Monday, December 21, 2009

Fairchild v. AOL briefing

Additional issues arise in the response to the motion for settlement.

1) Is an email notifying subscribers of a pre-existing policy substantive injunctive relief meriting attorneys' fees?
2) Is a request for attorneys' fees of 75% of the total financial settlement "fair" simply because its severable--when severability simply means that a reduction in fees reverts to the defendant, rather than to the class?
3) Is "cy pres" really cy pres when the designated charities are either local, related to the mediator, and/or related to the plaintiff?
4) Is apathy about a bad settlement judicial evidence of affirmative support?

The hearing is in Los Angeles December 28.

Monday, December 14, 2009

Objection to Yahoo! "Sponsored Search" settlement

In In re Yahoo! Litigation, Case No. CV06-2737 CAS (FMOx), plaintiffs’ lawyers seek approval to settle a class action over alleged problems in its "Sponsored Search" web advertising service with zero dollars for the vast majority of class members, but seek over $4.1 million in attorneys’ fees. The Center for Class Action Fairness filed an objection on behalf of Eric Turkewitz, a New York personal injury attorney and blogger. As the brief says, “It would be an abuse of discretion to reward these attorneys with a contingency fee of over 80,000% when they failed to make the millions of dollars of settlement money available to their putative clients, instead claiming it solely for themselves.”

Honda Civic Hybrid class action settlement objection

In True v. American Honda Motor Co., Case No. 07-cv-00287 VAP (OPx), trial lawyers seek to settle consumer fraud litigation over mileage claims for the Honda Civic Hybrid with a settlement that offers only coupons to the 186,000-member class, but $2.95 million for the attorneys. Worse, the coupon program appears to be designed to discourage class members from their use: they exclude Honda’s hottest models, may not be transferred, expire quickly, require a trade-in for full value, and cannot be used unless class members sit through a lengthy presentation on optimizing gas mileage. The Center for Class Action Fairness filed papers on behalf of a Civic Hybrid purchaser requesting that the settlement be rejected. A similar class action settlement over Ford Explorers in Sacramento last year issued one million $500 coupons to the class, of which only 75 were redeemed, while the attorneys collected over $20 million in fees.

Monday, December 7, 2009

AOL Footer case - Fairchild v. AOL objection to proposed settlement

Four plaintiffs represented by three law firms sued AOL for including advertising in the footers of emails and failing to make it sufficiently easy for members to opt out of the process. Before so much as a motion to dismiss was filed, they settled—for $320,000 for their attorneys, and nothing for the class they represented. (Per ¶¶ 23-24, AOL will give $110,000 to six charities that have nothing to do with email footer advertising; $35,000 of that amount was chosen by the four plaintiffs.)

Today, the Center for Class Action Fairness filed an objection on behalf of Objector Darren McKinney to the settlement.

Saturday, October 24, 2009

Court strikes down Ameritrade settlement

$1.87 million in attorneys' fees for a worthless settlement will not be collected; Judge Vaughn Walker denied settlement approval.
From the perspective of the class, the worst-case scenario may be realized if following this denial of final settlement approval the case were to fail on dispositive motion. But in that event, class would end up essentially in the same situation it would be if final settlement approval were approved: with nothing. Because the purported benefits to the class do not warrant settlement approval, the court DENIES final approval of the proposed settlement.

Monday, September 28, 2009

Dannon Activia class action settlement

A stipulation of settlement has been filed in the Dannon Activia yogurt consumer-fraud case. A $35 million fund will be established to pay claim forms with cash, and plaintiffs' lawyers (including Coughlin Stoia, the lead firm) have "clear sailing" to request $10 million plus expenses from that fund—that's over 28.5% for those of you keeping track at home. A typical contingent fee of 25% would mean a fee of $8.75 million.

Any unclaimed funds will go to charity—which means that, as the settlement is structured, the plaintiffs' firms have no incentive to ensure that the allegedly injured class members will collect the money: their fee is tied to the common fund, rather than to what consumers receive.

That's before we get to the injunctive relief. For that, I'll defer to Russell Jackson, who reports on his blog:
It's understandable that it could make economic sense for a defendant to settle a series of class actions after years of litigation. But this settlement's so-called "equitable" relief involving the defendant's advertising and labeling makes it crystal clear that these lawsuits were not based on any real fraud at all. The settlement allows Dannon to say practically the same thing it always has said. The lawsuits obviously were lawyer-invented, and although they may have survived some motions to dismiss, the settlement's equitable relief demonstrates that the defendant's statements were backed up by real science.
The court has yet to provide preliminary approval to the settlement. If you are a member of the class of Activia purchasers, and you wish to object to the settlement, please let me know.

Saturday, September 26, 2009

"The Cy Pres Racket"

Karen Lee Torre, in the Connecticut Law Tribune, hates cy pres even more than I do, so we'll be seeing her Sep. 28 op-ed in future briefs. See also Peggy Little at Point of Law.

Tuesday, September 22, 2009

Costco Fuel Settlement

Costco, along with other fuel retailers, has been sued over the way it measures gallons of fuel in some states. The putative class plaintiffs have settled the case--for zero dollars for the class, and ten million dollars for the attorneys. You are a member of the Settlement Class and are affected by the proposed settlement if you purchased gasoline from Costco at a temperature above 60 degrees, between January 1, 2001, and April 22, 2009, and reside in the following states: Alabama, Arizona, Arkansas, California, Delaware, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, the District of Columbia, or Guam. CCAF will be representing two class members who find the settlement objectionable.

(Updated to reflect status of case.)

Wednesday, September 16, 2009

CD California ruling approving Bluetooth settlement

The court's opinion is not quite a rubber-stamp of the defendants' proposed order and opinion, but it's pretty close. The court distinguishes precedent by claiming the cases we cited did not have severable attorneys' fees, but that (1) is a distinction without an economic difference and (2) is not universally true. The attorneys' fees were severable in Crawford v. Equifax, for example, as that settlement obliged only the payment of "reasonable" fees to be set by the court.

The critical issue of the fees to the attorneys has not yet been decided.

Thursday, September 3, 2009

In Forbes magazine

The Sep. 21 issue of Forbes magazine, now on newsstands, has a lengthy profile by Dan Fisher of my founding of the Center for Class Action Fairness, complete with a photo of my ugly mug gracing the story.

Friday, August 21, 2009

Ameritrade Stock Spam Settlement briefing responses

Plaintiffs and defendants each filed responses yesterday in the Ameritrade suit. I have to say that I didn't expect the claim that the coupon for free software is not a "coupon."

Wednesday, August 5, 2009

Tuesday, July 28, 2009

Ameritrade Stock Spam Settlement briefing

Unlike the Bluetooth case, we were among several plaintiffs who filed substantive objections to this settlement. The hearing will be before Judge Vaughn Walker in San Francisco on September 10.
You may notice that Public Citizen filed an objection on behalf of Elvey. Unfortunately, when one excludes oneself from a settlement, one loses standing to object, so Public Citizen's fine brief may well be out the door.

Wednesday, July 8, 2009

July 6 Bluetooth hearing

Monday, I attended the fairness hearing for the Bluetooth MDL settlement. UCLA math professor and client Henry Towsner was in the audience.

Dozens of people filed objections with the court, but, aside from the CCAF objection, only 12 of those successfully navigated the procedural maze to file a "valid" objection. Out of those, we were the only ones to cite precedent in favor of our objection. And we were the only ones to make an appearance in court, which suggests that this would've been a quiet rubber-stamp without our appearance and filing.

After hearing from all sides, Judge Fischer took the position that settlements are favored outcomes in a world of crowded dockets, and, even if the case is meritless and unlikely to succeed, it is preferable to allow defendants to get out of the case by paying a small cy pres sum, since the plaintiffs would get nothing if the case was thrown out. The judge ruled that the settlement was fair and adequate, and approved the settlement. She postponed a ruling on the attorneys' fees (despite my argument that the fairness of the settlement was inextricably tied to the fee award). The plaintiffs have until August 5 to submit additional material in support of their fee request; the defendants will file a proposed order by July 20.

This is a settlement that is arguably fair if the fees are knocked down sufficiently so that the attorneys are not receiving more than their putative clients; though the plaintiffs negotiated a "clear sailing" clause where the defendants will not object to fees, the fee request was severable from the rest of the settlement. We will know more in August or September.

Monday, June 29, 2009

Bluetooth Reply Brief

This morning we filed this reply brief in the Bluetooth Headset Products Liability Litigation. The hearing is July 6, a week from today.

If you read our first brief, you may recall that we argued that the new warnings mandated by the settlement were not materially different than those that class members already had when they bought their headset. (I was personally impressed that objectors held on to their thin-paper manuals and knew where to find them.) Much to my surprise, plaintiffs agreed, but claimed that the warnings were that good because of the lawsuit--a surprising concession that the settlement isn't creating any prospective relief.

And now some inside baseball: this case possibly presents an interesting choice-of-law question. California state law recognizes the "catalyst" theory for recovery of attorneys' fees. As such, Erie demands that a California-state-law case apply the catalyst theory, though that theory is rejected by federal common law in cases such as Buckhannon. But can one apply that substantive California law in fifty-state class action? Shutts would say no, but there is a D.N.J. decision out there, Chin v. DaimlerChrysler, that says yes--but without mentioning Shutts.

In this case, it's moot: the plaintiffs don't qualify for catalyst theory fees even under California law, and didn't even ask for recovery based on a catalyst theory. So I wouldn't expect the judge to reach it, but there's a law review article out there for someone ambitious.

Sunday, June 28, 2009

Compare and contrast: Costco renewal settlement

Not all class action settlements are anti-consumer, and CCAF does not reflexively oppose settlements. I had two people independently approach me about a class action settlement over Costco's membership renewal policies.

Prior to the suit, if one purchased a one-year $50 membership on February 1, 2006, let it expire, and then renew your membership on March 1, 2007, the one-year membership would expire February 1 rather than March 1, 2008. Plaintiffs sued arguing that this was consumer fraud. After some rulings adverse to it, Costco agreed to settle by providing a free month or three to class members.

The settlement was structured the way a settlement should be. Class members automatically received the benefit from the settlement without having to file a claim form: Costco's computers would automatically grant the benefit to its customers. We know that the class members prefer that in-kind relief, because they had already demonstrated their preference by exchanging cash for membership benefits, so the in-kind offer gave them full cash-value without loss of consumer surplus. With 50 million Costco members, even if only 10% were affected by the renewal policy, there would be a benefit to the class of over $21 million--though of course that is a guestimate and the real figure might well be more or less. The attorneys are requesting $5 million or so in fees, which is a good living, but not the greediness of demanding 25 or 35% of the pool, assuming that they have not inflated their hours on the case.

I told both people who contacted me that I would not be opposing this particular settlement.

Saturday, June 27, 2009

Ameritrade Stock Spam Settlement

In 2007, plaintiffs brought a class action lawsuit against Ameritrade, alleging that Ameritrade was somehow behind the plaintiffs' receiving spam pushing the purchase of certain stocks--because, after all, there is no other way that anyone receives spam.

In 2008, the parties settled, with $1.87M for the attorneys, and zero pecuniary benefits to the 6.2-million-member class other than coupons for anti-virus software. Unfortunately for the attorneys,
at the preliminary approval hearing, Matthew Elvey, one of the class representatives, came forward and expressed numerous “reservations” about the settlement. He suggested that the gains the class would receive under the settlement had the appearance of benefitting the class but were, in operation, trivial.
This is understatement: Elvey told the court that he opposed the settlement, and even filed papers to that effect. Judge Vaughn Walker therefore declined preliminary approval--but then a few months later approved a similar settlement that had some minor changes such as the expiration date of the coupons and the wording of the notice.

To date, there is no evidence that the spam was connected to Ameritrade, or that a breach of Ameritrade data security that released home addresses for its customers has resulted in any harm, despite Ameritrade seeding databases with dummy spam-catcher e-mail addresses, and multiple analyses of whether identity theft had occurred.

Objections to this settlement are due July 9, 2009, with a September 10 hearing date in the Bay Area. And wouldn't you know it, I am a class member, though I must have thrown my densely written notice in the trash.

(Case No. C 07-2852 VRW (N.D. Cal.)).

Tuesday, June 23, 2009

Opposition briefing in Bluetooth

The plaintiffs and defendants each filed their briefs yesterday in the $0-for-the-class and $800k-for-the-attorneys settlement. Note that defendants were required to pay $1M in notice costs. Yet still, there were class members who did not hear of the settlement until my Overlawyered post publicizing it--a post that comes in for some ad hominem criticism in the plaintiffs' briefs, a classic case of pounding the table.

Wednesday, June 17, 2009

In re Bluetooth Headset Product Liability Litigation

"If you bought a Bluetooth headset between June 30, 2002 and February 19, 2009, the settlement of a class action lawsuit may affect your rights." And if you want to know why your instruction manuals are overwhelmed with worthless wacky warnings, the settlement of this class action lawsuit may explain why.

Overlawyered has covered other ridiculous failure-to-warn-of-hearing-loss consumer-fraud lawsuits, but missed this one filed by the Garcia Law Firm, which was eventually consolidated with twenty-six other lawsuits against Motorola, Plantronics, and GN Netcom (which makes "Jabra" headsets) alleging that the insufficiently advertised risk of hearing loss from turning the volume up too high on a Bluetooth headset was consumer fraud meriting damages, yadda yadda, because, without a wacky warning, people might not know that loud sounds can cause hearing loss.

The settlement is remarkable: the defendants are spending approximately $1.2 million to give notice of the settlement that offers $0 to the class. That's, right $0. There's a total $100,000 cy pres award to four charities selected by the plaintiffs, and the manufacturers agree to provide a wacky warning that "Exposure to loud noise from any source for extended periods of time may temporarily or permanently affect your hearing." Only lawyers like warnings like this. Such warnings make the rest of us worse off; when people see so many warnings "crying 'wolf,'" it inures them to meaningful warnings.

In return, the trial lawyers are going to ask for up to $850,000 in fees and costs—a remarkable infinite-percentage attorneys' fee. Nine representative plaintiffs will ask the court for a total of $12,000 in "incentive" payments.

On June 3, CCAF filed filed an objection on behalf of seven clients.

And anyone in Los Angeles July 6 who wants to watch the hearing, please join in the fun. I've got my plane ticket.


This is the blog for the Center for Class Action Fairness, a non-profit project founded by Ted Frank to provide pro bono representation to consumers dissatisfied with court-appointed representatives in class actions, especially with respect to settlement approval.

I'm Ted Frank. The idea came from the success of my pro se objection to the settlement in the In re Grand Theft Auto MDL.

I often get inquiries on what consumers can do when they get notice of a class-action settlement that benefits lawyers to the expense of consumers. Without attorneys like CCAF, the answer is usually nothing: asking for exclusion doesn't prevent the lawyers from cashing in; objecting without the help of an attorney will almost always be brushed off by the court; there is no financial incentive for an attorney to get involved, unless an objector wants to pay their tremendous fees—and there is certainly not an incentive for an objector to spend thousands of dollars to hire an attorney to object to a bad settlement.

Even when a lawsuit is plainly meritless, it costs defendants a lot of money to have litigators dealing with the case. Without a loser pays rule, it's cheaper for the defendants to pay trial lawyers protection money to go away. Because no one has an incentive to object, the settlements get rubber-stamped, and the trial lawyers go on to file the next extortionate lawsuit. And we all pay higher prices as a result.

In other cases, the lawsuit has merit, but the class lawyers would prefer to maximize their share of the settlement than do what is right for their putative clients: they structure the settlement in tricky ways that will minimize the total cost to the defendant while making it seem like their own outsized fees are justified. The defendant just wants the suit to go away as cheaply as possible, and doesn't care whether lawyers or consumers get the money. The class notice might be misleading: we successfully objected in one case where the notice implied that the class would get $9.5 million (thus making the $1.05 million attorney fee seem reasonable), when the class in fact got about $117,000.

CCAF hopes to change this by giving consumers another option: object, with a lawyer standing behind them to explain to a court why the law doesn't permit such an extortionate settlement that fails to benefit consumers.

By letting courts know that consumers are watching them, they'll be less likely to rubber-stamp bad settlements. If so, the lawyers won't try to unfairly profit at the expense of their clients. On multiple occasions, once we made it clear to the parties that we were going to object to settlements that shortchanged the class, they amended their settlements to provide millions of dollars more to class members. This is wonderful when it happens, but we'd like it to happen before we get involved.

There's an additional side benefit to scrutiny of class action settlements to ensure that the settlements aren't solely benefiting lawyers. If bad settlements aren't approved, then trial lawyers will be unable to profit off of bad cases. Without the promise of profit, the bad cases won't be brought. And we'll all be better off.

When I started this in 2009, I was a resident fellow with the American Enterprise Institute. I left AEI to do this full-time; in 2010, I became an adjunct fellow at the Manhattan Institute. CCAF is not affiliated with and is entirely independent from AEI and the Manhattan Institute.

In the words of Justice Brandeis, "Sunshine is the best disinfectant." It is important to bring attention to the all-too-frequent cases where lawyers try to misuse the class action system to rip off their clients. Here's a list of some of our press coverage.