April 18 press release

CENTER FOR CLASS ACTION FAIRNESS

ANNOUNCES MULTIPLE VICTORIES

WASHINGTON, DC - Today the Center for Class Action Fairness LLC announced multiple victories in class action objections it filed in five class action settlements that will result in class members receiving over $5 million more than what their class attorneys were willing to negotiate.

• In a securities class action over options backdating by Apple executives, the Center's objection to the diversion of $2.5 million of shareholder money to unrelated third parties affiliated with the lead class counsel resulted in a modification of the settlement to ensure that class members would be given first dibs on that money. In March, the parties confirmed that class members had fully claimed the additional $2.5 million, meaning that the class would receive over $16.5 million instead of $14 million. The Center's motion for an incentive payment to the objector and a share of the $2 million of attorneys' fees requested by class counsel is pending in the district court. The case is In re Apple Inc. Securities Litigation, No. C-06-5208-JF (N.D. Cal.).
• The Center successfully objected to a settlement of a consumer fraud class action against Classmates.com that would have paid $117 thousand in cash and coupons to class members, but $1.05 million to the class attorneys. As a result, the parties renegotiated the settlement last month to make it easier for class members to make claims and ensure that $2.5 million in cash will be paid to the class. Preliminary review of the modified settlement is pending in the district court. The case is In re Classmates.com Consolidated Litigation, No. 09-cv-0045-RAJ (W.D. Wash.).
• The Center successfully objected to a diversion of $500,000 cy pres to unrelated third parties in a class action settlement with Toyota over antitrust allegations when the district court ordered this month that that money instead be distributed to the class. The Center's objection to an excessive attorney-fee request from the common fund is pending, which could result in additional millions of dollars being distributed to class members. The case is In re New Motor Vehicles Canadian Export Antitrust Litigation, No. MDL 03-1532 (D. Me.).
• The Center objected to a settlement that would have distributed $1.5 million in nearly worthless coupons to millions of class members, but paid the attorneys $2.9 million. In In re HP Inkjet Printer Litigation, 2011 WL 1158635 (N.D. Cal. Mar. 29, 2011), the district court agreed with the Center that class counsel's economic expert had wildly exaggerated the value of the proposed injunctive relief, and reduced the award to the class attorneys to $2.1 million. The Center is pleased with the favorable language in the opinion, but is deciding whether to appeal to ask the U.S. Court of Appeals for the Ninth Circuit to adopt a bright-line rule that it is inappropriate for attorneys to receive more than their putative class clients.
  
• In a case alleging that Costco Fuel and other gasoline retailers committed consumer fraud when they failed to disclose to consumers the law of physics that gasoline, like other liquids, expands with temperature, the parties announced a modified settlement that would provide $0 to the class while the class attorneys made a $10 million fee request. The Center renewed its objection to the settlement, presenting testimony from an economic expert, Dr. David Henderson, that class counsel's economic expert had inappropriately overvalued the worthless injunctive relief provided by the settlement. The Center further argued that it was inappropriate for the parties to expand the class without giving new notice to the new class members who had not previously had an opportunity to object. This month, the district court agreed with the last proposition, and ordered the parties to propose new notice and schedule a new fairness hearing. The case is In re Motor Fuel Temperature Sales Practices Litig., No. 07-MD-1840 (D. Kan.).

The Center for Class Action Fairness, founded in 2009, is a not-for-profit program that provides pro bono representation to consumers and shareholders aggrieved by class action attorneys who negotiate settlements that benefit themselves at the expense of their putative clients. 

Press coverage of the Center's work is available at http://tedfrank.com/press.

The Center's lead attorney, Theodore H. Frank, is available for comment on these cases and other issues relating to class actions, lawsuit abuse, and the civil justice system.

FOR MORE INFORMATION:
http://centerforclassactionfairness.blogspot.com

http://tedfrank.com

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Apple backdating litigation update

We opposed preliminary approval of the Apple settlement because there was a possibility that money would go to third parties at the expense of class members. The settling parties assured the court that that wouldn't happen, but have not disclosed the number of claims made on the settlement fund to date. So today we filed an objection to the settlement contingent upon whether the settlement fund goes to the class members or to third-party cy pres. If the settlement fund does end up in the hands of the class, we're going to ask for a token amount of attorneys' fees to reflect the $2.5 million we won for the class.

The case is In re: Apple Inc. Securities Litigation, No. 06-5208 (N.D. Cal.); the fairness hearing is scheduled before Judge Fogel on February 18 in San Jose.

Press coverage

• Not often that you see class actions discussed on ESPN.com, but Tuesday Morning Quarterback gave us a shout-out for our objection in the Classmates case.
• Karen Lee Torre (of Ricci fame) writes a very complimentary piece in the Connecticut Law Tribune about CCAF's work in the Apple settlement.
• We're even getting praise from the trial-lawyer site "Lawyers and Settlements."

In re Apple Inc. Securities Litigation: parties modify settlement

You may recall that I was not pleased with an Apple settlement that provided for $2.5 million to go to a series of universities and law schools with "corporate governance" programs (two of which were affiliated with the lead plaintiffs' counsel) instead of to the purportedly injured class members. (See also coverage from Ira Stoll, Jim Copland, John Carney, and Lyle Roberts.) Such "cy pres" awards are a breach of class counsel's fiduciary duty to the class by putting the interests of unrelated third parties ahead of their putative clients.

After I sent a letter to class counsel and counsel for Apple notifying them that I had a client who was going to object, the parties quickly rushed to court and submitted a modified settlement. Now, class members have first bite at the $2.5 million, an approximately 15% increase in what shareholders can recover in the settlement; Harvard, Columbia, and the University of Delaware will not get any of it.

This is definitely a material improvement (and one that would entitle the Center to attorneys' fees), but it's still not good enough; I've asked the court to refuse preliminary approval until the settlement guarantees that the class gets the entirety of the $16.5 million settlement fund.

"Cy Pres: A Not So Charitable Contribution to Class Action Practice"

I'm honored that Skadden's John Beisner, one of the world's leading class action attorneys, Jessica Miller, and Jordan Schwartz today released a new paper on cy pres that heavily relies upon my work and the work of the Center for Class Action Fairness in the AOL case, even singling out that case as an example of abusive cy pres. We'll be sure to cite it in a couple of upcoming objections involving improper cy pres.  (And welcome to all the O'Melveny attorneys reading this site since my letter to counsel for Apple regarding the improper cy pres settlement in that case!)

The illegal Apple backdating class action settlement

Did you buy Apple stock between 2001 and 2006?

Ira Stoll and Jim Copland have discussed the outrageous Apple backdating lawsuit resulting in the outrageous Apple backdating settlement. The magnitude of the settlement compared to the original claims demonstrates that it is an extortionate nuisance settlement, being made because it would cost more to defend the suit than to pay the attorneys to go away.

But it should be noted: the settlement is not just outrageous, it is illegal. Under the Ninth Circuit's Six Mexican Growers precedent, a court should not be issuing cy pres that is not likely to benefit the class members. And as the Center for Class Action Fairness noted in recent Ninth Circuit briefing, the American Law Institute has said that cy pres is inappropriate where class members are readily identifiable. Given that the class attorneys are negotiating money for third parties instead of their own putative clients (for their own benefit, no less), there is also a breach of fiduciary duty that raises questions whether the class attorneys meet the Rule 23(a)(4) standard. The settlement is further problematic in that the vast majority of class members are entitled to zero compensation; it is far from clear that the sole lead plaintiff is a member of this subclass.

The Center for Class Action Fairness would love to object to such a blatantly illegal settlement. But it can't do so in a vacuum: it can only do so on behalf of a class member who is being ripped off by these attorneys. Class members are those who bought Apple stock (AAPL) between August 24, 2001 and June 29, 2006—but only people who bought the stock between November 2005 and May 2006 are entitled to recover any money under the settlement, and their recovery is being diluted by the diversion to cy pres. We'd be happy to represent you pro bono if you agree that the settlement is objectionable and wish to object: please contact me. If you're not in the class, but know people or institutions who might be, spread the word.  (Update: we have one objector, and are talking to a couple of others. Isn't crowd-sourcing great?)

The case is In re Apple Inc. Securities Litig., No. C-06-5208-JF (N.D. Cal.).