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.).

September doings

• Groupon settlement rejected on cy pres grounds last week after our objection. The attorneys would have received $2.125 million, the class maybe a twentieth of that.
  
• I argued the Baby Products case in the Third Circuit, and am cautiously optimistic for a good precedent in a case where the attorneys collected over $14 million and the class was due less than $3 million. Briefing.
  
• The fairness hearing in Johnson & Johnson has been postponed until October 18. We filed two expert reports demonstrating that the plaintiffs had failed to present Daubert-satisfactory expert evidence in support of a claim that the $0 settlement provided "substantial benefit" to shareholders.
  
• The Ninth Circuit, relying on opinions from two CCAF victories, struck down a settlement on cy pres grounds in Dennis v. Kellogg September 4, also holding that an attorneys' 38.9% share of a settlement ($2 million in this case) would be "clearly excessive."
  
• The Center filed with the IRS for stand-alone 501(c)(3) status. I'd like to express tremendous gratitude to everyone at Donors' Trust for all they did to incubate us.

In re Johnson & Johnson Shareholder Derivative Litigation

Alison Frankel recently asked whether it's the end of "money-for-nothing" class actions; Ronald Barusch asks a similar question. The Center for Class Action Fairness is putting that question to the test in In re Johnson & Johnson Shareholder Derivative Litigation by asking the District of New Jersey to dismiss shareholder litigation that makes cosmetic changes to corporate governance, and then presents a $10.45 million bill to shareholders—150% of the already high "lodestar"—for the involuntary consulting arrangement. As in Robert F. Booth Trust v. Crowley, the suit "serves no goal other than to move money from the corporate treasury to the attorneys' coffers.... It is an abuse of the legal system to cram unnecessary litigation down the throats of firms ... and then use the high costs ... to extort settlements (including undeserved attorneys' fees) from the targets." As I noted then:

Under FRCP 23.1(a) and its state-law equivalents, a shareholder derivative suit isn't supposed to proceed unless the shareholders bringing the suit adequately represent the shareholders. If the suit is meant to profit the plaintiffs' lawyers at the expense of the corporation (and thus the shareholders), how can the bringers of a strike suit be adequate representatives of the shareholders? I've thus argued that the correct role for courts in such situations is to throw these cases out entirely (or approve the settlement but award only a token amount in attorneys' fees).

Good coverage at Forbes.com (noting that the lawsuits themselves are free-ride piggybacking off of J&J self-disclosure and government investigations) and Reuters (quoting plaintiffs' lawyers calling the motion "frivolous").

Two July 31 wins for the Center

On July 31, district courts substantially reduced attorney fees in two class action settlements where Center for Class Action Fairness attorneys objected.

In the Nutella litigation in the District of New Jersey, Judge Wolfson agreed with our objection that the parties overstated the value of the injunctive relief, and reduced the fee award from $3,725,000 to $1,125,000. More discussion at Point of Law.

And in the remand of the Bluetooth class action settlement in the Central District of California, the court reduced the requested fee award from $850,000 to $282,729.05. The National Law Journal covered without asking me for a quote. The precision of the nickel seems a poor use of court resources, and demonstrates why we argue for recovery based on benefit to the class with lodestar to be used only as a cross-check ceiling. We also think that the court erred in failing to consider the substantial evidence that the injunctive relief was not only worthless but harmful to the class. But we're obviously less dissatisfied with a $282 thousand mistake than a $850 thousand mistake.

Unfortunately, both courts disagreed with us that the "kicker" provision in the settlement combined with the reversion to the defendant meant that the settlement was unfair because of the class attorneys' breach of fiduciary duty to the class, and granted settlement approval. We think this is legal error. When defendants are willing to put $6 million on the table complete a "clear sailing" clause to settle a lawsuit, but only have to pay a little more than half of that because of self-dealing by the class counsel, the unfairness to the class seems fairly clear to us. As the Ninth Circuit said in our Bluetooth win, there is "no apparent reason" for such a reversion. But the Center already has an appeal pending in the Ninth Circuit addressing just this issue, so will likely forgo appeals here unless a cross-appeal is necessary.

Related: district court citing Bluetooth throws out $0 Fraley v. Facebook settlement.

In re Online DVD Rental Antitrust Litigation

The Class Action Fairness Act puts limitations on coupon settlements. In In re Online DVD Rental Antitrust Litigation, however, the district court approved a settlement that would pay $5.2 million in cash and $8.9 million in Walmart.com coupons to the class and held CAFA did not apply because the parties called the coupons "gift cards." Does the Class Action Fairness Act regulate semantics or something more? I argue the latter in a Ninth Circuit opening brief filed today.

The district court also awarded a disproportionate $8.512 million to the attorneys. Our appeal addresses that issue as well. And because I miss Lionel Hutz, the brief cites the classic case of Homer Simpson v. The Frying Dutchman Restaurant.

Groupon Marketing class action settlement

There was a lot of publicity about the "$8.5 million" Groupon will pay to settle a class action over expiration dates; several class members complained about the settlement to me, mostly because they viewed the lawsuit as silly. (So did Groupon, before their lawyers made them take down the original blog post criticizing the first of the many class actions brought against them.) But the settlement is even worse than it looks. Before the settlement, if a Groupon customer had a problem with a Groupon, they contacted customer service, indicated dissatisfaction, and got a full cash refund. After the settlement, if a Groupon customer has a problem with a Groupon that they purchased during the class period, they contact customer service, and customer service refers them to the class action settlement website, where they can fill out a claim form; after several months (and perhaps years), the class action settlement administrator will give the class member a pro rata share of the settlement fund—which, though the publicity says is $8.5 million, less than $6 million of it will be likely available to the class. In other words, the class action attorneys have negotiated a settlement that makes their clients—who had suffered no damages because of the availability of refunds—worse off, and are asking for millions of dollars for their efforts. I discovered this the hard way: I purchased a Groupon Voucher for a restaurant that closed, and tried to get my money back from Groupon. They told me to file a claim form. Fortunately, when I suggested that this was subpar customer service, they gave me a credit—which goes to show further that this is not a marginal benefit to the class of $8.5 million, but a change in accounting entries to rationalize a $2.125 million request for attorneys' fees. Today I filed an objection. The case is In re: Groupon, Inc., Marketing and Sales Practices Litigation, No. 3:11-md-2238-DMS-RBB (S.D. Cal.), and the fairness hearing is scheduled for September 7. Lead class counsel is Robbins Geller.

In re Baby Products update

Briefing is complete, and oral argument will be some time in the second half of September. Details at Point of Law.