TCPAWorld is a wild place. Everywhere you look you find something new and unexpected. And everything seems to have a rich and vibrant story. But a dimension of danger always lurks just beneath.

Here’s a particularly interesting tale of danger and intrigue.

Our friends over at Ocwen formerly tried to settle a TCPA class action for a mere $17.5MM. That class was stunningly denied certification by the district court, which concluded there was a “good chance” that class counsel had “sold the case short.” I wrote all about the jawdropping decision here.  (Ignore the attribution to my former firm—I wrote the article but they had NLR change the article to their name. What are you going to do?)

Unsurprisingly, the parties sat down at the mediation table anew and came to a new settlement. This time Ocwen would pony up $4MM more dollars—raising the fund to $22.5MM—and class counsel would accept a mere $4.75MM in fees. The banks for whom Ocwen serviced loans would also be left out in the cold and not receive the release of claims from class members that had been assured in the original settlement. All of this seemed reasonable to the Court and this time and the previously unacceptable settlement met with court approval following these enhancements.

All of that is newsworthy enough, but the real story here isn’t the settlement. It’s the Court’s assessment of the conduct of one of the putative class counsel—Mark Ankcorn. Ocwen filed a motion challenging that Counsel Ankcorn had violated his duties to the class back in November, 2017-before the initial settlement was rejected. The motion contended that Ankcorn had violated his duties to the class by soliciting high-value class members to opt out of the settlement, which had been reached by September, 2018. After a hearing on the motion the Court set an evidentiary hearing in April, 2018 and, apparently, took testimony from Ankcorn and others about what had occurred.

The Court found that Ankcorn had sent letters to a number of class members potentially encouraging those class members to opt out with the intention of referring those class members to Hyde & Swigart to sue Ocwen on individual claims. While other lawyers were doing the same thing—its not that uncommon even if it is questionable conduct—Ankcorn was representing the class at the time. And by taking actions that might encourage high-value class members to opt out of the class he was both risking the overall settlement—Ocwen had the right to blow up the settlement if over 4,000 members opted out—and diminishing the value of the settlement for absent class members as Ocwen had less incentive to settle the class case is millions or hundreds of millions in individual claimants had opted out.

In the Court’s words:

[i]t is clear that by encouraging high-value class members to opt out of the class to pursue  individual lawsuits, Ankcorn harmed the class’s interests in violation of his fiduciary duty to it.

Although the Court characterized Ankcorn’s conduct as “troubling” and, as noted below, found that the conduct constituted a violation of his fiduciary duty to the class—resulting in his removal as class counsel—the court yet awarded Ankcorn $601,697.50 for the work her performed on the case. The Court noted that, under the fee multiplier that was applied to the class counsel loadstar, Ankcorn would have been entitled to far more had he not engaged in conduct that risked the class member’s rights. Awarding Counsel Ankcorn over $600k in fees, therefore, achieved the appropriate balance in the Court’s mind of awarding him for work resulting in a favorable settlement while offsetting the risk he had created for the class.

To say that Snyder II is an interesting read is an understatement. It is remarkable that a class counsel who was found to have undermined the interests of the very class members he represented was yet awarded hundreds of thousands in attorney’s fees with—apparently—no further consequence. It is also remarkable that the parties were sent back to the settlement table following an initial rejection by the Court and returned with another $4MM. One wonders whether this creates a precedent of courts compelling Defendants for even greater class recoveries by rejecting initial settlement offers.

One other really interesting piece to this– the haircut Ankcorn took on fees will likely inure to the benefit of the class as the Court’s order seems to contemplate that class counsel is to allocate fees according to their agreed upon formula but forfeit to the class the remainder of the fees Ankcorn might have received. Talk about a dangerous exercise.

Think about this. A pool of money is now reserved for fees. Ankcorn can only take $601k. The rest of the class counsel have to split $4.75 minus $601k minus the additional amount Ankcorn would have received that is not forfeited to the class. Only no one but class counsel knows what that additional amount was supposed to be. As the Court puts it: “The Court leaves it to class counsel to calculate that figure precisely.”

One can only imagine the pressures on class counsel to reconfigure their internal compensation plan—for the details of it were never explained to the court apparently—to increase their own fee recovery to the detriment of the class.

Interesting, no? More to come TCPAWorld