In the
United States Court of Appeals
For the Seventh Circuit

Nos. 00-3122, 00-3178, 00-3181, 00-3182,
00-3367, 01-1239, 01-1617, 01-1654, 01-
2231, 01-2339, 01-2445, 01-2747, 01-2785,
& 01-3545

Cheryl Reynolds, et al.,

Plaintiffs-Appellees,

v.

Beneficial National Bank, et al.,

Defendants-Appellees.

Appeals of:   Belinda Peterson, et al.

Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
Nos. 98 C 2178 & 98 C 2550--James B. Zagel, Judge.

Argued February 12, 2002--Decided April 23, 2002



  Before Cudahy, Posner, and Rovner, Circuit
Judges.

  Posner, Circuit Judge. We have
consolidated for decision a number of
appeals from orders by the district court
approving a settlement of consumer-
finance class action litigation, denying
petitions to intervene, and awarding
attorneys’ fees. "Federal Rule of Civil
Procedure 23(e) requires court approval
of any settlement that effects the
dismissal of a class action. Before such
a settlement may be approved, the
district court must determine that a
class action settlement is fair,
adequate, and reasonable, and not a
product of collusion." Joel A. v.
Giuliani, 218 F.3d 132, 138 (2d Cir.
2000). The principal issue presented by
these appeals is whether the district
judge discharged the judicial duty to
protect the members of a class in class
action litigation from lawyers for the
class who may, in derogation of their
professional and fiduciary obligations,
place their pecuniary self-interest ahead
of that of the class. This problem,
repeatedly remarked by judges and
scholars, see, e.g., Culver v. City of
Milwaukee, 277 F.3d 908, 910 (7th Cir.
2002); Greisz v. Household Bank
(Illinois), N.A., 176 F.3d 1012, 1013
(7th Cir. 1999); Rand v. Monsanto Co.,
926 F.2d 596, 599 (7th Cir. 1991);
Duhaime v. John Hancock Mutual Life Ins.
Co., 183 F.3d 1, 7 (1st Cir. 1999); John
C. Coffee, Jr., "Class Action
Accountability: Reconciling Exit, Voice,
and Loyalty in Representative
Litigation," 100 Colum. L. Rev. 370,-385-
93 (2000); David L. Shapiro, "Class
Actions: The Class as Party and Client,"
73 Notre Dame L. Rev. 913, 958-60 and n.
132 (1998), requires district judges to
exercise the highest degree of vigilance
in scrutinizing proposed settlements of
class actions. We and other courts have
gone so far as to term the district judge
in the settlement phase of a class action
suit a fiduciary of the class, who is
subject therefore to the high duty of
care that the law requires of
fiduciaries. Culver v. City of Milwaukee,
supra, 277 F.3d at 915; Stewart v.
General Motors Corp., 756 F.2d 1285, 1293
(7th Cir. 1985); In re Cendant Corp.
Litigation, 264 F.3d 201, 231 (3d Cir.
2001); Grant v. Bethlehem Steel Corp.,
823 F.2d 20, 22 (2d Cir. 1987).

  We do not know whether the $25 million
settlement that the district judge
approved is a reasonable amount given the
risk and likely return to the class of
continued litigation; we do not have
sufficient information to make a judgment
on that question. What we do know is
that, as in such cases as In re General
Motors Corp. Engine Interchange
Litigation, 594 F.2d 1106, 1124 (7th Cir.
1979); Ficalora v. Lockheed California
Co., 751 F.2d 995, 997 (9th Cir. 1985)
(per curiam); Holmes v. Continental Can
Co., 706 F.2d 1144, 1150-51 (11th Cir.
1983), and Pettway v. American Cast Iron
Pipe Co., 576 F.2d 1157, 1214, 1218-19
(5th Cir. 1978), the judge did not give
the issue of the settlement’s adequacy
the care that it deserved.

  This litigation arose out of refund
anticipation loans made jointly by the
two principal defendants, Beneficial
National Bank and H & R Block, the tax
preparer. When H & R Block files a refund
claim with the Internal Revenue Service
on behalf of one of its customers, the
customer can expect to receive the refund
within a few weeks unless the IRS decides
to scrutinize the return for one reason
or another. But even a few weeks is too
long for the most necessitous taxpayers,
and so Beneficial through Block offers to
lend the customer the amount of the
refund for the period between the filing
of the claim and the receipt of the
refund. The annual interest rate on such
a loan will often exceed 100 percent--
easily a quarter of the refund, even
though the loan may be outstanding for
only a few days. Block arranges the loan
but Beneficial puts up the money for it.
Not disclosed to the customer is the fact
that Beneficial pays Block a fee for
arranging the loan and that Block also
owns part of the loan.

  Beginning in 1990, more than twenty
class actions were brought against the
defendants on behalf of the refund-
anticipation borrowers. The suits charged
a variety of violations of state and
federal consumer-finance laws and also
breach of fiduciary duty under state law.
Some of the alleged violations appear to
be technical. The most damaging charge
appears to be that Block’s customers are
led to believe that Block is acting as
their agent or fiduciary, much as if they
had hired a lawyer or accountant to
prepare their income tax returns, as
affluent people do, whereas Block is,
without disclosure to them, engaged in
self-dealing.

  Most of the suits failed on one ground
or another; none has resulted in a final
judgment against Beneficial or Block. But
in the late 1990s several withstood
motions to dismiss or motions for summary
judgment, and at least one, a Texas suit,
was slated for trial.

  On September 3, 1997, two lawyers who
had prosecuted two of the unsuccessful
class actions, Howard Prossnitz and
Francine Schwartz, had lunch in Chicago
with Burt Rublin, who was and remains
Beneficial’s lead lawyer in defending
against the class-action avalanche.
Prossnitz and Schwartz brought with them
to the lunch another lawyer, Daniel
Harris. Although neither Prossnitz nor
Schwartz, nor their friend Harris, had a
pending suit against Beneficial (or
against Block, which was not represented
at the lunch), they discussed "a global
RAL settlement" with Rublin. It is
doubtful whether Prossnitz or Schwartz
even had a client at this time; and
certainly Harris did not. Schwartz later
"bought" a client from another lawyer, to
whom she promised a $100,000 referral
fee. The necessity for such a
transaction, when the class contains 17
million members, eludes our
understanding.

  In the hearing before the district judge
on the adequacy of the settlement (the
"fairness hearing," as it is called),
Harris testified that at the lunch Rublin
"’threw out’ a number, for purposes of
illustration, of $24 or $25 million." The
judge described this testimony (which he
elsewhere describes as "Harris believes
he heard Rublin say the case was worth
$23 or $24 million"), though it is
vociferously denied by Rublin, as
"credible." There was, however, no actual
settlement negotiation at the lunch.

  Prossnitz, Schwartz, and Harris, all
solo practitioners, brought a substantial
law firm, Miller Faucher and Cafferty
LLP, into the picture. In April of the
following year the foursome filed two
class action suits against
Beneficialsimilar to the others that had
been filed and that were (those that
hadn’t flopped) wending their way through
the courts of various states. One of the
two suits filed also named as defendants
H & R Block and three affiliated Block
entities, but three of those, including
Block itself, were voluntarily dismissed
from the suit by the plaintiffs in
October 1998 and the fourth was dismissed
in February 1999. Shortly after the suits
were filed, Harris made a settlement
offer to Beneficial that was rejected,
but after a hiatus negotiations began.
Block was included in the settlement
negotiations, despite the fact that there
were by then no claims pending against
it. It was included because Beneficial
was reluctant to settle without Block,
having promised to indemnify it for any
liability resulting from Block’s role in
Beneficial’s refund anticipation loans.

  In October of 1999, a class jointly
represented by the three solo
practitioners and the Miller firm (we’ll
call these the "settlement class
lawyers"), plus Beneficial and Block, en
tered into a settlement agreement which
they submitted to the district court for
its approval. The agreement contemplated
the filing of an amended complaint naming
H & R Block as a defendant, and by its
terms covered claims against five Block
entities, of which four were the entities
originally named but subsequently
dismissed as defendants in one of the two
original class action complaints. The
agreement defined the class as all
persons who had obtained refund
anticipation loans from Beneficial
between January 1, 1987, and October 26,
1999, and provided for the release of all
claims "arising out of or in any way
relating to the tax refund anticipation
loans (’RALs,’ sometimes erroneously
referred to as ’Rapid Refunds’) obtained
by the Class at any time up to and
through" that date. The defendants agreed
to create a fund of $25 million against
which members of the class could file a
claim not to exceed $15. Any money left
in the fund after the expiration of the
period for filing claims was to revert to
the defendants, who also agreed to
injunctive relief in the form of certain
required disclosures to future customers,
primarily of the financial arrangements
between Beneficial and Block, and to bear
the cost of notice to class members and
of the class counsel’s legal fees out of
their own pockets rather than out of the
settlement fund. One RAL class action,
the Basile suit pending in the
Pennsylvania courts, was excluded from
the agreement, apparently because Block
thought it could get the supreme court of
that state to reverse a lower court
decision that had gone against the
company. Beneficial and Block agreed to
split the expense of the settlement 50-
50.

  The district judge approved the
settlement except for the reversion and
the $15 cap, which at his insistence the
parties raised to $30 for those members
of the class (apparently the vast
majority) who had had received two or
more tax refund anticipation loans from
Block. With these changes the settlement
was approved and notices mailed to 17
million persons--most of whom ignored
them; several million of the notices,
moreover, were undeliverable, presumably
because the addressees had moved and left
no forwarding address. Only 1 million of
the recipients filed claims, which would
be enough, however, to exhaust the
settlement fund. Only about 6,000 of the
recipients opted out of the class action
so that they could seek additional relief
against the defendants.

  Incidentally, there is an unremarked
conflict of interest within the class,
between those class members who took out
one or two refund anticipation loans and
those who took out more than two and thus
will receive no compensation for the
additional damages that they incurred.
Conflicts of interest can create serious
problems for class action settlements,
see, e.g., Amchem Products, Inc. v.
Windsor, 521 U.S. 591, 626-27 (1997);
Retired Chicago Police Ass’n v. City of
Chicago, 7 F.3d 584, 598 (7th Cir. 1993),
and require the creation of separately
represented subclasses. But in light of
the modesty of the stakes even of class
members who had multiple refund
anticipation loans and the expense
ofsubdividing the class (and how many
subdivisions would be necessary to
reflect the full range of damages?), we
are not disposed to regard this
particular defect in the settlement as
fatal.

  In finding that $25 million was an
adequate settlement, the judge relied in
part on an unsworn report by James Adler,
an accountant who purported to estimate
the damages caused by the defendants’
alleged violations of law. He was not
deposed or subjected to cross-examination
and the judge did not discuss the
adequacy of his methodology. Adler came
up with a figure of $60 million, but it
is unclear whether this was intended to
be an estimate of the entire damages that
the class might hope to recover if the
case was tried and went to judgment and
what legal assumptions underpinned the
estimates.

  The various objectors to the settlement,
primarily intervening or would-be
intervening plaintiffs who have claims
that the settlement will release, contend
that the settlement agreement is the
product of a "reverse auction," the prac
tice whereby the defendant in a series of
class actions picks the most ineffectual
class lawyers to negotiate a settlement
with in the hope that the district court
will approve a weak settlement that will
preclude other claims against the
defendant. Blyden v. Mancusi, 186 F.3d
252, 270 n. 9 (2d Cir. 1999); Coffee,
supra, at 392; Samuel Issacharoff,
"Governance and Legitimacy in the Law of
Class Actions," 1999 Sup. Ct. Rev. 337,
388; Marcel Kahan & Linda Silberman, "The
Inadequate Search for ’Adequacy’ in Class
Actions: A Critique of Epstein v. MCA,
Inc.," 73 N.Y.U. L. Rev. 765, 775 (1998);
John C. Coffee, Jr., "Class Wars: The
Dilemma of the Mass Tort Class Action,"
95 Colum. L. Rev. 1343, 1370-73 (1995).
The ineffectual lawyers are happy to sell
out a class they anyway can’t do much for
in exchange for generous attorneys’ fees,
and the defendants are happy to pay
generous attorneys’ fees since all they
care about is the bottom line--the sum of
the settlement and the attorneys’ fees--
and not the allocation of money between
the two categories of expense. The
defendants agreed to pay attorneys’ fees
in this case, to the three solo
practitioners and the law firm that
negotiated the settlement, of up to $4.25
million.

  Although there is no proof that the
settlement was actually collusive in the
reverse-auction sense, the circumstances
demanded closer scrutiny than the
district judge gave it. He painted with
too broad a brush, substituting intuition
for the evidence and careful analysis
that a case of this magnitude, and a
settlement proposal of such questionable
antecedents and circumstances, required.
The initial agreement submitted for the
judge’s approval, remember, had provided
for a reversion and also capped each
class member’s recovery at $15. If the
parties had an inkling that only 1
million class members would file claims,
they were agreeing to a settlement worth
only $15 million, and probably less; for
if 1 million class members filed claims
capped at $30, fewer would have filed
claims capped at $15. Yet according to a
credibility determination by the district
judge that we are not in a position to
second guess, two and half years earlier,
before RAL plaintiffs began having some
success in the courts, Beneficial’s
counsel had indicated that $23 to $25
million were ballpark figures for a
settlement with Beneficial alone.
Beneficial’s share of a $15 million
settlement in which Block was a
codefendant would be only $7.5 million
(remember that Beneficial and Block
agreed to split the cost of the
settlement 50-50)--yet that is the
settlement the lawyers for the settlement
class agreed to, plus injunctive relief
the value of which no one has attempted
to monetize and which is barely discussed
in the briefs or by the judge. The
injunctive relief signally does not
include a requirement that H & R Block
disclose its interest in Beneficial’s
refund anticipation loans.

  Moreover, H & R Block appears to have
faced substantial exposure in a Texas
class action in which it was accused of
breach of fiduciary obligations to its
customers. The class in that suit was
seeking disgorgement of all the fees paid
to Block by the banks that made refund
anticipation loans through it. The class
argued that such a forfeiture was
mandatory if Block was found to have
violated its fiduciary duties.
Disgorgement was also sought of all other
fees that Block had received "in
connection with each RAL transaction"--
that is, the tax-preparation and
electronic-filing fees that Block had
charged its RAL customers to file their
taxes for them--a form of relief that the
class claimed was within the trial
court’s equitable discretion. The total
amount sought could have reached $2
billion. The class had been certified,
the case was proceeding in the Texas
courts, and the theory of liability and
damages could not be dismissed as
frivolous; indeed, the case had been set
for trial. Even if the class had only a
1 percent chance of prevailing, the
expected value of its suit might reach
$20 million. (This is on the unrealistic
assumption that the only possible
outcomes were a $2 billion judgment and a
zero judgment. Realistic intermediate
possibilities could make the $20 million
estimate expand or shrink.)

  Remarkably in view of the progress and
promise of the Texas suit relative to the
half-hearted efforts of the settlement
class counsel, the district judge
enjoined the Texas suit on the authority
of the All Writs Act, 28 U.S.C. sec.
1651(a), reasoning that the suit might
upend the settlement. In re VMS
Securities Litigation, 103 F.3d 1317,
1323-24 (7th Cir. 1996); In re Agent
Orange Product Liability Litigation, 996
F.2d 1425, 1431-32 (2d Cir. 1993); In re
Baldwin-United Corp. (Single Premium
Deferred Annuities Ins. Litigation), 770
F.2d 328, 335-38 (2d Cir. 1985). The
effect of the injunction is that the
settlement release, if upheld, will
release the claims in the Texas suit. For
this release of potentially substantial
claims against H & R Block the settlement
class received no consideration. In fact
the settlement class received no
consideration for the release of any
claims against Block. The only effect of
bringing Block into the settlement was to
allow Beneficial to cut its own expense
of the settlement in half. The lawyers
for the settlement class were richly
rewarded for negotiations that greatly
diminished the cost of settlement to
Beneficial from the level that it had
considered to be in the ballpark years
earlier when the cases were running more
in its favor than when the settlement
agreement was negotiated. In effect, the
settlement values the Texas and all other
claims against Block at zero.

  The district judge enjoined the lawyers
for the Texas class from notifying the
members of that class of the status of
the Texas litigation to assist them in
deciding whether to opt out of the
settlement that the settlement class
counsel had negotiated with Beneficial
and Block and continue to litigate in the
Texas courts. The judge should not have
done this, especially since opting out
was likely to be the sensible course of
action given the ungenerosity of the
settlement to the Texas class. A pattern
of withholding information likely to
undermine the settlement emerged when,
after approving the settlement, the
district judge encouraged the solo
practitioners to submit their fee
applications in camera, lest the paucity
of the time they had devoted to the case
(for which the judge awarded them more
than $2 million in attorneys’ fees) be
used as ammunition by objectors to the
adequacy of the representation of the
class. There was no sound basis for
sealing the fee applications, let alone
for sealing the number of hours each of
the settlement class counsel had devoted
to the case. The applications are not in
the appellate record and we do not know
what the total number of hours devoted by
the class counsel to thislitigation was,
but apparently it was a small number.
This is not surprising, since the
lawyers’ efforts between the filing of
the complaint and the settlement
negotiations were singularly feeble,
illustrated by their responding to the
Block defendants’ motion to dismiss for
lack of personal jurisdiction with a
voluntary dismissal of the claims against
those defendants. Their representation of
the class was almost certainly
inadequate, an independent reason for
disapproving a settlement. Ortiz v.
Fibreboard Corp., 527 U.S. 815, 856 and
n. 31 (1999); Culver v. City of
Milwaukee, supra, 277 F.3d at 913; Linney
v. Cellular Alaska Partnership, 151 F.3d
1234, 1238-39 (9th Cir. 1998). But in
addition it reinforces our concern with
the adequacy of the district judge’s
consideration of the settlement.

  The judge approved the settlement
primarily because he thought the
prospects for the class if the litigation
continued were uncertain. They might lose
in the end, or win little; and even if
they won a lot, the delay in winning
would make the relief eventually awarded
the class worth much less in present-
value terms. To most people, a dollar
today is worth a great deal more than a
dollar ten years from now. It is
especially likely to be worth more to the
members of the class in this litigation.
Only a person with a very high discount
rate (that is, a strong preference for
present over future dollars--a preference
that may reflect desperation rather than
fecklessness or shortsightedness) would
borrow at an astronomical interest rate
in order to get a sum of money now rather
than a few weeks from now.

  All this is true, but in the suspicious
circumstances that we have recited the
judge should have made a greater effort
(he made none) to quantify the net
expected value of continued litigation to
the class, since a settlement for less
than that value would not be adequate.
Determining that value would require
estimating the range of possible outcomes
and ascribing a probability to each point
on the range, In re General Motors Corp.
Engine Interchange Litigation, supra, 594
F.2d at 1132-33 n. 44, though as just
noted those outcomes must be discounted
to the present using a reasonable, and in
this case perhaps a steep, interest rate.
In re General Motors Corp. Pick-Up Truck
Fuel Tank Products Liability Litigation,
55 F.3d 768, 806 (3d Cir. 1995); cf.
Transcraft, Inc. v. Galvin, Stalmack,
Kirschner & Clark, 39 F.3d 812, 819 (7th
Cir. 1994). We say "perhaps" because even
a person with a high discount rate may
not care much whether he receives $15 to
$30 now or in the future, since it is
such a trivial amount of money even to a
person who is usually strapped for funds.
If, moreover, the court would award
prejudgment interest in a case litigated
to judgment, discounting might wash out
of the picture altogether.

  A high degree of precision cannot be
expected in valuing a litigation,
especially regarding the estimation of
the probability of particular outcomes.
Still, much more could have been done
here without (what is obviously to be
avoided) turning the fairness hearing
into a trial of the merits. For example,
the judge could have insisted that the
parties present evidence that would
enable four possible outcomes to be
estimated: call them high, medium, low,
and zero. High might be in the billions
of dollars, medium in the hundreds of
millions, low in the tens of millions.
Some approximate range of percentages,
reflecting the probability of obtaining
each of these outcomes in a trial (more
likely a series of trials), might be
estimated, and so a ballpark valuation
derived.

  Some arbitrary figures will indicate the
nature of the analysis that we are
envisaging. Suppose a high recovery were
estimated at $5 billion, medium at $200
million, low at $10 million. Suppose the
midpoint of the percentage estimates for
the probability of victory at trial was
.5 percent for the high, 20 percent for
the medium, and 30 percent for the low
(and thus 49.5 percent for zero). Then
the net expected value of the litigation,
before discounting, would be $68 million;
discounting, depending on an estimate of
the likely duration of the litigation,
would bring this figure down, though
probably not to $25 million--and any
discounting might be inappropriate, as we
explained. These figures are arbitrary;
our point is only that the judge made no
effort to translate his intuitions about
the strength of the plaintiffs’ case, the
range of possible damages, and the likely
duration of the litigation if it was not
settled now into numbers that would
permit a responsible evaluation of the
reasonableness of the settlement.
  Two classes were absorbed into the
settlement even though their claims were
sharply different from those of the
classes represented by the settlement
counsel. A class action brought by
Belinda Peterson years before the suit
that gave rise to the settlement
complained of Block’s promise, for which
it levied a separate charge, that a
customer would receive a "rapid refund"
from the IRS. The Peterson class alleges
that Block knew that customers such as
Peterson who were seeking a refund on the
basis of the Earned Income Tax Credit
would not receive it rapidly because the
IRS was subjecting this class of refund
requests to special scrutiny. No loan was
involved. The district judge nevertheless
held that the Peterson class was embraced
by the settlement and release, meaning
that the members of the class would be
entitled to damages of $15 apiece,
period. The settlement class counsel had
never complained about, or so far as
appears knew anything about, the rapid
refunds, and indeed Harris testified that
the Peterson class was intended to be
excluded from the settlement. "Rapid
Refunds" are mentioned in the release
only because the term is sometimes used
to describe refund anticipation loans, an
entirely different practice from Block’s
promise of a rapid refund. Whatever
injury the promise caused Block’s
customers is not measured by the $15
award, which was an estimate of the
injury inflicted by violations connected
with refund anticipation loans. The
Peterson class was included in the
settlement as a result of a purely
semantic coincidence.

  Another class that got swept up in the
settlement as it were accidentally, the
Carbajal class, was complaining about the
defendants’ "intercepting" IRS refunds in
order to offset debts owed by the
customer on previous refund anticipation
loans. Block would apply to the IRS for a
refund for its customer but direct that
the refund be paid to it, and it would
then deduct whatever the customer owed it
and its partner lending institutions and
forward the balance (if any) to the
customer. This practice was distinct from
nondisclosure, misrepresentation, and
other alleged wrongs concerning the
making of refund anticipation loans. The
relation was closer than in the case of
the rapid refunds, because the
interception practice, though not
involving a loan as such, involved an
effort to collect debts based on past
refund anticipation loans. But the $15
damages award that the members of the
Carbajal class received as part of the
settlement that the district judge
approved was just as unrelated to
whatever injury the interception
inflicted on them.

  All things considered, we conclude that
the district judge abused his discretion
in approving the settlement. Because of
this conclusion, the other issues raised
by the appeals need not be decided, but
for guidance on remand we will address
the principal ones, which concern
attorneys’ fees. To begin with, we
disapprove the practice (a practice we
had never heard of and can find no case
law concerning) of encouraging or
permitting the submission of fee applica
tions in camera. In the unlikely event
that some confidential information is
contained in the applications, that
information can be whited out. To conceal
the applications and in particular their
bottom line paralyzes objectors, even
though inflated attorneys’ fees are an
endemic problem in class action
litigation and the fee applications of
such attorneys must therefore be given
beady-eyed scrutiny by the district
judge. Gunter v. Ridgewood Energy Corp.,
223 F.3d 190, 192 (3d Cir. 2000); 7B
Charles Alan Wright, Arthur R. Miller &
Mary Kay Kane, Federal Practice and
Procedure sec. 1803, pp. 510-11 (2d ed.
1986). Second, class counsel’s
compensation must be proportioned to the
incremental benefits they confer on the
class, not the total benefits. Supposing
that with absolutely minimal effort the
class counsel could, as appears to be the
case, have obtained a settlement for $20
million back in 1997 when they met with
Rublin, the question would be how much
they should be rewarded for having pushed
the settlement up to $25 million. Surely
not the $4.25 million that the judge
pursuant to the agreement between the
parties to the settlement awarded,
especially since the class counsel, but
for prodding by the judge, would have
settled for less than Rublin appears to
have been prepared to offer years
earlier.

  Several lawyers, each representing a
class member, appeared at the fairness
hearing to object to various features of
the proposed settlement, primarily the
reversion which the judge later struck.
They wanted a fee for having conferred a
benefit on the class by arguing
successfully against the reversion. The
judge turned them down.

  An initial question is whether we have
jurisdiction of their appeals, since
their clients, although members of the
class, were denied intervention in the
district court and are not appealing that
denial. These plaintiffs say they have no
reason to be parties at this stage
because they are content with the revised
settlement, which axed the reversion.
Ordinarily only a party to a litigation,
including a class action, can appeal.
Marino v. Ortiz, 484 U.S. 301, 304 (1988)
(per curiam); Karcher v. May, 484 U.S.
72, 77 (1987); In re Navigant Consulting,
Inc., Securities Litigation, 275 F.3d
616, 617-18 (7th Cir. 2001). (Not all
courts agree that a class member can
appeal only if he has intervened and thus
become a named party; the line up is
reviewed in Scardelletti v. Debarr, 265
F.3d 195, 205-06, 209 (4th Cir.), cert.
granted, 122 S. Ct. 663 (2001).) But to
this as to most legal generalizations
there are exceptions--see, e.g., United
States Catholic Conference v. Abortion
Rights Mobilization, Inc., 487 U.S. 72,
76 (1988), recognizing the right of
third-person witnesses, not named parties
to the case, to appeal from a contempt
citation for noncompliance with subpoenas
served on them by a named party--most
relevantly for cases in which a lawyer
appeals from a sanction imposed on him,
Vollmer v. Publishers Clearing House, 248
F.3d 698, 701, 705, 711 (7th Cir. 2001);
Corroon v. Reeve, 258 F.3d 86, 88, 90, 92
(2d Cir. 2001), or from the denial of a
motion for fees. Gaskill v. Gordon, 160
F.3d 361, 362-63 (7th Cir. 1998); Florin
v. Nationsbank of Georgia, N.A., 34 F.3d
560, 562 and n. 1 (7th Cir. 1994); In re
Continental Illinois Securities
Litigation, 962 F.2d 566, 568 (7th Cir.
1992). The lawyer doesn’t have to move to
intervene in the district court in order
to appeal to us; nor does the objector
have to move to intervene in order to
appeal the lawyer’s fee. Powers v.
Eichen, 229 F.3d 1249, 1251, 1256 (9th
Cir. 2000); Rosenbaum v. MacAllister, 64
F.3d 1439, 1441-43 (10th Cir. 1995); see
also Zucker v. Occidental Petroleum
Corp., 192 F.3d 1323, 1326 (9th Cir.
1999). We just the other day rejected the
proposition that a lawyer must be made a
party before he can be ordered to
disgorge a fee wrongfully retained, and
though not a party the lawyer was
permitted to appeal the order. Dale M. v.
Board of Education, 282 F.3d 984 (7th
Cir. 2002).

  The situation here is similar. The
clients being content with the
settlement, the only issue is whether
their lawyers are entitled to a fee. They
are in effect volunteer lawyers for the
class asking that they receive a fee for
their efforts. We think they can appeal
without their clients’ having intervened.
Intervention would not only be a
pointless formality. Powers v. Eichen,
supra, 229 F.3d at 1256. It would be a
futile one. For the clients, being
content with the settlement, could not
appeal even if they were parties, because
they seek no relief from us and standing
must continue throughout the entire
litigation. United States Parole Comm’n
v. Geraghty, 445 U.S. 388, 397 (1980);
Levin v. Attorney Registration &
Disciplinary Comm’n, 74 F.3d 763, 767 and
n. 5 (7th Cir. 1996); Chong v. District
Director, INS, 264 F.3d 378, 383-84 (3d
Cir. 2001). Unless the lawyers can
appeal, there will be no appellate review
of the district judge’s decision not to
award them fees.

  It would be a different case if the
claim for attorneys’ fees rested on a
fee-shifting statute, so that the money
would come from the defendants and not
diminish the $25 million fund. Then the
objectors would have to intervene,
because it is the litigants rather than
the lawyers who hold the entitlement to
awards under fee-shifting statutes.
Central States, Southeast & Southwest
Areas Pension Fund v. Central Cartage
Co., 76 F.3d 114, 116 (7th Cir. 1996).
The objectors might be obliged by
contract to pay these sums to their
lawyers, but that would not make the
lawyers parties. To be entitled to
appeal, however, the objectors would have
to become parties.

  But in fact the lawyers are claiming
fees in their own name, so that any fees
awarded to them would come from the $25
million fund under the common-fund
doctrine. When a lawyer lays claim to a
portion of the kitty, he becomes a real
party in interest; and should he
therefore have to intervene--not only for
purposes of taking an appeal himself but
so that he will be an appellee if class
members oppose the district court’s award
and want the money back? We do not see
why a person who has received money by
order of the district court at the
expense of a party must be named as a
party in order for the party harmed by
the order to be able to appeal. After
all, a defendant could appeal from a fee
award to the plaintiff’s lawyer that he
thought excessive.

  We need not pursue this interesting
question, on which the Supreme Court may
shed considerable light when it decides
the Scardelletti case, any further, since
the claim for attorneys’ fees falls with
the settlement. But assuming these
lawyers can appeal, let us for the sake
of guidance for the future consider the
merits of their appeals.

  The law generally does not allow good
Samaritans to claim a legally enforceable
reward for their deeds. Nadalin v.
Automobile Recovery Bureau, Inc., 169
F.3d 1084, 1086 (7th Cir. 1999); Saul
Levmore, "Explaining Restitution," 71 Va.
L. Rev. 65 (1985). But when professionals
render valuable albeit not bargained-for
services in circumstances in which high
transaction costs prevent negotiation and
voluntary agreement, the law does allow
them to claim a reasonable professional
fee from the recipient of their services.
Gaskill v. Gordon, supra, 160 F.3d at
363; In re Continental Illinois
Securities Litigation, supra, 962 F.2d at
568, 571; Levmore, supra, at 66. That is
the situation of objectors to a class
action settlement. It is desirable to
have as broad a range of participants in
the fairness hearing as possible because
of the risk of collusion over attorneys’
fees and the terms of settlement
generally. This participation is
encouraged by permitting lawyers who
contribute materially to the proceeding
to obtain a fee. Gottlieb v. Barry, 43
F.3d 474, 490-91 (10th Cir. 1994); Fisher
v. Procter & Gamble Mfg. Co., 613 F.2d
527, 547 (5th Cir. 1980); White v.
Auerbach, 500 F.2d 822, 828 (2d Cir.
1974).
  The principles of restitution that
authorize such a result also require,
however, that the objectors produce
animprovement in the settlement worth
more than the fee they are seeking;
otherwise they have rendered no benefit
to the class. Class Plaintiffs v. Jaffe &
Schlesinger, P.A., 19 F.3d 1306, 1308
(9th Cir. 1994) (per curiam); see also
Stewart v. General Motors Corp., supra,
756 F.2d at 1294; Petrovic v. Amoco Oil
Co., 200 F.3d 1140, 1156 (8th Cir. 1999).

  The judge denied a fee to the objectors
in part on the ground that he had already
decided, without telling anybody, not to
accept the reversion. But objectors must
decide whether to object without knowing
what objections may be moot because they
have already occurred to the judge. A
compelling ground for denying the
objectors a fee in this case does exist,
however. It is that other lawyers at the
hearing, notably counsel for the Carnegie
intervenors, had vigorously objected to
the reversion; the objectors added
nothing. In re Synthroid Marketing
Litigation, 264 F.3d 712, 722-23 (7th
Cir. 2001). For similar reasons the judge
was correct to deny intervention to class
representatives (Mitchell, Westfall,
Ramsey, Jones, Vaughn, and Longo) whose
arguments had already been covered by
existing plaintiffs. Fed. R. Civ. P.
24(a)(2).

  The judgment approving the class action
settlement and awarding attorneys’ fees
is reversed and the case is remanded to
the district court for further
proceedings consistent with this opinion.
The injunction against the Texas class
action must be vacated in light of our
disapproval of the settlement. See
Bradford Exchange v. Trein’s Exchange,
600 F.2d 99, 101-02 (7th Cir. 1979) (per
curiam); cf. Rufo v. Inmates of Suffolk
County Jail, 502 U.S. 367, 383 (1992); In
re Hendrix, 986 F.2d 195, 198 (7th Cir.
1993). The action of a panel of this
court in upholding the district judge’s
interlocutory injunction against the
Texas suit, entered while settlement
negotiations were in process, does not
bear on the validity of the final
injunction, which is an incident of the
settlement agreement and falls with it.

  Finally, we have decided that Circuit
Rule 36 shall apply on remand.

Reversed and Remanded.
