Appellate Judges don’t like to be told they don’t have authority to review appeals. Plaintiffs’ lawyers sometimes fight among themselves over fees. So trying to bar fee arbitration appeals isn’t going to work in the 9th U.S. Circuit Court of Appeals.
In a first of its kind ruling Tuesday, the 9th circuit weighed in on an $85 million settlement of a wage and hour class action against Wal-Mart, which included $28 million attorney fees. The fee provisions turned into a protracted battle over division of the spoils.
The appeals panel ruled that a “no-appeal” clause in the fee arbitration agreement can’t be enforced, including under a particular provision of the Federal Arbitration Act. It is the first time the appeals court has faced this particular non-appealability issue.
So the court marched right into the long-running fee fight between three law firms.
The federal court in Nevada in 2006 appointed Robert Bonsignore, of Belmont, N.H., Carolyn Burton, of San Ramon, Calif., as co-lead counsel and Carol LaPlant, of Berkeley, Calif., as liaison counsel for the Wal-Mart case.
The case settled in 2008, and approximately $28 million in attorney fees was awarded in 2009.
The Burton group received $6 million, the Bonsignore group, $11 million and LaPlant $730,000. In 2011, Bonsignore moved to confirm the award and Burton was not happy. There were challenges that lead to the current appeal. Bonsignore questioned whether the 9th Circuit had jurisdiction considering the non-appealability clause.
The panel upheld the Nevada district court’s division of the fees.
On the appeal rights issue, the 9th Circuit found the Third, Seventh and Eleventh Circuits have held that a non-appealability clause only waives review of the merits of the arbitration – not the right to appeal.
A second view, in the Second Circuit holds that such clauses divest both district and appellate courts of jurisdiction. The 9th did not choose sides but found the Second Circuit’s interpretative was unenforceable because it eliminates judicial review under the FAA.
“If parties could contract around this section of the FAA, the balance congress intended would be disrupted, and parties would be left without any safeguards against arbitral abuse,” wrote Judge Milan Smith.
Case: In re: Wal-Mart Wage and Hour Employment Practices, 11-17718