Lofton v. Wells Fargo Home Mortgage, 2014 WL 5358364 (Cal. Ct. App. 2014)
The Initiative Law Group (“ILG”) represented more than 600 plaintiffs in a class action filed in Los Angeles against Wells Fargo that was initially certified and then was later decertified. After decertification, ILG continued to represent the plaintiffs in their individual lawsuits against Wells Fargo. A similar class action (in which separate counsel represented the class) was pending in San Francisco. Both cases settled during a joint mediation, and a $6 million common fund settlement was set up for ILG and its clients. At the preliminary approval hearing for the settlement, the trial court was told that ILG’s clients who were members of the San Francisco class would opt out of the class action. However, after the hearing, ILG assisted its class member clients in participating in the $19 million class action settlement rather than the $6 million common fund, which ILG later explained to its clients it “thought” represented attorney’s fees owed to ILG. After an intervenor objected, ILG agreed to pay $1,750 to each of its clients from the $6 million common fund, leaving a total of $4.95 million to be distributed to ILG. Upon learning of the situation, the trial court issued a temporary restraining order requiring, among other things, that ILG deposit the funds in a secure escrow account. The Court of Appeal affirmed the TRO, noting that “[i]t is manifest that ILG intended to effectuate distribution of almost $5 million in fees to itself without court approval. Such a move by lawyers representing so many plaintiffs in a common fund situation appears to us unprecedented. It is fraught with the potential for conflicts of interest, fraud, collusion and unfairness.” See also Hernandez v. Siegel, 230 Cal. App. 4th 165 (2014) (in the absence of a contrary agreement, costs and post-judgment interest belong to the plaintiff’s attorney who owns the fee judgment).