On The Case

Judge in Robinhood class action balks at all-male class counsel team

(Reuters) - The plaintiffs’ firms Kaplan Fox & Kilsheimer and Cotchett Pitre & McCarthy put a lot of effort into bringing order to class action litigation against the securities trading platform Robinhood. Robinhood users filed about a dozen class actions against the fintech startup last spring, after trading platform outages during coronoavirus volatility in the markets. Kaplan Fox and Cotchett spearheaded coordination among the plaintiffs’ firms that filed prospective class actions, urging them to back consolidation in federal court in San Francisco. The firms began vetting possible class reps and designed a leadership structure to include other plaintiffs’ lawyers.

Last April, citing those efforts, they asked U.S. District Judge James Donato of San Francisco to appoint them interim class counsel. The firms proposed that the judge name lawyers from seven other well-known plaintiffs' firms to serve on an executive committee. All of the lawyers in the prospective leadership structure – from Kaplan Fox, Cotchett and the other firms – are men.

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Judge Donato, in an order Tuesday night, consolidated the cases - but rejected the leadership proposal. There was no doubt, he said, that Kaplan Fox and Cotchett would provide “highly professional and sophisticated representation” to the prospective class, given their “impressive history.” But Judge Donato said he was concerned that the proposed team lacked diversity.

There were no women among the proposed leaders of the case, the judge pointed out. He also noted that the list includes a lot of lawyers and law firms that frequently head class actions and MDLs. That experience might benefit the prospective class, he said, but “highlights the ‘repeat player’ problem in class counsel appointments that has burdened class action litigation and MDL proceedings.”

Judge Donato said Kaplan Fox and Cotchett can renew their request to head the case – with some changes. “Leadership roles should be made available to newer and less experienced lawyers,” the judge wrote, “and the attorneys running this litigation should reflect the diversity of the proposed national class.” (I emailed Laurence King and Matthew George of Kaplan Fox and Mark Molumphy and Tyson Redenbarger of Cotchett about Judge Donato’s order but they did not respond. Nor did Robinhood counsel from Debevoise & Plimpton.)

There may be a problem with Judge Donato’s order.

Don’t get me wrong: The judge’s intentions are entirely laudable. Leadership of multidistrict cases and big class actions should not be a club limited to lawyers – mostly white men – who’ve earned membership by leading previous cases. As University of Georgia law professor Elizabeth Burch has discussed in a 2017 paper on “repeat players” and in her recent book, "Mass Tort Deals: Backroom Bargaining in Multidistrict Litigation," when the same lawyers are in charge in case after case, innovation is stifled. In the long run, Burch has argued, that’s to the plaintiffs’ detriment. Burch emphasizes the concept of “cognitive diversity,” in which judges appoint leaders with a variety of ideas, skills and experiences, as well as diverse identities. “Diversity typically enhances complex systems’ functionality and contributes to innovation and productivity,” Burch wrote in the 2017 paper.

Here’s the thing, though. Judge Donato is not the first federal judge to order plaintiffs' lawyers to diversify class action leadership. Before his death in 2014, U.S. District Harold Baer issued orders in at least four class actions directing class counsel to staff cases with women and minority lawyers to reflect diversity among class members.

In 2013, an objector in one of those cases, an antitrust class action against the satellite radio company Sirius, challenged Baer’s order at the U.S. Supreme Court, arguing that the so-called diversity order “plainly discriminates based on race with no possible justification for that discrimination.”

The Supreme Court ultimately declined to grant review but Justice Samuel Alito issued a statement severely criticizing Judge Baer’s diversity orders. “I am hard-pressed to see any ground on which Judge Baer's practice can be defended,” Justice Alito wrote. The Supreme Court, he said, does not countenance racial or gender discrimination in the courtroom, so, according to the justice: “It is doubtful that the practice in question could survive a constitutional challenge.”

Judge Baer took Justice Alito’s comments in stride, telling Reuters reporter Bernard Vaughn soon thereafter that his orders were not unconstitutional discrimination because he didn’t actually require class counsel to assign particular lawyers to cases, just to take race and gender into account. The judge also said Justice Alito seemed to lack “either understanding or interest” in discrimination against Black, Latino and women lawyers. “So for him to talk about it as if this is something we shouldn’t look at is unfortunate,” Judge Baer said in December 2013.

But after Justice Alito’s criticism, other federal trial judges seem to have avoided diversity orders like Judge Baer’s – until Judge Donato in Tuesday’s decision. Like Judge Baer, Judge Donato did not specifically require prospective class counsel to include women or lawyers of color on their leadership slate. He sure sent a strong message, though.

Georgia prof Burch told me Judge Donato’s order does raise a concern in light of Justice Alito’s criticism of race- and gender-based class counsel appointments. (Burch said that trial judges can avoid that trap by focusing on a diversity of experience and knowledge rather than specifically on identities.)

I also reached out to Ted Frank and his colleagues at the Hamilton Lincoln Law Institute, whose objection in the Sirius case led to Justice Alito’s statement on requiring diversity in class counsel leadership.

“Judge Donato correctly recognizes the repeat-player problem, but has the wrong solution,” Frank said in an email. Instead of inviting constitutional challenges by instructing prospective class counsel to diversify their teams, Frank said, trial judges should use a competitive bidding process to select lead lawyers, which would give women and minorities more opportunity to break into leadership ranks.

A recent American Lawyer study found that more women are being appointed to leadership roles in multidistrict litigation these days, but few lawyers of color have won these plum appointments. It’s easy to see why trial judges like Judge Donato want to spur change. But they’ve got to be careful about how they do it.