(Reuters) - Under the time-honored journalism rule that three examples make a trend, I’m declaring a trend of judicial scrutiny for individual contingency fee contracts in billion-dollar cases settled as class actions. I’ve previously told you about U.S. District Judge Charles Breyer of San Francisco refusing to award fees to plaintiffs’ lawyers outside of class leadership in the $15 billion Volkswagen emissions cheating case – a decision now before the 9th U.S. Circuit Court of Appeals – and U.S. District Judge Anita Brody of Philadelphia capping fees for lawyers who represented individual retired pro football players in the National Football League concussion case.
The third case is also one I’ve written about: a month-old racketeering suit by a prospective class of corn farmers. The farmers, represented by Douglas Nill of Farm Law, claim plaintiffs’ lawyers, led by Mikal Watts of Watts Guerra, duped them into signing contingency fee contracts to pursue individual claims against the agricultural giant Syngenta, then cut deals with class action lawyers to preserve their contingency fee contracts when Syngenta agreed to a $1.5 billion class action settlement.
Since the case was filed in April, Nill and the Watts alliance have been fighting over venue, a battle that poses the question of whether judges overseeing MDLs have policing power over individual contingency fee contracts for plaintiffs in the litigation.
The twist here is that Watts Guerra – unlike contingency fee lawyers in the VW and NFL cases – is counting on the inherent power of the Syngenta MDL judge to protect its fee agreements.
A quick recap of the farmers’ case against Watts and his so-called joint venture partners: The farmers’ complaint, filed in federal court in St. Paul, Minnesota, alleges that Watts Guerra and associated plaintiffs’ firms deceived clients about the relative benefits and drawbacks of filing their own suits against Syngenta, which the farmers blamed for selling genetically modified seeds that produced corn that China refused to import. When Syngenta began negotiating a global resolution of the GMO claims in consolidated litigation in Kansas City federal court and in Minnesota state court, the farmers allege, Watts Guerra negotiated to exclude its clients from a class action settlement and failed to keep clients apprised, effectively opting farmers out of classwide proceedings without considering their due process and equal protection rights.
In the end, Watts Guerra settled its clients’ claims as part of the global deal, which received preliminary approval from U.S. District Judge John Lungstrum in April. The consequence, according to the farmers now suing the firm, is that Watts Guerra clients will receive no more from Syngenta than farmers who never signed individual contingency fee contracts, yet Watts clients will net much less because they’re on the hook for the law firms’ fees.
Mikal Watts has called the case “frivolous and meritless,” pointing to ethics opinions okaying his joint prosecution deals with lawyers in the state and federal MDLs. “We have done a good job and we’ve done it ethically,” Watts told me in April. “Every dollar I’m going to earn in this case is a fee earned.”
Within days of the filing of the farmers’ suit, Watts Guerra tagged the racketeering case as a tag-along in a motion for consolidation at the Judicial Panel for Multidistrict Litigation. “This potential tag-along action directly impacts the settlement approval process which is within (Judge Lungstrum’s) exclusive jurisdiction,” the motion said. The farmers’ suit “also potentially impacts the MDL court’s control over any award of attorneys’ fees which is inextricably interwoven with the settlement approval process.”
The JPML conditionally transferred the case to Judge Lungstrum on May 1. Watts Guerra and its associated firms then asked U.S. District Judge Donovan Frank of St. Paul to stay proceedings in his court.
The farmers’ lawyer, Nill, is fighting to keep the suit before Judge Frank in Minnesota. On Tuesday, he filed both a brief at the JPML, arguing against consolidation before Judge Lungstrum, and a motion for class certification before Judge Frank. The class certification motion also requests a preliminary injunction that would direct fees Judge Lungstrum awards to Watts Guerra in the Syngenta MDL to be placed in an escrow fund until the resolution of the racketeering suit.
The farmers contend their case is entirely distinct from the MDL litigation against Syngenta. “The Syngenta MDL has no reason to address Kellogg – a private contract dispute between clients and lawyers – nor does the Syngenta MDL, with pretrial proceedings concluded and a final settlement hearing on November 15, 2018, have the time or reason to address class certification and discovery for the Kellogg plaintiffs,” the JPML suit said. “The issue for Judge Lungstrum is whether defendants are entitled to a fee for their work on the case. The issue for Judge Frank in Minnesota is whether defendants are allowed to keep that fee as a result of their racketeering and fraud scheme.”
In effect, the farmers seem to be assuming that the Syngenta MDL judge will award Watts Guerra and its associated law firms big fees based on their contingency fee agreements. Rather than raising opposition to those fees in the MDL, they want their case to be heard by a judge with no interest in the Syngenta settlement.
That’s certainly a different course than we saw in the VW and NFL cases. The farmers’ lawyer said in his JPML brief that the racketeering case raises nationally important questions about lawyers exploiting clients in mass cases by whipping up suspicions about class actions in order to lock in individual contingency fees. That’s a provocative assertion. But it’s also fair to wonder if MDL judges are best equipped to deal with the issue.
Mikal Watts told me they are. In an email response to my query about the venue fight, Watts said the Syngenta settlement agreement gives the MDL judge exclusive jurisdiction over fees, including fee disputes between farmers covered by the settlement and their individual lawyers. Nill’s clients, he said, are trying to use “fictional class allegations” to attack the settlement, but Watts said that’s not going to work before Judge Lungstrum.
Nill declined to comment.