Class Action Quarterly Update: Discoverability of Retainer Agreements in Class Actions

Class action defense counsel should not assume that engagement letters and retainer agreements between representative plaintiffs and class counsel are privileged. Under Rule 23’s “adequacy” requirement, these letters can be both relevant and discoverable.

The Rationale for Producing Engagement Letters

Under Rule 23(g)(4), class counsel must “fairly and adequately represent the interests of the class.”  The adequacy requirement provides a hook for defendants to claim that these engagement letters are relevant. This is because the named plaintiff in a class action owes all other class members a fiduciary duty.  James Wm. Moore, et al., Moore’s Federal Practice, §23.25 (3d ed. 1997).  

Adequacy of representation is judged through a two-part inquiry. The first part focuses on the proposed class representative. The named plaintiff must be able to advocate the interests of absent class members, assess settlement opportunities, and oversee class counsel during the course of the case. See, e.g., Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 726-28 (11th Cir. 1987); Langbecker v. Elec. Data Sys. Corp., 476 F.3d 299, 314-15 (5th Cir. 2007) (adequacy inquiry encompasses both “the class representatives’ willingness and ability to serve” and “conflicts of interest between the named plaintiffs and the class they seek to represent”).   

The second part of the inquiry examines the adequacy of class counsel. Jimenez v. Domino’s Pizza, Inc., 238 F.R.D. 241, 248 (C.D. Cal. 2006) (attorney’s ethics “are relevant considerations in determining the adequacy of counsel”); Rodriquez v. West Publ’g Corp., 563 F.3d 948, 959 (4th Cir., 2009); Sipper v. Capital One Bank, No. CV 01-9547, 2002 BL 3149, at *2-5 (C.D. Cal. Feb. 28, 2002) (finding a “raft of ethical issues” for failure to disclose that class representative was a close business associate of counsel).   

The engagement letter can help defense counsel evaluate the relationship between the class representatives and their counsel, including the division of power between the class representative and class counsel and how the financial aspects of the relationship might affect their ability to fairly represent the class.  The Ninth Circuit analyzed this issue in Rodriguez v. West Publishing Corp. 7563 F.3d 948, 959 (9th Cir. 2009). After preliminarily approving a classwide settlement, the district court discovered an improper incentive agreement between class counsel and the class representatives—one that tied potential compensation for the class representatives to the total amount recovered for the class. Id. at 959-60. This created a disincentive for plaintiffs to go to trial once the defendants made a settlement offer that exceeded the highest threshold, thereby creating a conflict of interest between absent class members on the one hand and the class representatives and class counsel on the other. 

The engagement letter may also reveal whether class counsel can veto any settlement or insist on settling when the named representative wants to go to trial.  This would mean the class representative could be inadequate because they cannot make critical decisions about the litigation. In re Ocean Bank, No. 06 C 3515, 2007 BL 264879, at *4-5 (N.D. Ill. Apr. 9, 2007). 

There is ample authority on both sides of the question of whether retainer agreements are discoverable.   

Decisions Favoring Production

Court that has required production have found that these agreements can help identify conflicts of interest, the central aim of the adequacy inquiry.  

For example, in Klein v. Henry S. Miller Residential Service, Inc., the court stated that “[t]he primary criterion for determining whether the class representative has adequately represented his class for purposes of res judicata is whether the representative, through qualified counsel, vigorously and tenaciously protected the interests of the class.” 1382 F.R.D. 6, 8 (N.D. Tex. 1978) (quoting Gonzales v. Cassidy, 474 F.2d 67, 75 (5th Cir. 1973)). 

The court added that the fee arrangement could reveal plaintiffs’ ability to fund the lawsuit and help the court assess the reasonableness of any request for attorneys’ fees when the case concludes. Id. at 8-9. In response to the claim that fee agreements are privileged, the court responded that the privilege does not extend to information about an attorney’s receipt of fees. Id. Finally, the court emphasized its own duty to maintain “constant vigilance in overseeing the conduct of a self-appointed class representative.” Id. at 9. 

Similarly, in In re Sheffield, the court held that the defendant was entitled to the production of fee agreements because they would help assess whether the class representative could exercise appropriate control over class counsel. 17280 B.R. 719, 722 (Bankr. S.D. Ala. 2001). The court ruled that neither the attorney-client privilege nor the attorney work product doctrine generally protects fee arrangements. 18Id. at 721-22. The only remaining question was whether the agreement was relevant. The court concluded that it was because it might reveal “potential conflicts or biases.” 19Id. at 722.  See also Porter v. Nationscredit Consumer Discount Co., 2004 WL 1753255 (E.D.Pa.2004) (“Fee agreements may be relevant to a plaintiff's ability to protect the interests of potential class members by adequately funding the suit and to the question of awarding attorney's fees upon settlement or judgment.”); Epstein v. American Reserve Corp., 1985 WL 2598, *3 (N.D.Ill.1985); Klein v. Henry S. Miller Residential Co., 82 F.R.D. 6, 8–9 (N.D.Tex.1978) 

Decisions Denying Production

When courts find that engagement letters were not discoverable, they often focus on the defendant's failure to make the case for the relevance of the agreements.  See, In re Riddell Concussion Reduction Litig., 2016 WL 7325512, at *3 (denying motion to compel production of fee agreements because defendants' assertions of potential harm were speculative and insufficient to demonstrate the relevance of the fee agreements);  In re Front Loading Washing Mach. Class Action Litig., Civil Action No 08-51 (FSH)(MAS), 2010 WL 3025141, at * 4 (D.N.J. July 29, 2010) (denying defendant's motion to compel the production of fee agreements on the basis, in part, that the defendants could obtain the information by alternative means, such as plaintiffs' depositions); Sanderson v. Winner, 507 F.2d 477, 479–80 (10th Cir.1974); Stahler v. Jamesway Corp., 85 F.R.D. 85, 86 (E.D.Pa.1979) (inquiry into the manner in which plaintiff intends to compute the fees due to her has no relevancy to the issue of adequacy of representation); Lee-Bolton v. Koppers Inc. 2015 WL 11110545 (N.D. Fla 2015) (No production of retainer agreements absent a specific showing of the potential for conflict); Clark v. Berkshire Medical Center, Inc. 2019 WL 78994 (D. Mass 2019) (Noting that such discovery is rarely appropriate before class cert is determined, the court found that Defendant “has not made a sufficient prima facie showing of unsuitability or of a potential conflict between Ms. Clark and other class members.”)   


Counsel can enhance their chances of seeing the retainer agreements by observing what seems to matter to the judges faces with this issue.  Courts tend to allow discovery of fee and retainer agreements between class counsel and named plaintiffs where the information contained therein is directly relevant to potential conflicts with absent class members. See, e.g., Mitchell-Tracey v. United Gen. Title Ins. Co., 2006 WL 149105, at *1-3 (D.Md. Jan. 9, 2006).   

Defense counsel seeking to obtain engagement letters in class actions should thus be sure to have solid and well-articulated reasons for pursuing them.  Courts tend to deny hypothetical requests, especially if it is prior to class certification.  One way to maximize a court's chances to grant access to the retention agreement is to make the document request quite specific.  This is because “communications between attorney and client that concern the identity of the client, the amount of the fee, the identification of payment by case file name, and the general purpose of the work performed are usually not protected from disclosure by the attorney-client privilege." Paul v. Winco Holdings, Inc., 249 F.R.D. 643, 654 (D. Idaho Feb. 27, 2008).   

However, requests that go too far afield will face staunch resistance from most courts.  Thus, requests for “all communications” with counsel will obviously call for material that is subject to privilege, such as emails and memos relating to strategy. Clarke v. Am. Commerce Nat'l Bank, 974 F.2d 127, 129 (9th Cir. 1992).   Rolex Emps. Ret. Trust v. Mentor Graphics Corp., 136 F.R.D. 658, 666 (D. Or. 1991); Epstein, at *7 (" Fee agreements are relevant to the ability of named plaintiffs to protect the interest of potential class members and hence are a proper subject for discovery." (citing Klein v. Miller, 82 F.R.D. 6, 8-9 (N.D. Tex. 1978) (" [I]nquiry into Plaintiffs' . . . fee arrangement is relevant to the question of Plaintiffs' ability to protect the interests of potential class members by adequate funding of this lawsuit, and the question of award of attorneys fees in the settlement of possible judgment of this lawsuit." )). 

Further, if counsel does not succeed in having the agreement produced at first, perhaps try again after taking the class representative’s deposition.  This will be especially helpful after asking questions that might make the adequacy determination more likely to affect class certification. 


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