Class Actions — Attorney-Client Relationship Between Class Counsel and Absent Class Members

The New York Appellate Division, First Department, ruled on Thursday, December 27, 2007, that the attorney-client relationship between class counsel and absent class members is limited in scope and, specifically, does not require class counsel to turn over work product to every absent class member. The decision, Wyly v. Milberg Weiss Bershad & Schulman, LLP, 2007 NY Slip Op 10506 (1st Dept. Dec. 27, 2007) (which can be found at http://www.nycourts.gov/reporter/3dseries/2007/2007_10506.htm) arose out of the Computer Associates Class Actions in the Eastern District of New York that were settled for approximately $150 million in December 2003. A handful of absent class members who had not objected to the settlement commenced a CPLR Article 4 special proceeding seeking a judgment directing class counsel to "turn over their files" relating to the Class Actions. The First Department acknowledged that, at the end of a typical attorney-client relationship, “a client, presumptively, has full right of access, with narrow exceptions, to all of the documents in the attorneys' file, including work-product material, where no claim for unpaid legal fees is outstanding,” under the New York Court of Appeals’ decision in Matter of Sage Realty Corp. v Proskauer Rose Goetz & Mendelsohn, 91 NY2d 30 (1997). The First Department found Sage Realty fundamentally distinguishable, however:

[I]t has been observed, by courts and commentators alike, that the relationship between appointed counsel and an absent member in a class action differs fundamentally from that found in the traditional relationship (see e.g. Selection of Class Counsel, Third Circuit Task Force Report, 208 FRD 340, 347-348 [2002] ["absent class [*5]members are not individual clients. Thus, the ordinary attorney-client relationship does not exist between each class member and class counsel."] [other citations omitted]).

The Court concluded:

Given the above-delineated disparity in the roles, responsibilities, and potential liabilities assumed by a client in the traditional attorney-client context, as opposed to an absent class member's relationship to class counsel, and his/her status as a litigant, coupled with the potential for class counsel to be unduly burdened, even after the end of litigation, by a multitude of requests from absent class members for counsel's entire file, we reject a blanket extension of Sage Realty's presumptive-entitlement right to absent class members, and find that the better practice is to require absent class members to establish their entitlement to class counsel's file on a case-by-case basis. Petitioner, in this matter, has failed to shoulder that burden

In light of the fact that the Computer Associates’ Class Actions involved more than 600,000 class members — none of whom objected to the settlement — the First Department’s reference to potentially “a multitude of requests” is a masterful understatement, and its conclusion eminently practical.

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