Header graphic for print
Class Action Countermeasures Discussions of the Strategic Considerations Involved In Class Action Defense

What King v. Hausfeld tells us about the business of plaintiffs’ lawyers.

Posted in Lawyers

 So the small corner of the legal world that includes class action lawyers is up in arms this week because Jon King, formerly of Hausfeld LLP, has filed a wrongful termination complaint against his former employer, alleging that he was fired because he complained about ethical conflicts at the firm.

Hausfeld LLP is run by Michael Hausfeld, who has a larger than life reputation. And the complaint certainly contains its share of juicy allegations (Hausfeld LLP tried to spy on its landlord?), although, as Alison Frankel notes, portions of it read more as King’s attempt to get back at folks who done him wrong than support for his actual cause of action. That’s to be expected: this is a wrongful termination complaint, so King has an incentive to make everything as dramatic and one-sided as possible.

That said, even if one discards the juicy "he said-he said" portions and remains agnostic about the merits of the allegations, there’s a lot in King’s complaint that one can use to build a more accurate picture of how class action plaintiffs’ firms interact, and how they think in strategic situations.  To wit:

  • You have to pay to play. You have to spend money to make money. At least, that’s what Hausfeld allegedly believed, as he took on a "crushing debt load" in part to create the "appearance of success." (¶ 1.) But participating in large-scale litigation like the antitrust case against the NCAA also requires contributing to the plaintiffs’ litigation fund. (¶ 55.) (Indeed, according to those who have commented on this complaint so far, the most shocking allegation in it is that Hausfeld LLP would get other law firms to contribute to the fund while doing nothing himself. (Id.))
  • Lead counsel makes the rules. Despite the fact that Hausfeld wasn’t paying to prosecute the case, he handed out the work. The complaint alleges he did so as "some form of political deal relating to other matters." (¶ 55.) It also alleges that firms would fall in and out of favor very quickly. (¶ 57.)
  • It’s important to have a PR strategy. King spends a fair amount of time talking about how part of his role was to cultivate reporters. (¶¶ 64-66.) And he also talks a great deal about how many presentations he gave on panels. (¶¶ 61-63.) It’s debatable how much these public-relations strategies actually helped, but there is no question that King at least (and likely Hausfeld) viewed them as important.
  • It’s about the money. If King is right, then Morris Ratner has it wrong: there’s no need for a new model of the plaintiffs’ attorney because the old one is still in play. Even if it isn’t to start, it becomes so when the money is there. The most surprising revelation may be the degree to which the economic calculation at a large plaintiffs’ firm looks like the stereotypical calculation at a defense firm: prioritize the cases that bill the most (or have "more lodestar" in plaintiffs’ terms). (¶ 124.) But it does seem like, to a plaintiff, everyone has their hand out. Some attorneys want referral fees for finding clients. (¶ 131.) Other firms want a share of the take for a given case. (¶ 104.) Objectors need "paying off." (Id.)

The biggest takeaway for defense lawyers is not a surprising one. Assuming that the truth is somewhere between King’s allegations and Hausfeld’s likely denial, it still appears that those drawn to high-stakes plaintiffs’ work tend to be people who are ultimately after the big checks and the big ego strokes. And while this insight may not be revolutionary, confirming it is always useful for the next big case.