Wednesday, January 19, 2011

First District Holds No Conflict of Interest Created By Counsel’s Concurrent Representation of Settlement Objector and Overlapping Class Action: Kullar v. FootLocker

On January 18, 2011, the First District (Division 3) upheld a trial court order declining to disqualify counsel representing the plaintiff in an apparent tag-along class action based on counsel’s simultaneous representation of that individual in her objection (and subsequent appellate challenge) to the fairness of a settlement in the first-filed action. See Kullar v. FootLocker, __ Cal.App.4th __ (2011). The motion, brought by the defendant in both actions, claimed that “[b]y knowingly representing both the objectors to the Kullar v. Foot Locker settlement and putative class members in the Echeverria v. Foot Locker case who want to participate in that settlement, [counsel] has a conflict of interest that requires disqualification from both matters.” Slip Opinion, at 3. More simply stated, Foot Locker claimed that counsel could not represent the class in the tag-along action because it took a position adverse to that very same class by objecting to a settlement the class favored.

The Court disagreed. In addition to concluding that counsel had no attorney-client relationship with the class absent certification in the tag-along action (i.e. precluding the requisite “relationship” on which to hang an actual conflict) [id., at 5-6], the Court concluded that no actual conflict existed. The Court reasoned that Foot Locker’s claim of “conflict” was predicated upon on the false premise that there mere failure to object or opt-out equates to an affirmative showing of approval by the class as a whole. See id., at 6-7. According to the Court, something more is needed. By way of contrast, the Court explained that an actual conflict may be shown by evidence that counsel also represented other class members who submitted a claim in the settlement, as this would constitute a concrete conflict between actual clients. See id., at 7 (citing Moreno v. Autozone, Inc., 2007 U.S. Dist. Lexis 98250 (N.D.Cal. 2007)).

Although I believe that the Court's analysis may have gone a bit far hailing the virtues of the class action objector (as every settlement is a compromise, and thereon, susceptible to the claim that "more" recovery is in the interest of the class), the Court's above analysis does provide another basis to deal with unscrupulous objector counsel.  I previously wrote an article on this topic, which may be found here (although I don't take ownership for the horrible title the DJ assigned to it).

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