## Facts

- Approximately 15,000 African-American current and former Boeing employees brought a class action alleging race discrimination affecting promotions, compensation, and working conditions at Boeing facilities.
- The parties negotiated a consent decree providing (1) about $7.3 million in cash, (2) programmatic/injunctive measures valued by the parties at about $3.65 million, and (3) attorneys’ fees set at 28% of the combined stated value (about $4.05 million).
- The settlement included enhanced payments for named plaintiffs and certain designated individuals compared with many unnamed class members.
- The district court (W.D. Wash.) certified a settlement class under Federal Rule of Civil Procedure 23 and approved the decree as fair, reasonable, and adequate under Rule 23(e), including the negotiated fee provision.
- Several class members objected and appealed, challenging adequacy of representation, settlement fairness, and the attorneys’ fee methodology (including valuation of injunctive relief and integration of fees into the settlement).

## Issues

1. Whether the district court abused its discretion in certifying the settlement class under Rule 23(a), including whether adequacy of representation was satisfied given potential intra-class conflicts.
2. Whether the district court abused its discretion under Rule 23(e) in approving the settlement as fair, reasonable, and adequate.
3. Whether the district court erred in approving attorneys’ fees calculated as a percentage of a “common fund” that included a monetized valuation of injunctive relief and was negotiated as part of the settlement.
4. Whether differential awards to named plaintiffs and selected individuals were sufficiently justified or instead created conflicts undermining fairness and adequacy.

## Decision

- The Ninth Circuit largely affirmed the district court’s Rule 23(a) determination that the action could proceed as a class action in principle.
- The Ninth Circuit reversed approval of the settlement and attorneys’ fees and remanded for further proceedings.
- The court held the district court’s Rule 23(e) review was insufficient because it did not adequately scrutinize intra-class conflicts, disparate allocations, and the fee arrangement.
- The court faulted the use of a speculative dollar valuation of injunctive relief to increase the apparent settlement value and support a percentage-based fee.
- The court directed renewed examination of allocation of relief, justification for differential payments, and the method and amount of attorneys’ fees.

## Legal Principles

- Settlement-only classes require careful scrutiny of Rule 23(a) adequacy and potential intra-class conflicts because settlement terms can favor some class segments over others.
- Under Rule 23(e), courts must independently evaluate whether a class settlement is fair, reasonable, and adequate, including whether the allocation of benefits creates conflicts between named representatives and absent members.
- Incentive or service awards to named plaintiffs are permissible only if justified and not so disproportionate that they compromise adequacy of representation.
- When attorneys’ fees are negotiated as part of a class settlement, courts must examine whether fees reflect a tradeoff against class relief and whether settlement structure creates conflicts between counsel’s interests and the class’s interests.
- Courts should be cautious about assigning monetary values to non-monetary injunctive relief for purposes of calculating percentage fees, particularly where valuation is not well supported and risks inflating perceived class benefit.

## Conclusion

The Ninth Circuit permitted the case to proceed as a class action but vacated the consent decree because the district court did not conduct a sufficiently searching fairness review of disparate payments, intra-class conflicts, and a negotiated fee award based partly on a speculative valuation of injunctive relief, requiring reconsideration on remand.


Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003)