In Bartle v. Berry (No. 10-P-1235, Sept. 14, 2011), the Massachusetts Appeals Court held that plaintiffs’ attorneys who rejected a settlement orchestrated by co-counsel and forged ahead with a class action lawsuit breached no duty to co-counsel or former class members and could not be liable for lost contingent fees that would have been paid in the settlement.
The case arose from a lawsuit against a national beverage company, concerning allegations that the company had misrepresented the source and quality of its particular brand of bottled water. The plaintiffs in the underlying lawsuit were competitors of the beverage maker, as well as a class of consumers who claimed to have been adversely affected by the representations. The various competitors and class representatives were all represented by several attorneys and their law firms, pursuant to contingent fee agreements, which provided that the attorneys were to receive a percentage (ranging from 3.33 percent to 26.66 percent) of any settlement or judgment recovered from the defendant.
A dispute arose when counsel for some of the plaintiffs (the “settling attorneys”) and one class representative negotiated a $20 million settlement with the defendant beverage company. That arrangement was rejected by counsel for other plaintiffs (the “non-settling attorneys”), who chose to proceed with a class action with different named class representatives. The filing of the new class action suit caused the defendant to back out of the settlement agreement negotiated by the settling attorneys, resulting in millions of dollars of lost contingent fees to the settling attorneys. The settling attorneys then brought suit against the non-settling attorneys, alleging tortuous interference with economic relations, civil conspiracy, breach of contract, and breach of the implied covenant of good faith and fair dealing. The Superior Court ruled that the duty of undivided loyalty owed by the defendant non-settling attorneys to their clients in pursuing class action claims against the defendant trumped any potentially conflicting duty that they may have owed to the plaintiff settling attorneys.
In affirming the Superior Court’s rulings, the Appeals Court held that the filing of class action suits by the non-settling attorneys did not constitute “improper means” to cause the defendant to withdraw its settlement offer and, therefore, the settling attorneys could not establish the elements of an intentional interference claim. Similarly, the filing of the class action suits was not a “tortious act” that could form the basis for a civil conspiracy claim. The Court held that the breach of contract claims failed because there was no evidence in the record that any breach of the contingent fee agreements, as opposed to the filing of the class actions, had caused the failure of the settlement with the national beverage company. As for the claims of the former class member, the Court held that they failed as a matter of law because the non-settling attorneys were bound to act in the interests of the class, not any single class representative.