Benchslaps

Judge Benchslaps Class Action Firm

This judge does not take kindly to this class action law firm's antics...

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Say you’re a plaintiff’s firm. You take plenty of cases not knowing what, if any, payday is in your future. So maybe you’re a little aggressive about some fee arrangements… what can go wrong? Well, just don’t hide your arrangement from the court. Otherwise you could find yourself divested of $5 million.

That’s what happened to Initiative Legal Group (ILG) when they struck a $6 million settlement deal (over wage-and-hour claims against Wells Fargo Home Mortgage) then told their clients to file settlement claims in a related class action so the clients could receive… lower payments. Having hid this payday from the court, San Francisco Superior Court Judge Mary Wiss decided the firm was entitled to — nothing.

Having concealed its purported fee agreement from the court and having tried to appropriate those funds to itself without court approval, this court determines that ILG is not entitled to any of the claimed fees.

Well this doesn’t sound good. But I guess that’s a risk when a class action is mediated together with an individual action (albeit with a large number of plaintiffs). Those individuals in the related suit are still, technically, class members, so, in the instant case, when ILG told them to file class claims in that settlement (and gave the plaintiffs compensation for a release of claims) they did just that. This left the lion’s share of the individual suit’s settlement (~$5 million) as an ILG payment.

Not so fast! As The Recorder reports, Judge Wiss doesn’t find any of these facts amusing. And sought to right these perceived wrongs:

As stated by the Court of Appeal, ‘there is a question on this record whether ILG is entitled to any fees at all,'” Wiss wrote. “Given the record before it, this court concludes that the answer to that question is ‘no.’

For their part, ILG is obviously unhappy with Judge Wiss’s decision:

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Klinedinst partner Natalie Vance, who represents ILG, said the firm is studying its options, including a possible appeal. “ILG continues to dispute that the class action court here had authority to take control of the fees ILG earned and its clients agreed to for representation in their individual cases litigated in other counties around the state,” she said.

But, pending an appeal, it is something they’ll have to live with. And it remains a reminder for the rest of the lawyers out there — if you’re going to bluff your way through settlement strategies, make sure it doesn’t blow up in your face.

Judge Blasts Class Action Firm Over $5 Million Fee Grab [The Recorder]

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