Jay Edelson
Jay Edelson ()

The Bandas Law Firm, one of the country’s most active objectors to class-action settlements, has bedeviled courtroom dealmakers for years. Now prominent Chicago plaintiffs lawyer Jay Edelson and his firm have lashed out against Texas-based Bandas and others in Chicago federal court, branding them “extortionists” in a lawsuit filed on Monday.

Edelson PC’s proposed class action invokes the Racketeer Influenced and Corrupt Organizations Act and seeks to recover fees the Bandas firm and affiliated lawyers have taken to drop their settlement objections over the years, a figure potentially totaling millions of dollars. The complaint also asks for an injunction that would bar the lawyers from filing future objections without a judge’s consent.

Such objections can allow class members to protect themselves against cozy deals struck between plaintiff lawyers and the companies they sue. But Monday’s lawsuit says Bandas and his affiliates have no legitimate grievances against the settlements they’ve challenged, and don’t even seek any changes. They simply demand money to walk away.

The firm, led by Christopher Bandas, has filed at least 55 settlement objections, according to Edelson’s complaint. To withdraw the objections, the firm asks plaintiff lawyers to pay up to $500,000, with a mere $5,000 going to the underlying plaintiff and the bulk of the cash going to the firm, the suit says.

An independent website that tracks these objections says the Bandas firm’s challenges are withdrawn or serve as the basis for sanctions more than 90 percent of the time.

Bandas “is a notorious ‘professional objector’ who abuses the court system to file baseless objections to class action settlements and threatens to appeal their inevitable rejection, all in an attempt to extort a nuisance payment from class counsel to go away without ever providing any benefit to the class,” the suit says.

Bandas denied the allegations and said he would defend his firm’s actions.

“I have read all of his allegations. He is wrong on the law. His claim for RICO is patently frivolous. And no court in the country has ever supported his very specious position,” Bandas said.

The issue of “professional objectors” is not new, with the U.S. Court of Appeals for the Seventh Circuit identifying the possibility for extortion as far back as 2003. In April, U.S. District Judge Jack Zouhary in the Northern District of Ohio compared a litigant’s objection to “scavenger ants on a jelly roll, scrambling to extort money from the approved settlements.”

But the practice has recently gained renewed attention. A committee of the U.S. Judicial Conference’s Committee on Rules of Practice and Procedure has introduced a proposed rule that would force objectors and their lawyers to get court approval for fees, rather than negotiate them behind closed doors. That will be debated until Feb. 15, when any new rule would go to the U.S. Supreme Court and Congress for approval.

Ross Good, an attorney at Illinois’ Anderson Wanca, set up a website, serialobjector.com, to track objections filed by attorneys like Bandas. Good said his firm has taken a hard line with serial objectors: It will not pay them. A settlement his firm reached with insurer MetLife in August, 2014 is still being appealed by Bandas. Good said his firm set up the website to raise awareness about the issue among other lawyers and journalists.
 
He recommends lawyers don’t pay objectors because of their propensity to ask for more. He said Bandas and other objectors track law firms that have already paid them once and actively seek out objectors in their later settlements.

The Edelson and Bandas firms have a long history, but the complaint says the lawsuit was spurred by Bandas’ objection to a $13.8 million settlement finalized last month in a case brought under the Telephone Consumer Protection Act against publisher Gannett Co.

The complaint says a local Chicago attorney, Jeff Thut, acted on Bandas’ behalf in the Gannett case. Thut threatened to appeal the dismissal of his objection and offered to mediate the case with Edelson’s firm, the complaint says. But the mediation session on Dec. 1 didn’t contain any proposed changes to the settlement; it was merely a negotiation conference, the complaint says, with demands of payment ranging from $225,000 to $445,000 in exchange for dropping the appeal.

Edelson’s firm says it agreed to pay $225,000, but the lawsuit claims that the Bandas firm then attempted to back out of the deal after Edelson attorneys stated they would bring the agreement to the court’s attention, noting that no changes were made to the settlement.

Thut did not immediately return a phone message seeking comment.

In a statement, Edelson partner Rafey Balabanian said the firm “strongly believe(s)” in the right to bring good-faith objections to class-action settlements.

“However, like many parts of the judicial system (including class actions themselves), objections can be abused,” Balabanian said. “Our complaint alleges that the defendants have conspired to distort the objection process for their own personal gain. We allege that they are using the pretense of objections purely as a vehicle to delay settlements and thus extort large secret payments to themselves.”

Contact Roy Strom at rstrom@alm.com. On Twitter: @RoyWStrom.