Professional plaintiffs

What Is Professional Plaintiffs?

Professional plaintiffs are individuals or entities who repeatedly serve as named plaintiffs in numerous lawsuits, particularly class action lawsuits, often with the primary motivation of generating legal fees for associated attorneys or securing personal financial gain. This practice falls under the broader category of Legal and Financial Litigation and raises questions about the integrity and intent of certain legal actions. While named plaintiffs are crucial for initiating collective legal action on behalf of a larger group, the concept of a professional plaintiff highlights concerns about potential abuses of the legal system, especially in areas like securities fraud and consumer protection.

History and Origin

The phenomenon of professional plaintiffs gained significant attention in the context of federal securities litigation in the United States, particularly before the mid-1990s. Prior to reforms, it was relatively easy for plaintiffs' lawyers to find individuals to act as named plaintiffs in multiple lawsuits, sometimes with inducements beyond their proportional share of any potential recovery. This practice often led to what critics described as "lawyer-driven" litigation, where the attorneys, rather than the aggrieved investors, held primary control and benefited most from the outcomes.²⁷,²⁶

In response to concerns about abusive securities class actions and the role of professional plaintiffs, Congress enacted the Private Securities Litigation Reform Act (PSLRA) of 1995.²⁵ This landmark legislation aimed to curb such abuses by instituting new rules, including provisions that favored institutional investors as lead plaintiffs in securities cases, with the intent of ensuring that the party with the "largest financial interest" in the relief sought by the class would represent the class.²⁴ The PSLRA sought to shift control of securities class actions from plaintiffs' lawyers back to investors.²³

Key Takeaways

Professional plaintiffs are individuals or entities who serve as named plaintiffs in multiple lawsuits, sometimes as a recurring practice.
Their involvement can raise concerns about whether lawsuits are driven by genuine injury to the broader class or by the pursuit of legal fees.
The Private Securities Litigation Reform Act (PSLRA) of 1995 was enacted, in part, to address issues related to professional plaintiffs in securities class actions.
Courts often scrutinize the "adequacy of representation" for lead plaintiffs, particularly when concerns about professional plaintiff behavior arise.
While initially focused on securities litigation, the concept of professional plaintiffs applies to other areas of law, such as consumer protection and disability rights.

Interpreting the Professional Plaintiff

The presence of a professional plaintiff often leads courts and defendants to scrutinize the motivation behind the lawsuit and the plaintiff's ability to adequately represent the interests of the broader class. The central question revolves around whether the named plaintiff's interests align genuinely with those of all affected individuals or if their primary motive is linked to financial gain from repeated litigation.

For instance, in class action lawsuits, courts are required to ensure that the lead plaintiff is typical of the class and can adequately represent its interests.²² If a plaintiff has a history of initiating numerous lawsuits, particularly in a manner that suggests self-inflicted injury or a business relationship with the attorneys, it can lead to judicial skepticism.²¹,²⁰ Such behavior may prompt a court to deny class certification, asserting that the plaintiff's claims are not typical or that they pose a risk of the litigation focusing on issues unique to their professional plaintiff status rather than the common interests of the class.¹⁹

Hypothetical Example

Consider an individual, Sarah, who has filed five separate lawsuits against five different mid-sized technology companies over the past three years. Each lawsuit alleges a minor, technical violation of a specific consumer privacy regulation related to website cookie policies. Sarah claims to have visited each website, identified the alleged violation, and then initiated the lawsuit. In none of these cases has she demonstrated significant personal damages beyond the technical infraction.

Her pattern of behavior—actively seeking out technical violations across multiple companies and then suing—could lead a court to classify her as a professional plaintiff. If Sarah attempts to file a sixth lawsuit and seek class action status, the defense counsel might argue that she does not adequately represent the broader class of consumers, as her motivation appears to be the act of litigating itself, rather than rectifying a substantive harm experienced by typical users. The court would then need to evaluate if her unique approach to identifying violations compromises her ability to genuinely represent a large, potentially unsuspecting group of consumers.

Practical Applications

The concept of professional plaintiffs has practical implications across several domains of legal and financial litigation:

Securities Class Actions: In the equity market, the PSLRA sought to empower institutional investors, such as large pension funds, to serve as lead plaintiffs. The¹⁸ rationale was that these entities, with their significant financial stakes, would be more motivated to achieve substantial settlements for the entire class and exercise stronger oversight over legal fees. However, some reports suggest that even institutional investors can fall into "frequent filer" patterns, raising ongoing questions about benefits to shareholders.
¹⁷ Consumer Protection Lawsuits: Professional plaintiffs are sometimes observed in areas like the Fair Credit Reporting Act (FCRA) or the Telephone Consumer Protection Act (TCPA). These individuals may apply for numerous jobs or receive a high volume of unsolicited calls specifically to identify technical violations that can form the basis of a lawsuit. Cou¹⁶rts have, in some instances, denied class certification when such a professional plaintiff's behavior created unique defenses or lacked commonality with the proposed class.
¹⁵ Americans with Disabilities Act (ADA) Claims: Another area where professional plaintiffs sometimes emerge is in ADA compliance lawsuits. Individuals may visit numerous businesses to identify minor accessibility violations, which then become the basis for litigation. Critics argue these cases can be driven by a desire for quick settlement rather than substantive improvement in accessibility.
Corporate Governance: The appointment of lead plaintiffs, whether individuals or institutions, impacts corporate governance. Effective lead plaintiffs, especially institutional ones, are associated with more favorable litigation outcomes for the class, including higher settlement amounts, and can influence positive changes in a defendant firm's corporate governance.

##¹⁴ Limitations and Criticisms

Despite the reforms introduced by the PSLRA, criticisms regarding professional plaintiffs persist. One primary concern is that even with larger, institutional lead plaintiffs, the incentives for attorneys may still outweigh the direct benefits for the majority of class members. Some argue that attorneys can still effectively control the litigation, potentially leading to inflated legal fees while providing minimal actual recovery to the broader class of investors or consumers.

An¹³other criticism points to the "loophole" effect, where professional plaintiffs, both individual and institutional, may find ways to circumvent the safeguards intended by the PSLRA. For example, some individual "frequent filers" have been observed to exploit specific areas of law, such as merger and acquisition challenges, filing dozens of cases with little discernible benefit to class members, as often these cases end without a settlement or judgment in favor of the class.

Fu¹²rthermore, the legal system attempts to balance the right of individuals to seek redress for grievances with the need to prevent abuse. Courts evaluate the "adequacy of representation" and "typicality" of the lead plaintiff under procedural rules. However, distinguishing between a genuinely aggrieved party who happens to be litigious and a professional plaintiff who initiates lawsuits as a business model can be challenging. A key differentiating factor often considered is whether the plaintiff's "injury" was self-inflicted or primarily sought out for the purpose of initiating litigation.

##¹¹ Professional Plaintiffs vs. Class Action Lawsuit

The terms "professional plaintiffs" and "class action lawsuit" are related but distinct. A class action is a type of lawsuit where one or more individuals (the named or lead plaintiffs) sue on behalf of a larger group of people (the class) who have similar claims against a defendant. The purpose of a class action is to provide a mechanism for collective redress when individual claims might be too small to pursue independently, and to promote judicial efficiency.

A ¹⁰professional plaintiff, on the other hand, refers to the behavior or identity of the named plaintiff within such a lawsuit (or series of lawsuits). Not all lead plaintiffs in class actions are professional plaintiffs. A lead plaintiff becomes a professional plaintiff when they repeatedly assume this role across multiple, often unrelated, cases, sometimes with the perceived primary intention of generating income through the legal process rather than solely seeking compensation for a genuine, unforeseen injury. The focus shifts from the original injury of a single shareholder or consumer to the plaintiff's recurring involvement in litigation. The concern with professional plaintiffs is that they may compromise the fundamental principle that a class action should genuinely represent the collective interests of all affected parties, rather than being driven by the named plaintiff's or their attorney's financial strategy.

FAQs

What is the role of the lead plaintiff in a class action?

The lead plaintiff in a class action represents the interests of all class members, actively participates in the litigation, works with legal counsel, and approves major decisions like settlements. In ⁹securities class actions, the Private Securities Litigation Reform Act of 1995 (PSLRA) dictates that the lead plaintiff is typically the investor with the largest financial interest.

##⁸# Why are professional plaintiffs controversial?

Professional plaintiffs are controversial because their repeated involvement in lawsuits, sometimes without substantial personal injury beyond a technical violation, raises questions about their motives. Critics argue that they can lead to lawyer-driven lawsuits that primarily benefit attorneys through legal fees, rather than providing meaningful compensation or investor protection for the broader class.,

#⁷#⁶# How does the legal system address professional plaintiffs?

The legal system addresses professional plaintiffs primarily through court scrutiny of the lead plaintiff's "adequacy of representation" and "typicality" under Rule 23 of the Federal Rules of Civil Procedure. Add⁵itionally, the PSLRA of 1995 introduced specific provisions for securities class actions, aiming to give greater control to investors with substantial financial interests, thereby reducing the influence of individuals perceived as professional plaintiffs.

##⁴# Can an institutional investor be considered a professional plaintiff?

Yes, while the term "professional plaintiff" often conjured images of individuals, some institutional investors have also been described as "frequent filers" in securities class actions. This occurs when an institution repeatedly serves as lead plaintiff in numerous cases, which can raise similar questions about the effectiveness of the litigation for the broader class versus the efficiency of the legal process.

##³# What is the Private Securities Litigation Reform Act of 1995 (PSLRA)?

The Private Securities Litigation Reform Act (PSLRA) of 1995 is a U.S. federal law designed to curb abuses in securities class action lawsuits. Key provisions include stricter pleading standards for plaintiffs and rules for appointing a lead plaintiff, typically favoring institutional investors with the largest financial interest to ensure investor control over the litigation.,[^1²^](https://www.govinfo.gov/content/pkg/CRPT-104srpt98/html/CRPT-104srpt98.htm)