Since 2009, the Center for Class Action Fairness has been objecting to a $0 settlement in a ludicrous class action against Bluetooth headsets alleging consumer injury because of failure to (adequately) disclose risk of hearing loss from loud volume settings. Apple won a similar case over iPods, but the defendants here decided to pay the attorneys $850,000 to go away. The district court rubber-stamped the settlement and fee request, and CCAF appealed. Friday, the Ninth Circuit reversed and remanded, instructing the district court to apply more scrutiny to a settlement where the fees were so disproportionate to the class recovery.
Especially important is the fact that the appeals court singled out a "kicker" provision segregating the fee request from class recovery: if the request was disallowed in whole or part, the money would revert to the defendant. In conjunction with the "clear sailing" provision whereby the defendant would not contest the fee request, the effect is to shield the fee request from scrutiny. For years, trial lawyers have argued to courts that this somehow benefits the class, because the fees will "come from the defendants, rather than from the class" as in the cases where a common fund is used to pay both the class and attorneys. This is an absurd fiction divorced from economic reality, and it is a very good sign that the Ninth Circuit rejected it. Also important is the recognition that when attorneys are asking for fees based on lodestar, there must be a cross-check against actual class recovery. [In re Bluetooth (9th Cir. Aug. 19, 2011); CCAF; Forbes; Law360 ($); Business Law Daily; Lawyers USA Online; Courthouse News; Am Law Litigation Daily ($)]
The Center for Class Action Fairness LLC is not affiliated with the Manhattan Institute.