Friday, April 24, 2009
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Ninth Circuit Affirms Approval of BAR/BRI Settlement Agreement
By SHERRI M. OKAMOTO, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed U.S. District Court Judge Manuel L. Real’s approval of a $49 million settlement between West Publishing Corporation, Kaplan Inc. and a class of nearly 300,000 law school graduates who took a BAR/BRI course between 1997 and 2006.
Under the terms of the settlement reached in February 2007, about $36 million of the total is to be distributed among the class members based on tuition amounts paid. Class members’ recovery is to be capped at 30 percent of tuition paid.
Ryan Rodriguez and Reena B. Frailich filed the initial action in 2005, and were later joined by Loredana Nesci, Jennifer Brazeal, and Lisa Gintz. That action was then consolidated with a related claim by Kari Brewer and Lorraine Rimson.
All seven individuals were designated as class representatives and McGuire Woods LLP was appointed class counsel.
The operative complaint alleged that West—BAR/BRI’s parent company— had engaged in numerous acts of anticompetitive conduct, such as entering a market division agreement with Kaplan to keep Kaplan from entering the bar exam preparation market and maintaining entry barriers to that market. It sought actual damages of $300 million, treble damages and injunctive relief.
$49 Million Fund
After three months of settlement negotiations, West and Kaplan agreed to pay $49 million into a settlement fund that would be allocated pro rata to class members based on the amount each paid for BAR/BRI courses relative to the amounts paid by all other class members who filed an allowable claim.
On March 26, 2007, over the objections of Rodriguez, Nesci and Gintz, the district court granted preliminary approval of the settlement and directed that notice of the settlement be sent to the class.
The Settlement Notice informed class members that class counsel would seek 25 percent of the settlement fund for attorney’s fees and expenses. It further stated that class counsel was requesting incentive awards of $25,000 for Brazeal, Brewer, Frailich and Rimson, and $75,000 for Gintz, Nesci and Rodriguez.
Retainer Agreements
However, in their retainer agreements with Van Etten Suzumoto & Becker—which had preceded McGuireWoods LLP as counsel—Rodriguez, Frailich, Nesci, Brazeal and Gintz had entered into an incentive arrangement that obligated the attorneys to seek awards of $75,000 if the settlement were to exceed $10 million.
By the time the motion seeking the incentive awards was filed, Brazeal and Frailich had agreed to lower their request to $25,000, but the three representatives who had objected to the settlement—Gintz, Nesci and Rodriguez—did not.
The two remaining class representatives—Brewer and Rimson—were not parties to the incentive agreement and were separately represented by Finkelstein Thompson LLP and Zwerling, Shachter & Zwerling LLP, but class counsel sought awards of $25,000 for each of them.
Several objectors questioned various aspects of the settlement at the final fairness hearing, but the district court approved the settlement in September 2007. The court also denied the motion for incentive awards to all seven class representatives.
Six groups of objectors appealed, asserting that the class had not received adequate representation because of the conflict of interest between the representatives and the class created by the incentive agreements.
Writing for the appellate court, Judge Pamela Ann Rymer agreed. “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,” she wrote.
The agreements gave the representatives an interest in a higher monetary settlement as opposed to other remedies, which set them apart from the class, and “infect[ed] the class action environment with the troubling appearance of shopping plaintiffships,” she added.
‘Unacceptable Disconnect’
Due to the “unacceptable disconnect” between the class representatives and the class, Rymer explained that the incentive agreements could not be enforced, but reasoned that the settlement could still stand because only five of the seven representatives had entered into the agreements.
Noting that class counsel had “vigorously prosecuted the case through to a fair settlement with the participation of two non-conflicted law firms that represented class representatives Brewer and Rimson,” Rymer concluded the class had been adequately represented.
Rymer, joined by Judges Diarmuid F. O’Scannlain and Kim McLane Wardlaw, reversed and remanded the award of attorney fees to class counsel for consideration of the effect, if any, of the incentive agreements on entitlement to fees.
The panel also reversed and remanded the denial of fees to the objectors’ counsel for a determination of a reasonable award based on their contribution to the denial of the requests for the incentive awards.
The case is Rodriguez v. West Publishing Corporation, 07-56643.
Copyright 2009, Metropolitan News Company