Class Action

Class Action Defense Settlement Cases–Rodriguez v. West Publishing: Ninth Circuit Affirms Approval Of Class Action Settlement Of Antitrust Class Action But Remands For Further Consideration Of Incentive And Attorney Fee Awards

By Michael J. Hassen

District Court Approval of Antitrust Class Action Settlement did not Require Reversal due to Conflict of Interest with Certain Class Representatives because Other Class Representatives did not Share Conflict so Error was Harmless Ninth Circuit Holds

Plaintiffs filed a class action against West Publishing and Kaplan alleging antitrust violations; the class action complaint asserted that individuals who purchased BAR/BRI courses from defendants to prepare for bar examinations paid more than they should have because of defendants’ anticompetitive conduct. Rodriguez v. West Publishing Corp., ___ F.3d ___ (9th Cir. April 23, 2009) [Slip Opn., at 4743, 4752-53]. An amended class action complaint was filed adding additional named plaintiffs, who had been plaintiffs in a related class action entitled Brewer v. West Publishing. Id., at 4752. The class action sought more than $300 million in damages, id., at 4753-54. Eventually, the district court certified the litigation as a class action, id., at 4754. The court appointed all of the named plaintiffs as class representatives, and appointed class counsel, id., at 4752. The parties entered into settlement discussions and signed an agreement that called for defendants to pay $49 million in settlement; three of the class representatives (“the Class Representative Objectors”) objected to the proposed class action settlement and refused to sign it. Id., at 4755. The district court gave preliminary approval of the settlement over the objection of the Class Representative Objectors, id., at 4755-56. The Class Representatives were to receive $25,000 as incentive awards, but the Class Representative Objectors were to receive $75,000 as incentive awards. Id., at 4756. In the end, 54 objections were filed to the proposed class action settlement, id. The plaintiffs in the original Rodriguez class action complaint had a fee agreement with a prior law firm that contained a graduated incentive award, and some of those plaintiffs agreed to reduce their incentive award to $25,000, but the Class Representative Objectors did not. Id., at 4756-57. Ultimately, the district court approved the class action settlement (though it denied incentive awards in their entirety), and six groups of objectors appealed. Id., at 4757. “Their principal objection relates to incentive agreements that were entered into at the onset of litigation between class counsel and five named plaintiffs who became class representatives.” Id., at 4750. They objected also to the district court’s reliance on an estimate of single damages, rather than treble damages, in finding the $49 million payment to be fair, reasonable and adequate. Id. The Ninth Circuit affirmed the settlement.

The Ninth Circuit noted that “Much of the appeal turns on the presence — and nondisclosure to the class — of the incentive agreements.” Rodriguez, at 4758. The Court explained that while such awards are “fairly typical in class action cases,” id., providing for incentives in a fee agreement is “quite different” because only the district court can determine the appropriate award, but the fee agreements in this case “tied the promised request to the ultimate recovery and in so doing, put class counsel and the contracting class representatives into a conflict position from day one,” id., at 4758-59. The Circuit Court held that this conflict should have been disclosed at the class action certification stage, not at the time for approval of a proposed class action settlement. Id., at 4759. If the potential conflict had been disclosed timely, then “the district court would certainly have considered its effect in determining whether the conflicted plaintiffs…could adequately represent the class. “ Id. As the Ninth Circuit explained at page 4759, “An absence of material conflicts of interest between the named plaintiffs and their counsel with other class members is central to adequacy and, in turn, to due process for absent members of the class.” (Citation omitted.)

Full post as published by Class Action Defense Blog on April 27, 2009 (boomark / email).