Class Action Settlements

It’s always worth a look when a federal judge steps down from Olympus the bench to act as an ordinary mortal litigant.  Class action aficionados in particular should not  miss Alison Frankel’s report for Reuters, discussing a remarkable objection by Chief Judge Kozinksi and his wife to approval of a class settlement in a case in which he happens to be a class member.
Continue Reading Ninth Circuit Chief Judge Alex Kozinski Objects to Class Settlement

For weeks, class-action practitioners have been waiting to see whether the Supreme Court would grant review in Marek v. Lane, a case involving a challenge to the cy pres component of the class settlement of the Facebook “Beacon” litigation. The Court did not, but Chief Justice Roberts issued a rare statement respecting the denial that sounded a warning to everyone involved in class-action settlements: At least some Justices are on the lookout for a case in which to address the propriety of cy pres settlements.

Here’s the background. The plaintiffs alleged that Facebook’s Beacon program violated a host of
Continue Reading Supreme Court Denies Review—This Time—Of Challenge To Cy Pres Class Settlement

The federal courts of appeals continue to scrutinize class-action settlements closely when the direct benefits to class members are overshadowed by the attorneys’ fees that flow to plaintiffs’ counsel. The most recent example is Greenberg v. Procter & Gamble Co. (pdf), No. 11-4156 (6th Cir. Aug. 2, 2013). In its decision, the Sixth Circuit provided guidance to practitioners regarding the fee awards and incentive payments to named plaintiffs.
Continue Reading Sixth Circuit Rejects Class Settlement Over Excessive Payments to Class Counsel and Named Plaintiffs

Social media can be a game-changer for class actions.

I was recently reminded of this when reading news coverage of a proposed class settlement of claims involving chicken that a fast food restaurant allegedly had improperly described as halal. A Michigan lawyer, who wasn’t involved in the case, had taken to Facebook to complain that the settlement would distribute the $700,000 class fund to plaintiff’s counsel and two charities rather than to class members. (We’ve previously blogged about the emerging backlash against settlements with large cy pres components.)

Plaintiff’s counsel, apparently fearing that the Facebook posting would stir up objectors,
Continue Reading Will Your Class Action Go Viral?

A new paper by Fordham law professor Howard Erichson, entitled “The Problem with Settlement Class Actions”—and a blog post about it by Andrew Trask—caught my eye.

The paper uses two recent class settlements, In re AIG and Sullivan v. DB Investments, Inc., as the springboard to discuss settlement class actions. Erichson argues that the problem with class settlements isn’t that the would-be class counsel will collude with defendants to reach a deal that sells out the rights of absent class members. Instead, he says that plaintiffs’ lawyers simply lack sufficient leverage to negotiate a fair deal because
Continue Reading Is There A Problem With Settlement Class Actions?

It’s rare for a court to appoint its own expert in a class action. But Judge Gleeson of the Eastern District of New York is poised to do precisely that in order to help him decide whether to grant final approval to the $7.25 billion proposed class settlement of antitrust claims by retailers challenging Visa’s and MasterCard’s interchange fees. Some observers say that the proposed class settlement in the case—In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 1:05-md-01720—would be the largest class settlement of private antitrust claims in U.S. history.

In November,
Continue Reading Judge Mulls Appointment of Own Expert to Evaluate What Could Be the Largest-Ever Class Settlement of Private Antitrust Claims

We’ve blogged before about federal courts’ increasing reluctance to approve class settlements that involve a significant cy pres component. The Third Circuit’s recent decision in In re Baby Products Litigation (pdf) is the latest example of this trend.

Class counsel often use the distribution of funds to handpicked charities in order to disguise the percentage of the class recovery that’s actually going right into class counsel’s pocket. That may have been what was going on in In re Baby Products Litigation. In that case, class counsel got almost five times as much money ($14 million in fees and expenses)
Continue Reading Third Circuit Rejects Class Settlement Because Class Fund Went to Class Counsel and Cy Pres Rather than Class Members

A recent decision from the Delaware Supreme Court is a reminder that the members of a mandatory class—one in which the class isn’t guaranteed opt-out rights—sometimes may be given the right to opt out in order to pursue their own individual actions.

The decision, In re Celera Corp. Shareholder Litigation (pdf), addressed a class settlement of claims that the directors of Celera Corp. had breached their fiduciary duties in agreeing to a merger with Quest Diagnostics. The settlement promised “therapeutic benefits” to the class of Celera shareholders, such as additional disclosures and changes to the merger agreement that made it
Continue Reading Can Members of a Mandatory Class Action Opt Out?

As readers of the blog by now know, I’m always on the lookout for examples of class-action settlements that pay off the lawyers while providing little or no benefit to the members of the putative class. The most recent example is Galloway v. Kansas City Landsmen, LLC (pdf), in which Judge Greg Kays of the U.S. District Court for the Western District of Missouri rejected a coupon-only settlement.

The claim in the case is that the defendants, a number of Budget rental car outlets, violated the Fair and Accurate Credit Transactions Act (FACTA) by failing to truncate credit card numbers and expiration dates on electronically printed receipts. The parties entered into a “claims made” settlement under which class members who submitted claims would receive coupons for use in future car rentals. The coupons would have a 120-day expiration date, be subject to blackout periods, and could not be combined with other coupons, discounts, or promotions. Meanwhile, the defendant agreed to pay $175,000 in attorneys’ fees to class counsel.

Judge Kays concluded that “few class members will likely file claims because the benefit of doing so is not worth the effort.” That was so for two reasons.

Continue Reading Galloway v. Kansas City Landsmen, LLC: Court Rejects Coupon Settlement After Finding That Few Class Members Would Be Likely To File A Claim

Past posts have noted that federal courts have become increasingly skeptical of class-action settlements that contain a cy pres component.  Another recent example is In re Groupon, Inc., Marketing & Sales Practices Litigation (S.D. Cal.).  The plaintiffs in this case alleged that Groupon violated various federal and state consumer-protection statutes by marketing vouchers with allegedly improper restrictions on usage.  In settling the case, Groupon agreed to create a settlement fund of $8.5 million, of which $2.125 million would be paid to class counsel as attorneys’ fees.  The remaining funds would be used to provide settlement vouchers (good for 130 days)
Continue Reading In re Groupon, Inc., Marketing & Sales Practices Litigation: Judicial Skepticism Of Cy Pres Dooms Another Settlement