SAN FRANCISCO (Legal Newsline) – A judge has ordered that attorneys hoping to be named lead counsel in a class action case against LendingClub must submit an application - but the lead plaintiff still chose its own attorneys.
In an unusual maneuver, U.S. District Court Judge William Alsup, of the Northern District of California, recently declined to appoint lead counsel in a class action suit against LendingClub, instead opting to have firms submit applications and then be approved by the lead plaintiff in the case.
The lead plaintiff was appointed by Alsup as the Water and Power Employees Retirement System Disability and Death Plan (WPERP), as it was the only plaintiff that didn’t withdraw or oppose WPERP’s motion for appointment. Although WPERP has its own legal representation in the case, they too must submit to be lead counsel.
Although WPERP has gone through the application process, it has selected its previous law firm, Robbins Geller Rudman & Dowd LLP, as its lead counsel in the class action case.
“Now that WPERP [has] selected Robbins Geller, its prior counsel, as lead counsel, it remains to be seen whether the court looks at WPERP’s motion with more scrutiny to ensure that WPERP performed its diligence with regard to the other applicants,”
John S. “Terry” McMahon III, an associate at Mintz Levin Cohn Ferris Glovsky and Popeo PC, told Legal Newsline.
The case against LendingClub involves its former CEO Renaud Laplanche's alleged interest in third party fund Cirrix Capital while LendingClub was considering investing in the fund and also selling $22 million in loans to a loan investor against the investor’s direct wishes.
“Although the court’s decision to split the lead plaintiff and lead counsel process is unusual, Judge Alsup noted that 'no decision by the lead plaintiff is more important than the selection of class counsel,' and since '[a] lead plaintiff is a fiduciary for the investor class … the lead plaintiff should precede its choice with due diligence,'” McMahon said.
“That said, one could also argue that the decision to retain counsel is always important and that WPERP had the same incentive to find the best counsel on its own behalf that it does to find the best lead counsel for all the class plaintiffs."
Although the gesture to have lead counsel submit to a review process by WPERP is unusual, it is not the first time Alsup has done this. He made a similar ruling in a case against Diamond Foods – also requiring the plaintiff to select counsel based on who could provide the best option for the class.
In that case, the lead plaintiff selected the two law firms that provided their representation to become lead plaintiff in the same case.
Alsup directed WPERP to advertise for counsel and take into consideration fees and abilities.
“The court instructed WPERP to advertise for applicants, but it did not make clear what exactly should be included in the application process,” McMahon said.
“That said, when directing WPERP to conduct this process, the court said: 'Considerations should include their fee proposal, their track record, the particular lawyers assigned to the case, their ability and willingness to finance the case, and their proposals for the prosecution of the case, or the factors set forth in the questionnaire.'”