Class Suing Nextel Decertified on Appeal

MANHATTAN (CN) - Hailing from 27 different states, Nextel's workers cannot join in a class action accusing the company of hiring their lawyers to court a conflict-of-interest in an employment dispute, the 2nd Circuit ruled Wednesday.

The case puts a spotlight on what the appellate court dubbed New York-based law firm Leeds, Morelli & Brown's "novel approach to aggregate litigation that continues to provoke debate among experts in legal ethics."

Nearly four years ago, the 2nd Circuit ridiculed the settlement Leeds Morelli reached for Nextel's workers as an "employment contract" with their bosses.

Stipulating that 587 employees would split $2 million to waive all claims, the contract provided the firm with $3.5 million in fees and an additional $2 million to keep working as a consultant for Nextel.

Reviving breach of contract, fraud and other claims, the 2nd Circuit's earlier decision found that the settlement, "on its face alone," seemed to create an "enormous conflict of interest."

U.S. District Judge George Daniels certified the lawsuit as a class action when it returned to him on remand.

The appeal on this decision fell before a mostly different panel of judges, who appeared more neutral to the question of the firm's ethics.

"Both [Leeds, Morelli & Brown] and Nextel obtained opinion letters from experts in legal ethics who concluded that the fee arrangement and dispute resolution process proposed in the [settlement] were ethical, so long as [the firm] provided disclosure to, and obtained consent from, the individual clients," Judge Gerard Lynch wrote for the panel Wednesday.

Judges Richard Wesley and Peter Hall, the sole remaining member from the original panel, joined the new opinion.

Without reaching the substance of the allegations, the court on Wednesday found the workers' situations too diverse to come together in a single class action.

"The possibility that different state laws will apply is especially relevant in this case, because we know of at least one significant conflict that would affect liability for a sizable portion of the class," the opinion states.

Lynch added: "The application of the different jurisdictions' laws therefore renders individual issues predominant and undercuts the superiority of trying the common issues on a classwide basis."

Lawyers for Nextel and the workers have not returned requests for comment.

The Leeds Morelli law firm, though a defendant in the case, was not listed as a party to this appeal.

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