$5.5 Million Side Deal, Done Without Court Approval, Derailed.
Judge Mary E. Wiss of the San Francisco County Superior Court, in a July 16, 2015 order in Lofton v. Wells Fargo Home Mortg., Case No. CGC-11-509502, derailed a $5.5 million “supplemental” fee arrangement between one class law firm, its clients, and Wells Fargo after finding that it was never disclosed to the court—especially at the preliminary approval hearing. Having not disclosed the agreement and having appropriated the funds to itself, the law firm was found to have no entitlement to the fees and was ordered to disgorge about another $500,000 in moneys.
On October 22, 2014, we posted about this litigation, after the Court of Appeal ruled that the trial court properly issued a TRO requiring the deposit of settlement funds in an account under court supervision, and co-contributor Marc posted on the California Mediation and Arbitration blog about the admissibility of settlement letters in the case to establish imminent harm as the basis for obtaining a TRO, rather than to establish liability.