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Apple iPhone 4 bumper class action settlement



When there were reports that the Apple iPhone 4's sleek case, which contained the phone's antenna, caused reception problems if held in a particular way, Apple acted quickly: less than four weeks after the product's release, it announced a program that allowed customers to order a free bumper case that would prevent reception problems and created an app so that phone users could simply download the app and upload their requests without leaving their phone. But whenever there's a news story about a deep-pocketed company with temporarily unhappy customers, there's a class action—in this case over two dozen class actions all alleging that Apple had committed consumer fraud. Apple's executives time is valuable, it costs money to pay for lawyers and search everyone's email, so Apple has settled the cases.

At first, the settlement seems generous: "Apple iPhone owners can claim $15 says the LA Times, and several blogs, e.g., MacRumors, iPhone Hacks, TG Daily. But that's not so: only a tiny percentage of iPhone 4 customers are eligible for the $15. (iPhone JD got it correct.) Moreover, the claims process is insane: one must access the settlement website, perform data entry to request a claim form, and then fill out the claim form by hand. Wait a second: I could order the bumper with an app; I have to use the Internet to get a claim form; it costs more to process the claim forms by hand than to process electronic data. Why isn't there an app for that? The answer of course, is that Apple would rather spend an extra dollar in claims processing than $15 in claims. The settlement is designed so that Apple will not actually pay very many claims. Given the hoops and limited eligibility requirements, I will be surprised if there are 40,000 claims—worth about $590,000, $600,000 minus about $10,000 in postage paid by class members to submit claim forms.

The lawyers, however, are asking for ten times that: $5.9 million. The settlement contains the Bluetooth indicia of fees disproportionate to class relief, a clear sailing clause (Apple agrees not to challenge the fees), and a "kicker" (even if fees are reduced, the reduction goes to Apple, not the class). The settlement is structured to hide the number of claims from the judge: the claims deadline is well after the fairness hearing. This is litigation and settlement designed to benefit attorneys, not class members, and an illegal abuse of the class action system. I am a class member and plan to object.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.