Two Is a Crowd: Over $7 Million in Attorney's Fees Denied Because of Conflicts of Interest

• Jurisdiction: United States,Federal,California
• Citation: Vol. 16 No. 11
• Publication year: 2012
• Year: 2012

Two Is a Crowd: Over $7 Million in Attorney's Fees Denied Because of Conflicts of Interest

by Evan R. Shirley

We all know that simultaneously representing two or more clients that have conflicting interests may result in disqualification, an ODC investigation, and unhappy clients under Hawaii Rules of Professional Conduct ("HRPC"), Rule 1.7(a). Recently, the Ninth Circuit sent a message that there may be another adverse consequence — the denial of a potential fee award.

Rodriguez v. Disner, 688 F.3d 645 (9^th Cir. 2012) (Rodriguez II) involved two sets of plaintiffs who brought an antitrust class action in the Central District of California against bar exam review course companies BAR/BRI (owned by West Publishing) and Kaplan, Inc. The primary claim was that West illegally acquired the assets of its direct competitor, West Bar Review, in violation of the Clayton and Sherman Acts and wrongfully monopolized the market.

The plaintiffs' law firm entered into "ex ante" [before the event] incentive agreements entitling the five clients who agreed to be individually named in the class action, and who ultimately were appointed as class representatives, to sliding-scale payments that varied between $10,000 and $75,000 each depending upon the amount of the settlement or verdict. The class was never informed of these agreements and there was no disclosure to the court until well after the preliminary hearing on the settlement. Two other class representatives did not have incentive agreements and were represented by separate counsel.

During the settlement approval proceedings, certain groups of absent class members argued that the monetary "incentive arrangements" to the five class representatives created conflicts of interest between the named and absent class members, constituted impermissible fee sharing between lawyers and clients, and resulted in conflicted rep-resentation.¹

The district court approved the settlement and awarded attorneys fees of over $7 million to the law firm representing the incentive representatives. However, it declined to approve incentive awards to the five class representatives, holding that the incentives created an appearance of impropriety, violated the fee-sharing rule with non-lawyers, and created conflicts of interest between the class representatives and unnamed class members.² Six groups of objectors appealed the fee award.

In Rodriguez v. West Publishing Corporation, 563 F.3d 948 (9th Cir. 2009) ("Rodriguez I"), the Ninth...