Ted Frank speaking in Trenton September 16

The New Jersey Civil Justice Institute is saying really nice things about my scheduled luncheon talk September 16 in Trenton. Come say hi if you're in the neighborhood.

Oetting v. Green Jacobson / Oral argument September 10 in 8th Circuit on cy pres

Bank of America settled a nationwide securities class action in the E.D. Mo. for hundreds of millions of dollars. For some reason, the district court judge ordered that $2 million or so of the settlement fund not be distributed immediately. By a few years later in 2013 (after interest and restitution from a settlement administrator employee that had embezzled from the settlement fund), there's $2.7 million left over. At the behest of St. Louis class counsel, but over the objection of the class representative, the district court distributes that money not to the class, but to a local St. Louis charity. Class counsel rushes to hold a ceremony delivering the check notwithstanding the automatic stay on such things.

The class representative, David Oetting, retained us to take the lead on the appeal to the Eighth Circuit in a fascinating case where just about everything we complain about in the world of cy pres abuse took place. Oral argument is scheduled for the morning of September 10, and will be available at this link that afternoon or the next day. Law360 ($) coverage.

• Opening brief
• Appellee brief
• Reply brief

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. 

Allen v. Dairy Farmers of America

What happens when class counsel wants to settle and the class representatives do not? Rule 23(a)(4) and the Constitution require adequate class representation before individual class members can be bound. If class counsel can hijack a class and force a settlement when no class representative approves, it would seem to unconstitutionally abrogate the Rule 23(a)(4) inquiry. If class representatives have limited power to bind a class (as the Supreme Court has held in Standard Fire Ins. Co. v. Knowles and Smith v. Bayer Corp.), how can a class without any representation do so? And if a zombie class can proceed and settle without any class representatives, why have the Rule 23(a) requirements at all, and not just allow attorneys to sue on behalf of a class without any individual standing?

This issue is about to arise in Allen v. Dairy Farmers of Am., Inc., No. 5:09-CV-00230 (D. Vt.), where class counsel moved for preliminary approval of a settlement without a single class representative agreeing to the settlement. Unfortunately for the class representatives, the Second Circuit permits this shenanigan; unless the district court steps in, they will need to persuade the Second Circuit to reverse itself and join circuits like the Seventh that hold that class representation requires class representatives, or eventually take the case to the Supreme Court. The district court has so far withheld preliminary approval, so the class representatives may be able to prevail on the merits without need for resort to the niceties of constitutional law and procedural protections for absent class members, but this will someday be an issue that the Supreme Court resolves, and almost certainly resolves against current Second Circuit law.

Letter to Chicago Lawyer Magazine

To the editor:

Your June 2014 article "Cy pres success" contains a material misstatement of the law, when it implies that giving the class's money to legal services organizations is invariably a "recognized approach to avoid granting awards to dubious organizations." A number of decisions, including Ira Holtzman, CPA v. Turza, 728 F.3d 682 (7th Cir. 2013), have held such cy pres recipients to be inappropriate, rejecting the reasoning of the article for such distributions. 

One might overlook this statement as an excusable oversimplification of a complex area of the law, except that the author's firm, McDermott Will & Emery, currently represents the National Legal Aid and Defender Association in at least two pending appeals (including one adverse to one of my clients, Oetting v. Green Jacobson, No. 13-2620 (8th Cir.)) where it is arguing for affirmance of cy pres awards against existing precedent. This conflict is nowhere disclosed in the article.

Very truly yours,

Theodore H. Frank

Center for Class Action Fairness

Washington, DC

Eubank v. Pella Corporation (7th Cir. 2014)

Judge Posner writes a very interesting Seventh Circuit opinion reversing a settlement approval on multiple grounds. A lot of friends forwarded the decision to me. I got to write back that I had argued it.

This wasn't a Center for Class Action Fairness case; the Center is a non-profit and restricted by federal tax law to cases where the client would not be able to retain a private attorney. But an objector's counsel retained my private solo law practice to assist with the briefing for one of the objectors; I then argued the appeal in Chicago in April along with counsel for the class representatives frozen out of the deal.

But even if it's not a CCAF case, it's worth discussing here. The opinion is going to be very helpful to class members, including several CCAF cases pending on appeal. While a lot of the press coverage has focused on the scathing remarks Judge Posner had for the unique conflicts of interest of class counsel, the opinion more importantly also singled out as improper several practices the Center has repeatedly complained about: the use of separate funds for attorneys' fees with reversion to the defendant; the use of imaginary hypothetical valuations of settlements based on bogus assumptions about the number of claims that would be made; grouping disparate sets of class members (in this case, thirteen or so different categories of settlement relief) into a single settlement class; and "quickpay" provisions where class counsel takes its check early in the proceedings while the class is not entitled to relief until years down the road. And more.

Brian Wolfman points out that the opinion notes the silliness of approving settlements based on low opt-out rates.

The opinion also had kind words for the important role played by objectors in policing abusive class-action settlements. And as I joked to friends, this victory was particularly special for me, because the client wrote me a check.

Coverage: Forbes; Overlawyered; Chicago Daily Law Bulletin; Litigation Daily ($); Legal Newsline/Washington Examiner; ABA Journal; National Law Journal; law.com; law.com; Workplace Class Action Blog; Blawgletter.

Opening brief in Redman v. RadioShack

RadioShack committed the sin of printing credit-card receipts with expiration dates on them, which exposed it to possible liability of $100 a receipt ($1000 if willful), a bankrupting sum. Class counsel settled for coupons. Our clients objected that the settlement did not comply with CAFA's limitations on coupon settlements, and was structured so that class counsel's benefit would outstrip that of the class. As is typical in coupon settlements these days, the settling parties denied that the coupons were coupons. For some reason, the district court bought the argument, and awarded $1M in attorneys' fees while the 16-million-member class will receive 83 thousand coupons with a face-value of $10, give or take. We've appealed, and filed our opening brief April 16.