Saturday, February 27, 2010

Good quotes from the Honda case

Quotes from the court's order. On the appropriateness of disparate class treatment (pp. 25-29):
Courts generally are wary of settlement agreements
where some class members are treated differently than
others. See, e.g., In re General Motors Corp. Pick-Up
Truck Fuel Tank Prods. Liability Litig. (“In re GMC Pick-
Up Litig.”), 55 F.3d 768, 808 (3rd Cir. 1995) (“One sign
that a settlement may not be fair is that some segments
of the class are treated differently from others.”).
Compare Hanlon, 150 F.3d at 1021 (rejecting objection to
settlement where settlement “does not propose different
terms for different class members”). ...

As in Acosta [v. Trans Union, LLC, 243 F.R.D. 377 (C.D.
Cal. 2007)], the settlement here draws an arbitrary
distinction among class members with identical legal
claims and injuries, and allows some to receive a cash
award, and others only a DVD and limited rebate. This is
patently unfair, and counsels against approval of the
proposed settlement.
On coupons (pp. 30-32):
The primary relief offered by this settlement is the
$500 or $1000 rebate given to class members who purchase
another Honda or Acura over the next nineteen months.
Thus, the settlement is largely a “coupon settlement.”
See Fleury v. Richemont North America, Inc., No.
C-05-4525 EMC, 2008 WL 3287154, at *2 (N.D. Cal. Aug. 6,
2008) (a coupon settlement is one where the relief
constitutes “a discount on another product or service
offered by the defendant in the lawsuit”). ...

The Court acknowledges the wide range of judicial and
scholarly criticism of coupon settlements cited by the
Objectors and amici, and concurs that such settlements
are generally disfavored. This is due to three common
problems with coupon settlements: “they often do not
provide meaningful compensation to class members; they
often fail to disgorge ill-gotten gains from the
defendant; and they often require class members to do
future business with the defendant in order to receive
compensation.” Figueroa v. Sharper Image Corp., 517 F.
Supp. 2d 1292, 1302 (S.D. Fla. 2007), citing Christopher
R. Leslie, “The Need to Study Coupon Settlements in Class
Action Litigation,” 18 Geo. J. Legal Ethics 1395, 1396-
97. See also Synfuel Techs., 463 F.3d at 654; In re
Mexico Money Transfer Litig., 267 F.3d 743, 748 (7th Cir.
2001); In re GMC Pick-Up Litig., 55 F.3d at 807-10 (3d
Cir. 1995); Kearns v. Ford Motor Co., No. CV 05-5644 GAF,
2005 WL 3967998, at *1 n. 1. ...
On valuation of coupon settlements:
Courts have generally rejected the idea
that the face value of coupons or rebates should be used
for settlement valuation purposes; “[c]ompensation in
kind is worth less than cash of the same nominal value.”
Acosta, 243 F.R.D. at 390, quoting In re Mexico Money
Transfer Litig., 267 F.3d at 748. See also In re GMC
Pick-Up Litig., 55 F.3d at 807. Where a coupon or rebate
is not freely transferable on the open market, as is the
case here, it has even less value. See In re Compact
Disc Minimum Advertised Price Antitrust Litig., 216
F.R.D. 197, 221 n. 58 (D. Me. 2003); In re Lloyd’s Am.
Trust Fund Litig., No. 96 Civ. 1262 RWS, 2002 WL
31663577, at *16 (S.D.N.Y. Nov. 26, 2002); Clement v. Am.
Honda Finance Corp., 176 F.R.D. 15, 27 (D. Conn. 1997).
Compare In re Mexico Money Transfer Litig., 267 F.3d at
748 (analyzing value of transferable coupons).

Plaintiffs’ argument that face value is the proper
measure ignores the basic economics of coupons and
rebates. “Coupons promote sales without lowering the
price to everyone (that is, holding a ‘sale’).” Menasha
Corp. v. News America Marketing In-Store, Inc., 354 F.3d
661, 662 (7th Cir. 2004). In the automobile context,
“[r]ebates are given to encourage purchases by reducing
the total amount of money the buyer needs to acquire the
new car or by providing the debtor a premium that can be
used for some purpose other than acquiring the new car.”
In re Gray, 382 B.R. 438, 442 (Bankr. E.D. Tenn. 2008).
Since rebates and coupons aim to facilitate a sale to a
purchaser who would not otherwise purchase a product at a
higher price, the Court cannot, as Plaintiffs do, assume
that every sale to a class member “would have happened
anyway.” (Pls.’ Resp. to Objs. at 15.) Class members
may purchase new Honda or Acura vehicles only “because
they fe[el] beholden to use the certificates,” not
because they would have otherwise. In re GMC Pick-Up
Litig., 55 F.3d at 808.

The Court also notes that the coupons are not only
worth less than face value to class members, but they
cost AHM less as well. If many class members do in fact
take advantage of the rebates offered by Options A and B,
the Settlement can result in a “tremendous sales bonanza”
for AHM. In re GMC Pick-Up Litig., 55 F.3d at 808,
quoting Bloyed v. General Motors Corp., 881 S.W.2d 422,
431 (Tex. Ct. App. 1994). For each class member who
purchases another Honda or Acura who would not have done
so without the settlement rebate, AHM will experience a
net benefit.
On the use of lodestar to calculate fees:

While the lodestar method of awarding fees is permissible under
CAFA, the Court has the discretion to use either a
percentage or lodestar method in awarding fees, and is
particularly wary of using the lodestar method here. See
Hanlon, 150 F.3d at 1029; Fleury, 2008 WL 3287154, at *2-
*3. The lodestar amount is particularly inappropriate
where, as here, the benefit achieved for the class is
small and the lodestar award large. See, e.g., Create-ACard,
Inc. v. Intuit, Inc., No. C 07-06452 WHA, 2009 WL
3073920 (N.D. Cal. Sept. 22, 2009). ...

Under the terms
of the settlement, there is no certainty that class
members will receive any cash payments or rebates at all,
but class counsel will receive a three million dollar
payment regardless of whether one or 10,000 class members
file valid claims. Since there is no guarantee that AHM
will pay any money out of the settlement to either class
members or a cy pres beneficiary, to award three million
dollars to class counsel who may have achieved no
financial recovery for the class would be unconscionable.
Does a small number of objectors demonstrate approval?
“However, a combination
of observations about the practical realities of class
actions has led a number of courts to be considerably
more cautious about inferring support from a small number
of objectors to a sophisticated settlement.” In re GMC
Pick-Up Litig., 55 F.3d at 812, citing In re Corrugated
Container Antitrust Litig., 643 F.2d 195, 217-18 (5th
Cir. 1981); In re General Motors Corp. Engine Interchange
Litig., 594 F.2d 1106, 1137 (7th Cir. 1979). “[A] low
number of objectors is almost guaranteed by an opt-out
regime, especially one in which the putative class
members receive notice of the action and notice of the
settlement offer simultaneously.” Ellis v. Edward D.
Jones & Co., L.P., 527 F. Supp. 2d 439, 446 (W.D. Pa.
2007). ...

Plaintiffs attack many of the Objectors’
counsel because they have represented objectors in other
actions in the past. (Id. at 17.) This has no greater
bearing on the merits of the objections raised than a
plaintiff’s counsel’s experience in filing class action
suits speaks to the merits of claims he brings.

Wednesday, February 24, 2010

Victory in Honda case

At Monday's fairness hearing, Judge Phillips upheld our objection to the coupon settlement; Legal Newsline has coverage. Here is our reply brief, and we'll update this post with the court's order when it's available.

Update: National Law Journal coverage and WSJ Law Blog coverage.

Saturday update: The court's order was released late Friday.

Monday, February 22, 2010

In the news

  • interviewed discussing warning labels
  • Los Angeles Times: quoted on the future feeding frenzy around Toyota
  • Triangle Business Journal: commenting on a story where a judge reduced attorneys' fees in a nuisance class action by $1 million, I note the common tactic of strike suits against mergers
You may have noticed that we've been posting less recently; we're not any less busy, but we're changing the posting schedule to put up briefs after a fairness hearing, rather than immediately after we file, so we're still in that gap now. We filed notices of appeal in the AOL and Yahoo cases, so we have three appeals pending in the Ninth Circuit that will likely be argued late this year or early next year.