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Posts Tagged ‘conflict of interest’

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.

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It’s that time of the week already.  Here are some blog postings from the past week that might be of interest to class action practitioners. 

The fallout from several plaintiffs’ class action corruption scandals took center stage in the class action blogosphere this week.

Mass Tort Litigation Blog discusses the sentencing of plaintiffs’ class action lawyer Melvyn Weiss…

http://lawprofessors.typepad.com/mass_tort_litigation/2008/06/mel-weiss-recei.html

… and discusses a possible settlement involving his firm:

http://lawprofessors.typepad.com/mass_tort_litigation/2008/06/milberg-llp-nea.html

See the many other blog entries discussing Mr. Weiss’ sentencing here:

http://www.sphere.com/search?q=sphereit:http://legalblogwatch.typepad.com/legal_blog_watch/2008/06/if-kickbacks-ar.html

Class Reactions quotes a less-than-remourseful class action attorney William Lerach discussing his views on the social benefits of his acts of “fee-sharing” and his belief of the injustice of his imprisonment for those acts …

http://classreactions.com/?p=28

… and see Mr. Lerach’s essay entitled “I am Guilty (My Side of the Story)” at Conde Nast Portfolio.com:

http://www.portfolio.com/executives/features/2008/06/02/Bill-Lerach-Essay

Overlawyered discusses developments in the Kentucky fen-phen settlement fraud scandal:

http://overlawyered.com/2008/06/another-victim-in-the-kentucky-fen-phen-settlement-fraud/

The Complex Litigator provides a critical review whether a recent California Court of Appeal decision addressing the California Song-Beverly Credit Card Act truly “limits” the scope of the Act’s protections of credit card holders:

http://www.thecomplexlitigator.com/2008/05/tjx-companies-i.html (responding to this entry in the Privacy Law Blog; also see a recent entry on the same case from Class Action Defense Blog here)

Class Action Defense Blog and Wage and Hour Blog both have summaries of a recent decision by the California Court of Appeal addressing alleged conflicts of interest by plaintiffs’ counsel and the named plaintiffs where the attorneys represented both individual class representatives and a labor organization interested in promoting union organizing efforts by class members:

http://classactiondefense.jmbm.com/2008/06/class_action_defense_casesshar.html

http://wagelaw.typepad.com/wage_law/2008/06/union-attorneys-can-represent-non-union-employees-in-wage-hour-class-actions.html

D&O Diary discusses potential insurance implications arising from cooperation given by former executive to plaintiffs’ counsel in a class action filed against the executive’s company (where the executive had previously pled guilty to criminal charges arising out of the same scandal):

http://www.dandodiary.com/2008/05/articles/d-o-insurance/former-refco-ceo-aids-class-action-plaintiffsan-insurance-issue/

The UCL Practitioner has an interesting analysis of a press release issued by the San Francisco City Attorney regarding a public prosecutor’s UCL action being brought on behalf of the San Francisco Health Plan and other political subdivisions and California citizens.  The plaintiffs are reportedly being jointly represented by the City Attorney’s office and a private class action firm.

http://www.uclpractitioner.com/2008/05/san-francisco-c.html

Point of Law provides a link to a position paper by California Senator Tom Harman entitled “Incentivizing Appropriate Restitution in Class Action Cases.  (For a previous discussion on ClassActionBlawg.com regarding legislation proposed by Senator Harman, click here).

http://www.pointoflaw.com/archives/2008/06/state-senator-calls-for-tying.php

Classified provides a summary of a recent decision by the U.S. Court for the Middle District of Georgia dismissing a class action regarding “guaranteed auto protection insurance policies” due to the plaintiffs’ failure to provide notice of cancellation required under the policy:

http://www.carltonfields.com/classactionblog/blog.aspx?entry=215

Healthcare HR Solutions Blog comments on an increase in wage and hour class action litigation and provides tips on how employers can avoid potential Fair Labor Standards Act (FLSA) liability:

http://healthcarehrsolutions.com/blog/2008/05/29/increase-in-wage-and-hour-class-action-litigation/

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