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When Brent Ferguson and Florencia Prieto hired Walnut Creek, Calif., lawyer Michael Meadows to represent them in a suit against Unocal Corp. over a toxic leak at an East Bay plant in 1994, they say they told him they wanted no part of any class action. Three years later, after San Francisco-based class action litigation giant Lieff Cabraser Heimann & Bernstein entered the picture, the case settled — as a class action global settlement. Ferguson got $125,000 out of the $80 million pot, while Prieto received $100,000. Both promptly turned around and sued Lieff Cabraser and Meadows, accusing them of legal malpractice. They claimed that the lawyers entered into an agreement, without their knowledge, that not only deprived them of making claims for punitive damages, but also kept them from pursuing suits against Unocal individually. “They’re essentially taking away [Ferguson's and Prieto's] right to litigate,” says plaintiffs’ lawyer David Becht, a partner at San Francisco-based Adams, Nye, Sinunu & Walker. “My clients would have opted out if they could and proceeded with their own litigation.” Both suits are now in California’s 1st U.S. District Court of Appeal, after having been dismissed on summary judgment in San Francisco Superior Court. The Lieff Cabraser case is slated for oral argument on Dec. 6 and, among other things, raises troubling issues for large class action firms in that it challenges the assumption that class members may not collaterally attack a court’s approval of a class settlement by suing for malpractice. “A contrary holding would undermine the jurisdiction of courts approving class-action settlements,” Jerome Falk Jr., who represents Lieff Cabraser, wrote in court documents, “and could discourage class counsel from attempting to settle future class actions.” The oral argument in Ferguson v. Lieff, Cabraser, Heimann & Bernstein, A091877, is set to be heard by Division Four Justices Timothy Reardon, Patricia Sepulveda and Laurence Kay. A hearing in the companion case against Walnut Creek lawyer Meadows and his firm, Casper, Meadows & Schwartz, hasn’t been set. According to court papers, Ferguson and Prieto were two of about 12,000 people who sued Unocal after its facility near Crockett and Rodeo, Calif., leaked about 100 tons of the potentially toxic chemical catacarb into the air for 16 days in August 1994. The two plaintiffs say they retained Meadows and his firm only after making clear they didn’t want to participate in any possible class action. Even so, a class action was later filed by Lieff Cabraser, which, along with Walnut Creek’s Farrow, Bramson, Baskin & Plutzik, was named co-lead class counsel. Casper Meadows remained the plaintiffs’ direct action counsel. Ferguson and Prieto sued both Meadows’ firm and Lieff Cabraser, after collecting compensatory damages in the settlement, which even retired San Francisco Superior Court Judge Daniel Weinstein — the court-appointed settlement master and referee — said couldn’t have been reached without an agreement to prohibit punitive damages against Unocal. Even so, Becht, the plaintiffs’ lawyer, contends that both firms committed malpractice and breached their fiduciary duty to his clients. “Our contention is that a class action attorney has not only a fiduciary duty to the class as a whole, but to every individual in the class,” he says. “It was a matter of objecting because their rights and the punitive damages they thought they were entitled to were taken away.” Meanwhile, Lieff Cabraser and the other co-lead counsel walked away with more than $6.6 million in fees, while Meadows’ firm and one other co-lead direct action counsel got nearly $2.4 million in fees. The suit against Lieff Cabraser also names partners William Bernstein and Donald Arbitblit of San Francisco and Jonathan Selbin of New York individually. Neither Arbitblit nor Selbin returned telephone calls and Bernstein referred questions to their attorney, Falk. Falk, a partner at San Francisco-based Howard, Rice, Nemerovski, Canady, Falk & Rabkin, argues that class counsel have responsibilities to the class as a whole, not to individual participants. The plaintiffs’ arguments, he wrote in court papers, “betray a fundamental misunderstanding of class action procedures, the differing roles of class and individual counsel, and the finality and significance of class action settlements.” Falk says the question about whether class members can collaterally attack a court-approved class settlement is one of first impression in California, but that the few rulings outside the state have indicated you can’t: A court-approved settlement accepts the adequacy of class counsel and the settlement. “It would be a real burden on the class action process if one member of the class could complain about the settlement and turn around and sue the class counsel for malpractice,” he says. “I just don’t know how the class action system could function.” The settlement allowed plaintiffs to accept a one-time cash payment without any need to prove injury or to apply to the special master for an individual award. Trading their punitive damages claim for “very good compensatory damages,” Falk maintains, was “the kind of thing that normally happens in a class action.” But Becht disagrees. “What makes this unique is that instead of doing a typical class action,” he says, “[the plaintiffs' lawyers] got a stipulation from the defendant that the class would be mandatory and that no one would be able to opt out. For Unocal, that would be a good deal.” Meadows, the plaintiffs’ former individual lawyer, says his old clients should be happy because they would have had trouble proving injuries. “These people, both Ferguson and Prieto, went before a three-judge panel, they were awarded substantial amounts of money with absolutely no record there was anything wrong with them,” he says. “Then, after taking the money and cashing the checks, they turn around and complain.”

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