Hohenberg v. Ferrero USA, Inc

Filing 145

MOTION to Vacate Judgment and for Indicative Ruling by Courtney Drey, Andrea Pridham. (Attachments: # 1 Memo of Points and Authorities Motion to Vacate Judgment, # 2 Exhibit Ex A - Order in Unilever case, # 3 Exhibit Ex B - Order in Yelp case, # 4 Exhibit Ex C - Judge Whelan Order re Weston)(Pridham, Grenville) (ag).

Case5:10-cv-00387-JW Document103 Filed09/14/10 Page1 of 7

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION
NO. C 10-00387 JW

Evangeline Red, et al.,

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ORDER DENYING PLAINTIFFS’
MOTION TO TERMINATE BECK & LEE
AND REESE RICHMAN AS COUNSEL OF
RECORD; APPOINTING SPECIAL
MASTER

Plaintiffs,
v.

For the Northern District of California

United States District Court

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Unilever PLC, et al.,
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Defendants.
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/

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I. INTRODUCTION
Presently before the Court is a Notice of Termination of Beck & Lee and Reese Richman

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LLP by Plaintiffs Evangeline Red, Jennifer Red, and Rachel Whitt.1 (Docket Item No. 70.) Various

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parties have filed Oppositions and Responses. (Docket Item Nos. 71-94.) The Court conducted a

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hearing on September 13, 2010. Based on the papers submitted to date and oral argument, the Court

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DENIES Plaintiffs’ Motion to Terminate Beck & Lee and Reese Richman as counsel of record.

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II. BACKGROUND
This is a class action in which Plaintiffs allege, inter alia, that Defendants engaged in false

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advertising for the product “I Can’t Believe It’s Not Butter!” Defendants filed a Motion to Dismiss

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which was scheduled for a hearing on June 21, 2010. (Docket Item No. 11.) At that hearing, the

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parties informed the Court that they had signed a term sheet settling the case. (Docket Item No. 68.)

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The Court construes this Notice as a Motion for Termination of Counsel.

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Based on the parties’ representations, the Court vacated Defendants’ Motion to Dismiss and set a

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hearing for Preliminary Approval of Class Settlement for September 27, 2010. (Id.)

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However, on August 16, 2010, Mr. Weston, one of Plaintiffs’ attorneys of record, filed a

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Notice of Termination, effectively moving to terminate the Reese Richman and Beck & Lee firms as

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co-counsel for Plaintiffs. (Docket Item No. 70.) Two days later, Beck & Lee filed an Opposition to

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the Notice, charging the Weston Firm with engaging in “a shocking course of unethical and bad faith

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conduct.” (Docket Item No. 71 at 1.) Beck & Lee’s Opposition contends, inter alia, that:

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(1)

Mr. Weston offered a “kickback” to at least one individual, a “Ms. June
Higginbotham,” in return for serving as a named plaintiff in class actions;

(2)

Mr. Weston promised Ms. Sutton, one of his paralegals, a “finder’s fee” in exchange
for “signing up” Ms. Higginbotham as a named plaintiff; and

(3)

The Weston Firm has agreed to compensate its non-lawyer employees on a
percentage basis from settlement proceeds.

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For the Northern District of California

United States District Court

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(Id.) Beck & Lee’s Opposition also indicates that Mrs. Beck unsuccessfully attempted to contact the
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named Plaintiffs in this case to determine whether or not they had been offered any improper
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kickbacks or finder’s fees. (Id.)
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Given the seriousness of these allegations, the Court ordered all effected parties, including
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Plaintiffs, to appear for a hearing and submit any supplemental briefing regarding the Motion to
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Terminate counsel. (Docket Item No. 75.) In response to that Order, several parties filed
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supplemental briefing, attaching dozens of accompanying declarations. (Docket Item Nos. 78-94.)
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In its Supplemental Brief, the Weston Firm denies any misconduct, and alleges a pattern of
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interference and bad faith conduct on the part of certain attorneys at Beck & Lee. (Docket Item No.
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93.) The Weston Firm also submitted declarations from Ms. Higginbotham and Ms. Sutton, denying
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the alleged misconduct. (Docket Item Nos. 86, 87.)
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The Court conducted a hearing on the Motion to Terminate counsel on September 13, 2010.
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At the hearing it became clear to the Court that the Motion was motivated by circumstances
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extraneous to the settlement. For the reasons discussed below, the Court DENIES Plaintiffs’ Motion
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to Terminate counsel, orders the parties to proceed with the settlement of the case and appoints a
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Special Master to hold any settlement funds being paid for attorney fees and to make

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recommendations to the Court with respect to the disposition of that portion of the settlement.
III. DISCUSSION

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A.

Plaintiffs’ Motion to Terminate Counsel
At issue is whether the Court should grant Plaintiffs’ Motion to Terminate Beck & Lee and

Reese Richman as counsel of record.
This case was filed as a class action. Although a class has not been certified, Rule 23 of the

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Federal Rules of Civil Procedure gives the trial court broad administrative powers to protect the

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putative class, including the power to designate interim counsel, and to impose conditions on the
conduct of named plaintiffs seeking certification as representative parties. See Fed. R. Civ. P. 23(d),

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For the Northern District of California

United States District Court

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23(g)(3).

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Here, pursuant to a Joint Prosecution Agreement,2 three law firms undertook representation

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of the named Plaintiffs and the putative class. On behalf of Plaintiffs, some of the attorneys

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commenced settlement negotiations with Defendants. The negotiations resulted in a “term sheet”

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that the parties believed settled the case. Apparently, in due course, the parties contemplated

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moving the Court to approve the settlement, certify a class for purposes of the settlement, and

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approve the payment of attorney fees.

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Before such a motion was made, a dispute developed between and among the attorneys with

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respect to the sharing of attorney fees. The Weston firm took the position that the Joint Prosecution

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Agreement was void, filed a lawsuit in a court seeking a declaration to that effect,3 and demanded

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that Defendants deposit all settlement funds for attorney fees into the Weston client trust account.

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The other attorneys objected to Mr. Weston’s position that the Joint Prosecution Agreement was

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(Declaration of Jared H. Beck in Support of Beck & Lee’s Opposition to Plaintiffs’ Notice
of Termination, Ex. A, Docket Item No. 73.)
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At the hearing, Mr. Weston stated that he had filed a lawsuit against Beck & Lee in San
Diego federal court seeking to declare their joint prosecution agreement invalid and adjudicate the
division of any shared attorney fees. See Weston Firm, P.C. v. Beck & Lee, P.A., No. 3:2010-cv01694 (S.D. Cal.).
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void and objected to depositing the funds for attorney fees into the Weston trust account.

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Defendants also objected to proceeding with the settlement under these circumstances. Ultimately,

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on behalf of Plaintiffs, the Weston firm filed the present Motion to Terminate the other attorneys.

Plaintiffs’ attorneys, Plaintiffs, all three Plaintiffs’ law firms and Defendants desire to proceed with

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the settlement. The Court’s primary duty is to ensure that the named Plaintiffs and their lead counsel

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adequately represent the class. See, e.g., Manual for Complex Litigation, Fourth (2004) § 21 at 244.

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With respect to the adequacy of the named Plaintiffs, the Court does not find that the

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accusations being made by the attorneys against their colleagues concern conduct directly related to

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this case and its settlement. Beck & Lee’s accusations concern parties involved in a different class

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For the Northern District of California

At the hearing, it became clear to the Court that, notwithstanding the dispute between

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United States District Court

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action not before the Court. (Docket Item No. 71 at 1.) The Court is therefore satisfied that the

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alleged conduct in Beck & Lee’s Opposition has not tarnished the ability of the named Plaintiffs to

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adequately represent the class.

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With respect to the adequacy of class counsel, the Court finds insufficient cause to terminate

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Beck & Lee and Reese Richman from this case.4 The Court finds that granting the Motion to

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Terminate two of the law firms who were involved in negotiating the settlement could jeopardize the

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settlement. Their termination would deprive Plaintiffs of the knowledge of these attorneys about the

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provisions of the term sheet.

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Thus, because of the unanimous interest in proceeding with the settlement, the Court

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concludes that it would be in the best interest of the class if the Court established a procedure that

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would permit the settlement to proceed and that would defer the attorney fees division to a later

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proceeding.

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In its response, the Weston firm relies on a line of cases for the proposition that “[a]
client’s power to discharge an attorney, with or without cause, is absolute.” Fed. Sav. & Loan Ins.
Corp. v. Angell, Holmes & Lea, 838 F.2d 395, 395 (9th Cir. 1988) (quoting Fracasse v. Brent, 6 Cal.
3d 784, 790 (1972)). These cases are inapplicable, as they do not deal with the representation of a
class, nor the Court’s countervailing obligation to protect the interests of that class.

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Accordingly, the Court DENIES Plaintiffs’ Motion to Terminate Beck & Lee and Reese

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Richman as counsel of record and orders that these attorneys proceed to bring the settlement to a

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conclusion.

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B.

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Appointment of Special Master
At the hearing, the parties represented to the Court that the only roadblock to settlement was

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a provision in the term sheet regarding who should hold the attorney fees from the settlement fund in

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trust pending the attorneys’ disputes over proper allocation of the fees. Mr. Weston does not dispute

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that he has asked Defendants to deposit these funds in his firm’s trust account. In fact, despite the

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Weston firm’s filing of a separate federal action to determine the validity the parties’ Joint
Prosecution Agreement, at the hearing, Mr. Weston unilaterally declared that the agreement is

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For the Northern District of California

United States District Court

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“void” on its face. Mr. Weston’s statements at the hearing raise serious concerns for the Court with

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respect to his ability to hold the attorney fees from the settlement in trust. Thus, the Court finds that

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it is in the interest of the class and the firms involved for a neutral third party to administer and

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allocate any attorney fees from the settlement funds pending the resolution of the firms’ disputes or

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any subsequent fees motion in this action.

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Accordingly, pursuant to Fed. R. Civ. P. 53, the Court appoints Mr. George Fisher as Special
Master.

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1.

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Subject to Court’s approval of the settlement, Defendants shall separate any portion of any

Scope of Appointment

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settlement funds for attorney fees, payable to “George Fisher in Trust.” Mr. Fisher shall deposit the

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attorney fees allocated by the settlement into a trust account. Mr. Fisher shall determine the

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positions of any claimant of those funds; seek a stipulation to an agreed division and if no stipulation

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is reached, make a report and recommendation to the Court with respect to the funds held in trust.

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Fees and Costs of the Special Master

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The Special Master will bill at the rate of $400.00 per hour. No portion of the fees of the

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Master shall be paid from any funds payable to the named Plaintiffs or members of the class. The

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fees and costs of the Master shall be paid from the settlement fund allocated for attorney fees. Ten

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days before the date of the Final Approval hearing, the Special Master shall file a motion with the

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Court for approval and award of fees and costs. Any objections shall be filed five days after such

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submission.

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To complete the appointment, Mr. Fisher shall file the affidavit required by Rule 53(b)(3) of
Federal Rules of Civil Procedure within five (5) days from the date of this Order.

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IV. CONCLUSION
Accordingly, the Court DENIES Plaintiffs’ Motion to Terminate (Notice of Termination)

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Beck & Lee and Reese Richman as counsel of record. In light of this Order, the Preliminary

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Approval Hearing currently set for September 27, 2010 is continued to November 1, 2010 at 9 a.m.
On or before October 18, 2010, the parties’ shall file their Joint Motion for Preliminary

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For the Northern District of California

United States District Court

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Approval of the Settlement. Consistent with this Order, the Proposed Order shall include a

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provision naming Mr. Fisher as the Special Master to oversee the allocation of attorney fees from the

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settlement funds.

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Dated: September 14, 2010
JAMES WARE
United States District Judge

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:

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Elizabeth Lee Beck [e-mail]
Gregory Steven Weston [e-mail]
Janelle Jad Sahouria [e-mail]
Jared Harrison Beck [e-mail]
John Joseph Fitzgerald [e-mail]
Michael Robert Reese [e-mail]
William Lewis Stern [e-mail]

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Dated: September 14, 2010

Richard W. Wieking, Clerk

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By:
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For the Northern District of California

United States District Court

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/s/ JW Chambers
Elizabeth Garcia
Courtroom Deputy