class actions settlements

• 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.).

Wednesday, we filed our Second Circuit brief in Blessing v. Sirius XM Radio, Inc.

• Appellees are filing response briefs in Cobell v. Salazar today. We'll put them up in our Cobell appeal update post when they make it onto the web. Oral argument is scheduled for February 16. If you're going to be in the DC area at the beginning of February, and I know you personally, let me know if you're interested in attending a moot.
• The district court approved the settlement in Barber Auto Sales v. UPS. I'm unhappy with the ruling, which I think is very wrong, but the case is both too small and too narrow to be worth appealing; we already have the larger Sirius case and pending HP Inkjet case in appellate courts to raise the Class Action Fairness Act issues that would have been central to this case. Devoting resources to appealing this case would preclude us from objecting in a couple of other cases, and stretch us pretty thin with the existing appellate schedule. Can't win 'em all, even if we only bring cases that should be won.
• The district court approved the settlement and the fee request in Trombley v. National City Bank. If it's not an abuse of discretion to approve a 28% fee and $3000/hour-of-paralegal recovery when a case settles without any risk on Docket Entry No. 5, it never is, so we're thinking long and hard about whether to appeal this one; one objector has already appealed, so our appeal wouldn't have any effect on when payouts occurred.
• The appalling refusal of Missouri appellate courts to do anything about the coupon settlement ripoff in Bachman v. AG Edwards earlier this year resulted in that state receiving attention in the annual Judicial Hellholes report earlier this week.
• It's not all bad news. Yesterday was the hearing in the second Classmates.com settlement. The parties agreed to modify the settlement to remove the Bluetooth kicker, and the court indicated it would reduce the $1.05M fee request, meaning that money will go to the class. The fee reduction alone might outstrip the original $117,000 settlement, which is now worth over $2.5M. If you're keeping track, that's the fifth time in a row we've won a case and/or fee reduction against Kabateck Brown Kellner; one hopes that this discourages them from continuing to bring bad class actions just to negotiate self-serving settlements. This time, they refrained from abusive ad hominem attacks against us in their briefs; they're learning.

Yes, we know about the Ticketmaster class action settlement, which over a dozen class members have emailed us about. There's no question that this coupon settlement (complete with questionable cy pres) would be illegal in federal court. Unfortunately, the case is pending in California state court. This limits the precedential value of the case (it's only a jurisdictional accident that it's not in federal court; if it were brought today it would be), and I'm sufficiently discouraged by the last few ventures into state court that I'm reluctant to devote limited resources to it. Including objections and a notice of appeal we've committed to file but haven't yet, we have nineteen cases pending, including eight appeals where the briefing isn't finished.

However, many of the class action settlement members who have written us are attorneys. So a possibility is that sufficiently angry attorney class members volunteer to write the briefs (working off of briefs we've previously filed on these issues). Then someone based in California (or me) could attend the fairness hearing. Other class members could submit their objections saying they're joining that one. We're going to try to coordinate that over the course of this month; if you've written to me, and I haven't emailed you yet on this, I will this weekend.

• Kimberly Craven objection
• Craven Opposition to Final Approval (stricken by court)
• Fairness Hearing Transcript (pp. 70-82)
• No. 11-5205 Amended Statement of Issues
• No. 11-5205 Certificate of Parties, Rulings, and Related Cases

Update, September 1: The plaintiffs moved for an $8.3 million appeal bond to create a procedural barrier to prevent Ms. Craven from exercising her appellate rights. Unfortunately for them, such an excessive appeal bond is illegal. Their motion inexplicably failed to cite binding precedent and court rules that contradicted their position, and we have requested sanctions.

• Craven Opposition to Motion for Appeal Bond
• Frank Declaration in Opposition to Motion for Appeal Bond

• September 6 FRAP 30 letter from Frank to opposing counsel

Update, September 9: The indiantrust.com website has been updated with the plaintiffs' September 7 reply brief on the appeal bond briefing, but omits any link to Ms. Craven's response brief.

Update, September 14: We've reached an agreement with the appellees to expedite the briefing schedule for the appeal. Ms. Craven's opening brief will be due October 17; the appellees' response briefs will be due December 16; our reply brief will be due January 6. This will, one hopes, shave several months off the time for resolution of the appeal. The D.C. Circuit has agreed to this schedule. Coverage at BLT.

Update, October 6: class counsel's motion for appeal bond denied. Class counsel is ordered to produce a declaration explaining how its brief failed to cite binding precedent and misrepresented the law. Let's see how long it takes to get the district court opinion on the indiantrust.com website.

Update, October 17: Craven's opening brief was filed today. The appellees' briefs are due December 16. I expect some amicus briefs to be filed October 24.

Update, October 26: The Competitive Enterprise Institute filed an amicus brief this week in support of Ms. Craven's appeal. More coverage at BLT.

Update, December 1: We've moved for judicial notice of a government motion to dismiss a $400 million lawsuit over Indian trust mismanagement based on the Cobell settlement. The existence of this motion supports our argument that the class certification of (and settlement distribution for) the Trust Administration class was illegal. The indiantrust.com website took down all the briefing for the appeal bond issue rather than acknowledge the district court's ruling denying the bond and criticizing their briefing strategy, so this appears to be the first appearance of the affidavit required by the court that class counsel was required to file in November. The indiantrust.com website also fails to identify that the briefing schedule for the 11-5270 appeals has not been set yet; the settling parties have requested that that be expedited to conclude in March, well after Ms. Craven's appeal briefing concludes. Finally, the DC Circuit granted CEI's leave to file an amicus brief.

Update, December 15:

• Oral argument is scheduled for February 16, with a panel of Rogers/Tatel/Brown. 
• Plaintiffs' opposition to the motion to judicial notice.
• Monday, the government has filed a brief in Two Shields v. United States that essentially argues that class certification of the Trust Administration Class under Rule 23 was illegal for the same reasons we argued that it was illegal. We've made a second motion for judicial notice of that filing. That brief contradicts the position that the government took at the fairness hearing, so I'm curious to see what they do when they file their briefs tomorrow. Certainly, however, the Two Shields case demonstrates that this illegal settlement adversely affects more than just Kimberly Craven.

More coverage of the AOL victory in a Washington Examiner op-ed. And Reuters Legal does a lengthy story.

AOL's attorney's comment is revealing: all they cared about was whether they were able to get rid of the frivolous claims against them in a nuisance lawsuit. But the Center cares more about establishing precedents and rules governing the long-term fairness of class actions than any individual result. That larger issue was irrelevant to AOL, so they think they have a victory, but we do, too. Reuters, through Professor Brian Fitzpatrick, questions whether it makes a difference: it does. Class actions are supposed to benefit the class first, rather than the attorneys. When the attorneys have carte blanche to choose cy pres recipients, they effectively get double-payment. To the extent Professor Fitzpatrick cares about defendant deterrence as a reason for class actions, he should be pleased that the defendant would not be allowed to dictate illusory cy pres that goes to their preferred charitable donee.

Interestingly, Kabateck Brown Kellner, whose attorneys had written a dishonest op-ed criticizing CCAF's defense of class members in cy pres settlements without revealing they were adverse to us in four cases (all four of which have now resulted in CCAF court victories), couldn't even be bothered to file a Ninth Circuit brief making a public-policy argument for their preferred tactic of abusive cy pres.

• Coverage of Monday's Nachsin v. AOL cy pres victory for CCAF, some of which is even accurate. I was also interviewed by Reuters and the Daily Journal, but I don't see their stories yet. [Zywicki @ Volokh; Fisher @ Forbes; BLD; law.com; Metropolitan News-Enterprise; Litigation Daily ($); Law360 ($); Wolfman]
• In Blessing v. Sirius XM, Judge Baer denied the request for a punitive appeal bond. Thanks to Adam Schulman, who took the lead in drafting the successful opposition brief.
• The Dewey v. VW oral argument in the Third Circuit looks like it will be scheduled in late March.
• We filed our objection to the fee request and structure in the second Classmates settlement. Dan Greenberg will argue at the fairness hearing December 15.
• Yes, that Apple Magsafe class action settlement you've gotten an email for is likely unfair given the artificial restrictions on the claims process. We have one class member as a client, perhaps two.

Welcome to those of you who found this page after reading the Wall Street Journal profile. The Journal also discussed our Sirius XM objection. Other articles about CCAF can be found on my personal website. Join our Facebook page to stay updated on what we're up to. (Later today, I'll be posting our Ninth Circuit brief on the HP Inkjet printer coupon settlement, where the attorneys got $2.1 million, and the class got coupons only usable at HP.com—which charges far more than other Internet vendors, making it more expensive to use the coupons than not to use the coupons.)

I should note the story does not give enough credit to the attorneys working with me; for example, Frank Bednarz (now a much better-paid patent litigator in BigLaw) argued the Honda case, and Dan Greenberg argued the West Publishing, Kellogg, and Hertz cases. Adam Schulman, a 2010 Georgetown Law grad, just got his first district-court argument a month ago in the Pampers case, which, after a district-court approval, will generate an interesting Sixth Circuit appeal on the scope of Rule 23(b)(2) and the permissibility of big attorney-fee awards in $0 settlements.