Ninth Circuit gives some solace to class action objectors when it directs trial court to re-consider whether a fee award to objectors' counsel is justified

NinthClass action objectors don’t get much love. Usually the trial court overrules their objections. Usually their attorneys get nothing or some sliver of fees paid out by class counsel to buy the objector’s silence. But in Rodriguez, et al. v. West Publishing Corporation, et al. (April 23, 2009), the Ninth Circuit gives a little bit of that much-needed love to some objectors. But first, the bad news for the objectors: the Court affirmed the trial court’s approval of a class action settlement in the antitrust class action brought by those who purchased BAR/BRI bar review course materials between August 1, 1997 and July 31, 2006.

Now the good news for the objectors: the Court remanded the matter for consideration of several issues, including whether the class counsel fee award should be reduced and whether the objectors’ counsel should receive some compensation for benefits conferred upon the class:

The district court should have recognized that Objectors’ position on the impropriety of incentive agreements had some effect on its decision to deny the request for incentive awards; and it should have considered what effect, if any, the ethics implications of a conflict of interest created by the incentive agreements had on class counsel’s request for an award of attorney’s fees.

Therefore, we affirm approval of the settlement. We reverse and remand the award of attorney’s fees to class counsel for consideration of the effect, if any, of the incentive agreements on entitlement to fees. We also reverse and remand the denial of fees to Objectors’ counsel for a determination of a reasonable amount given their contribution to the denial of the requests for incentive awards.

(Opinion, at pp. 4776-77.) Class counsel bought themselves quite a bit of unnecessary grief by including some provisions in their retainers that promised requests for incentive awards of specific size if various settlement value targets were achieved:

By tying their compensation — in advance — to a sliding scale based on the amount recovered, the incentive agreements disjoined the contingency financial interests of the contracting representatives from the class. As the district court observed, once the threshold cash settlement was met, the agreements created a disincentive to go to trial; going to trial would put their $75,000 at risk in return for only a marginal individual gain even if the verdict were significantly greater than the settlement. The agreements also gave the contracting representatives an interest in a monetary settlement, as distinguished from other remedies, that set them apart from other members of the class. Further, agreements of this sort infect the class action environment with the troubling appearance of shopping plaintiffships. If allowed, ex ante incentive agreements could tempt potential plaintiffs to sell their lawsuits to attorneys who are the highest bidders, and vice-versa. In addition, these agreements implicate California ethics rules that prohibit representation of clients with conflicting interests. See Image Tech. Serv., Inc. v. Eastman Kodak Co., 136 F.3d 1354, 1358 (9th Cir. 1998) (noting that “[s]imultaneous representation of clients with conflicting interests (and without informed written consent) is an automatic ethics violation in California”); Flatt v. Superior Court, 885 P.2d 950, 955 (Cal. 1994).

(Opinion, at pp. 4760-61, footnote omitted.) Not a great outcome when the Ninth Circuit goes out of its way to note various ethics rules that are “implicated” by the conduct of class counsel. Beyond this case (in which counsel actually obtained a commendable $49 million settlement), the result, if any, will be to encourage objectors to try their luck in contesting a settlement in the hope that some modest fee award is issued by the trial court to safeguard against any appellate review.