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The 9th U.S. Circuit Court of Appeals upended a multimillion-dollar race discrimination settlement Tuesday, citing suspicions that the attorney fees were the product of collusion. The split three-judge panel described the injunctive relief won in the case against Boeing Co. as “relatively weak,” and said it and the $7 million in damages didn’t appear to justify more than $4 million in fees and a broad release of liability. The case was filed in Seattle in 1998 on behalf of 15,000 black employees of Boeing alleging racial discrimination. In 1999, U.S. District Judge John Coughenour approved a settlement, which included a consent decree aimed at promoting minority employees of Boeing, $7.3 million for the class, and the pre-negotiated attorney fees. To justify the fee, plaintiffs’ lawyers asked Coughenour to consider the value of the injunctive relief, the cost of class notices to be paid by Boeing, the settlement fund and the attorney fees together as a “common fund.” Doing that, the lawyers argued, meant that the fees were only 28 percent of the total settlement — near the 9th Circuit’s benchmark. But Judge Marsha Berzon wrote that fees should be left up to a judge to decide, not cooked up in settlement negotiations. “In order to obtain fees justified on a common fund basis, the class’ lawyers must ordinarily petition the court for an award of fees, separate from and subsequent to settlement,” Berzon wrote. She was joined by Senior 8th Circuit Judge Donald Lay, sitting by designation. Judge Stephen Trott dissented, arguing that the panel should defer to the judgment of the trial court. Calling curative measures an “inexact and easily manipulable value,” Berzon also wrote that judges may not consider the value of injunctive relief when examining the reasonableness of attorney fees. “We hold further, therefore, that parties may not include an estimated value of injunctive relief in the amount of an actual or putative common fund for purposes of determining an award of attorneys’ fees,” Berzon wrote in Staton v. Boeing Co., 02 C.D.O.S. 11411. Harrell, Desper, Connell, Hunter & Gautschi, the Seattle-based firm representing the class, had supplied many declarations, including one from the Rev. Jesse Jackson, supporting the terms of the settlement. Trott accused the majority of ignoring them, and of applying a broad concern about class action settlements to one that passes muster. “What does collusion or the possibility of collusion have to do with this case and this settlement? Nothing. But, the mere specter of collusion in cases like this ends up almost as a neurosis undoing this settlement — even though villainy is manifestly non-existent,” Trott wrote. “The ‘possibility’ of collusion in this case turns out under scrutiny to be a classic red herring.” The majority approved of Coughenour’s certification of the class, but was disturbed that he didn’t conduct a more thorough examination of the fee settlement, saying it should have been subjected to “lodestar-based scrutiny.” In remanding the case, Berzon wrote, “Not even a summary of the billing records was submitted.” Seattle appellate lawyer Charles Wiggins, who represented the class members, couldn’t be reached for comment. The fee award was challenged by Philadelphia’s Spector Gadon & Rosen, which had filed a similar class action in Philadelphia. Alan Epstein, head of the firm’s employment practice, said the case was settled while a multidistrict litigation panel considered where it should be tried. More than 2,000 class members objected, he added. He also said most of the curative measures called for by the settlement were already in place at Boeing. Furthermore, Epstein added, “There was nothing there that was mandatory. Everything relied upon the good faith of Boeing and class counsel.”

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