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Inside Kimberly Craven’s Cobell Appeal to U.S. Supreme Court

WASHINGTON – Indian Country Today Media Network has learned details of what Kimberly Craven’s appeal to the U.S. Supreme Court of the $3.4 billion Cobell settlement will include.

The following information comes from her 52-page petition for writ of certiorari, which will be filed with the court on August 20:

•“In a decision that conflicts with many decisions of both this Court and other appellate circuits, the Circuit Court of Appeals for the District of Columbia affirmed the final approval of a contested settlement of a long-standing class action involving mismanagement of land trusts for American Indians. Without allowing them to opt out, the settlement extinguishes the rights of the class members to any accounting of the moneys they are owed, in exchange for a one-time $1,000 payment. Then, despite the class members’ ignorance of the amount to which they would be entitled, the settlement offers an additional baseline sum of at least $800 in exchange for which they relinquish any rights to sue on dozens of related claims.”

•“This settlement was approved over the objections of a number of class members. In addition to the bargain described above, it afforded a $99 million fee to the plaintiffs’ attorneys, and incentive payments ranging between $150,000 and $2 million for each of the named plaintiffs.”

Craven’s lawyers, of the McGuire Woods firm, tell the justices in the brief that there are two main questions for them to consider:

•“Whether a court may impose on an objector the burden to provide evidence of a structural conflict where it concedes that the defendant’s conduct has destroyed any such evidence.”

•“Whether the payment of incentives to named plaintiffs of an amount more than eighty times the award due each class member compromises their ability to adequately represent the class at settlement.”

Points raised regarding the settlement agreement:

•“After more than fifteen years of litigation originally intended to achieve an adequate accounting for Indians holding Individual Indian Money accounts (trusts accounts administered by the United States Department of the Interior), the courts…approved a settlement agreement with pervasive intra-class conflicts.”

•“Over the course of the litigation, the plaintiffs established that the government had breached its fiduciary duties to the IIM holders, among them the duty to afford a full and adequate accounting to all Indians for whom it managed accounts…. After years of hearings and a refusal by Congress to appropriate necessary funding, it became clear that providing an adequate accounting to each class member was prohibitively expensive….”

•“The plaintiffs’, the Government’s, and the lower courts’ answer to this impasse was a settlement agreement that aggregated wildly varying claims of individual Native Americans—some more valuable than others, but all incapable of precise valuation without an adequate accounting—into two classes.”

•“The first is a mandatory Historical Accounting Class that provides $1,000 to each class member; in exchange each class member relinquishes her already-recognized right to an adequate accounting. The second is a Trust Administration Class, which will provide small additional payments to all class members who do not opt out.”

Points made on lawyers’ fees and incentive awards to lead plaintiffs, including Elouise Cobell, who passed away in October 2011:

•“Compounding these intra-class conflicts were enormous fee requests by Class Counsel and incentive award requests by the Class Representatives. According to government counsel Thomas H. Bondy, while these provisions did not fulfill the government’s fiduciary duty, they did accomplish some ‘rough justice’ for the class members.”

•“But while the class members were forced to settle for ‘rough justice,’ the attorneys and the Class Representatives were handsomely rewarded. The starting point for Class Counsel’s ultimate fee request was a ‘clear sailing’ provision executed in the parties’ Agreement on Attorney’s Fees, Expenses, and Costs. The ‘clear sailing’ provision agreed not to contest up to $99.9 million in attorney fees. From that amount, Class Counsel argued upward for a total fee of $223 million. The district court ultimately awarded a $99 million fee.”

•“Meanwhile, the four Class Representatives received $2.5 million in aggregated incentive awards. They further claimed that they were owed over $10.5 million more in ‘litigation expenses’ that included Representatives’ personal rent and public relations-related expenses…. They sought these large sums notwithstanding the fact that the absent class members they purported to represent—and whose valuable rights they had arranged to settle —would each receive only a small fraction of their requests. Despite their drastically diverging interests—in both the types of claims and monetary recovery they stood to recover—the lower courts approved the Class Representatives as adequate to represent the interests of absent class members and approved millions of dollars in incentive awards.”

•“The American Law Institute has expressed particular concern about the potential for incentive bonuses to improperly influence class representatives. While it endorses incentive bonuses to cover reasonable, litigation-related expenses, it warns that they ‘should not be an incentive for securing the acquiescence of either the lead parties or the named class members on a basis adverse to the interests of the aggregated class as a whole.’”

•“In this case, the sheer size of the incentive awards—both those that the plaintiffs requested and those that the court ultimately awarded—indicates that by the time of settlement, the incentives of the Class Representatives were more closely aligned with their counsel than with the absent class members. In such a case, it would be error to find the Class Representatives, who now had hundreds of thousands of dollars at stake in the settlement, adequate to represent the absent class members, who at most stood to recover at most a few thousand dollars.”

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•“The incentive payments the D.C. Circuit approved in this case were far from ‘small.’ They represented an amount many times greater than the average class member’s recovery. All told, the Class Representatives received $2.5 million in aggregated incentive awards. Ms. Cobell requested $10 million but alone received a $2 million incentive award; Mr. LaRose received a $200,000 award; and the two remaining named plaintiffs took in $150,000 each.... These figures dwarf the per capita payments to individual class members—a modest $1,000 payment for surrendering accounting claims and a base payment of $800 for releasing trust administration and mismanagement claims.”

•“Furthermore, the Class Representatives’ disproportionately large incentive payments came from the same pool of funds appropriated by Congress to pay the class claims, and consequently diminishing class members’ pro rata shares.”

•“More importantly, the sizable awards the D.C. Circuit authorized were actually reductions from the original amounts the named plaintiffs requested. In addition to $2.5 million in aggregated incentive awards, the Class Representatives further claimed that they were owed over $10.5 million more in litigation expenses…. The sheer size of those requests, by themselves, should have alerted the lower courts that the adequacy of these representatives had been compromised.”

•“These requests suggest that the Class Representatives had grown far more interested in maximizing their own recovery than in protecting the interests of the class.”

•“Alternatively, the requests could indicate that Class Counsel was compensating the Class Representatives for accepting a deal they had previously rejected.”

•“To say that these awards would color a class representative’s perception of a settlement does not cast aspersions on her character, it recognizes a fundamental fact about human nature. By ignoring that fundamental conflict, the Court of Appeals committed reversible error. Correcting that error would provide essential guidance about the role of the class representative in large-scale settlements.”

•“Setting a clear guideline on incentive awards would also help to curb the problems with attorneys’ fees that tend to arise in the same circumstances. Here, at the same time as the named plaintiffs were requesting millions of dollars in incentive awards, class counsel requested an astounding $223 million attorneys’ fee…. While this request represented a small percentage of the total recovery in the case, it was still exponentially greater than the per capita recovery of any of their clients.”

•“This case is particularly appropriate for review because the D.C. Circuit did not pay adequate attention to these red flags: large incentive payments to the class representatives and huge fees awarded to class counsel often indicate that the interests of the absent class members have been sacrificed to those of the lawyers. As a result, this Court may offer clear guidance on whether (and under what circumstances) incentive payments to class representatives and fees awarded to class counsel—negotiated simultaneously with an exponentially smaller recovery for the class—create impermissible conflicts of interest.”

The lawyers offer the following reasons as to why the high court should grant the petition:

•“At the settlement stage, particularly in a long-fought case like this one, the interests of the absent class members are in particular danger. Plaintiffs, defendants, and even courts all have strong incentives to approve any settlement the original parties can reach…. For this reason, proper oversight of class action settlements is of vital importance to the protection of the rights of absent class members. Often, that oversight will only be provided by objectors to the settlement.”

•“This Court has long held that adequate representation is a due process requirement for class actions…. As a result, it is vital that settling parties provide structural assurances that absent class members receive adequate representation…. Here, that did not happen.”

•“Kimberly Craven and the other objectors provided evidence that there was a structural conflict in the proposed settlement, pitting the low value claimants the federal government admitted existed against various high-value claimants…. For class members with low-value claims, many of whom are in dire economic circumstances, forgoing the accounting to which they were entitled (and therefore forgoing any further cause of action to recovery damages) may be worth much less than $1,000. But for those class members with claims reaching into five, six, or even seven figures, $1,000 is nowhere near compensation for the rights they will be forced to relinquish.”

•“By finding no conflict under these circumstances, the D.C. Circuit has created a split in how to approach intra-class conflicts…. First of all, the class members could not opt out of the Historical Accounting Class that forfeited their right to an accounting, because that class was certified under Rule 23(b)(2), which does not allow for opt outs. As a result, since none of the class members knew what their particular claims against the federal government would be worth, their right to ‘opt out’ of the Trust Administration class would be functionally meaningless. This Court has recognized this problem in the past, when damages claims were gathered for resolution in a limited fund class.”

•“Relying on the ability to opt out as the primary protection for absent class members is a problematic strategy at the best of times.”

•“In a case like this, clearer guidance about the necessity of adequate representation would do far more to protect the interests of absent class members than simply pointing to an opt-out right that has been hollowed out by the provisions of the settlement itself.”

•“The question of when a conflict within a class is fundamental, so that ignoring it compromises the right to due process….”

Previously commenting on her filing, Craven told ICTMN, “It’s been my belief, since it was first announced, that the Cobell settlement violates due process and federal rules established to ensure class action fairness. As it stands now, individual Indians have less legal protection than Wal-Mart workers.”

The high court has granted an extension to file appeals until September 19 to three other Indian appellants, which their lawyers says they plan to do.

Cobell lawyers and officials with the federal government have not yet responded to requests for comment.