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Posted: August 14, 2015

Court Rejects Settlement in Class Action Due to Improper Communications by Class Counsel

In In re Am. Express Anti-Steering Rules Antitrust Litigation, 11-MD-2221 (E.D.N.Y. August 4, 2015), Judge Nicholas G. Garaufis took the unusual step of denying a motion for final approval of a negotiated settlement in an antitrust class action on the ground that he was not satisfied that the settlement was “fair, reasonable, and adequate” because of his “serious concerns about the Settlement’s substantive fairness.” Slip op. 21.

The circumstances that justified this rare occurrence were the revelation of private communications between the lead lawyer for the class plaintiffs, Gary Friedman, and Keila Ravelo, a defense lawyer for AmEx competitor MasterCard in a separate class action (where the class of plaintiffs substantially overlapped with the class in the AmEx litigation, though Friedman was not involved in the MasterCard action). Friedman, a longtime friend and former law school classmate of Ravelo, was regularly consulting with her on case strategy related to his action against AmEx. In the course of those discussions, he disclosed confidential information produced by AmEx under a protective order. He was apparently aware of the sensitive nature of his disclosures, as he marked at least two of them with the words, “Burn after reading.” Slip op. 25.

The court ruled that Friedman’s “improper and disappointing conduct . . . fatally tainted the settlement process,” slip op. 21, in part because the relief sought in the AmEx action impacted what relief would be available in the MasterCard action in which Ravelo was involved. And the court rejected Friedman’s co-counsel’s assertions that they could carry the settlement to its conclusion without him, noting that “Friedman’s co-counsel may be more interested in protecting Friedman, their settlement, and their attorneys’ fees application, than they are in protecting the merchant class that they purport to represent.” Id. at 39.

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