Class Action Fiduciary Duties and Court’s Continuing Equitable Authority To Do Justice Justified The Lower Court’s Decision To Award Attorneys Nothing.
Lofton v. Wells Fargo Home Mortgage, Case No. A146282 (1st Dist., Div. 3 Sept. 28, 2018) (published) is a stark reminder to attorneys that trial courts have broad jurisdiction to administer justice and make sure that “secret” fee deals of a separate nature are cut in a related class action context unless there is court approval.
What happened in a prior appeal was that the appellate court affirmed a TRO by which attorneys were ordered to deposit into court over $5 million in settlement proceeds claimed as attorney’s fees in cases brought against Wells Fargo, based on the theory that the attorneys were compensating themselves out of a separate settlement without court approval which really related to representing a class action which was resolved through a separate $15 million settlement. The appellate court in that prior appeal also remanded, based on the trial court’s continuing jurisdiction under various grounds (including the equitable authority to administer justice), to gauge whether disgorgement of all or some of the $5 million was in order.
The lower court decided that no fees should be awarded to attorneys; instead, it ordered the escrowed moneys paid to class members who filed claims in the settled class action matter.
Attorneys’ appeal did not disrupt the trial judge’s injunctive relief/disgorgement orders. The reason was that the trial judge did have exclusive concurrent jurisdiction given that a common fund settlement was at issue, since the settlement money belonged to the class subject to fee allocation to attorneys to prevent unjust enrichment by the court. The attorneys did not ask for fees, but really only challenged jurisdiction. Coupled with their nondisclosure of the separate agreement not subject to court approval, plenty of equities justified the disgorgement ordered by the lower court.