By Daniel Klausner, JD
The Ninth Circuit Appellate Court recently set a precedent by remanding half a case without a Rule 54(b) severance in Parrish v. Manatt.
The malpractice case arose from the class action in Adderly v. NFLPA, involving retired NFL football players and the National Football League Player Association (NFPLA). Although one defendant law firm successfully argued a motion to dismiss the malpractice claims in front of the Northern District Court of California, plaintiff’s counsel and the other defendant sought a settlement before the appellate court published a decision. Of course, a settlement involving a certified class requires approval from the district court originally handling the class certification. The limited remand allows the appellate court to decide the claims pertaining to one defendant while the settlement agreement between the other parties proceeds through district court approval. The court required class representatives and settling defendant to request the limited remand “unequivocally.” The court found a party claiming to be an objecting class representative was not a member of the class and dismissed him to effect the limited remand.
Plaintiffs had two claims against class co-counsels, Manatt, Phelps & Phillips, LLP (Manatt) and McKool Smith, PC (McKool). Certain plaintiffs claim the law firms wrongfully excluded them from the final class roster in the underlying action thereby depriving them of their legal rights to the class settlement. Additionally, plaintiffs’ counsel, Belcher & Collins, PC (Belcher), claim Manatt and McKool failed to provide adequate counsel based on two facts. Defendants failed to lay the proper foundation for “critical” evidence and to present a plausible theory of the plaintiff’s claim of breach of fiduciary duty. The claimed damages were a dramatic lessening of the classes’ recovery. In the Adderley action, the class was awarded a $28.1 million jury verdict: zero damages for the breach of contract but $7.1 million in compensatory for breach of fiduciary duty and $21 million for punitive damages. The class then settled for $26.25 million while the verdict was being appealed.
Adequate Counsel
The “critical” evidence not admitted at trial included an email chain between individuals at the NFLPA and Electronic Arts, Inc., relating to the marketability of retired NFL player publicity rights. The facts claiming to show inadequacy of counsel were taken directly from the court’s order awarding class counsel fees in the Adderley action. However, as the court explained in Manatt, the order referenced those issues only to clarify why the awarded fees were lower than the premium that class co-counsel had requested.
The plaintiffs were aware of these failings but never objected to the quality of class counsel based on these facts at the time. When discussing jury instructions and in various post-trial motions the issue was raised that the class counsel had failed to raise an alternative theory for the breach of the NFLPA’s fiduciary duty. However, plaintiffs never objected to class counsel quality because of this failure. Meanwhile, plaintiffs were not shy about making numerous objections about the quality of class representation in other regards.
Moreover, these facts as well as those other complaints about counsel representation were considered when the district court approved the class settlement with the NFLPA. Despite several class members filing standardized objections letters addressing other grievances about class counsel representation, no class member voiced an objection at the fairness hearing. The court emphasized that the very point of the process of reviewing and approving a settlement is to consider factors such as quality of counsel representation. The district court dismissed the breach of fiduciary duty complaint against Manatt and McKool, finding the claim barred by the principle of collateral estoppel.
The Final Class Roster
The claims in Adderley pertained to the fiduciary relationship between the NFPLA and retired football players. The NFLPA solicited retired players to join a “Retired Players Group licensing Program” then assigned the bundled licenses to their marketing and licensing subsidiary, Players Inc. The retired players who were members of the NFLPA but were not solicited, alleged that the NFLPA withheld information about benefits that retired-player members could have been entitled to. Those retired players who had signed a group licensing agreements (GLA) alleged that the NFLPA failed to pursue licensing opportunities on their behalf.
The district court in Adderley was presented with two classes to be certified: retired players who had signed a GLA with the NFLPA and all other retired NFL players who joined the NFLPA. The district court certified a class consisting of “[a]ll retired NFL players who signed GLAs with the NFLPA that were in effect between February 14, 2003, and February 12, 2007.” (Adderley, Order Granting Certification, N.D. Cal. 3:07-cv-00943-WHA, Doc. 275, at 11). Those not on the final class roster did not participate in the action. Accordingly, their rights were not limited by the judgment in Adderely. Even if they could have been on the final class roster because they had signed a GLA, the retired player’s rights are unaffected if they were not actually on the final class roster. Those retired players who had joined the NFLPA but did not sign a GLA were represented in the Adderley action by Mr. Bernard Parrish.
Mr. Bernard Parrish
The class represented by Mr. Bernard Parrish was not certified because Mr. Parrish was an inadequate representative of the class. The adequacy requirement answers the questions: (1) do the representative plaintiff and counsel have any conflicts of interest with other class members; and (2) will the representative plaintiff and counsel act vigorously on behalf of the class? In denying the certification of the class, the district court cites cases explaining a representative plaintiff’s fiduciary duty and the disqualifying effect of vindictiveness. (Adderely, Ibid., quoting Diaz v. Trust Territory of Pacific Islands, 876 F.2d 1401, 1408 (9th Cir. 1989); Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1464 (9th Cir. 1995) and citing Larson v. Dumke, 900 F.2d 1363, 1367 (9th Cir. 1990).
The district court cites numerous extreme remarks that Mr. Parrish either made or adopted directed at the executive director of the NFLPA, Mr. Gene Upshaw. Among these remarks were comments likening Mr. Upshaw to Caesar, Napoleon, Idi Amin, Hitler, Stalin, Milosevic, and Saddam. Mr. Parrish also made “racially charged comments” about the NFLPA and Mr. Upshaw on an Internet blog. Furthermore, in a submission to the Department of Justice, Mr. Parrish leveled more racial attacks alleging that, “The retired player retirement benefits issue is tainted with vindictive Upshaw and Vincent motives to get back at the white pioneer era players for how the white NFL management and owners treated blacks in the earlier days of the NFL.” (Adderley, Ibid. at 12). The racially motivated comments brought Mr. Parrish’s representation under question because many of the putative class members he wished to represent are African American.
Mr. Parrish also sent an email that indicated he was unwilling to negotiate any settlement with the NFLPA. Specifically, the email stated, “I am going to finish this fight no matter how dirty it gets or what it takes or where it goes. I am not in it to make any deal.” (Adderley, Ibid.). The court surmised that “Parrish’s personal vendetta against Upshaw and the NFLPA would be a roadblock to any favorable settlement.” (Adderley, Ibid. at 13).
Finally, the court cited Mr. Parrish’s reckless management of a previous attempt to represent retired NFL players as demonstrative of Mr. Parrish’s inadequacy. Mr. Adderley and Mr. Parrish had co-founded an organization to represent retired NFL players. After raising $5500 from these retired players, the organization “became inactive.” The organization had exhausted the funds and the secretary/treasurer, Mr. Parrish’s sister, had no explanation of how the funds were spent. Moreover, Mr. Adderley testified that he had no knowledge of the organization’s operation even though Mr. Parrish regularly signed documents with Mr. Adderley’s name as the co-president. Thus, the class that Mr. Parrish claimed to represent was never certified. His participation in the Manatt action seems an anomaly.
The Remand
When McKool and Belcher motioned for a remand, Mr. Parrish and Manatt objected to the remand request. Manatt was concerned that the approval process at the district court might affect its rights in a forum where it had no representation. The court found no authority for the limited remand and initially denied the motion for remand. The court suggested that because the appeal of the remaining claims would be decided before the district court could approve any settlement the remand was pointless. However, the court advised it would grant such a request over the protests of the remaining defendant law firm if it was “unequivocally requested by plaintiffs and McKool before [the court] render[ed] [its] decision.” (Parrish v. Manatt, 9th Cir. Order, July 23,2012, Dkt. 46). Subsequent negotiations resulted in both defendants jointly requesting the limited remand. Mr. Parrish was the only party left who objected to the remand. Belcher explained that Mr. Parrish was not part of the appeal. The court ordered his dismissal from the case and granted the limited remand.
