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Thursday, January 20, 2011

Kullar v. Foot Locker II: Court Refuses to Disqualify Class Counsel Based on Representation of Objectors in Overlapping Action

Kullar v. Foot Locker Retail, Inc. (1/18/11) --- Cal.App.4th ----, 2011 WL 135771, is an interesting, albeit unusual case.

In Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, employees brought a class action against their employer for Labor Code violations including requiring purchase of work uniforms, withholding wages for purchase of work uniforms, failure to compensate for all hours worked or at the minimum wage, and failure to provide meal and rest periods. The trial court (San Francisco Superior, Judge Kramer) approved a settlement, over the objection of certain class members. The objectors appealed, and the Court of Appeal reversed, holding that the trial court lacked sufficient information to determine that the settlement was fair and reasonable.

Prior to the final approval order in Kullar, the objectors filed their own class action, partially overlapping Kullar, in Alameda County Superior Court. Echeverria I. That action was stayed pending Kullar. The same objectors, represented by the same attorneys, filed yet another overlapping action, this one in San Francisco Superior Court. Echeverria II. This action also was stayed.

On remand, the trial court again gave final approval to the settlement in Kullar. The objectors dismissed Echeverria I, and the court lifted the stay in Echeverria II. Foot Locker then moved to disqualify Qualls and Workman, the firm that represented the objectors in Kullar and the plaintiffs in Echeverria I and Echeverria II. The trial court denied the motion, and Foot Locker appealed. The Court of Appeal affirmed, finding no conflict of interest between the Echeverria II plaintiffs, or their counsel, and the class of individuals they seek to represent:
[A]s the trial court observed, there is no conflict of interest requiring disqualification. The issue to which the objectors and their attorneys directed their argument in Kullar is whether the proposed settlement is fair and reasonable, and whether the settling parties have made a sufficient showing that it is. While other unnamed class members in Kullar may not have filed objections to the settlement or opted out of the settlement, they have not expressly indicated they believe the settlement is in their best interests or that they are not entitled to a greater recovery than provided in the settlement agreement. As we pointed out in our prior opinion in this case, it is the court that has the ultimate responsibility to determine the fairness and adequacy of the settlement. The class representatives (and their attorneys, as well as Foot Locker and its attorneys) disagree with the objectors and their attorneys over this issue and they have submitted their respective arguments to the court for decision. While the consequence of the objectors prevailing would be to forestall the recovery class members will receive under the proposed settlement, such may nonetheless be in their best interests if they are likely to obtain a much greater recovery by pursuing the litigation. There is no more of a conflict between the objectors (and their attorneys) and the unnamed members of the class who favor the settlement than there is between the class representatives (and their attorneys) and unnamed members of the class who do not favor the settlement but who have refrained from expressing their views and do not want to be excluded from the recovery if the settlement is approved
The putative class members favoring the proposed Kullar settlement may be adverse to objectors in the sense that they disagree as to the adequacy of the settlement and in their desire to have it approved or rejected, but their common interests in the outcome of the litigation are unaffected by that disagreement. There is no suggestion that Q & W has obtained any confidential information from the putative class members who favor the settlement, nor have the attorneys engaged in any conduct displaying disloyalty to any of the putative class members. Disqualification under the circumstances here would be no more justified than the automatic disqualification of class counsel whenever a dispute arises among class members or class representatives as to the advisability of settlement.
Slip op. at 4.

Whether courts will apply this reasoning to the conflict of interest arguments that sometimes arise in the class certification context remains to be seen.

The opinion is available here.

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