## Facts

- Purchasers of BAR/BRI bar-review courses brought an antitrust class action alleging West (doing business as BAR/BRI) and Kaplan conspired to restrain trade and inflate course prices.
- Early in the case, class counsel entered private, undisclosed “ex ante” incentive agreements with five named class representatives, promising sliding-scale payments tied to total class recovery (up to $75,000 if recovery exceeded $10 million).
- Two other named class representatives had no such agreements and were represented by separate counsel without the same conflict concerns.
- Class counsel later sought final approval of a settlement that created a $49 million common fund and requested approval of the contemplated incentive payments.
- Objecting class members challenged the settlement and the incentive agreements as conflict-creating and unethical, and argued the agreements undermined adequate representation.
- The district court approved the $49 million settlement as fair, refused to honor the incentive agreements, denied attorney’s fees to objectors, and awarded fees to class counsel without accounting for the conflicts raised by the incentive agreements.

## Issues

1. Whether undisclosed ex ante incentive agreements between class counsel and certain class representatives created conflicts of interest that required rejection of the class settlement for inadequate representation.
2. Whether the district court abused its discretion by assessing the settlement’s adequacy by comparison to estimated single damages rather than possible treble damages in an antitrust case.
3. Whether the district court erred by (a) denying fees to objectors who exposed the incentive agreements and (b) awarding fees to class counsel without considering ethical concerns arising from those agreements.

## Decision

- The court affirmed approval of the $49 million settlement, holding the district court did not clearly abuse its discretion in finding the settlement fair, adequate, and reasonable.
- The court disapproved the ex ante incentive agreements as improper and conflict-creating, and affirmed the denial of the requested incentive payments.
- The court held that the incentive agreements did not require rejection of the settlement because the class was also represented by non-contracting representatives with separate, non-conflicted counsel, which supported adequate representation.
- The court reversed the denial of fees to objectors because the district court failed to give weight to objectors’ role in securing denial of the improper incentive payments.
- The court reversed the fee award to class counsel because the district court did not account for ethics and conflict concerns related to the incentive agreements.
- The case was remanded for reconsideration of attorney’s fees in light of the incentive agreements and the objectors’ contributions.

## Legal Principles

- Ex ante incentive agreements between class counsel and named representatives that promise substantial, recovery-contingent payments can create conflicts between representatives, counsel, and the class and are improper, particularly when undisclosed and not court-approved.
- The presence of conflicted representatives does not automatically defeat adequacy of representation or require rejection of a settlement when other non-conflicted representatives and counsel provide adequate representation for the class.
- In assessing the fairness of an antitrust class settlement, a district court may, but need not, compare the settlement to estimated treble damages; focusing primarily on single damages is not per se an abuse of discretion if the evaluation is otherwise reasoned and the recovery is substantial.
- Objectors who materially improve the result or integrity of the proceedings may warrant attorney’s fees; a court must consider their contribution rather than deny fees categorically.
- Attorney’s fee awards to class counsel must take into account counsel conduct that raises ethical or conflict concerns; failure to do so can require reversal and remand.

## Conclusion

The Ninth Circuit upheld an antitrust class settlement and the rejection of undisclosed, recovery-contingent incentive agreements, but required the district court to reconsider fee awards because it did not credit objectors’ beneficial efforts and did not account for conflict and ethics concerns when compensating class counsel.


Rodriguez v. W. Publ'g Corp., 563 F.3d 948 (9th Cir. 2009)