Dennings v. Clearwire Corporation

Plaintiffs allege that Defendant, Clearwire Corporation, advertised "high speed" Internet services.  However, Clearwire generally throttled their Internet speed such that it was substantially similar to that of a dial-up modem.  Owing to their lack of infrastructure, Clearwire knew it would not be able to provide its advertised high speed Internet.  Customers, realizing they had paid a premium for a level of service they were not receiving, attempted to withdraw from their contracts, leading to early termination fees.  Plaintiffs believe that this constitutes unlawful practices by the Defendant.

1. Final Approval granted.
2. All objections overruled.
3. Objectors Morgan and De La Garza appealed the Final Approval.
4. A $41,150 appeal bond was ordered by the District Court as a condition of their appeal.
5. The appeal bond was not timely posted twice, ultimately leading the Western District of Washington to sanction Mr. Bandas by revoking his pro hac vice status (discussed extensively below).
6. The appeal of Objectors Morgan and De La Garza was dismissed by joint stipulation.

1. Claims-made structure is designed to depress the value of the settlement.
2. Settlement negotiations indicate self-dealing.
3. Distribution of attorneys' fees is improperly delegated to the lead plaintiff's attorney.
4. Attorneys' fees are excessive.

Both Mr. Morgan and Mr. De La Garza were deposed by Class Counsel on December 17, 2012.  Both objectors were unaware of the substance of their objections, having never reviewed the document filed by Mr. Bandas on their behalf purporting to detail their objections to the settlement (See Morgan Deposition, page 10-11; De La Garza Deposition, page 12; discussed in depth in Plaintiff's Declaration Regarding Depositions of Objectors).

Plaintiffs motioned for, and the District Court granted, an appeal bond of $41,150 ($39,150 for increased settlement administration costs, as well as $2,000 in filing and copying fees).

On April 22, 2013, the Ninth Circuit granted summary affirmance of the settlement.  They found that "the questions raised in this appeal are so insubstantial as not to require further argument."  Objectors Morgan and De La Garza petitioned for a re-hearing.  However, eleven days later, on April 15, 2013, their appeal was voluntarily dismissed under pressure from the District Court to either do so or pay the $41,150 appeal bond.

On the same day (June 3, 2013) that the mandate from the Ninth Circuit was issued for the dismissal of their appeal of the Final Approval Order, Objectors Morgan and De La Garza filed a second appeal, this time contesting the Order Granting Attorney's Fees.  Class Counsel motioned for the previously ordered appeal bond to be extended to this second objector appeal, which the District Court granted.

Attorney Bandas moved to appeal the appeal bond, as well as requesting an emergency stay for the $39,150 portion of the bond that was contested.  Mr. Bandas did pay the uncontested $2,000, which was rejected by the District Court.  The District Court denied the Emergency Motion to Stay, finding that the "perhaps having learned from their prior attempt to proceed with their appeal without complying with this court's bond order, the Objectors have adopted a new strategy to achieve the same result."  The Court felt that "objectors' arguments are spurious and fail to show that the appeal bond or its amount are inappropriate under these circumstances."  The Court also found that the argument relied on a "flawed interpretation of Azizian v. Federated Department Stores."  The Court ordered the payment of the full appeal bond (see Order Denying Emergency Motion to Stay Appeal Bond).

After failing to get the Appeals Court to overturn the appeal bond and following an order to appear and show cause, Mr. Bandas finally posted the full $41,150 on July 23, 2013, nine days after the Court mandated deadline of July 14, 2013.  Concurrently, Mr. Bandas motioned to vacate the sanctions, arguing that he had fulfilled the District Court's bond order.  The Court found that the objectors "appear to believe that they do not need to follow court orders until they are threatened with sanctions for failing to do so...This is not acceptable conduct for attorneys appearing before this court."  Mr. Bandas also requested to appear for the sanctions hearing telephonically, which the Court found inappropriate.  "If Objectors' counsel intends to litigate in the State of Washington, he must be prepared to appear in Washington when ordered to do so by the court.  The nature of Objectors' behavior in these proceedings makes this sanctions hearing more appropriate for in-person resolution." (see Order Denying Motion to Vacate Sanctions)

On August 1, 2013, the District Court held a show cause hearing, with Mr. Bandas represented by Mr. Iaria and Ms. Wilk.  The Court seemed to have little patience for "what's really quite simple conduct.  This is the second time around, I have ordered a bond to be posted.  The first time, I didn't do anything, and what I got greeted with was an intentional disregard of an order to file a bond.  And then some gratuitous payment of what an attorney thinks ought to be the amount of the bond.  And then notice that, well, that's all that I need to do.  I've substituted my judgment for your judgment, and tough luck...This legal system does not operate on the basis of attorneys substituting their judgment for the Court's judgment" (see Sanctions Hearing Transcript, page 12).

In the hearing, Mr. Bandas, by and through counsel, continued to argue that the payment of the uncontested $2,000 while disputing the remainder of the bond, constituted an appropriate interpretation of Azizian v. Federated Department Stores (03-cv-03359).  He also argued that it was always his intention to post the full amount and a vacation by his bookkeeper that partially overlapped with the bond deadline prevented him from posting it on time. (see Declarations of Christopher Bandas and Jan Petrus)

In order to afford Mr. Bandas' counsel time to consult with experts and to present further evidence as to why his actions were taken in good faith and not sanctionable, the Court extended the Show Cause Hearing until August 20, 2013.  At the second hearing, the Court characterized Mr. Bandas' relationship with his clients as "interesting...Mr. Bandas apparently has an agreement with these people that they substituted his judgment for their judgment, which is an interesting approach to the attorney-client relationship.  That's when your three adversaries sitting there...asked these people 'Did you read this?' And they say, 'No.'  'Well, do you agree with it?'  'Well, I don't know.'  'Did you consult with your lawyer about it?'  'No.'...That doesn't sound - I understand the attorney is going to be better informed; he is going to have a broader understanding of the law, but I think there is some need to consult with your client to say, 'This is what I recommend.  Do you agree?  Am I authorized?'  That apparently...was initiated by Mr. Bandas' agreement." (see Sanctions Hearing Transcript (Continuance), page 25)

Ultimately, the Court did find that Mr. Bandas' failure to twice pay the mandated appeal bond in an timely fashion was sanctionable conduct.  "Therefore, the ruling of this court is that, in regards to the appropriate sanction, it will be to revoke Mr. Bandas' permission to practice pro hac vice in the Western District of Washington" (see Sanctions Hearing Transcript (Continuance), page 32).

By Joint Stipulation, the appeal of Objectors Morgan and De La Garza was dismissed on September 19, 2013 and the appeal bond was returned in full.

NOTE ON ATTORNEYS:  Mr. Heyrich was engaged as local counsel for the Objectors but ultimately withdrew his appearance and was not involved in the decision to continue the appeal in defiance of the appeal bond issue (see Notice of Posting Appeal Bond, page 2, footnote).  Mr. Iaria and Ms. Wilk represented Mr. Bandas at the Show Cause Hearings and did not represent the Objectors.