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Ninth Circuit Ends $28M Fee Allocation Dispute in Walmart MDL

December 30, 2013 | Posted in : Fee Dispute, Fee Issues on Appeal

A recent The Recorder story, “In Walmart Fee Fight, Ninth Circuit Balks at ‘Non-Appealable’ Arbitration,” reports that two Bay Area plaintiff lawyers have won an arbitration battle but lost a bitter $28 million fee allocation dispute.  The U.S. Court of Appeals for the Ninth Circuit ruled that Carolyn Burton and Robert Mills may challenge the allocation of attorney fees in multidistrict litigation against Walmart, even though they had previously agreed to “non-appealable” arbitration.

“Permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text” of the Federal Arbitration Act, Judge Milan Smith Jr. wrote in In re Wal-Mart, “but would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.”

But exercising that judicial review, the Ninth Circuit rejected the attorneys’ fiercely contested claims that arbitrator Layn Phillips colluded with Fredrick Furth and another plaintiffs attorney to get more Walmart mediation work, and then stiffed Burton and Mills on fees to punish them for refusing to play ball. 

Burton, Mills, and co-counsel Carol LaPlant will receive about $6.7 million in fees, while New Hampshire attorney Robert Bonsignore will keep $11 million.  The remainder of the $28 million goes to some 40 state and local counsel who helped negotiate an $85 million settlement of wage-and-hour claims in multidistrict litigation across 30 states.  Mills and Burton claim Phillips punished them by allocating the lion’s share of the MDL fees to Bonsignore.

Bad blood in the case dates back to 2007, when Burton left the Furth Firm, accusing the famed attorney of cheating her out of bonuses and selling the MDL to get a better settlement of his California state court case.  The federal litigation settled in 2008 for $85 million, and Phillips was chosen to arbitrate the division of the $28 million in attorney fees.

The Ninth Circuit rejected all of the bias claims.  Instead, Judge seemed more interested in a provision of the MDL settlement agreement that provided arbitration would be binding and non-appealable.  “This appeal presents a question of first impression in this circuit: Is a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under Section 10 of the FAA, enforceable?” he wrote.  “We conclude it is not.”