You may recall our coverage of a bad settlement where the attorneys got $2.73 million and the class nothing. CCAF appealed on behalf of a class member and, Friday, the Sixth Circuit agreed in a 2-1 decision:
Class-action settlements are different from other settlements. The parties to an ordinary settlement bargain away only their own rights--which is why ordinary settlements do not require court approval. In contrast, class-action settlements affect not only the interests of the parties and counsel who negotiate them, but also the interests of unnamed class members who by definition are not present during the negotiations. And thus there is always the danger that the parties and counsel will bargain away the interests of unnamed class members in order to maximize their own.
This case illustrates these dangers. The class is made up of consumers who purchased certain kinds of Pampers diapers between August 2008 and October 2011. The parties and their counsel negotiated a settlement that awards each of the named plaintiffs $1000 per "affected child," awards class counsel $2.73 million, and provides the unnamed class members with nothing but nearly worthless injunctive relief. The district court found that the settlement was fair and certified the settlement class. We disagree on both points, and reverse. ...
In sum, we reject the parties' assertions regarding the value of this settlement to unnamed class members. Those assertions are premised upon a fictive world, where harried parents of young children clip and retain Pampers UPC codes for years on end, where parents lack the sense (absent intervention by P&G) to call a doctor when their infant displays symptoms like boils and weeping discharge, where those same parents care as acutely as P&G does about every square centimeter of a Pampers box, and where parents regard Pampers.com, rather than Google, as their portal for important information about their children's health. The relief that this settlement provides to unnamed class members is illusory. But one fact about this settlement is concrete and indisputable: $2.73 million is $2.73 million.
Judge Cole, in dissent, would nevertheless have affirmed. He does not explain whether he thinks it is ever possible to have a settlement so biased towards class counsel at the expense of the class that it cannot be fair under Rule 23.
The Center for Class Action Fairness is now 7-2 in decided federal appellate opinions; Adam Schulman, a Georgetown Law '10 grad, successfully argued for the Center. [Fisher @ Forbes; Adler @ Volokh; Bloomberg; Litigation Daily ($); Law360 ($)]
(The Center is not affiliated with the Manhattan Institute.)