Results matching “class action fairness act”

New Video: Manhattan Institute Event on Class Action Lawsuits - PointOfLaw Forum

C-SPAN has broadcasted video footage of Manhattan Institute's recent forum on the topic of class action litigation.

Participants talked about class action lawsuits and why some critics argue they benefit no one except attorneys. Following James Copland's introductory explanation of class action lawsuits, Ted Frank, a leading tort reform advocate and a leading critic of class action suits, described major cases his Center for Class Action Fairness organization got overturned. Panelists in the discussion afterward talked about various aspects of class action suits, including the reasons why big corporations settle and policy changes needed to address the ethical problems with these cases

CAFA violation in Korean Air Passenger settlement - PointOfLaw Forum

At first glance, the Korean Air Passenger Settlement looks pretty good: $50 million in cash for class members. You have to dive very deep in the papers to find out that the attorneys are going to ask for $21.5 million of that cash. They justify this by valuing coupons with face value of $36 million at $36 million, but we know from the Class Action Fairness Act and In re HP Inkjet Printer Litig. that you're not allowed to do that. Tsk, tsk. (And, of course, 25% is likely excessive even if the settlement was worth $86 million, given that the lawsuit just piggybacked on a government antitrust investigation. But, of course, the court is never going to hear that unless a class member comes forward and objects, or retains counsel (perhaps pro bono counsel?) to represent them at the fairness hearing.

The class consists of:

All persons and entities (excluding governmental entities, Defendants, and Defendants' respective predecessors, subsidiaries, and affiliates) who purchased Passenger Air Transportation on [Korean Air or Asiana Airlines], or any predecessor, subsidiary, or affiliate of the Defendants, at any time
during the time period January 1, 2000 through August 1, 2007. As used in this definition, "affiliates" means entities controlling, controlled by, or under common control with a Defendant [and does not include travel agents]. "Passenger Air Transportation" means passenger air transportation service purchased in the United States for flights originating in the United States and ending in the Republic of Korea ("Korea") or flights originating in Korea and
ending in the United States.

There is a claim form online if you want your cash and coupons; class members should get formal notice shortly.

One of the lead class counsel is Jeff Westerman, who you might remember from his Milberg days for his role in the NVIDIA settlement bait-and-switch where he hired an expert witness to testify against letting class members recover what the settlement notice told them they'd recover. So one is skeptical when one reads in the settlement that "Korean Air and Class Counsel shall set the maximum coupon redemption value per ticket by mutual agreement."

A few years back, I argued an objection to an appalling settlement in district court. The attorneys got paid and the defendant made a meaningless label change; it was basically identical the Dry Max Pampers settlement without even the fig leaf of cy pres or an impossible refund process. The judge gave an oral ruling from the bench. He praised my diligence and good faith to the sky, and let me know how much he appreciated my taking the trouble to object. And then he rubber-stamped the settlement and gave class counsel everything they asked for. (In hindsight, we should have appealed, but we already had a lot of appeals pending and took our lumps.)

Yesterday, I had the opposite experience. In response to our objection in Wyeth Securities, the district court essentially adopted every bad-mouthing lie and misrepresentation class counsel made about what a terrible person I was, making a series of wrong legal rulings along the way and ignoring one of our actual legal arguments to successfully knock down class counsel's straw-man characterization of it. But when push came to shove, the judge gave us a lot of what my client wanted: an 18.4% reduction in an excessive fee request, meaning $3,037,500 more for the class.

Between a judge saying nice things to me and letting a class get ripped off and a judge saying mean things about me but at least partially looking out for the class, I'm sure class counsel would have preferred the former. (We know that plaintiffs' attorneys prefer $3 million in cash to Ted Frank being insulted because no one in the plaintiffs' bar has offered me a $3 million contract to quit class-action work to focus on writing reviews of five-star beach resorts.) So if a judge criticizes me but the class gets $3M more, I'll take that trade—though one wonders why a judge thinks complaining that class counsel is asking for too much is worse than class counsel actually asking for too much. (Don't cry for class counsel: their $13M award is still more than 3 times their likely exaggerated $4M lodestar for negotiating a settlement where their clients got pennies on the dollar.)

It means CCAF probably shouldn't ask for attorneys' fees, but CCAF's non-profit status and success rate means that it is legally entitled to ask for far more fees than tax law permits it to receive in any given year, so there's no marginal cost to us if we forgo arguing for fees in a particular case. And we'd rather spend time litigating for class members than for our fees.

Some unfortunate dicta in the process: the court held that my client didn't have standing to object to a settlement that explicitly froze out small individual shareholders like herself solely because she didn't take the entirely redundant and futile step of filing a claim form for her $0 recovery. That's just simply incorrect: the objector, as a class member, suffers injury from the waiver the settlement imposes upon her for no compensation, and that injury is redressable if the court rejects the self-dealing by the institutional class representative that favors institutional interests over small-shareholder interests. (Furthermore, there's plainly a problem in claiming that a class action is superior to individual litigation under Fed. R. Civ. Proc. 23(b)(3) if class counsel is going to claim that it's too hard for the aggregated litigation to actually bother to compensate class members.) But do we spend time getting appellate correction of that mistake? Probably cheaper for us to just ask future clients to jump through a pointless hoop in future cases to preempt that argument—though I've also seen class counsel argue "See, the objector likes the settlement because she filed a claim!" And the opportunity cost of pursuing this injustice is not having the time to pursue bigger injustices.

Stockholm Syndrome watch: defense counsel from Simpson Thacher & Bartlett gratuitously supported class counsel's excessive fee request at the fairness hearing. It peeves me when plaintiffs' lawyers look out for lawyers' interests instead of that of their clients, and it peeves me no less when defense counsel do it, too. Unrepresented class members have little choice in the matter, but why a publicly-traded corporation like Pfizer puts up with that is beyond me.

The $3 million fee reduction is the 30th CCAF objection that has met with at least a partially successful result. It also puts CCAF over the quarter-billion-dollar mark in fees knocked out in cases where we objected in our four-year history.

(The Center for Class Action Fairness is not affiliated with the Manhattan Institute.)

CCAF Sixth Circuit victory in Pampers Dry Max - PointOfLaw Forum

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.)

We discussed earlier the surprisingly bad Ninth Circuit split decision affirming a $0 settlement where the only beneficiaries were the attorneys who received double lodestar and a brand new cy pres charity controlled by the defendant. With the able assistance of lawyers who litigated in the Ninth Circuit below and with BakerHostetler's fine Supreme Court practice, the Center for Class Action Fairness filed a petition for certiorari on Friday asking the Supreme Court to resolve the numerous competing strands of cy pres jurisprudence among the appellate courts. A number of reporters have expressed interest, and I'll update this post with that coverage.

(CCAF is not affiliated with the Manhattan Institute.)

We Need Your Help to Make PointofLaw Great! - PointOfLaw Forum


Hello PointofLaw Community,

Firstly, thank you for your readership, support and constructive feedback which has helped turn PointofLaw into the valuable resource it is today. The PoL team strives daily to return the favor by providing unique, insightful and timely commentary on a diverse range of legal topics such as civil justice reform, criminal law and prosecution, corporate governance, financial regulation to name a few. We now have an opportunity to make our legal blog even better for our readers, but we need your help!

Here's How:

The American Bar Association is currently accepting nominations for their annual list of the 100 best legal blogs. We know that a vast majority of our readers are extremely busy, but we ask that you please take a couple of minutes to fill out a very brief nomination form in order to include PoL on that prestigious list for 2013. PoL cannot make the cut without your nominations.

Here's Why:

PoL is fortunate to feature numerous legal scholars and intellectuals who have led truly distinguished careers. These top-flight legal minds use our forum to share their knowledge and vast experience with you, our readers, while also contributing to legal scholarship and public discourse. A few of these scholars include:

- Ted Frank, adjunct fellow for the Manhattan Institute's Center for Legal Policy, and Editor-in-Chief of PoL. In addition to these roles, Mr. Frank is the president and founder of the Center for Class Action Fairness; he has written on various issues such as class action reform, litigation reform, medical malpractice, and products liability. Mr. Frank has previously been named by the Wall Street Journal as a "leading tort-reform advocate."

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- Hester Peirce, senior research fellow at the Mercatus Center at George Mason University. Ms. Peirce's research areas include consumer protection, financial crises and regulation, and financial markets. She has served as senior counsel for Senator Richard Shelby's staff on the Senate Banking, Housing, and Urban Affairs committee; in this capacity, she worked on financial reform following the 2008 crash and oversaw the implementation of the Dodd-Frank Act.

- Jonathan Wilson, attorney in the corporate & business practice group of the Atlanta firm of Taylor English Duma, LLP. Mr. Wilson has experience in corporate securities, corporate finance and governance, M&A and intellectual property law. He is the former general counsel of two NASDAQ companies.

We want to add to that impressive roster, expand our coverage, and diversify our content in order to improve the readers' experience. Additionally, in the past, we have hosted lively debates on our featured discussions and podcasts pages which flesh out multiple perspectives on breaking legal news. We'd like to increase the frequency of those PoL debates and discussions. ABA recognition of PoL as among the top legal blogs has the potential to significantly boost our exposure which can take our content and presentation to the next level and help us meet all of the aforementioned goals.

It is in this spirit that we ask that you please take a few minutes to nominate us for the ABA's top 100 legal blogs. Clicking here will take you to the nominating instructions. As always, we thank you for taking the time to visit PointofLaw.com and hope you will continue to find it a valuable and insightful resource.

We've previously discussed the abusive coupon settlement in In re EasySaver Rewards Litigation. In February, the district court approved the settlement and an $8.85M attorney award, and the Center for Class Action Fairness filed an appeal on behalf of its objector client. Friday, we filed our opening brief, with the following issues presented:

1. The Class Action Fairness Act ("CAFA") expressly contemplates and sets forth rules for coupon settlements that include relief other than coupons. 28 U.S.C. §1712. Did the district court err as a matter of law in holding that CAFA did not apply to a coupon settlement because it also paid class members a total of about $225,000 in cash?

2(a). 28 U.S.C. §1712 requires that a court calculating an attorney fee for a "proposed settlement in a class action [that] provides for a recovery of coupons to a class member" to value the coupons "based on the value to class members of the coupons that are redeemed." Accord In re HP Inkjet Printer Litig., No. 11-16097, -- F.3d --, 2013 WL 1986396 (9th Cir. May 15, 2013). Did the district court commit an error of law in determining attorneys' fees without determining the "value to class members of the coupons that are redeemed" and ascribing a $20 value to a coupon that was not stackable with already existing discounts?

2(b). In the alternative, if the Class Action Fairness Act does not apply, did the district court commit clear error in finding that the value of the settlement was $38 million and awarding $8.85 million in attorney awards, when the class would receive only about $225,000 in cash plus coupons that were unlikely to be redeemed and even less likely to be redeemed in such a manner to provide the full face value to class members?

3. Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011), held that it was error for cy pres to favor local charities when there was a national class, and criticized the possibility of conflicts of interest between class counsel and cy pres recipients. Did the district court commit an error of law or abuse its discretion in approving a cy pres component of a settlement involving a national class that favored the alma mater of class counsel, and only distributed funds to local San Diego-area institutions?

4(a). Under Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468 (5th Cir. 2011), a settlement fund "belongs solely to the class members." Did the district court err as a matter of law in approving a settlement that provided over $3 million for cy pres but only about $225,000 for class members when there were class members who had not been fully compensated and 99.8% of the class had not made claims?

4(b). In the alternative, if Klier does not apply, In re Baby Products Antitrust Litig., 708 F.3d 163 (3d Cir. 2013), requires a district court to consider the ratio of cy pres to actual class recovery when evaluating the fairness of a settlement. Did the district court err as a matter of law in rejecting Perryman's request that this factor be considered where cy pres recipients would receive more than ten times as much cash as the class would and class counsel would receive more than forty times as much?

As always, the Center is not affiliated with the Manhattan Institute.

You may recall that the Center for Class Action Fairness won a big victory in May shutting down a tendentious interpretation of the Class Action Fairness Act that evaded the statute's intent in limiting coupon settlements to those that actually produced usable coupons. (As always, CCAF is not affiliated with the Manhattan Institute.)

The panel decision was 2-1, and that encouraged en banc petitions. We opposed the en banc petition, and Ninth Circuit denied the motion Monday, with only one judge (the dissent, Judge Berzon) requesting en banc rehearing.

We're encouraged, and the victory will likely help us in two or three other pending Ninth Circuit appeals we have, as well as a case in the Northern District of Illinois.

But the victory does little good if district courts and settling parties continue to ignore the plain language of CAFA. Take, for instance, the settlement in Redman v. Radio Shack Corp., No. 11-cv-06741 (N.D. Ill.). The settlement provides $1M in attorneys' fees and $10 coupons to the class, without any mechanism to track redemptions. Of course, there will be nowhere near the hundreds of thousands of claims comprising "settlement value," so the settlement also provide cy pres of leftover coupons. Except Section 1712(e) of the Class Action Fairness Act explicitly prohibits the use of cy pres coupons for calculating fee awards.

The settlement class is defined as

"All persons who, between August 24, 2010 and November 21, 2011, paid by credit or debit card for products or services and received an electronically-printed receipt from any Store that contained the expiration date of the person's credit or debit card.

"Excluded from the Settlement Class are Defendant, its officers, employees, and attorneys; transactions conducted with business credit or debit cards; and transactions made with RadioShack-branded debit or credit cards, as those cards do not contain expiration dates."

One hopes a class member aggrieved by this lawyers-first settlement will contact a non-profit attorney willing to help them object to such an unfair settlement.

(This post is co-authored with Adam Schulman of the Center for Class Action Fairness.)

Sullivan v. DB Investments, the Third Circuit en banc decision affirming a class action settlement certification, was troubling, for reasons noted by Andrew Trask last year. Class members who had no cause of action were grouped with class members who did have a cause of action in a single settlement class, and got identical relief. The Third Circuit found no intra-class conflict, despite the obvious wealth transfer. As Judge Scirica's concurrence reads:

[O]bjectors contend some class members do not have a valid cause of action, but these class members with non-repealer state law claims have lost nothing through inclusion in the class. Objectors speculate inclusion of non-repealer state law claims necessarily diminishes the settlement accrued to class members whom they contend have undisputedly valid claims. But they provided no support for their assertion.

Objectors contend they seek to protect absent class members, but fail to explain how absent class members--all of whom claim injury--are harmed by the defendants' willingness to settle all potential claims.

Judge Jordan had the obvious rejoinder:

The problem here is not that some absent class members who deserve compensation are left out by the settlement. The problem is that some class members who deserve nothing are included in the settlement and hence are diluting the recovery of those who are entitled to make claims. That harm is real, and the cause of it, the overbreadth of the class, is akin to the problem in Amchem.

Now, over a year after the decision, checks have been mailed, and, surprise, surprise, class members' claims have been diluted to near nothing: a Consumerist poster, Laura Northrup, notes that a class member with a $3000 claim (which would be trebled under the antitrust laws), received a mere $48. (This is hardly surprising, given that there were 67 million class members splitting about $200 million. If anything, $48 is surprisingly large. Of course, Ms. Northrup's friend might be in the $0 cross-subsidizing subclass, rather than the subclass whose recovery was diluted.) Meanwhile, the attorneys who won this nuisance settlement of pennies on the dollar were compensated more than in full: $73 million.

The DC Circuit rejected a similar challenge in Cobell v. Salazar; cert petitions were rejected in Cobell and voluntarily dismissed in Sullivan, so the Supreme Court has not yet addressed appellate courts' disregard of its precedents and the circuit split, but the issue is likely to arise again in some pending megasettlements.

In re HP Inkjet Litigation (9th Cir. 2013) - PointOfLaw Forum

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.)

Update in Kitagawa v. Apple, Inc. (9th Cir.) - PointOfLaw Forum

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.)

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.)

Two CCAF victories - PointOfLaw Forum

As in our successful Baby Products objection, the Center for Class Action Fairness recently represented me objecting to two similar settlements where the attorneys' fees were based on the size of the settlement fund rather than the tiny percentage of the settlement fund that would go to the attorneys' putative clients: Bayer and EA Sports Madden. Confronted with our objection in Bayer, the parties suddenly discovered that they could obtain a list of class members and send them checks directly, increasing payout more than 25-fold by millions of dollars. And the court in EA Sports strongly encouraged the parties to increase payouts and issue new notice to ensure money get distributed to the class: a tripling of payouts plus a more-than-doubling in claims rates has again resulted in millions of dollars for class members.

(The Center is not affiliated with the Manhattan Institute.)

Courts beginning to reject M&A strike suits - PointOfLaw Forum

96% of mergers result in litigation alleging breach of fiduciary duty. This isn't because there are widespread breaches of fiduciary duty; it's because strike suits threatening to generate litigation expenses relating to the merger are highly profitable. The case settles with a tweak to the disclosures, and the attorneys walk away with over $1000/hour for agreeing to stop trying to hold up the merger. Courts are beginning to see through this.

Today, the Center for Class Action Fairness won a victory in the Texas Court of Appeals: the appellate court zeroed out attorneys' fees in a shareholder derivative suit settlement that added largely meaningless disclosures to the proxy statement in Kazman v. Frontier Oil. I argued the case, but D. Wade Carvell, our pro bono local counsel, really deserves the credit as the principal author of the briefs and the man who came up with the winning argument. We discussed the case on January 18 and October 10. It's CCAF's sixth appellate victory. (CCAF is not affiliated with the Manhattan Institute.)

(Update: Reuters press coverage.)

And earlier this week, the Ninth Circuit affirmed an award of sanctions against Joseph Alioto for violating 28 U.S.C. § 1927 in challenging a merger of Southwest Airlines. Alioto is unrepentant. [Reuters] Little wonder: the $67 thousand sanction isn't even 1% of the $308 million requested in the pending LCD settlement, two to three times the normal rate for settlements of that size. Sadly, the attorneys general participating in the litigation are failing to protect their citizens and have not objected to the outsized fee.

I'll be on WYNC today from 9:30 to 9:40 am to discuss the practice of hiring line-sitters to attend Supreme Court arguments and other court and federal hearings.

A Jada Smith piece discusses the decades-old practice of paid line-sitters holding places in line for the fifty seats open to the public for Supreme Court hearings.

Adam Liptak tweets that the idea of seats going to the highest bidder violates the concept of "Equal Justice Under Law." But just because the Supreme Court doesn't charge for seats doesn't mean that the seats aren't going to the highest bidder: the "first-come, first-serve" rule (which doesn't apply to journalists like Liptak, who get a guaranteed front-row seat in press gallery) just charges by the bidders with the most time, rather than the most money: over 24 hours for the most popular arguments. It's hardly a surprise that the result is that there's room for a deal, since one can pay people for their time. It's not free for someone with a job to sit in line for days, especially if they don't live in Washington to begin with. (If the Supreme Court simply gave out 50 tickets for free to each argument, one would quickly see those tickets on Ebay or Craigslist or StubHub.)

Now, one can complain that line-sitting companies are capturing rents from scarcity that would be better served in the judicial coffers: at $50/hour for a line sitting company, it appears that this argument could have raised $100,000 or more for the courts if the Supreme Court had simply sold tickets.

It's worth noting that the Supreme Court is already the most open of the branches. Unlike the legislative and executive branches, when the Supreme Court makes a decision, it is immediately public, and when it's precedential, they explain their reasoning. Lobbyists have secret conversations with legislators and regulators, but lawyers' arguments to the Supreme Court are constrained by public briefing. The argument may not be contemporaneously available to the entire public, but the oral argument is the least important part of the process and is, in any event, available in transcript form same day, and audio recording not much later. Where's the real harm?

As "outrages" go, let's take a look at PACER, where the judiciary overcharges by over $100 million over costs for documents available in public court dockets and provided over the Internet—and that was before PACER raised its prices 25% this year. (For a non-profit like the Center for Class Action Fairness, PACER charges are a non-trivial part of our annual spending.) And don't even get me started about the waste of money of over a hundred separately designed and programmed and inconsistent ECF filing systems for each of the courts.

Standard Fire v. Knowles - PointOfLaw Forum

In a unanimous decision, the Supreme Court rejected the most notorious tactic for evasion of federal jurisdiction under the Class Action Fairness Act. More: Olson @ Cato; OL; earlier at POL.

Brian Wolfman complains that this is a "pro-defendant" decision and it will certainly be spun that way. But it's important to recognize that it's also a pro-consumer decision. The same hellhole judges that ignore due process concerns of defendants when refusing to rule on personal jurisdiction issues or countenancing abusive expensive discovery or improperly certifying classes (on which, see this great Roger Parloff article) go on to ignore due process concerns of absent class members when the defendants facing this barrage of litigation pay Danegeld to go away. Miller County trial lawyers had collected hundreds of millions of dollars of legal fees from forum-shopped class-action settlements; the class members whom they purportedly represented likely didn't even get 10% as much. We'll never know because judges approved these settlements without inquiring into that figure, and refused defendants' attempts to conduct discovery in that area. It was the pro-consumer aspect of CAFA that led the Center for Class Action Fairness to file an amicus brief. Defendants win and consumers win; the only losers are rent-seeking plaintiffs' attorneys that had been running roughshod over the rights of both.

Andrew Trask has good analysis and points out that the Supreme Court has once again rejected the entity theory of class actions. As I note in my MI white paper, the class action is a procedural device that can't be used to affect individuals' substantive rights. It makes a difference: given that the Supreme Court has repeatedly rejected an "entity" theory of class actions, it implies that class action settlements that favor third parties—i.e., cy pres recipients, or non-class-beneficiaries of future injunctive relief—over class members are inappropriate.

by Ted Frank

Professor Gilles's last parenthetical confuses me. What is my "typical" objection? For that matter, who is my cohort? I always thought of myself as sui generis.

I honestly haven't paid a lot of attention to the Visa/Mastercard settlement because (1) no class member has asked for my help and (2) there are several competing class-action attorneys who have already (if clumsily) objected, and, thus, there doesn't seem to be a need for my non-profit to get involved to vindicate class members' interests, because for-profit entities with the proper incentives seem to already be on the case. But if one side or another wants to offer me a suitcase of money to consult on the litigation and possible objections as a private attorney, I'll be happy to consider the possibility and try and get permission from CCAF to do so.

Not that I think Visa/Mastercard tells us a lot about AmEx. I can think of exactly one American brick & mortar merchant with more than $100,000 in annual sales that I dealt with in the last five years that wouldn't take my Visa card, and it just went out of business. The case for Visa monopoly power is a different one than that for AmEx, where enough merchants don't do business with AmEx to show that when AmEx makes a take-it-or-leave-it offer that the merchant doesn't like, AmEx doesn't get the business. And DOJ has cried wolf often enough in the antitrust context in the Clinton and Obama administrations that a complaint over a tying arrangement doesn't have a lot of credibility with me: it's at least as likely to be the result of special-interest rent-seeking as consumer protection. In any event, that the Justice Department sued AmEx sort of undercuts the idea that we need a private class action to bring AmEx to heel.

Separately, since I've been critical of the AmEx Italian Colors litigation strategy through now, let me give credit where credit is due to Mr. Kellogg's excellent oral argument--which as Professor Gilles suggests, performed as I hoped and retreated to AmEx's stronger arguments. At oral argument, AmEx disputed the claim that it had not challenged certain factual contentions in the record. I'll note that the dispute exists without attempting to resolve the quibble, since the underlying public-policy question that I'm interested in doesn't turn on how well AmEx litigated its case in the lower courts. I do note that I've certainly been the victim of court opinions that chose to assert that I had not made an argument that I made rather than reach the questions my argument raised.

It's not clear to me why Professor Gilles is upset that a possible consequence of this argument would be dismissal of certiorari as improvidently granted; that result would very much be perceived as a victory by the array of special interests opposing the freedom to contract for arbitration clauses, leaving the broad Second Circuit exception to Concepcion intact.

Does it beg "reality to assert AmEx's arbitration clause doesn't completely preclude vindication of federal antitrust claims"? The Andy Pincus's amicus brief for the Chamber and other business entities suggests numerous ways arbitration proceedings could be aggregated to spread the costs of an expert witness (though I think their reliance on the Honda small-claims-court movement is overstated). It's just that the resulting aggregate litigation would be opt-in rather than opt-out--as it was in American courts during the first several decades of the Sherman Act. And, as Justice Breyer notes, why do we assume that the streamlined and informal procedures of arbitration require the same disastrous litigation expenses of court proceedings? There's certainly nothing in the record about that.

Professor Gilles complains that my floodgates argument isn't "rooted in reality," but my contention is hardly hypothetical: we see it in the Italian Colors case itself. As Justice Breyer noted at oral argument, plaintiffs' expert report about vindication was perfunctory, and didn't even mention arbitration. Yet it was sufficient to put American Express through what must be to date seven digits of litigation expenses, and may even eventually be successful in nullifying AmEx's contractual rights. Anyone who doesn't think it won't be easy to invest a few thousand dollars in a hired-gun expert to create a factual dispute over whether an arbitration clause makes vindication of a cause of action possible hasn't seen how little adverse consequence attaches to attorneys and parties who hire experts to make fantastic claims.

Speaking of vindication, I find it fascinating how often class action advocates speak of the importance of the class action in vindicating rights but how little they speak of vindication when it comes to the class actions themselves. Friday, I was in court watching class counsel argue that it was okay to freeze small shareholders out of a securities settlement because of the administrative expense in paying their claims; in the pending Fraley v. Facebook settlement, I expect to see class counsel argue that it is fair, reasonable, and adequate to pay the class zero cash because there are too many class members who want to be compensated. I find these arguments remarkable: if the class action has such high administrative expenses that after paying for notice and attorneys' fees, the class cannot be paid at all, why are these classes being certified under Rule 23(b)(3) in the first place? Doesn't that rule require a demonstration "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy"? What makes a class action "superior" in the (b)(3) sense, much less the "vindication" sense, when class counsel takes the position that the class can't be compensated?

James R. Copland

Today, the Supreme Court will hear oral arguments in American Express v. Italian Colors, the latest in a string of recent cases in which the Court tackles arbitration and the class action device. To preview, react to, and assess the argument, we are happy to welcome Cardozo law professor Myriam Gilles alongside our own Ted Frank.

Italian Colors involves an asserted antitrust claim filed by a class of vendors against American Express, alleging that the AmEx "accept all cards" policy constitutes an illegal "tying arrangement" by linking the card company's less-desirable credit-card customers with its more desirable charge-card clientele. The Second Circuit determined that AmEx could not invoke its contractual arbitration clause because individual arbitrations would make the expert witness necessary to assert the antitrust claim cost-ineffective--in the court's view, denying the plaintiffs the ability to vindicate a federal statutory remedy. Five judges dissented from the denial of a rehearing in banc, led by Chief Judge Jacobs's blistering dissent, joined by Judges Cabranes and Livingston, which accused the panel of substituting its public-policy preferences for Supreme Court precedents on the enforceability of arbitration clauses' waiver of class-action remedies, most recently in AT&T Mobility v. Concepcion.

Professor Gilles--who teaches torts, advanced torts, class actions, and aggregate litigation--has criticized Concepcion, warning that "most class cases will not survive the impending tsunami of class action waivers" in the decision's wake. In contrast, Frank--the founder of the Center for Class Action Fairness as well as a Manhattan Institute adjunct fellow and editor of Point of Law--has argued that such concerns are "overwrought," and that post-Concepcion, "many forms of class action lawsuits will continue, and those that are replaced by individual arbitration will generally lead to greater consumer protection, not less." It is my pleasure to welcome Professor Gilles, and I trust that her discussion with Ted will prove illuminating.

Follow the discussion.

No en banc in Lane v. Facebook - PointOfLaw Forum

In Lane v. Facebook, Facebook settled its claim for $0 for the class and $3.2 million to the attorneys—and less than $6.3 million in illusory cy pres money to a charity established by Facebook. This plainly violated multiple Ninth Circuit precedents, but the district court approved the settlement, and a Ninth Circuit panel affirmed in a 2-1 decision, creating an intra-circuit split. Now the Ninth Circuit has refused to review the decision, leaving contradictory guidance for lower courts. Six judges dissented from the denial of rehearing en banc noting this "muddle"; as Public Citizen's Scott Nelson notes, all six were Republican-appointed judges, making one wonder whether the question of consumer protection in class-action settlements has become a partisan question—and one where liberal judges are on the side of the powerful against the weak. More: Fisher; Reuters; Trial Insider.

The objectors, I think, erred in failing to more explicitly ask the Ninth Circuit to consider the settlement under the Bluetooth framework. When Facebook pays the $6.5 million cy pres to itself to promote its own interests, it means that the real economic settlement is "$0 for class and $3 million for attorneys"; as Dennis v. Kellogg noted, cy pres payments that overlap with existing charitable donations are really just a shift in accounting entries rather than a class benefit. That's plain evidence of self-dealing. For this reason, I think Lane is distinguishable from the cy pres objections the Center for Class Action Fairness brings, because the Lane court did not consider the Bluetooth factors.

The question will arise again in the pending Fraley v. Facebook case in the Northern District of California. That settlement has been modified to provide payments to the class, unless there are too many claimants, in which case the whole amount goes to cy pres charities favorable to Facebook. The attorney-fee request is disproportionate, too, and the claims process oddly excludes many class members from recovery.

Vindicating vindication - PointOfLaw Featured Discussion

by Ted Frank

This might be a short debate! From the beginning, I've defended Concepcion because I believe nothing in Concepcion precluded consumers from vindicating their rights. American Express's briefing, however, has focused on a theory that they can do with an arbitration clause what it would be plainly impossible to do with any other contractual clause. AmEx couldn't have a "tying arrangement" waiver clause; it couldn't even have a procedural clause to agree to restrict the use of expert witnesses in antitrust disputes. And—theoretically at least—a monopolist would not face the market competition that would force it to pass along the savings from arbitration to consumers, making the argument for where to draw the line to force arbitration weaker in antitrust cases than other cases. The Federal Arbitration Act says that arbitration clauses are not to be disfavored, not that they get special treatment from the courts.

The Second Circuit, however, did disfavor AmEx's arbitration clause, and thus failed to correctly apply the Federal Arbitration Act. They did that by giving the record and the arbitration clause a cribbed reading to reach its preferred result. The Supreme Court should correct that kind of abuse, or judges will be able to undo the FAA with the sort of rulings that the Court criticized in Concepcion, but just classify them as "vindication" decisions rather than "unconscionability" decisions.

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