class actions settlements

On July 31, district courts substantially reduced attorney fees in two class action settlements where Center for Class Action Fairness attorneys objected.

In the Nutella litigation in the District of New Jersey, Judge Wolfson agreed with our objection that the parties overstated the value of the injunctive relief, and reduced the fee award from $3,725,000 to $1,125,000. More discussion at Point of Law.

And in the remand of the Bluetooth class action settlement in the Central District of California, the court reduced the requested fee award from $850,000 to $282,729.05. The National Law Journal covered without asking me for a quote. The precision of the nickel seems a poor use of court resources, and demonstrates why we argue for recovery based on benefit to the class with lodestar to be used only as a cross-check ceiling. We also think that the court erred in failing to consider the substantial evidence that the injunctive relief was not only worthless but harmful to the class. But we're obviously less dissatisfied with a $282 thousand mistake than a $850 thousand mistake.

Unfortunately, both courts disagreed with us that the "kicker" provision in the settlement combined with the reversion to the defendant meant that the settlement was unfair because of the class attorneys' breach of fiduciary duty to the class, and granted settlement approval. We think this is legal error. When defendants are willing to put $6 million on the table complete a "clear sailing" clause to settle a lawsuit, but only have to pay a little more than half of that because of self-dealing by the class counsel, the unfairness to the class seems fairly clear to us. As the Ninth Circuit said in our Bluetooth win, there is "no apparent reason" for such a reversion. But the Center already has an appeal pending in the Ninth Circuit addressing just this issue, so will likely forgo appeals here unless a cross-appeal is necessary.

Related: district court citing Bluetooth throws out $0 Fraley v. Facebook settlement.

The Class Action Fairness Act puts limitations on coupon settlements. In In re Online DVD Rental Antitrust Litigation, however, the district court approved a settlement that would pay $5.2 million in cash and $8.9 million in Walmart.com coupons to the class and held CAFA did not apply because the parties called the coupons "gift cards." Does the Class Action Fairness Act regulate semantics or something more? I argue the latter in a Ninth Circuit opening brief filed today.

The district court also awarded a disproportionate $8.512 million to the attorneys. Our appeal addresses that issue as well. And because I miss Lionel Hutz, the brief cites the classic case of Homer Simpson v. The Frying Dutchman Restaurant.