Abusive appeal bonds

(This post is by both Adam Schulman and Ted Frank.)

Over at Public Citizen's blog, Scott Michelman posts about the attempt by class attorneys in the Facebook Sponsored Stories settlement to impose $32,000 appeal bonds against each of the 15 appealing objectors in that case. (As you'll recall, CCAF represented objectors in this case, but chose not to appeal when the settlement was improved and the district court substantially cut attorneys' fees. The improvements made the settlement somewhat less objectionable, and given that we have limited resources and can only take on so many appeals each year, we'd rather devote them to a case where we can make more of a marginal difference than where there are fifteen other appellants.)

Michelman is correct that $32,000 is far beyond what the law allows under Federal Rule of Appellate Procedure 7. In multiple cases, even when the appellees violate FRAP 30 to bloat the appendix, we have yet to see a cost order greater than $3,000.  Sadly, however, this $32,000 request is not unique. In the Center's short history we have seen several attempts to abuse Rule 7, some even successful:

• Cobell v. Salazar, 816 F. Supp. 2d 10 (D.D.C. 2011) (appeal bond request of $8.3 million denied);
• Blessing v. Sirius XM Radio, Inc., No. 09-cv-10035-HB, 2011 WL 5873383 (S.D.N.Y. Nov. 22, 2011) (appeal bond request of $200,000 denied);
• In re MagSafe Apple Power Adapter Litig., No. C 09-01911 JW (N.D. Cal. 2012) (appeal bond request of $200,000 against each appealing objector; court orders illegal $15,000 bond on each of five appellants); currently on appeal at the Ninth Circuit; and
• In re EasySaver Rewards Litig., No 09-cv-2094-AJB-WVG (S.D. Cal. 2013) (appeal bond request of $60,000 before the settlement had even been approved, let alone appealed!) (court issued illegal $15,000 bond); currently on appeal at the Ninth Circuit.

Unlike a criminal bond, where one can find a bondsman to post bond in exchange for a small deposit, the cheapest way to post a $15,000 bond in a civil case is to deposit $15,000 with the district court. In both MagSafe and EasySaver, that's what we did. We posted half of a $25,000 appeal bond in Dewey v. Volkswagen after the district court decided that we had a low chance of success on appeal, and got our money back over a year later when we won at the Third Circuit.

Fortunately, most judges get it right. See, e.g., the non-CCAF case In re Navistar Diesel Engine Prod. Liab. Litig. (N.D. Ill. Aug. 12, 2013).

A particularly abusive appeal bond is pending before the 10th Circuit. Two objectors appealed an abusive settlement that the district court approved over the objection of several state attorneys general, after which the district court imposed a $1 million appeal bond. Tenille v. Western Union, 2013 U.S. Dist. LEXIS 130962 (D. Colo. Sept. 10, 2013); the Tenth Circuit will hear argument next week.

Michelman worries that "[such strong-arm tactics] play into the negative stereotype about class actions and class counsel." They certainly do—but the fact that class counsel so frequently engages in them show that the stereotypes have much truth. For all the plaintiffs' bar talks about "access to justice," many trial lawyers will not hesitate to run roughshod over a class member's right of appeal if they think it will short-circuit a meritorious appeal that would jeopardize an excessive fee award. Given that Fraley class counsel (who claims his time is worth $975/hour) will be expending more than $32,000 of lodestar to brief and argue the appeal bond motion (and any collateral litigation caused if the bond is granted), the motion is clearly a bad-faith attempt to improperly deter appeals, rather than a legitimate concern over recovering appellate costs.

Urban Active Fitness class action settlement

The class in Gascho v. Global Fitness Holdings LLC, Case No. 2:11-cv-436 (S.D. Ohio), consists of the 606,246 individuals who signed a gym membership or personal training contract with Urban Active Fitness between January 1, 2006 and October 26, 2012. You might be one of the people who received a postcard.

The fact that the parties can identify the number with specificity suggests that a settlement is simple: give money to the allegedly injured class members. But instead one must make a claim (by mail or by the settlement website, www.urbanactivelawsuit.com). The reasoning for that is simple: class counsel would rather that the money to go to settle the lawsuit go to themselves and their friends, the settlement administrator company, rather than the class.

Earlier this year, the Sixth Circuit in In re Dry Max Pampers Litigation condemned sham settlements that allocated a disproportionate sum of money to class counsel. This settlement will pay $2.4 million to class counsel (from a segregated fund that reverts to the defendant) and, most likely, only $1.3 million to the putative clients—exactly the sort of thing the Sixth Circuit said was impermissible.

One hopes that a class member who received a postcard investigates the unfairness of the settlement and retains qualified counsel to object. The claims deadline and the objection deadline is December 30.

November 4 Press Release

US SUPREME COURT DENIES FACEBOOK USERS

CY PRES SETTLEMENT CHALLENGE OPPORTUNITY

OPENS DOOR FOR FUTURE CHALLENGES

WASHINGTON, D.C. – The US Supreme Court (SCOTUS) has declined to hear arguments in Marek v. Lane, (No. 13-136) a case challenging the fairness, reasonableness and adequacy of a $6.5 million cy pres settlement where the only concession Facebook made to settle the claims of millions of users was to establish a new foundation to educate the public about “user control” over Internet privacy.

However, in a separate statement, Chief Justice Roberts acknowledged the need for the Court to address the increasing use of cy pres settlements. He wrote, “…review of this case might not have afforded the Court an opportunity to address more fundamental concerns surrounding the use of such remedies in class action litigation, including when, if ever, such relief should be considered….In a suitable case this Court may need to clarify the limits on the use of such remedies.”

“We’re hopeful the Court in a future case will address abuse of the cy pres doctrine which has become an increasingly serious problem that cheats consumers of fair settlements in class action cases,” said Ted Frank, founder of the Center for Class Action Fairness and one of the lawyers challenging the Facebook settlement.

Cy pres awards in class action settlements provide awards be given to charities or foundations instead of individual consumers. According to legal scholars these awards “create the potential for conflicts of interest by ensuring that class counsel are able to reap exorbitant fees regardless of whether the absent class members are adequately compensated.”

October 15

Tomorrow morning, the Supreme Court will announce orders relating to two cert petitions we filed (with substantial and critically necessary pro bono assistance) that it considered at its October 11 conference: Martin v. Blessing (which long-time readers remember as the Sirius XM case) and Marek v. Lane (the Facebook Beacon cy pres case). Both petitions made SCOTUSblog's "Petitions We're Watching" list, which means that the experts there think that those petitions have a better than average chance of being granted--but since "average" means "less than 1%," odds are still long.

I'll be speaking at the University of Chicago Law School at lunchtime, and hope to see some readers there.

Marek v. Lane cert petition in the Wall Street Journal

In The Wall Street Journal, David Rivkin and Lee Casey write about Marek v. Lane, arguing that it's time to end class-action settlements that only reward lawyers, not plaintiffs. Earlier.

Mid-September update

• Procter & Gamble (but not the plaintiffs) filed an en banc petition seeking further review of the 2-1 decision striking down the ludicrous attorney-benefit-only settlement in Dry Max Pampers. CCAF filed its opposition yesterday.


• Similarly problematic to the Dry Max Pampers settlement is the case of Richardson v. L'Oreal, a pathetic lawsuit and settlement that seems to have forum-shopping shenanigans. CCAF attorney Adam Schulman filed an objection on behalf of a class member.


• One tactic class counsel engages in is to attempt to scare off objections with abusive discovery requests. This happened in L'Oreal, where class counsel purported to try to subpoena every attorney working for CCAF. Less than one business day after the subpoena was served and we sent this letter, class counsel withdrew all of the subpoenas. We're not scared of discovery: we follow the rules, and as Citigroup showed, class counsel almost always has something to hide. In this case, for example, it's doubtful the class representatives ever had any real input in the settlement process, and some might not even have standing; and I'd wager there's more than a colorable chance that there are documents existing where the parties agree that they don't want to be in the Ninth Circuit because of Bluetooth. But we're leanly staffed, and offensive and defensive discovery can be time-consuming and take away from the fun appellate stuff we like to do. If you're a litigator who'd like to be on our pro bono SWAT team call list the next time someone tries to play discovery games with us (subject of course to conflict checks and the like when the occasions arise), please drop me a line. We're engaging in fundraising so that we can be more aggressive with offensive discovery in future cases.


• We won $26.7 million for shareholders in the Citigroup case, but we think we can win even more on appeal. Another objector appealed anyway, so we're not adding any delay. We filed a notice of appeal yesterday. [Litigation Daily]

Korean Air and Asiana Airlines coupon settlement

At first glance, the Korean Air Passenger Settlement looks pretty good: $50 million in cash for class members. You have to dive very deep in the papers (it's nowhere in the notice) to find out that the attorneys are going to ask for $21.5 million of that cash. They justify this by valuing coupons with face value of $36 million at $36 million, but we know from the Class Action Fairness Act and In re HP Inkjet Printer Litig. that you're not allowed to do that. Tsk, tsk. (And, of course, 25% is likely excessive even if the settlement was worth $86 million, given that the lawsuit just piggybacked on a government antitrust investigation. But, of course, the court is never going to hear that unless a class member comes forward and objects, or retains counsel (perhaps pro bono counsel?) to represent them at the fairness hearing. The class consists of:

All persons and entities (excluding governmental entities, Defendants, and Defendants’ respective predecessors, subsidiaries, and affiliates) who purchased Passenger Air Transportation on [Korean Air or Asiana Airlines], or any predecessor, subsidiary, or affiliate of the Defendants, at any time during the time period January 1, 2000 through August 1, 2007. As used in this definition, “affiliates” means entities controlling, controlled by, or under common control with a Defendant [and does not include travel agents]. “Passenger Air Transportation” means passenger air transportation service purchased in the United States for flights originating in the United States and ending in the Republic of Korea (“Korea”) or flights originating in Korea and ending in the United States.

There is a claim form online if you want your cash and coupons; class members should get formal notice shortly. One of the lead class counsel is Jeff Westerman, who you might remember from his Milberg days for his role in the NVIDIA settlement bait-and-switch where he hired an expert witness to testify against letting class members recover what the settlement notice told them they'd recover. So one is skeptical when one reads in the settlement that "Korean Air and Class Counsel shall set the maximum coupon redemption value per ticket by mutual agreement."