Tuesday, March 17, 2015

In re Online DVD Antitrust Litigation: adverse decision and en banc petition

You might recall the settlement approval in Online DVD Antitrust Litigation we briefed back in 2012. A district court held that the Wal-Mart $12.03 "gift cards" the settlement awarded weren't "coupons," refused to apply the Class Action Fairness Act, and awarded fees based on the face value of the coupons.

On February 27, the Ninth Circuit, in a Judge Sidney Thomas opinion, affirmed.

Wait a second! careful readers exclaim, Didn't you already win that exact issue on appeal?!

Yep. Appellees made the same arguments about "settlement vouchers" and attorney-fee calculations in Redman v. RadioShack Corp., 768 F.3d 622 (7th Cir. 2014), and that court, in a Judge Posner opinion, rejected them in a lengthy and lively discussion that was widely discussed.

So what did the Ninth Circuit say to reject the contrary Seventh Circuit case?

Absolutely nothing. They didn't mention it once, though we filed a Rule 28(j) letter in September.

Was there another appellate precedent that they followed instead?

Nope. Some district courts make the same mistake that Redman criticized (though some don't), and the Ninth Circuit followed those cases without mentioning the others while creating a circuit split.

What now?

Well, we've asked for rehearing or rehearing en banc. If we don't get correction, we have an interesting circuit split to put before the Supreme Court in a certiorari petition.

Thursday, January 8, 2015

Big cy pres victory in 8th Circuit: Oetting v. Green Jacobson

For years, parties have used cy pres—the practice of giving settlement money to charity instead of the class—in abusive ways. When proposed by defendants, cy pres can be used to create the illusion of relief to justify greater attorneys' fees at the expense of the class when in fact all that is happening is that the defendant is changing accounting entries on charitable donations it would have made anyway. When cy pres is used to justify attorneys' fees, it takes away the incentive of class counsel to prioritize direct recovery to the class: after all, it's much more satisfying to hold a ceremony giving away an oversized $3 million check to a local charity run by a friend than to issue a million $3 checks to ungrateful class members. And I've discussed other problems with cy pres in Congressional testimony and an article for the Federalist Society.

So cy pres was one of the issues that provoked the founding of the Center for Class Action Fairness. The Center has won a number of victories on the cy pres issue over the years, most notably in the Third and Ninth Circuits. A cert petition we filed in a case we didn't handle below got some attention. Though it was ultimately denied, a separate statement by Justice Roberts sent a strong message. And the Rules Committee is considering the issue.

In 2013, a class representative in securities litigation in St. Louis complained that class counsel was planning to give away $2.7M of the class's money to local charities instead of to class members in a nationwide class. The district court signed off on the distribution, and the Center agreed to assist the class representative, David Oetting, on the appeal to the Eighth Circuit. The argument resulted in an entertaining column by Bill McClellan. And today, we won a landmark victory where a divided panel adopted our arguments in full. (That's eight straight CCAF intermediate appellate wins since the begining of 2013.) The precedent will do much to protect class members against abusive cy pres in the future—and, if adopted by other courts, may well moot the need for the Rules Committee to opine on the issue. We have a Ninth Circuit appeal on the cy pres problem scheduled for argument in Pasadena February 2.

The case is David Oetting v. Green Jacobson, P.C., No. 13-2620 (8th Cir. Jan. 8, 2015).

Press coverage: Reuters, Litigation Daily, Alison Frankel @ Reuters.

Friday, October 10, 2014

Cy Pres You'll Read This

Learn about the state of cy pres law without having to pay for a CLE class!

Today, Washington Legal Foundation published a short and useful working paper authored by James M. Beck and Rachel B. Weil titled "Cy Pres" Awards: Is the End Near for a Legal Remedy With No Basis in Law? 

The paper effectively summarizes recent litigation demonstrating courts' skepticism of such awards, wherein settlement funds are paid to third parties instead of to class members.

Beck and Weil highlight some CCAF-generated precedents, such as Chief Justice Roberts's statement in Marek v. Lane, 134 S. Ct. 8 (2013), the Third Circuit's opinion in In re Baby Prods. Antitrust Litig., 708 F.3d 163 (3d Cir. 2013), and the Seventh Circuit's opinion in Redman v. Radioshack Corp., ___ F.3d ___, 2014 U.S. App. LEXIS 18181, 2014 WL 4654477 (7th Cir. Sept. 19, 2014). (Credit is also due to Bexis, the blogging nom de guerre of Mr. Beck, whose post "Sunsetting Cy Pres" drew attention to the Redman ratio's applicability to cy pres remedies just one day after Redman v. Radioshack was decided.)

The rationale for having a defendant settle class members' claims by paying money to third parties is that it would be impossible to compensate the class members themselves. But it's a reverse Robin Hood, wherein money that belongs to the aggrieved nationwide mass of class members is taken and funneled to well-connected recipients, like the plaintiffs' lawyers' preferred local charities and alma maters. Sometimes, it isn't even true that class members can't be located!

What do you think about cy pres? How do you think it should be pronounced: see pray, or sigh pray?

Leave your comments below.

Tuesday, October 7, 2014

Oral Argument in Pearson v. NBTY, Inc.

Are you trick-and/or-treating in downtown Chicago this Halloween?

If so, visit the United States Court of Appeals for the Seventh Circuit to watch oral argument in Pearson v. NBTY, Inc., No. 14-1198 (7th Cir.). That's 9:30 a.m. in the Main Courtroom on October 31, 2014, at 219 S. Dearborn Street.

Ted Frank will be arguing for appellants in full costume (i.e. business formal court attire) as The Class Action Avenger.

You can read the background about this settlement in our last post about it. Basically, it's under $900,000 for class members, $1.1 million for third parties, and $4.5 million for plaintiffs' lawyers. Class members also get some labeling changes to the sued-over glucosamine bottles, changes which are alleged by the plaintiffs' lawyers to be worth $21 million. For example, instead of saying "Osteo Bi-Flex works by providing the nourishment your body needs to build cartilage, lubricate, and strengthen your joints," the label could say "Osteo Bi-Flex works by providing the nourishment your body needs to support cartilage, lubricate, and strengthen your joints" (italics added free-of-charge). See the opening brief for what "is perhaps the best 13,000-word summary of CCAF philosophy."

Plaintiffs, calling this settlement a "tremendous result," cross-appealed when the district court awarded them $2.1 million in attorneys' fees and expenses instead of $4.5 million. That $4.5 million, after all, "was negotiated at arm's-length by the parties" and, since the requested fees were only up to 2.56 times greater than the plaintiffs' lawyers' billing rate for the labor they expended, the requested fees were "certainly not excessive."

The briefing proceeded as follows:
Oral argument audio will be available at this link on October 31 or November 1: follow our blog for updates.

Friday, October 3, 2014

Opening Brief in Gascho v. Global Fitness Holdings

Candy corn, pumpkin pie, egg nog . . . no wonder that three months from now we'll all be joining gyms.

So let's inaugurate the 2014 Holiday Season with the opening brief in this appeal of an unfair settlement over gym memberships: Gascho v. Global Fitness Holdings, LLC, No. 14-3798 (6th Cir.). (You might remember this settlement from November 2013, when it was winding its way through the district court.)

Joshua Blackman, a class member, Texas citizen, law professor, former Sixth Circuit clerk, current client of CCAF, blogger, and author, objected to this settlement, which paid $2.4 million to class counsel and representatives, yet only $1.6 million to the class: a Redman ratio1 of 60%.

Main Question: Is it fair for a settlement to so privilege attorneys with "preferential treatment" over their clients? Sixth Circuit law suggests the answer is, "No."

Bonus Question: What is the value to the class of a settlement that pays the class $1.6 million? The answer: $8.5 million, according to the magistrate judge below, who literally split the difference between the amount that class members actually received and the $15.5 million they would have received if every single one of them--even those who hadn't been notified of the settlement--submitted a claim. Respectfully, CCAF and Professor Blackman believe that's a legally erroneous approach.


1"The ratio that is relevant to assessing the reasonableness of the attorneys’ fee that the parties agreed to is the ratio of (1) the fee to (2) the fee plus what the class members received." Redman v. Radioshack Corp., -- F.3d --, 2014 U.S. App. LEXIS 18181, *16, 2014 WL 4654477 (7th Cir. Sept. 19, 2014) (Posner, J.). The higher the ratio, the worse the settlement.

Friday, September 19, 2014

Victory! Redman v. Radioshack

CCAF won a tremendous victory for class members in Redman v. Radioshack, just eleven days after oral argument!

Judge Richard Posner, a legal authority renowned worldwide, wrote an excellent and accessible opinion, explaining that class action plaintiffs' attorneys' fees must be proportionate to the benefit they've realized for their clients, and that a coupon is a coupon regardless of the percentage discount that it represents.

You can read more about the underlying case here. The oral argument made headlines last week, and is also a fun listen. (Ted Frank appears at 9:40 and 54:55.)

Monday, September 8, 2014

Redman v. RadioShack, Inc. / oral argument today

As we discussed earlier, class counsel agreed to a settlement over RadioShack credit-card receipt legality that would have paid themselves $1 million, but the 16-million-member class 83 thousand coupons with a face value of $10. The district court approved the settlement because (1) it held the $2.25 million spent to distribute those coupons was a class benefit and (2) the coupons weren't "coupons." Oral argument is scheduled this morning in the Seventh Circuit. Some time this afternoon or tomorrow, a recording of the argument will be available online.

The reply brief was fun, as plaintiffs were forced to defend an indefensible argument. From pages 5-6:

1.                  Plaintiffs rely on a logical fallacy.

It is not unfair to summarize plaintiffs’ proposed syllogism as follows:
1.         There exist websites that offer coupons where each coupon provides only a partial discount. PB26.
2.         There exists legislative history that criticizes a coupon settlement where the coupons offered provided only partial discounts. PB24-25; PB28.
3.         Therefore all “coupons” provide only partial discounts.
4.         Therefore a voucher for a free product is not a “coupon.” PB29-31.
The formal fallacy in plaintiffs’ logic is even more apparent in the following analogy:
1.         There exists a dog racing track where each racing dog is a greyhound.
2.         Actor Leonard Nimoy owns a dog that is a greyhound.
3.         Therefore all dogs are greyhounds.
4.         Therefore a collie is not a dog.
Nimoy’s most famous character had a catchphrase for this.[5]

[5] Cf. Leonard Nimoy, Highly Illogical on Two Sides of Leonard Nimoy (Dot Records 1968). Or, as Woody Allen once said, “All men are mortal. Socrates is a man. Therefore all men are Socrates.” Love and Death (United Artists 1975).