Class Claims Lawyer Took 'Secret' $6M Deal

OAKLAND, Calif. (CN) - A California law firm accepted a $6 million "secret settlement" of a labor class action against a bank, agreed to dismiss the claims without telling 600 clients, then tried to convert the whole settlement into legal fees, a class action claims in state court.

Lead plaintiff Kendra Cutting sued Mark Yablonovich; an attorney in his law office, Michael Coats, and The Law Offices of Mark Yablonovich, in Alameda County Court.

Yablonovich's office is in Los Angeles, according to the California Bar Association web page.

Cutting claims the defendants "wrongfully collected and continue to unlawfully retain substantial sums belonging to plaintiff and the other members of the proposed class."

Cutting and other sold mortgages for Wells Fargo and alleged that the bank improperly classified them as exempt from overtime wages.

She claims that she and about 600 others "were represented by attorney defendants in a wage and hour class action against Wells Fargo," and that "Attorney defendants entered into settlement negotiations with Wells Fargo to resolve the lawsuit and agreed to a secret settlement (the 'Supplemental Settlement') without the consent or knowledge of clients."

The complaint continues: "The Supplemental Settlement contained three core provisions: (1) "the class and individual lawsuits filed on behalf of clients would be dismissed; (2) the clients would forego their right to opt out of a class action settlement of their wage and hour claims; and (3) Wells Fargo would pay $6 million in exchange for the dismissal of the lawsuits and the surrender of clients' opt out rights. In essence, attorney defendants bargained away clients' opt out rights for $6 million without the approval of or disclosure to clients.

"As a result of a concerted and focused campaign, clients were induced not to opt out of the class action settlement. Their wage and hour claims against Wells Fargo extinguished. The terms of the Supplemental Settlement remained undisclosed until it was too late for them to opt out and pursue individual claim which would have yielded far greater recoveries than the class action settlement.

"Attorney defendants concealed the existence of the Supplemental Settlement from clients for 11 months during which they maneuvered to convert the entire $6 million settlement into attorneys' fees. Acting without the knowledge or approval of clients, attorney defendants attempted to persuade Wells Fargo to execute a 'confidential' settlement agreement characterizing the entire $6 million as attorneys' fees instead of funds belonging to clients. Wells Fargo declined to sign this agreement.

"Undeterred by this setback, attorney defendants then participated in a fraudulent scheme to induce clients to accept a self-serving allocation of approximately $5.5 million of the settlement to 'attorneys' fees.' Attorney defendants were covertly paid and continue to retain a portion of these 'attorneys' fees.'

"The activities of attorney defendants challenged in this action were both unethical and unlawful. ... Attorney defendants concealed and misrepresented material facts, put their own interests ahead of clients and ultimately defrauded clients out of approximately $5.5 million. To redress this appalling misconduct, plaintiff seeks compensatory and punitive damages against each of the attorney defendants, restitution, and appropriate declaratory and injunctive relief."

Campbell is represented by Mark Chavez, with Chavez and Gertler, of Mill Valley.

Source: Courthouse News Service