Objector Lawyers Committed ‘Fraud on Court,’ Chicago Appeals Court Says

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A Chicago appeals court has found two prominent lawyers who frequently object to class action settlements committed “a fraud on the court” and referred them to state authorities for possible disciplinary actions.

The First District of the Illinois Appellate Court issued a ruling just before Thanksgiving that referred attorneys Christopher Bandas and C. Jeffrey Thut to the Illinois Supreme Court’s disciplinary commission. The three-judge panel Nov. 20 found that Thut, of Noonan Perillo & Thut in Waukegan, Illinois, had helped Bandas, of the Bandas Law Firm in Corpus Christi, Texas, engaged in the unauthorized practice of law in Illinois by signing his court papers and appearing in court for an objector named Gary Stewart in a class action against Gannett Co. for alleged breaches of the Telephone Consumer Protection Act in marketing its newspapers.

“Bandas was named as Stewart’s counsel from the inception of proceedings; this status never changed and presents this court with the conundrum of Bandas filing an objection to reap monetary benefits in an Illinois case, and doing all the substantive work, while hiding behind the cloak of Rule 137,” wrote Judge Michael Hyman, in reference to the Illinois rule for sanctions. “Thut was merely the frontman for the objection so that Bandas did not have to sign any pleadings or appear in court.”

The court directed that a copy of its order go to the Illinois Supreme Court’s Attorney Registration & Disciplinary Commission for possible disciplinary action against Bandas and Thut.

“Both attorneys have engaged in a fraud on the court,” Hyman wrote.

The case addresses the controversial issue of “objector blackmail,” which is when objector lawyers extort payments to drop their appeals challenging class action settlements. An upcoming amendment to the federal class action rules requires court approval of such payments, currently done in secret.

Plaintiffs' attorney Jay Edelson praised the decision, which he said would have ramifications beyond just his case.

“The professional objector bar has been living in the dark,” he said. “We think we’re going to find that out through Bandas and Thut. We will find out that information—just how many millions of dollars have they been making by holding up settlements.”

Thut was quick to rebut the appeals courts findings. In particular, he disagreed with court’s remarks that he and Bandas had teamed up with the same objector multiple times—15 to be exact—to “frivolously object” in “multiple cases in different states.”

“That’s absolutely untrue. I have never done anything outside the state of Illinois,” he told Law.com.

As to the court’s referral for possible disciplinary action, Thut noted that Edelson filed a complaint about him earlier in the case, and the Attorney Registration & Disciplinary Commission “found no reason to discipline me. So they’re well aware of everything that that opinion addresses.”

Bandas and his lawyer, Darren VanPuymbrouck of Chicago’s Falkenberg Ives, did not respond to a request for comment.

The First District court's decision is the latest turn in a case that prompted Edelson, of Edelson PC in Chicago, to file a racketeering lawsuit in 2016 against Bandas, Thut and a third objector lawyer, solo practitioner Darrell Palmer, now disbarred. But on Feb. 6, U.S. District Judge Rebecca Pallmeyer in the Northern District of Illinois dismissed much of Edelson’s racketeering case. She agreed, however, that Bandas had engaged in “bad faith.”

“Coupled with Judge Pallmeyer’s decision, we now have the two most important decisions that take on the professional objector bar,” said Edelson. “Courts have been increasingly willing to recognize there’s a lot of really improper unethical behavior going on by some of the professional objectors, and courts have not known how to deal with it. Now we’re seeing a few road maps.”

The decision, and potential disciplinary actions that could come out of it, could have ramifications outside of Illinois. Judges in other states have increasingly called out Bandas for his actions, despite being unable to sanction an attorney not appearing in their courtroom. Last year, U.S. District Valerie Caproni in the Southern District of New York criticized Bandas for what she termed his “unseemly effort to extract fees from class counsel” while using local counsel “to shield himself from potential disciplinary action associated with frivolous objections.”

Edelson also noted a class action against Walmart Inc. in which Bandas teamed with a Philadelphia lawyer to represent an objector. Plaintiffs’ attorney Frank Salpietro of Pittsburgh’s Rothman Gordon, in court papers this month, called the objection “nothing more than an attempted shakedown.” The objector’s lawyer, Glenn Manochi of Lightman & Manochi, had argued that the settlement could end up granting $15.75 million in attorney fees, despite a value as low as $21.5 million. Allegheny County Court of Common Pleas Judge Robert Colville rejected the objection and approved the settlement Nov. 21.

Neither Salpietro nor Manochi responded to requests for comment.

In Illinois, a spokesman for the Attorney Registration & Disciplinary Commission would not confirm whether Bandas, licensed in Texas, and Thut, licensed in Illinois, are under investigation. Neither Bandas nor Thut has any prior record of discipline.

But the spokesman, Ari Telisman, said that any disciplinary measure, whether a reprimand or suspension or disbarment, could lead to reciprocal actions in other states.

“If an attorney licensed somewhere else is engaged in misconduct in an Illinois court, the Illinois Supreme Court has jurisdiction to implement disciplinary action,” he said. “That enables the jurisdiction where the attorney is licensed to impose reciprocal discipline, where they would be able to impose an equal type of discipline without having to go through a full trial of re-proving the allegations.”

The Illinois originated in Cook County Circuit Court and alleged that Gannett made unsolicited sales calls to the cell phones of 2.6 million potential newspaper subscribers in violation of the TCPA. Stewart’s objection focused in large part on how 39 percent of the $13.8 million fund would go to Edelson for attorney fees. But former Judge Kathleen Kennedy approved the deal in 2016.

Edelson moved for sanctions.

“We argued that Bandas was acting improperly by not getting admitted pro hac vice, acting as a lawyer engaging in the unauthorized practice of law in Illinois,” Edelson said. “We also argued that Thut was acting improperly in that he was filing documents without reviewing them, and that the whole objection was done for an improper purpose.”

Judge Pamela McLean Meyerson, who took over the case after Kennedy retired, did not sanction Bandas because he hadn’t signed the objection or appeared in court. At an evidentiary hearing, Edelson testified that Thut, whenever questioned about the objection, referred both him and his firm’s managing partner, Rafey Balabanian, to Bandas. Balabanian also testified that Bandas later demanded between $225,000 and $457,000 to drop the objection, according to this month's appellate court decision.

Meyerson refused to sanction Thut, concluding that “the objection was not filed for an improper purpose.”

But the appeals court concluded that Edelson, in seeking sanctions for an attorney’s “vexatious and harassing actions,” should have been allowed to present evidence of a “history with courts across the country of acting frivolous, vexatious and in bad faith.”

“The pattern of conduct engaged in by Bandas, Thut, and Stewart is relevant to the objection’s possible improper purpose of seeking attorneys’ fees with the bare minimum of effort, expense, and time,” the ruling held. “Bandas-Thut, with Stewart as the objector, have used this strategy in multiple cases in different states.”

On remand, Edelson said his ultimate goal was to stop Bandas from practicing law. But he said he would be seeking “significant” monetary sanctions for the “hundreds of thousands of dollars” both lawyers have cost the class, and his firm.

As part of the settlement, Edelson received nearly $5.4 million—fees that didn’t go unnoticed by the appeals court. In a concurring opinion, Judge Mary Anne Mason chastised Meyerson for failing to probe into whether Edelson’s fees were justified—a slight that “encourages the skepticism, cynicism, and distrust of our judicial system so prevalent in society today.”

“I strongly encourage trial judges in future cases to fulfill their critical role as the guardians of the interests of absent class members, to carefully analyze unopposed fee requests that diminish funds available to compensate class members, and to insist that a reviewable record be made of any hearing, including the court’s reasons for granting counsel’s fee request,” Mason wrote.

But Edelson said that Meyerson adequately reviewed his fee request.

"We took Judge Mason's concurrence seriously," he said. "And while we appreciate the sentiment that class counsel fees should be carefully scrutinized, that is precisely what happened in this case. The trial court considered our request and read adversarial briefing and heard argument on whether it was appropriate and decided it was. The notion that the trial court did not question our fees is simply incorrect."