Judge rules that lawyer misconduct is grounds to reject class action settlement in its entirety
NACS, along with dozens of merchants, has long opposed the class action settlement with American Express because in many merchants’ view the settlement does nothing to change the anti-competitive restrictions that American Express has placed on merchants. Recently, in a strongly worded opinion, Judge Nicholas Garaufis of the U.S. District Court for the Eastern District of New York rejected the settlement in its entirety.
Judge Garaufis did not, however, rule on the fairness of the terms of the settlement itself. Instead, he focused on the misconduct of one of the lawyers for merchants in the case: Gary Friedman. According to the decision, Friedman sent confidential material from the American Express case to one of MasterCard’s lawyers, Keila Ravelo, and consulted with her on the case numerous times. The judge found that these communications – numbering more than 1000 – betrayed Friedman’s duty to his clients and meant the merchant class was not adequately represented in the case.
The judge wrote that the communications between Friedman and Ravelo were “improper and disappointing” and that they “fatally tainted the settlement process.” As a result, the judge not only rejected the settlement but also removed Friedman as counsel to the class and required other counsel to the class to justify why they should be able to continue their representations of merchants in the case.
The opinion was highly critical of the reactions of other class counsel to Friedman’s conduct. Rather than condemning his conduct counsel kept him as part of the counsel team and sought to minimize his impact rather than expressing concern and seeking to protect the clients’ interests.
Friedman and Ravelo also shared confidential communications relating to the Visa/MasterCard class action. NACS and other merchants have filed a similar motion in that case contending that the settlement should be rejected because of the actions of the two lawyers. While that case is before a different judge, the court is expected to consider Judge Garaufis’ decision to reject the American Express settlement when deciding the fate of the Visa/MasterCard settlement.