Laguna v. Coverall N.A.

Coverall N.A. settled a class action over janitorial franchises by paying a $1M attorney fee and setting up a claims-made process that would pay about $56,625 to the class. The parties justified this settlement by pointing out injunctive relief that some class members would be eligible for; if the maximum number of class members took advantage of the injunctive relief, they said, it would be worth $20 million. Wait a second, complained an objector: most class members will never take advantage of the injunctive relief because they're not eligible for it, and the court should get that data from the defendant to find out the true value of the injunctive relief before approving a settlement that might run afoul of Bluetooth. The district court approved the settlement without engaging in the inquiry: meh, maybe the injunctive relief isn't worth $20 million, but if it were worth $4 million, the settlement would be fair. (After all, perhaps the settling parties might exaggerate the value of injunctive relief by 400%, but what monster would ever exaggerate the value of injunctive relief by 20-fold or 100-fold?)

The objector (not represented by us) appealed. On June 3, the day after Eubank v. Pella Corp. was decided, the Ninth Circuit affirmed on abuse-of-discretion grounds, over a fervent dissent that pointed out the decision contradicted both Pampers and existing Ninth Circuit precedent. 

Now here's where it gets interesting. The objector petitioned for en banc review. While the petition was pending, Coverall paid him $15,000 to drop his appeal (more than a quarter of the cash relief paid to the class), and the objector did so. But Ninth Circuit judges can request a vote for en banc review sua sponte, and the Ninth Circuit issued an order demanding a response to the petition. That order granted leave to amici to file briefs on the subject, and how could the Center for Class Action Fairness resist? The appellant's en banc petition focused on conflicts with Ninth Circuit law, so our amicus focused on the circuit split created by Laguna, as well as the interesting and largely unresolved jurisdictional issues. 

Opening brief in Ninth Circuit MagSafe appeal

In the In re Apple MagSafe Power Adapter Litigation, the attorneys walked away with $3.1 million, while the class got less than $1 million, and likely less than a quarter of what the attorneys got. The district court (Judge Ware in the N.D. Cal.) not only rubber-stamped the settlement while ignoring the Bluetooth precedent, but then issued an order to protect the illegitimate settlement, requiring a punitive appeal bond or the dismissal of any appeals. This deterred three of the five appellants, with a fourth being sanctioned for failing to dismiss his appeal. But Marie Newhouse, represented by me and attorneys with the Center for Class Action Fairness, held firm in her objection, and, after some delaying tactics by the plaintiffs, the opening brief was filed today, as we test whether the Bluetooth principles have teeth or can be ignored by district courts and trial lawyers with impunity. To this add another few questions: when is it permissible to have a "claims-made" settlement that pays the attorneys regardless of whether class members make claims or, as in this case, are deterred from making claims by artificial hoop-jumping requirements? Can class counsel take credit for "injunctive relief" that has the defendant doing what it was already doing before the complaint was filed? Is class counsel entitled to a commission on payments to the settlement administrator? Earlier: objection; appeal bond hypocrisy. The case is Kitagawa v. Apple, Inc., No. 12-15782 (9th Cir.).

CCAF objection in Blessing v. Sirius XM Radio

The Center for Class Action Fairness LLC objected today to a valueless class action settlement: the objection, filed in the Southern District of New York on behalf of a class member, underscores that the proposed Sirius XM Radio settlement would provide valueless injunctive relief to the class but $13 million to class attorneys.

"Certainly, parties to a class action can agree to settle a case for $13 million," said Ted Frank, the lead attorney on the objection and the founder of CCAF. "But if they do, it is inherently unfair and unreasonable for the attorneys to extract 100% of the settlement benefit for themselves. Class actions should be prosecuted on behalf of the class members, not self-serving class counsel."

The settlement of the antitrust class action against Sirius XM requires only that the defendant agree to not raise prices for five months. But this is an entirely valueless promise, given that Sirius XM, facing admittedly heavy competition from Internet music services and MP3 players, has been lowering prices and engaging in deep discounting to keep customers. Yet class counsel (including the Milberg law firm) implausibly claims that the settlement is worth $180 million to the class.

The CCAF objection also targets Judge Harold Baer's class certification order. For several years, Judge Baer has controversially required class counsel to meet racial quotas as a condition of appointment. CCAF has requested that Judge Baer vacate that part of his class certification order as unconstitutional.

The case is Blessing v. Sirius XM Radio Inc., No. 09-cv-10035 (S.D.N.Y.).

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. It has won millions of dollars for class members over the last two years.

Court reduces fees after CCAF objection to HP settlement

In January, we discussed a Center for Class Action Fairness objection to a coupon settlement involving HP inkjet printers. That settlement turned out to be even worse than the pathetic one advertised: $5 million in coupons were offered, but the multi-million member class only bothered to file claims for $1.5 million worth of the coupons, with the rest reverting to HP. And of course, a claim for a coupon is not an actual redemption of the coupon: my $2 coupon will likely go unused, since there's nothing HP sells on its website that isn't more than two dollars more expensive than what I can get it for elsewhere.

The attorneys asked for $2.9 million in fees and expenses, justifying it with a quack economic expert report valuing some token injunctive relief as being worth tens of millions of dollars. In a March 29 opinion, Judge Fogel rejected that valuation, held that the settlement was worth only $1.5 million to the class, and reduced the award of fees and expenses to $2.1 million.

Some of the language in the opinion is very good: all too often, courts divorce the fee inquiry from the relief actually won. As Russell Jackson points out, this court said, "To allow an award of attorneys' fees to outstrip the benefit to consumers in such cases would undermine the importance of focusing the efforts of class action counsel on issues that most affect consumers."

So why did the attorneys get $2.1 million? Because of the economic fiction of "fees" and "expenses," which are calculated differently. See, "expenses" cover things like travel, experts, and copying costs. But "fees," that covers things like rent and other overhead, attorney salaries, and paralegals. Attorneys will allocate a dollar received into one bucket or the other, and for some reason, courts will scrutinize the buckets differently, though at the end of the day, the attorneys get a single check for money that they can spend any way they want: the rent and the airlines are going to get paid either way. So the court held that the $2.9 million requested, consisting of $2.3 million in fees and $0.6 million in expenses, was unreasonable with respect to the fees, and reasonable with respect to the expenses—even though the fee request also includes money that goes to expenses, just a different category of expenses. So the attorneys got all of their "expense" request, and just had the "fee" request reduced—but still ended up with more than the class.

That's just business as usual, but there were a couple of other troubling things about the decision. The Class Action Fairness Act requires coupons to be valued by their redemption rate, not by the claim rate. Many of these coupons (such as the one I am scheduled to receive) are not going to be used; one institutional party received tens of thousands of unusable coupons because the terms of the settlement require a claimant to use only one coupon per order, and it would be infeasible for the company to split up its bulk orders to tens of thousands of individual orders.

Second, the court opinion says that there were only three objections, but this is false: there were hundreds of objections, but, because of a confusing notice, 99% of the objectors (including the institution discussed earlier) sent their objections to the claims administrator, the parties never passed along those objections to the court, and the court disregarded my complaint about the procedure in its opinion. Ironic for a consumer fraud case that the plaintiffs' attorneys successfully took advantage of a misleading notice they provided.

Should CCAF appeal this decision? An attorney commenting at Jackson's site suggests that the plaintiffs' attorneys will appeal, and if they do, we'll certainly cross-appeal. At some point CCAF will ask the appellate courts to create a bright-line rule forbidding attorneys from recovering more than their clients. Is this the case to do it?

In re HP Laserjet and the question of injunctive relief

On February 14, there was an hour-long fairness hearing before Judge Guilford in the Central District of California, and anyone who practices in federal court in California knows how rare hour-long arguments are. One certainly appreciates the attention paid to the case. The Laserjet settlement was pretty much identical to the Inkjet settlement (with the twist that the lead plaintiff in Laserjet filed an objection accusing his attorneys, Kabateck Brown Kellner, of fraud). The Court gave the opportunity for additional briefing, and Tuesday we provided this brief with a short summary on the question of injunctive relief and answering some of the Court's questions.

The return of the $0 Costco fuel settlement

You will recall that a class action is pending in Kansas over gasoline retailers' failure to disclose the laws of physics to customers, i.e., gasoline, like all other liquids, expands in higher temperatures. Since a "gallon" is a measure of volume rather than power, someone buying gasoline when it's warm is getting less mileage than someone who buys the same volume of gasoline when it's cool. To some extent, the retailers are being hoist by their own petard, because they pulled the same class-action nonsense on wholesalers, but it's still socially wasteful litigation that benefits no one but the lawyers; when I argued at a fairness hearing in Kansas City last April, I had several dozen witnesses, likely each billing an average of over $400/hour. Costco decided to get the uncertainty off of its books, and agreed to pay the lawyers to go away. But the class members, the ones putatively injured by Costco's conduct, got nothing. The plaintiffs had the chutzpah to claim that Costco's agreement to "temperature-adjust" their fuel sales was a benefit to consumers, but that's clearly not so. If Costco's average "gallon" happens to increase in size a cubic inch or two, that doesn't mean that consumers are getting free gas any more than it would mean that consumers would get free eggs if the government suddenly mandated that a "dozen" was now equal to eighteen.

The court threw out the settlement on a technicality, and the parties are now back with an amended settlement that fixes the technicality, but still doesn't do anything for the class. So my clients renewed their objection to the settlement. Last time around, we challenged the quack economic report that plaintiffs submitted that claimed changing the size of a gallon would magically result in consumers getting tens of millions of dollars of free gasoline; the other side protested that I was just a mere lawyer who wasn't qualified to use big words like "cross-subsidization." Over the last few months, I've discussed this case with several economists, many of whom fell over laughing as I described the testimony of Dr. Andrew Safir; the distinguished Dr. David Henderson was kind enough to charge us a reduced rate to provide a simple rebuttal on short notice this time around.

When is injunctive relief a benefit to the class? So many plaintiffs' lawyers seem confused about this issue: they forget that they represent clients, and the injunctive relief needs to benefit their clients if one is to count it towards determining the fairness of the settlement. Few courts consider the issue because few objectors raise it, but the ones that do consider it consistently distinguish between retrospective injunctive relief (say, a recall that fixes an automobile or a computer) and prospective injunctive relief (a company agrees to change its business practices). Even when there is consumer fraud, prospective injunctive relief doesn't benefit consumers unless they engage in new business with the vendor. And even then, the consumers will not benefit if the vendor simply raises its prices to account for the new costs in the change in business practices.