who helped Dardarian fend off the Boies firm. One defense attorney said there’s an advantage to having multiple settlements on the table. “You obviously are trying to get the broadest relief possible for the cheapest amount,” said Dominic Surprenant, a partner with Quinn Emanuel Urquhart Oliver & Hedges in Los Angeles who defends class actions. Sometimes the problem arises when two plaintiff firms unknowingly file similar class actions. Other times, after one plaintiff firm spends years-and a lot of money-building a solid case, latecomers rush in, file copycat suits and look to settle fast and cheap. Daniel Girard, a partner with Girard Gibbs & De Bartolomeo in San Francisco, knows all about that. He’s spent the past two years in a game of legal whack-a-mole, flying to courts in Florida, Illinois and Texas to beat back the settlement offers that tend to pop up when he has an expensive case headed to trial. “It’s just amazing because of the brazenness of it,” he said. Stopping a reverse auction generally requires convincing a judge to rule that a proposed settlement is unfair. But this doesn’t always work, and plaintiff lawyers are often forced to take other measures-in and out of court-to prevent another firm from settling their claims. Ethical gray areas in class action law have allowed reverse auctions to become a trend, said Joseph McMonigle, an ethics expert and partner at Long & Levit in San Francisco. He said that competing filings can allow defendants to pick the plaintiff with the weakest case. With weaker opposition, he said, defense lawyers have more leverage to reach a cheap settlement. There is the danger that a lawyer in that position might be tempted to cut a worse deal for his clients just to make sure he gets paid. Since there are few clear rules on the duty a plaintiff lawyer has to a prospective class that hasn’t been certified, there’s some ethical wiggle room. “It certainly isn’t something that makes the legal profession shine,” McMonigle said. Disaster for class As bad a break as reverse auctions can be for the lawyers being undercut, the settlements tend to be a disaster for class members-the deals can result in undervalued payouts, inflated attorney fees, no injunctive relief and blanket immunity for a defendant from follow-up claims. Dardarian said she doesn’t see the Boies firm as a clear predator in her Countrywide case-Boies had been litigating other cases against the lender before Dardarian filed hers. But she said Boies’ proposed settlement was a raw deal for her class. It would have settled overtime claims for plaintiffs spanning several states-including Dardarian’s California class-for $16 million. After a nasty epistolary spat with Caryl Boies-David Boies’ partner and daughter-Dardarian persuaded a Texas judge to overrule that deal last year. Dardarian finally settled her suit in April-coming away with $30 million for California plaintiffs. Caryl Boies said she that didn’t engage in a reverse auction, and added that she didn’t know whether Countrywide tried to enter the cheaper settlement with her to avoid Dardarian’s more valuable claims. “I don’t want to speculate on what they’re thinking. Their goal was to settle all of the claims, and they could not do that in California,” Boies said. Reverse auctions are a new concern for Dardarian. Her firm-where partners come from places like the National Association for the Advancement of Colored People and tend to retire early to write hiking books or start a nonprofit-specializes in employment law, an island of civility in the harshly competitive class action bar. But the successes of firms like Goldstein Demchak may be changing that, as other lawyers seeking big payouts get into the field.

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