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Media Alerts - Radcliffe v. Experian Info. Sols. - Ninth Circuit
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May 3, 2016
  Radcliffe v. Experian Info. Sols. - Ninth Circuit
Area of Law: Civil Procedure, Class Actions

Headline: Ninth Circuit panel holds that California law, that requires per se disqualification when an attorney has been shown to possess a simultaneous conflict of interest in her representation of multiple clients, does not require automatic disqualification in class action cases.

Issues Presented: Whether California law applies its rule of automatic disqualification of class counsel for conflicts of simultaneous representation in a class action context.

Whether the district court abused its discretion in holding that class counsel remained adequate class representatives under Federal Rule of Civil Procedure 23(g)(1).

Brief Summary: Subsequent to consolidation of class action claims against three major credit bureaus, the parties entered into a settlement agreement, which included an incentive awarded to any "Named Plaintiff[] serving as class representatives . . . in support of the Settlement." After an initial approval of the settlement, some of the plaintiffs objected, arguing that the incentive award produced a conflict of interest between the absent class members and the class representatives. The Ninth Circuit panel agreed, finding that the incentive award "changed the motivation for the class representatives" and created a simultaneous conflict of interests. Accordingly, the panel reversed the settlement approval, and remanded with instructions for the district court to "determine when the conflict arose and if the conflict continues under any future settlement agreement."

On remand, the district court denied the objecting plaintiffs' motion for disqualification of lead counsel because the conflict at issue was short-term, produced by an inoperative settlement, and was governed by case law indicating a "willingness to use the disqualification rule flexibly." On second appeal, the Ninth Circuit panel agreed in light of an absence of California policy justifying application of the automatic disqualification rule to class action cases, Federal policy's reluctance toward disqualification of class action counsel, and the mootness of the conflict of interest that was cured when the Ninth Circuit panel reversed approval of the settlement agreement.

Significance: California law does not require automatic disqualification of counsel as class representative in a class action when the attorney is shown to possess a simultaneous conflict of interest.

Extended Summary: This case involves consolidated class action claims against Experian Information Systems, Inc., TransUnion LLC, and Equifax Information Services LLC for violation of the Fair Credit Reporting Act (FCRA) as well as California state law credit reporting regulations. After the district court consolidated a case known as the White lawsuit with a case known as the Hernandez lawsuit, counsel for the plaintiffs in the Hernandez lawsuit ("Hernandez Counsel") was appointed as lead counsel. Subsequent to consolidation of the actions, the parties entered into a $45 million settlement agreement, which included an incentive awarded to any "Named Plaintiff[] serving as class representatives . . . in support of the Settlement." After an initial approval of the settlement, the plaintiffs in the White Lawsuit ("White Plaintiffs") objected, arguing that the incentive award produced a conflict of interest between the absent class members and the class representatives.

On appeal of the settlement agreement to the Ninth Circuit, the panel agreed with the White Plaintiffs that the incentive award "changed the motivation for the class representatives" and thus "class counsel was simultaneously representing clients with conflicting interests." Accordingly, the panel reversed the settlement approval and remanded with instructions for the district court to "determine when the conflict arose and if the conflict continues under any future settlement agreement."

On remand, counsel for the plaintiffs in the White lawsuit ("White Counsel") moved for a disqualification of Hernandez Counsel and argued that California requires an automatic disqualification of counsel upon a finding of a "simultaneous conflict of interest in its representation of multiple clients." In its opposition, Hernandez Counsel cross-moved for re-appointment as interim class counsel. The district court denied White Counsel's motion for disqualification and granted Hernandez Counsel's cross-motion for re-appointment finding that the conflict at issue was short-term, produced by an inoperative settlement (reversed settlement approval), and was governed by case law indicating a "willingness to use the disqualification rule flexibly. White Counsel appealed.

The first issue addressed on appeal was whether "California law . . . require[s] automatic disqualification in class action cases." Hernandez Counsel argued that California's disqualification rule is inapplicable in the class action context while White Counsel contended that California's disqualification rule was applicable because California's case law description of the automatic disqualification rule is expressed in per se terms and does not expressly exclude class actions.


The Ninth Circuit panel first noted that the policy justifications for California's automatic disqualification rule do not apply to class actions. As explained by the California Supreme Court: "A client who learns that his or her lawyer is also representing a litigation adversary, even with respect to a matter wholly unrelated to the one for which counsel was retained, cannot long be expected to sustain the level of confidence and trust in counsel that is one of the foundations of the professional relationship" and that "[t]he most egregious conflict of interest is representation of clients whose interests are directly adverse in the same litigation." The panel concluded that neither circumstance fits the context "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." The panel further concluded that disqualification upon finding some adversity among plaintiffs is not in accord with federal case law that seeks to resolve conflicts of interest by considering the extent of the conflict, whether the conflict has been cured, and the consequence of disqualification of counsel who is most familiar with the lawsuit. The panel further ruled that "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."

Next, the panel addressed White Counsel's contention that the district court erred in holding that the Hernandez Counsel remained adequate counsel. According to White Counsel, the conflict of interest created by the placement of the incentive award in the settlement agreement potentially exposed Hernandez Counsel to civil liability for misconduct, which in turn may encourage Hernandez Counsel to seek an expedited settlement to advance its own interest in avoiding liability. The panel sided with the district court's conclusion "that neither precedent nor policy supports the proposition that potential civil liability renders attorneys inadequate to represent a class."

Lastly, the panel addressed White Counsel's argument that the district court abused its discretion by considering White Counsel's unrealistic damage calculations in determining that Hernandez Counsel is "best able" to represent the class. The panel concluded that consideration of White Counsel's unreasonably high damage valuation was not an abuse of discretion because the district court "carefully analyzed each factor under Rule 23(g)(1)" before ruling that Hernandez Counsel "possessed greater experience and knowledge relevant to [the] case."

For the foregoing reasons, the panel affirmed.

To read full opinion, please visit:

https://cdn.ca9.uscourts.gov/datastore/opinions/2016/03/28/14-56101.pdf

Panel: Before: Mary M. Schroeder and Jay S. Bybee, Circuit Judges and Jon S. Tigar,* District Judge.

Argument Date: November 5, 2015

Date of Issued Opinion: March 28, 2016

Docket Number: 14-5601

Decided: Affirmed.

Case Alert Author: Andre Clark

Counsel: George F. Carpinello (argued) and Adam R. Shaw, Boies, Schiller & Flexner LLP, Albany, New York; Daniel Wolf, Law Offices of Daniel Wolf, Washington D.C.; Charles W. Juntikka, Charles Juntikka & Associates LLP, New York, New York, for Plaintiffs-Appellants.

F. Paul Bland, Jr. (argued), Public Justice, P.C., Washington, D.C.; James A. Francis and David A. Searles, Francis & Mailman, Philadelphia, Pennsylvania; Michael W. Sobol, Lieff, Cabraser, Heimann & Bernstein, LLP, San Francisco, California; Michael A. Caddell and Cynthia B. Chapman, Caddell & Chapman, Houston, Texas; Arthur H. Bryant, Public Justice, P.C., Oakland, California; Stuart T. Rossman and Charles M. Delbaum, National Consumer Law Center, Boston, Massachusetts; Leonard A. Bennet and Matthew Erausquin, Consumer Litigation Associates, P.C., Newport News, Virginia; Lee A. Sherman, Callahan, Thompson, Sherman & Caudill, Irvine, California, for Plaintiffs-Appellees Jose Hernandez, Robert Randall, Bertram Robison, and Kathryn Pike.

Daniel John McLoon, Jones Day, Los Angeles, California, for Defendant-Appellee Experian Information Solutions, Inc.

Stephen J. Newman, Stroock, Stroock & Lavan LLP, Los Angeles, California, for Defendant-Appellee Transunion, LLC.

Author of Opinion: Judge Tiger

Circuit: Ninth

Case Alert Supervisor: Professor Glenn Koppel

    Posted By: Glenn Koppel @ 05/03/2016 03:22 PM     9th Circuit  

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