First of all, I want to encourage everyone to get to the polls today and vote! I certainly will be voting today (Go Hillary!).
When I was reading the Walker opinion for my post yesterday, I realized the Ninth Circuit had handed down an opinion on a similar subject earlier this year (March) that I hadn't covered yet.
In Radcliffe v. Hernandez, 818 F.3d 537 (9th Cir. 2016), the court considered whether the attorneys who had included improper promises concerning incentive awards in a class action settlement agreement, thereby creating a conflict of interest for class counsel between the class representatives and the unnamed class members, should be disqualified from continuing to represent the class. In 2013, the Ninth Circuit had reversed final approval of the settlement because of the incentive award provisions. See Radcliffe v. Experian Information Solutions, Inc., 715 F.3d 1157 (9th Cir. 2013) (briefly discussed in this blog post).
On remand, the objectors who had obtained that reversal moved to disqualify the firms previously appointed as lead counsel, who had negotiated the settlement with the problematic provisions. The district court denied the motion, but certified the questions to the Ninth Circuit, which granted permission to appeal. 818 F.3d at 540-41. The Ninth Circuit affirmed, holding that "California law does not require automatic disqualification in class action cases." Id. at 541.
In so holding, the Court considered a number of California decisions involving conflicts in non-class cases, but concluded that none of these:
fits the circumstances of the lawyer who represents a class of plaintiffs whose interests may in some ways be adverse to each other, but all of whose interests are adverse to the defendant. In a class action, conflicts often arise not because an attorney simultaneously represents litigation adversaries but because they simultaneously represent different members of the same class who develop divergent interests regarding how to prevail on their shared claims. Thus, in Radcliffe I, we explained that the conditional incentive award was improper because it “undermined [the named plaintiffs'] ability to ‘fairly and adequately protect the interests of the class.’ ” Radcliffe I, 715 F.3d at 1165 (quoting Fed. R. Civ. Pro. 23(a)(4)). “This requirement is rooted in due-process concerns—‘absent class members must be afforded adequate representation before entry of a judgment which binds them.’ ” Id. (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998)). These concerns with adequate representation and due process for absent party members are simply not present in individual plaintiff suits. And because the California Supreme Court has never discussed the automatic disqualification rule in the context of class actions, it also has never been required to confront the ethical issues and conflicts of interest that are unique to class action cases. Given this vacuum, we are not willing to assume that California courts would apply the same disqualification rules to a class action case as they do in individual plaintiff cases.
Id. at 544-45. In particular, given the specific type of conflict that the settlement agreement created, disqualification was not warranted:
[I]n this case the district court could reasonably conclude that the conflict of interest was appropriately cured when we rejected the settlement agreement that contained the improper conditional incentive award. This conflict was not inherent to the relationship between Hernandez Counsel [i.e., class counsel] and the rest of the class but rather, as in Rodriguez, resulted from a particular provision in an agreement that was later held invalid.
Id. at 546. The opinion goes on to hold that class counsel remained adequate to represent the class and should not be replaced by objectors' counsel. Id. at 547-49.
The opinion concludes:
We previously found that Hernandez Counsel created a significant conflict of interest between themselves, their clients, and the rest of the class, and nothing in the present order diminishes or qualifies that holding. We are not convinced, however, that the conflict we found requires automatic disqualification of class counsel. We believe that, given the unique ethical and due process concerns involved in class actions, district courts must have the discretion to address attorney representation and disqualification issues based on the details of each case, and we further believe the California Supreme Court would agree. Accordingly, we hold that the district court did not abuse its discretion in denying White Counsel's motion to disqualify Hernandez Counsel and to be appointed as class counsel, and granting Hernandez Counsel's cross-motion to be appointed as class counsel.
Id. at 549.