On Friday, the Center for Class Action Fairness LLC filed its opening brief in the Third Circuit case of Dewey v. Volkswagen (10-3618). The case presents some interesting jurisdictional issues as a side effect of Devlin, plus run-of-the-mill economic quackery and an inexplicable decision to arbitrarily include in the class a million vehicles without providing the same pecuniary reimbursement benefit available to the rest of the class. The settlement as a whole is inexplicable: the class counsel's economist calculated that defendant Volkswagen was going to spend $55 million on a service action that would prevent $24 million in future damage. This, the economist concluded, was worth $103 million to the class: the $55 million spent on repairs, plus the $24 million in future damage avoided, plus the $24 million in increased resale value from not being damaged!
Most entertaining, however, was the economist's insistence that the injunctive relief—a letter to the class informing them of a revised maintenance schedule—was worth millions of dollars to the class because now the class would get the benefits of purchasing maintenance. As we argued:
Imagine three hypothetical class-action settlements with Apple. In Hypothetical Apple Settlement #1, every class member receives a free $700 iPad. It is easy to conclude that the value of this settlement would be $700/per class member; even if a class member did not want the iPad, they could sell it on the market.
In Hypothetical Apple Settlement #2, every class member receives a brochure describing the iPad that contains a coupon for $50 off an iPad. Here, the Class Action Fairness Act dictates the valuation of the settlement: it is worth $50 times the number of coupons redeemed. 28 U.S.C. § 1712.
Now imagine Hypothetical Apple Settlement #3, where every class member simply receives the iPad brochure (or say "educational iPad information") without the coupon. How should that settlement be valued? According to Eads's methodology, the educational information tells a class member that an iPad exists (whether or not they already knew that: the Eads Report assumes 100% ignorance replaced by 100% knowledge), and could lead a class member to purchase an iPad worth $700 to the class member. Therefore, according to the Eads Report, Hypothetical Settlement #3 is worth $700 per class member, as much as Hypothetical Settlement #1, and more than a settlement that included a coupon.
The Center for Class Action Fairness LLC is not affiliated with the Manhattan Institute.