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Attorney Fees

Judge blasts class action firm for $5M fee maneuver; it now gets zilch

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A California judge has barred payment of attorney fees to a class action firm after finding it “attempted to arrogate to itself more than $5 million in class action attorneys’ fees without court approval.”

Judge Mary Wiss of San Francisco denied fees to the Initiative Legal Group in a July 16 opinion (PDF), the Recorder (sub. req.) reports.

Wiss said the Initiative Legal Group reached a $6 million settlement for 600 home mortgage consultants individually suing for alleged wage violations by their employer Wells Fargo Home Mortgage. ILG then funneled the 600 clients into a wage class action against the lender and kept $5 million for attorney fees, according to Wiss.

Wiss ruled as a result of motions filed in the class action, Lofton v. Wells Fargo Home Mortgage, which had settled for $19 million after it was mediated along with the suits filed by ILG.

“ILG encouraged and directed its clients to make claims from the Lofton settlement,” Wiss wrote, “and never advised its clients of the benefits of opting out of the Lofton Class,” which paid about $1.5 million to the ILG clients.

Those ILG clients later got a letter from ILG stating that they each would receive an additional payment of $750 in ILG’s suits for claims that survived Lofton, and ILG would get about $5.5 million in attorney fees. The clients were advised to sign a release to get the payment.

After one client protested, ILG sent an additional $1,000 to the clients in exchange for a release of all claims. The dissatisfied client then moved to intervene in the Lofton class action.

Wiss said ILG’s attorney fees should have been disclosed to the court as part of the resolution in Lofton.

“Having concealed its purported fee agreement from the court and having tried to appropriate those funds to itself without court approval, this court determines that ILG is not entitled to any of the claimed fees,” Wiss wrote.

The $5 million should instead be paid to class members in Lofton, including the ILG clients, Wiss said. She also ordered the firm to deposit another $527,000 with the court, which represents money paid to ILG clients for release of claims against the law firm and additional payments made to representative plaintiffs.

The Initiative Legal Group is considering an appeal, according to its lawyer, Klinedinst partner Natalie Vance. “ILG continues to dispute that the class action court here had authority to take control of the fees ILG earned and its clients agreed to for representation in their individual cases litigated in other counties around the state,” she told the Recorder.