One of the targets of the Class Action Fairness Act was coupon settlements, the problematic class-action settlement device where the attorneys would receive millions, and the class members would receive coupons of little or no value that were often indistinguishable from what the defendant would use to market itself to non-class members anyway. Under 28 U.S.C § 1712(a), if a court is to value coupons in a coupon settlement, it has to use the value of the "redeemed" coupons, not some hypothetical valuation.

The coupons issued by HP in the HP Inkjet Litigation case were especially appalling: a few dollars only good at HP.com, and not stackable with other coupons. HP looked to make money on the coupons, because they would receive full retail price (minus a few dollars) for things like paper and ink cartridges instead of wholesale price if consumers purchased the goods (often at lower prices) at Staples or Amazon. The Center for Class Action Fairness objected to a settlement that looked to pay the attorneys $2.9 million, but the class only worthless coupons. The district court approved the settlement, while reducing the Rule 23(h) award to $2.1 million, even though class members only claimed about 30% of the coupons available: the $800,000 and remainder of the coupon "fund" reverted to HP. We appealed the district court's failure to follow § 1712(a). As Larry Schonbrun recently complained in the American Thinker, many courts had been evading CAFA's requirement by looking at a provision that permitted the use of lodestar for non-coupon relief.

In a split 2-1 decision that was the first published appellate decision to interpret § 1712, the Ninth Circuit agreed. We were especially pleased by the following language endorsing a principle that has motivated many Center objections:

Of course, one might argue that the fees award in this hypothetical case is "attributable to" the work of class counsel on the action, rather than the coupons. But one would be mistaken. Attorney's fees are never "attributable to" an attorney's work on the action. They are "attributable to" the relief obtained for the class. See Class Plaintiffs v. Jaffe & Schlesinger, P.A., 19 F.3d 1306, 1308 (9th Cir. 1994). An attorney who works incredibly hard, but obtains nothing for the class, is not entitled to fees calculated by any method.
For although class counsel's hard work on an action is presumably a necessary condition to obtaining attorney's
fees, it is never a sufficient condition. Plaintiffs attorneys don't get paid simply for working; they get paid for obtaining results. Because it is the class relief that is both a necessary and a sufficient condition to an award of attorney's fees, it follows that an attorney's fees award can only be "attributable to," or the consequence of, the class relief, not the attorney's hard work.

The dissent, however, which was willing to read the "redeemed" requirement right out of the statute, and affirm a settlement approval where the attorneys recovered more than even the face value of the coupons, shows how difficult it is to legislate reform.

More: Trask; law.com (upgrading me from "gadfly" to "class action titan"); Reuters; Zieve; Jacobson/Monaghan; Bashman; Law360 ($).

A big victory for the Center, its third appellate victory this year. (The Center is not affiliated with the Manhattan Institute.)

A US Chamber Institute for Legal Reform study by NERA finds (no surprise) that the US legal system is the most costly in the world, even when one accounts for the difference in social-insurance programs between American and Europe. Of interesting note: UK legal expenses are up 47% in the last three years, though still substantially cheaper than the US. More: Fisher @ Forbes; Sunday Times ($); related: Zywicki @ Volokh on auto safety.

I'd like to see the full report, because even the figure of an extra 1% of GDP going to excess legal expenses relative to Europe is likely an understatement. A 2011 edition of a similar report by NERA didn't include the expense of securities litigation, where much of the money goes to attorneys (and a disproportionate share of the proceeds goes to institutional investors at the expense of small shareholders). (Update: here it is, and, indeed, the 0.82 to 1.03% estimate is very definitely an underestimate.)

While the trial bar argues the expense of the liability system as a deterrent to make medicine and consumer products safer, I'm not aware of any evidence that Europe is less safe than the US. For example, though Germany has both an Autobahn without speed limits and a much higher percentage of mini cars like the "Smart," in 2005, their auto fatality rate was 7.8 deaths per billion km travelled versus 9.1 in the United States the same year. New Zealand has no medical-malpractice cause of action at all, and there is no evidence that patients there are being butchered as a result. And fear of liability and overcautious pharmaceutical regulation is likely costing lives at the margin.

The Epstein/Landes/Posner methodology has been refuted numerous times, but it's still getting play as they release a new paper repeating their earlier methodological errors and concluding that the current Supreme Court is more "pro-business" than any other. (Why not conclude that the Ninth Circuit is more anti-business than any other American appellate court in history, and that has resulted in a greater degree of error correction?) Jonathan Adler @ Volokh and Greve take up the cudgel again. More: January 2012 (with earlier links).

A new study's abstract says that it finds that a "physician's years in practice and previous paid claims history had no effect on the odds" of a payout of more than a million dollars to a plaintiff—supporting my contention that, at the margin, the status quo medical malpractice system is largely random and does more to deter practice than malpractice. The authors don't seem to realize this implication of their finding, but only the abstract is available publicly. [JHQ via Torts Prof]

Related on POL: January 2005; April 2011.

I'm profiled on pages 11-12 of the Spring 2013 issue of American Lawyer's Litigation magazine.

Dahlia Lithwick makes a good living writing Supreme Court commentary where she utterly misrepresents conservative justices' positions and knocks down the strawmen. That she got a National Magazine Award for three such columns about the health-care cases says more about the National Magazine Award than Lithwick's work. Ramesh Ponnuru's takedown of one of the columns should have been disqualifying by itself; we earlier noted other devastating criticism of the columns, and have had no shortage of other Lithwick critiques, though I've largely stopped reading her for the sake of my blood pressure.

CCAF filed an opening brief in October; after many many delays, the reply brief is now on file. The case presents the question whether a district court can rubber-stamp a settlement that pays the attorneys more than four times what the class received without making any reasoned response to the objections. It also presents the question of whether one can assert that injunctive relief that merely continues a customer-service program that preexisted the litigation can be counted as a settlement benefit, and what procedural rights a district court and appellee has in trying to deter appeals through punitive appeal-bond orders. Our objection to the odd claims process—whereby Apple laptop owners were required to download information from the settlement website, print it out and fill out paperwork by hand, and then manually mail it in—designed to deter claims will surely be helped by the Baby Products precedent. (As always, the Center for Class Action Fairness is not affiliated with the Manhattan Institute.)

CCAF has filed an objection on behalf of a class member in the Southwest Drink Voucher coupon settlement, which I discussed here in January, and was covered in Legal Newsline. (CCAF is not affiliated with the Manhattan Institute.)

The Center for Class Action Fairness filed an objection on Sam Kazman's and my behalf yesterday. The settlement would pay attorneys $7.5 million, and give some class members the opportunity to claim up to $10 from a net fund of about $9M to $10M—except the number of claims is likely to be high enough to preclude any class distribution at all. We've objected, inter alia, to the excessive fee request and to the Rule 23(a)(4) problems presented by class certification. We've been talking about this cy pres settlement for a year on Point of Law.

Public Citizen has also objected on overlapping, but different grounds. Amusingly, another objector, represented by an attorney who's been practicing for 25 years, filed a brief cut and paste from a several-year-old CCAF brief, so missed the opportunity to cite some more recent cases.

(CCAF is not affiliated with the Manhattan Institute.)

Years after the late Andrew Breitbart called attention to the multi-billion dollar giveaway of taxpayer money to Friends of Obama under the guise of settling discrimination litigation, the New York Times notices that a political decision to settle meritless litigation that the government was winning in court as if the government had defaulted on all claims has led to an abuse of the Settlement Fund, and a lot of fraudulent claims, with no intent by the government to investigate the theft from taxpayers. (Where are the False Claim Act qui tam suits?) As the late Richard Nagareda and I noted years ago, when you have a mass-tort settlement with no checks for fraud, you will get the Field-of-Dreams problem: "If you build it, they will come," and the claims process will be overrun by fraud. But, as Paul Horwitz notes, the legal academy utterly ignored this aspect of the Pigford litigation.

One settlement of $700 million only presented $300 million of claims (itself a likely exaggerated figure), leaving a $400 million slush fund for the attorneys (Cohen Millstein) for "cy pres," again with apparently no oversight. Will anyone be checking to determine if the money is actually going to its intended purposes instead of to something affiliated with the attorneys?

More: Walter Olson; Daniel Foster; earlier on POL.

The story focuses on Department of Agriculture settlements, and thus omits the equally problematic Cobell v. Salazar settlement. There, the government had essentially won the litigation, getting the D.C. Circuit to throw out a judgment of $455 million. Yet, once Obama took office, the case settled for $3.4 billion—including $1800 a pop for hundreds of thousands of class members with absolutely no damages because they correctly had only pennies in their trust accounts. As you recall, I filed an objection on behalf of a class member who complained that class members with actual damages were being shortchanged by the settlement because of the arbitrary payments to the uninjured class members. Yet, though the D.C. Circuit had earlier held that such a distribution "would be inaccurate and unfair to an unknown number of individual trust beneficiaries," it affirmed approval of a settlement with the exact same "inaccurate and unfair" distribution. That taxpayers ended up on the hook for $3 billion more than the D.C. Circuit had already held was unreasonable has gone entirely unreported upon.

Even more remarkable is the fact that the plaintiffs used the D.C. Circuit briefing to admit that they had lied before Congress about their case. James Otis Kennerly, served as the poster child for the class because he had allegedly been cheated out of millions of dollars by poor trust accounting relating to an oil well on his land; lead plaintiff Elouise Cobell testified before Congress about that story as late as 2007. In arguing for rejection of the settlement, we noted that Kennerly was going to get the same $1800 as class members entitled to nothing. In response, plaintiffs argued that Kennerly's case couldn't be used to prove the settlement unfair because Kennerly wasn't actually entitled to anything either, because evidence the government presented years before Cobell's testimony to Congress showed that Kennerly never had a legitimate claim to the oil well. (Mother Jones hasn't run a correction to its story, and a documentary about Cobell is apparently planning to retell the bogus version of the Kennerly account; if you google Kennerly, you will find no indication from anyone other than me that plaintiffs have made this admission.) Again, no consequences: Cobell was awarded $2 million, and her heirs are asking for another $11 million as an "incentive" for her success in this case.