Victory in Dewey v. Volkswagen!

WASHINGTON, DC - The Center for Class Action Fairness LLC announced today its victory in the U.S. Court of Appeals for the Third Circuit objecting to a class action settlement that arbitrarily froze out over a million class members from meaningful recovery while paying the attorneys over $9.2 million. On Thursday, the appellate court vacated a district court's 2010 approval of a settlement of a lawsuit over allegedly defectively leaky Volkswagen and Audi sunroofs. While the settlement permitted many class members to submit claims for water damage, an uncertified and unrepresented “subclass” of over a million car owners received no financial compensation. The settling parties defended this unjust result by arguing that the settlement provided these owners with a letter notifying them of the need for additional maintenance, and submitted an implausible economic expert report (adopted by the trial court) that this letter was worth millions of dollars. The Third Circuit rejected the proposition that class members in the same class with the same claims could receive such disparate treatment.

Ted Frank, who argued the appeal in March, has now won three out of the four challenges to class action settlement approvals federal appellate courts have decided since he founded CCAF in 2009.  This case is particularly important because, in late 2011, an en banc panel of the Third Circuit decided in Sullivan v. DB Investments to reduce the scrutiny given to intra-class conflicts in class action settlements; today's decision confirms that Sullivan does not given carte blanche to unfair treatment of class members.

The case is Dewey v.Volkswagen  AG, No. 10-3618.

The Center for Class Action Fairness 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. With a skeleton staff, it has won millions of dollars for class members over the last three years; it has won rejections of unfair settlements, pecuniary benefits for the class, and over $150 million in fee reductions in eighteen different cases. Attorneys affiliated with the Center have eight cases pending on appeal in the federal courts, and a ninth in Texas state court.

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

Mr. Frank is available for comment on this case 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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May update

• A disappointing loss in Cobell v. Salazar, the first time I lost a federal appeal I've argued. We're still evaluating our options. Lots of links and analysis at Point of Law.
• Briefing and oral argument in Robert F. Booth Trust v. Crowley. I'm looking forward to the Seventh Circuit opinion.
• Odd shenanigans in Brazil v. Dell: see Point of Law; Reuters coverage; Reuters follow-up coverage.
• We completed Sixth Circuit briefing in the Pampers Dry Max case, and will discuss in a future post.
• The district court approved the Costco "hot fuel" settlement, though it at least refused to credit the junk economics expert; several other defendants are settling, and, if they're similar settlements where the benefits go entirely to the class counsel, we'll file objections there, too. Some objectors have appealed; we don't believe there's appellate jurisdiction yet. 

Cy pres in the First and Third Circuits

On Tuesday, the First Circuit issued a landmark decision on cy pres, In re Lupron Marketing. Though odd litigation decisions by the objectors led to affirmance in that case, the First Circuit (quoting CCAF's victory in Nachshin v. AOL) made clear that it had "unease" with cy pres, and set a precedent generally requiring compliance with §3.07 of the ALI Principles of the Law of Aggregate Litigation. [Legal Newsline; FindLaw]

Coincidentally, the same day, the Center for Class Action Fairness filed its opening brief relating to the yet-to-be-proposed multi-million-dollar cy pres distribution in In re Baby Products, asking the Third Circuit to adopt §3.07; the district court held that the class wasn't even entitled to an opportunity to object to the as-yet-to-be-proposed recipients. Baby Products presents the additional problem of the sort of settlement where class members were artificially deterred from making claims to expand the amount available for cy pres; indeed, under the district court's order, the class counsel will walk away with over $14 million of the $35.5 million fund, and the class millions of dollars less, likely less than half of what the attorneys got.

March updates

• If you listen to one oral argument from March 27, well, I have to say that you need to listen to Paul Clement's performance in HHS v. Florida. But if you have time for a second oral argument, and you have a hankering for Third Circuit class action action, I'd be curious about your thoughts of the argument in Dewey v. Volkswagen. See also.
  
• Following up on our earlier post, the Third Circuit denied the motion for sanctions without comment, or permitting us to file a reply brief. (Mazie Slater had no explanation for the misquote; they used the passive voice in describing its mysterious appearance in the brief, and didn't explain how citecheckers missed it.) Having been given such carte blanche, Mazie Slater then proceeded to lie to the court about the terms of the settlement and settlement notice during the oral argument. I simply don't understand why courts aren't willing to do more to police the attorneys who appear before them. If the only consequence for inventing a citation out of whole cloth is the need to file an errata deleting an invented citation (i.e., the brief that should have been filed in the first place), what incentive does the Holmesian "bad actor" have to get the law right in the first place? After all, if there's a 5% chance that the fictionalized version will swing the case, 5% times $9 million in fees is a $450,000 incentive to lie to the court. If the bad actor isn't facing a proportionate downside, you can expect the bad actor to act badly.
  
• We renewed our objection in Bluetooth. Details at Point of Law.
  
• The Apple MagSafe settlement—$600,000 for the class, $3.1 million for the attorneys—was rubber-stamped by the district court. We plan to appeal to the Ninth Circuit.
  
• In the Online DVD Rental Antitrust Litigation settlement with Wal-Mart for a class of Netflix customers, the district court agreed with the settling parties that a coupon isn't a coupon if they call it a "gift card" instead, and that the restrictions on coupon settlements in the Class Action Fairness Act didn't apply, and rejected my objection. We believe this contradicts CAFA, as well as Seventh Circuit precedent, and plan to ask the Ninth Circuit to address this problem.

Deposition fun in the Bluetooth case

It had been a few years since I took a deposition, so it was refreshing to see that I wasn't as rusty as I was worried I'd be. Here's the plaintiffs' expert testifying about the value of the injunctive relief.

Q: So it is your opinion that only a trained audiologist with experience knows whether or not it is unsafe to listen to a device at a high volume level?

MR. HART: I object to the form of the question.

A: It’s my opinion that outside of those rare individuals who are able to educate themselves to such a high degree that no one would be able to determine whether the level at which they’re listening is relatively safe or relatively unsafe.

Q: So even after you’ve warned your patients, they might be listening to the Bluetooth device at unsafe levels?

A: No, because I would be able to provide them with detailed enough information to help them to use the device in a safe manner.

Q: What is that detailed information that is required for them to use the device in a safe manner?

A: The actual output level of the device in their ear at a given volume control setting, which is something that I can measure with my equipment and my -- in my clinic.

Q: And do the warnings provided in this settlement provide that detailed information?

A: To my knowledge, they don’t.

Two important appellate briefs filed this week

• Shareholder derivative suits present interesting conflicts of interest. The suit is purportedly brought on behalf of shareholders, but when the case settles, the corporate defendant—i.e., the plaintiff shareholders—are the ones paying the bill. Thus, if the suit does not actually extract any wealth from directors or officers for their supposed breaches of duty, shareholders are frequently worse off. This is the case in Robert F. Booth Trust v. Crowley, a derivative suit against Sears Holding Corp. where the alleged breach was failure to recognize the risk of Clayton Act litigation. The irony, of course, is that the actual shareholder derivative suit is far more expensive than the possibility of Clayton Act litigation. I objected; the posture is muddied by some procedural issues relating to the Seventh Circuit's intervention requirement, as you can see, but the fundamental point—shareholder derivative suits should not be permitted to be maintained when they are designed to benefit the attorneys, rather than the shareholders—remains valid, and we believe this is the first case to present this principle in the shareholder derivative context. The case is No. 10-3285, Robert F. Booth Trust v. Crowley (7th Cir.).
• Claims-made settlements are the successor to coupon settlements in structuring settlements to divert the lion's share of relief to the attorneys, rather than the class. The parties typically structure a claims process that will reward less than a tenth of the class (in this case, less than 3% of the class), hide the claims rate from the lower court by scheduling the fairness hearing well before the claims deadline (though that evasion didn't happen in this case), and then ask for attorneys' fees on the illusion that the entire class got relief. Thus, we have cases like Brazil v. Dell, where the class got less than $500,000, but the attorneys received $7 million. We think that is per se unfair, and have asked the Ninth Circuit to weigh in. The case is No. 11-17799, Brazil v. Dell (9th Cir.).

Mazie Slater misquotes a case

In Dewey v. Volkswagen, the parties negotiated and the district court approved a settlement that violates Supreme Court and Third Circuit precedent, which makes reversal likely. What's a class counsel to do? Make up new precedent! After talking the clerk's office into letting them include a sur-reply to the lead appeal's reply brief in their cross-appeal's reply brief, class counsel invented a quote in a recent Third Circuit en banc decision that, if accurate, would have all but dictated affirmance in this case.

We noticed the fictional quote, which required literary creativity rather than mere mistyping, and invited class counsel to do the honorable thing and withdraw the brief. Remarkably, they refused, so we have moved for sanctions, given class counsel's previous misrepresentations in the case and the evidence of bad faith in this particular misquote. (I'd be curious to see what Matthew Butterick thinks of the typographical smoking gun, identified on page 5 of our brief.)