Rodriguez v. Disne

Facts

The law firm of Van Etten, which later merged with McGuire-Woods entered into 'incentive agreements' with five plaintiffs, Rodriguez, Frailich, Nesci, Brazeal, and Gintz, in connection with a potential antitrust class action against West Publishing. These clients authorized Van Etten to apply to the court for a fee award based on recovery against West Publishing. Van Etten agreed to seek incentive compensation for each client in an amount equal to between $10,000 and $75,000, depending on the value of the settlement or verdict. If the settlement amount was greater than or equal to $500,000, class counsel would seek a $10,000 award for each client who signed an agreement; if the settlement amount were $1.5 million or more, counsel would seek a $25,000 award; if it were $5 million or more, counsel would seek $50,000; and if it were $10 million or more, counsel would seek $75,000. Ps brought federal antitrust claims against BAR/BRI and Kaplan, for their activities in the market for bar preparation courses. The district court certified a nationwide class comprised of all persons who purchased a bar review course from BAR/BRI between August 1, 1997, and July 31, 2006. The five Ps who signed the incentive agreements were designated as class representatives, and McGuire Woods was appointed class counsel. Brewer and Rimson did not enter into incentive agreements and were separately represented by the law firms Zwerling Schachter and Finkelstein Thompson LLP. Under the settlement agreement, West Publishing and Kaplan agreed to pay $49 million into a settlement fund that would be allocated pro rata to class members, with 25 percent of the fund set aside for attorneys' fees. Woods filed motions seeking $325,000 in incentive awards for the class representatives and seeking fees for their representation of the class. Nonnamed members of the class challenged the fairness, reasonableness, and adequacy of the settlement and objected to the applications for $325,000 in incentive awards for the class representatives. Nonnamed members of the class challenged the fairness, reasonableness, and adequacy of the settlement and objected to the applications for $325,000 in incentive awards for the class representatives and class counsel's fee request. These nonnamed class members, organized into groups of objectors. The Schneider Objectors argued that the court should reduce Woods's fee award because the incentive agreements created a conflict of interest between class counsel and the five representatives who had entered into the agreements and the remaining members of the class. The district court approved the settlement agreement despite the conflict of interest between class representatives and class members. The court awarded Woods over $7 million but declined to approve incentive awards totaling $325,000 to the class representatives. It held that the incentive agreements created an appearance of impropriety, violated the ethics rule against fee-sharing with non-lawyers, and created conflicts of interest between the class representatives and unnamed class members. The court denied fees to the objectors' counsel. Parties appealed. On remand, the district court concluded that the incentive agreements gave rise to a conflict of interest between the class representatives and the other members of the class that 'tainted Woods's representation,' and that, under California law, such a conflict 'constitutes an automatic ethics violation that results in the forfeiture of attorneys' fees.' Simultaneous representation of clients with conflicting interests and without written informed consent is an automatic ethics violation in California and grounds for disqualification,  and that attorney cannot recover fees for such conflicting representation. The court disallowed attorney fees to Woods and awarded the costs and expenses it incurred in bringing the action, and a quantum meruit award of $500,000 for services provided after the court's rejection of the incentive awards, at which point the conflict of interest had come to an end. The district court denied all objectors' fee requests, reasoning that it had relied on its own analysis of the applicable case law in reaching its determination that Woods was not entitled to fees due to the conflict of interest, and that 'the work performed by the objectors' counsel conferred no benefit on the class' and 'was merely cumulative.' Woods and six objector groups appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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