Judge Signals Likely Decision Against Fee Reduction in Morgan Stanley Settlement Dispute

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Mark Humenik, representing objectors Matthew Lucadano and Tracy Chen, argued that the failure to disclose the side deal tainted the fairness of the settlement. He emphasized that this hidden agreement undermined the undivided loyalty that class counsel owed to the plaintiffs.

“The fairness of the settlement has already been established,” Judge Orrick responded. He added that the settlement was found to be fair in previous rulings and upheld during the appeal process.

Humenik also argued that the fee awarded to Harvey’s lawyers, amounting to $2.1 million, should be returned, citing Ninth Circuit precedent on conflicts of interest in class action settlements. He pointed out that the walkaway provision was initially part of the agreement before being discarded, and claimed this provision gave Harvey a personal benefit, suggesting a potential conflict of interest.

However, Edward Wynne, representing Harvey, defended the settlement, insisting that no quid pro quo existed and that the failure to disclose the abandoned side deal was an honest mistake. Wynne clarified that the monetary aspects of the settlement were negotiated first, with the walkaway provision added as a secondary matter that was eventually removed.