Just weeks after a federal judge agreed to settle a multimillion-dollar lawsuit against Toyota Motor Company, Larry Schonbrun, aka "The Spoiler," showed up. The Berkeley lawyer butted in at the last minute to make sure that the attorneys who sued the carmaker didn't walk away with all the money the judge had just awarded them.
Schonbrun has fashioned a successful legal career out of spoiling settlements just like this one. As he sees it, the lawyers who live off these massive class-action suits are like sophisticated con artists who rip off consumers and corporations at the same time, all in the name of fighting for the common man. The lawyers whose fees he challenges look at him as they might look at an annoying homeless man whom you have to pay to make go away. Only in Schonbrun's case, he shows up in a tailored suit.
He first became a serial objector to the legal spoils of class-action lawsuits in the early 1990s, when multiparty lawsuits against corporate America became as popular as Starbucks lattes. As such litigation spread, the legal fees in large cases swelled too, and now often exceed $1 million, even when consumers walk away with only coupons, discounts, or paltry payouts. Occasionally, legal bills have grown to tens or even hundreds of million of dollars. To date, Schonbrun has convinced judges to reduce such fees by more than $100 million.
In the Toyota case, the carmaker and its dealers had been accused of colluding to fix certain prices on its new cars. The judge's settlement awarded thousands of past car buyers $150 coupons toward the purchase of a new Toyota, which amounted to $1.2 million for consumers in the case. But what sickened Schonbrun and his client, Yolanda Luna, was that the judge awarded the four attorneys who sued the carmaker $4.25 million -- three and a half times more money than consumers received.
As sometimes happens in such cases, Schonbrun's foes struck back -- hard. The four lawyers whose fees he was contesting investigated his client's right to participate in the case. They concluded that Schonbrun had falsely claimed he'd represented Luna since 1994, two years earlier than she herself had testified. They also accused him of altering his client's testimony after the fact, so that he would have legal standing to participate in the class action. Pissed-off plaintiffs' attorneys petitioned the judge and sought to get Schonbrun sanctioned and barred from objecting in the case.
If Schonbrun's mission were judged by the number of enemies he's made, he'd have to be considered enormously successful. Judges call him names and threaten to sanction him. Lawyers petition judges to have him ejected from the proceedings and dream of getting him disbarred. In most courtrooms around the country, he is as welcome as a drunk at a preschool.
Judges are used to extreme deference from the attorneys who come before them. They don't get that from Schonbrun. Although he's polite and respectful, the heart of what he does is profoundly disrespectful. He tells judges they are wrong. He urges them to rethink the amount of money they fork over to plaintiffs' attorneys in settlement agreements and give the extra cash to the wronged consumers. And of course, he then insists that because he represented the real interests of the class members, he too should be paid for the time he spent on the case.
Class-action attorneys, one of the most powerful groups of lawyers in the country, see Schonbrun as a parasitic interloper who disguises himself as a do-gooder. Not only does he routinely downplay their hard work and accuse them of overbilling, he audaciously demands a cut of their legal fees for objecting -- a sickening and unethical way to make a living as far as they're concerned.
"I believe he extorts class counsel," says San Francisco attorney Francis Scarpulla, one of Schonbrun's four foes on the Toyota case. "He has no risk, no clients, no cost, and people will pay him money to go away."
Scarpulla and his colleagues got to tattle on their courtroom nemesis in their 1996 complaint in the Toyota case. "Mr. Schonbrun, who clothes himself in the garb of the class protector, is anything but the Don Quixote he claims to be," they sniped. "Rather than acting in the best interests of the class, Mr. Schonbrun insinuates himself into settled class actions in an attempt to generate fees for himself based on the labor of other lawyers. Far from being the defender of helpless class members, Mr. Schonbrun is the wolf in sheep's clothing."
In response to that complaint, US District Judge Marilyn Hall Patel wrote that a review of the perjury allegations raised "serious concerns about the conduct of attorney Schonbrun." She ordered him to appear before another judge to explain "why disciplinary action should not be taken." In court, Judge Patel verbally reprimanded Schonbrun, and said his changes to his client's testimony raised "serious questions of ethical breaches."
Schonbrun denied that he had done anything wrong, and said he simply refreshed Luna's memory with proof that they had discussed the case much earlier than she had recalled. The matter dragged on for weeks, but a judge ultimately chalked the controversy up to a misunderstanding, and cleared Schonbrun of any wrongdoing. US District Court Judge Charles Legge, who investigated the allegations at Patel's request, said the matter would "go into the record books as an unfortunate event."
Although exonerated, Schonbrun failed to convince Judge Patel to thin out the legal fees in the Toyota case by one cent. But he says he learned a valuable lesson. "What I learned from this is these guys are really ruthless," he recalls nowadays, in a measured voice that betrays the anger he obviously still feels. "These guys knew what they were doing was perpetrating a falsehood, but getting rid of me was more important."
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