class actions settlements

Our January 13 post on the NVIDIA GPU settlement, where class members were promised a “replacement HP notebook computer … of similar kind and value as their eligible malfunctioning notebook computer" as part of a settlement, but are instead getting a $330 Compaq CQ56 notebook, has generated several updates and over 100 comments. Though class counsel suggested to me that patience would result in a fix to the settlement, it did not for the vast majority of aggrieved class members, and we ended up losing five weeks. I've started this post now that the court filings have started, and will update as new filings come in. The court granted our motion to expedite the hearing schedule, but expediting means a March 28 hearing. Over 100 HP owners have asked for the opportunity to provide a declaration to the court. One of my clients has a website with more information: fairnvidiasettlement.com.

• 343. HP Owners' emergency motion to shorten time
• 344. Frank declaration in support of emergency motion
• 345. Plaintiffs' status report and response to emergency motion
• 346. NVIDIA response to emergency motion (Note: NVIDIA says I was not authorized to represent their non-opposition. That's my fault: I incorrectly assumed that when Robert Varian of Orrick e-mailed me to say that there was an "Agreement not to oppose" the motion, that meant there was an agreement not to oppose the motion. Similarly, plaintiffs surprised me when they sat on my proposed schedule for over 24 hours without telling me they changed their minds not to oppose. Live and learn.)
• 347. Court order scheduling briefing and hearing
• 348. Motion to enforce settlement
• 349. Memorandum in support of motion to enforce settlement
• 349-12. Proposed order
• 350. Frank declaration in support of motion to enforce settlement
• 351. Ram/Edelson objectors kibitz on motion
• 352. Brown class members' response to Ram/Edelson objectors
• 353. [Transcript ordering relating to objectors' appeal; not relevant to this motion]
• 354. NVIDIA response to [348] motion
• 355. Jon Peddie (NVIDIA) declaration
• 356. Keith Katchor (NVIDIA) declaration
• 357. Dan Rosenthal (NVIDIA/settlement administrator) declaration
• 358. Milberg response to [348] motion
• 358.1. Westerman declaration
• 358.2. Bagherzadeh declaration
• 358.4. Laratro declaration
• 359. Certificate of service
• 360. Unrelated docket entry regarding procedural step in objector appeal
• 361. Lichterman (NVIDIA/Orrick) declaration
• 362. Reply brief in support of motion to enforce settlement
• 363. Zilles declaration
• 364. Frank supplemental declaration
• 365. Vlastone supplemental declaration and report
• 366. Notice of settling parties' alteration of settlement website
• 367. NVIDIA response to notice of settling parties' alteration of settlement website
• 368. Supplemental Bagherzadeh declaration
• 369. Supplemental Laratro declaration
• 370. Certificate of service
• 371. Supplemental Zilles declaration
• 372. Supplemental Frank declaration
• 373. Docket entry noting hearing and motion under submission
• 374. Horton declaration

You will recall that a class action is pending in Kansas over gasoline retailers' failure to disclose the laws of physics to customers, i.e., gasoline, like all other liquids, expands in higher temperatures. Since a "gallon" is a measure of volume rather than power, someone buying gasoline when it's warm is getting less mileage than someone who buys the same volume of gasoline when it's cool. To some extent, the retailers are being hoist by their own petard, because they pulled the same class action nonsense on wholesalers, but it's still socially wasteful litigation that benefits no one but the lawyers; when I argued at a fairness hearing in Kansas City last April, I had several dozen witnesses, likely each billing an average of over $400/hour. Costco decided to get the uncertainty off of its books, and agreed to pay the lawyers to go away. But the class members, the ones putatively injured by Costco's conduct, got nothing. The plaintiffs had the chutzpah to claim that Costco's agreement to "temperature-adjust" their fuel sales was a benefit to consumers, but that's clearly not so. If Costco's average "gallon" happens to increase in size a cubic inch or two, that doesn't mean that consumers are getting free gas any more than it would mean that consumers would get free eggs if the government suddenly mandated that a "dozen" was now equal to eighteen.

The court threw out the settlement on a technicality, and the parties are now back with an amended settlement that fixes the technicality, but still doesn't do anything for the class. So my clients renewed their objection to the settlement. Last time around, we challenged the quack economic report that plaintiffs submitted that claimed changing the size of a gallon would magically result in consumers getting tens of millions of dollars of free gasoline; the other side protested that I was just a mere lawyer who wasn't qualified to use big words like "cross-subsidization." Over the last few months, I've discussed this case with several economists, many of whom fell over laughing as I described the testimony of Dr. Andrew Safir; the distinguished Dr. David Henderson was kind enough to charge us a reduced rate to provide a simple rebuttal on short notice this time around.

When is injunctive relief a benefit to the class? So many plaintiffs' lawyers seem confused about this issue: they forget that they represent clients, and the injunctive relief needs to benefit their clients if one is to count it towards determining the fairness of the settlement. Few courts consider the issue because few objectors raise it, but the ones that do consider it consistently distinguish between retrospective injunctive relief (say, a recall that fixes an automobile or a computer) and prospective injunctive relief (a company agrees to change its business practices). Even when there is consumer fraud, prospective injunctive relief doesn't benefit consumers unless they engage in new business with the vendor. And even then, the consumers will not benefit if the vendor simply raises its prices to account for the new costs in the change in business practices.

I'm quoted in a Reuters story about merger lawsuits and their quick settlements:

Settlements often come fast, and plaintiffs' lawyers share in the spoils -- $500,000 in a typical lawsuit, Advisen said.

"The real problem, I think, is in cases where lawyers win a few extra sentences of disclosure and walk away with $1 million of fees," said Ted Frank, who founded the Center for Class Action Fairness and often challenges proposed
Settlements.
Lawyers and researchers say the proliferation of lawsuits reflects increased competition among firms.

"There are some bottom feeders on the plaintiffs' side," said Adam Savett, a director at the Claims Compensation Bureau LLC, which monitors Class Action claims for investors. "Their modus operandi is throw up a lot of stuff on the wall and try to get a quick Settlements, and move on."

REARRANGING DECK CHAIRS

Typically, an individual or institutional investor sues a target company or its directors, seeking Class Action status and alleging a breach of fiduciary duty to shareholders.

...

"Defense lawyers benefit from this game," Travis Laster, a vice chancellor in Delaware Chancery Court, said at a December hearing. "They get to bill hours without any meaningful reputational risk from a loss. They then get to get a cheap settlement for their client. Disclosures are cheap."

Frank, of the Center for Class Action Fairness, said it was up to judges to decide if these Settlements have much benefit.

"Judges should consider whether these provisions actually create value for shareholders," he said, "or amount to a rearranging of the deck chairs to create the illusion of value to justify attorneys' fees."