Rodriguez v. Disner

Under long standing equitable principles, a district court has broad discretion to deny fees to an attorney who commits an ethical violation, such as representing clients with conflicting interests, regardless of whether or not the clients are harmed by the ethical violation.

This appeal comes from a denial by the district court to award attorney fees to the counsel of a class action lawsuit. Before trial was set five of the class representatives entered into 'settlement incentive' agreements. For certain increases in settlement amounts, the attorney's would seek incentive compensation for the class representatives who signed the agreement. The increments were between $10,000 and $75,000. The district court found this to be an actual conflict of interest between the class representatives who had an incentive to settle and the class members who were not part of these agreements. The district court concluded that the firm who represented the class therefore forfeited their right to attorney fees. The Ninth Circuit agreed with this analysis based on previous circuit decisions and other circuits decisions and that the district court did not abuse its discretion. The district court also denied attorney fees for the counsel who brought the objections to the court's notice on the basis that the counsel only brought it to the attention of the court and nothing more. The Ninth Circuit disagreed with this analysis and concluded that the district court abused its discretion because of the work the firm did in bringing the conflict of interest to the attention of the court. AFFIRMED in part and VACATED and REMANDED in part.