Last July, in an entry titled Incentive Awards Ok, but Not Incentive Agreements, I commented on the Ninth Circuit Court of Appeals’ decision in Rodriguez v. West Publishing Corp. In Rodriguez, the Ninth Circuit panel condemned the use incentive agreements in class actions. The incentive agreements were engagement agreements between the law firm and the named class representatives that called for the attorneys to seek successively higher incentive payments to the class representatives in the event of class settlements or verdicts in successively higher dollar amounts. As the court in Rodriguez noted, incentive agreements are to be distinguished from incentive awards, which if reasonable in amount are widely accepted as compensation for the named plaintiff’s assistance with and risk assumed in prosecuting the case. The incentive agreements at issue in Rodriguez had not been disclosed prior to preliminary approval of the settlement or notice to the class. As noted in the July entry, the Ninth Circuit nonetheless upheld approval of the settlement as fair and reasonable, but remanded to the trial court for further proceedings regarding the requests by plaintiffs’ counsel for an award of attorney’s fees.
Earlier this month, the trial court entered a final order on attorney’s fees and costs requested by attorneys for the representative plaintiffs and objectors. The court held that in light of the Ninth Circuit’s opinion, and under California law, one of the firms representing the plaintiffs, McGuire Woods, had forfeited any right to recover attorney’s fees because it had performed the legal services on behalf of different clients, the class and the class representatives, that had a conflict of interest. As a result, the firm will receive no attorney’s fees at all, as compared to the $15 million that the firm had requested for its part in obtaining the $49 million settlement for the benefit of the class. The court awarded approximately $1.5 million each in attorney’s fees to two additional firms that it concluded were not involved in the conflict of interest.
Ashby Jones of the WSJ Law Blog, has authored a comprehensive article discussing the recent trial court decision and the history of the case, entitled The Class Gets $49 Million, But the Lawyers Get Nothing.