Hernandez, et al. v. Experian Information Solutions Inc, et al.
- Summarized by Lars Fuller , BakerHostetler
- 8 years 9 months ago
- Citation:
- No. 14-56101 (9th Cir. March 28, 2016) (Published)
- Tag(s):
-
- Ruling:
- The 9th Circuit affirmed the district court’s (C.D. Cal.) order denying a motion to disqualify counsel from representing plaintiffs in a consumer class action alleging breaches of the Fair Credit Reporting Act arising out of misreporting of debts discharged in bankruptcy. The court of appeals previously held that certain named plaintiffs and their counsel (appellees) created a conflict of interest by conditioning incentive awards for the class representatives on their approval of a proposed settlement agreement. On remand, other named plaintiffs and their counsel (appellants) moved the district court to disqualify appellees’ counsel from representing the class based on that conflict. Affirming the denial of the disqualification motion, the panel agreed with the district court that California does not apply a rule of automatic disqualification for conflicts of simultaneous representation in a class action context. The panel held that the district court did not abuse its discretion in determining that appellees’ counsel would adequately represent the class.
- Procedural context:
- On remand, following reversal by the 9th Circuit, one set of class action plaintiffs moved the district court to disqualify counsel for the other set of class action plaintiffs, alleging a conflict arising out of a proposed settlement. The district court rejected the argument and denied the motion. The challenging plaintiffs' appealed to the 9th Circuit.
- Facts:
- Two sets of plaintiffs commenced two class actions alleging Fair Credit Report Act violations from misreporting by credit rating agencies of debts discharged in bankruptcy. Cases were consolidated. Each set of plaintiff was represented by different attorneys, and each vied to represent consolidated class. Following mediation with defendants, the parties reached a settlement agreement for injunctive relief, which was approved in August 2008 and was not disputed by any party. In February of 2009, the parties then reached a monetary settlement for a total amount of $45 million. The settlement included incentive awards for each named plaintiff not to exceed $5,000, which were awardable to any class representative. The agreement was preliminarily approved in May 2009. The district court held a series of fairness hearings on the monetary settlement. One set of plaintiffs objected to it, in part due to the discrepancy between the settlement and the potential recoverable damages. They also argued that conditioning the incentive awards on named plaintiffs’ agreement with the settlement created a conflict of interest between the class representatives and the absent class. The court approved the settlement, and the objecting plaintiffs appealed to the Ninth Circuit. In Radcliffe I, the Ninth Circuit agreed that the conditional incentive award created a conflict of interest. The Ninth Circuit noted that incentive awards for serving as class representatives are often appropriate, but cautioned that they should be scrutinized carefully, because special incentives could create a conflict of interest, in that class representatives might become more concerned with
maximizing incentives than with judging the adequacy of the settlement as it applies to the class members at large. The Ninth Circuit held that under the facts, conditioning the incentive awards for the class representatives created a conflict of interest for the class representatives. The Ninth Circuit reversed the settlement as well as awards
of attorneys’ fees and costs. On remand, the Ninth Circuit instructed the district court to determine when the conflict arose and if the conflict continues under any future settlement agreement. Should the district court approve such an agreement, it could then exercise its discretion in deciding whether, and to what extent, class counsel would be entitled to fees
under the common-fund doctrine. On remand, appellants (one set of plaintiffs) moved the district court to disqualify appellees’ counsel (representing other set) from representing the class based on that conflict. They contended that under California law, attorneys with simultaneous conflicts of interest in a case must be automatically disqualified. The district court rejected argument and denied the motion. One set of plaintiffs' counsel filed a motion to disqualify counsel for the other set of plaintiffs and to serve as interim class counsel. They argued that disqualification was mandatory under California law because any counsel’ simultaneous conflict of interest in its representation of multiple clients must result in automatic disqualification. The existing class counsel opposed the motion and filed a crossmotion to be re-appointed as interim class counsel. On May 1, 2014, the district court denied the challenging counsel's motion and granted the existing class representative counsel's motion. The challenging plaintiffs' appealed.
- Judge(s):
- Schroeder, Bybee, Tigar
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