Results matching “aol”

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.

CCAF objects to Easy Saver coupon settlement - PointOfLaw Forum

If a customer ordering on line at Red Envelopes or ProFlowers or some related sites wasn't unusually careful, he or she might find themselves checking boxes to join and be billed monthly for Easy Saver Rewards, a service that wouldn't have been able to obtain subscriptions through normal channels. This resulted in a class action that has settled, but the vast majority of the benefits to class members are coupons of limited application. Though the parties claim the coupons to be worth $20 face value, the reality is that they're not stackable with standard discounts the defendant uses. Thus, someone buying a $70 jewelry order from Red Envelope has a choice of a 30%-off coupon or a $20-off coupon—making the $20 coupon worse than worthless for that particular purchase. Nevertheless, the class counsel is requesting a 25% award—double their lodestar—based on the face value of the coupons, rather than the redemption rate. This artificial inflation of the settlement value swipes millions of dollars that would otherwise go to class members. Class counsel try to get away with this plain violation of the Class Action Fairness Act restrictions on coupon settlements by never using the word "coupon" in the settlement agreement, instead calling the coupons credits.

Furthermore, despite the instruction in Nachshin v. AOL that cy pres in a national class go to national charities, cy pres is instead allocated to local universities, including the alma mater of several of the attorneys involved.

The Center for Class Action Fairness has objected on behalf of a class member. The case is In re EasySaver Rewards Litig., No. 09-cv-2094 (S.D. Cal.).

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

Bluetooth ripples: Dennis v. Kellogg Co. - PointOfLaw Forum

You might recall the Rice Krispies class action settlement, Weeks v. Kellogg that the Center for Class Action Fairness successfully objected to, resulting in a modification of cy pres and a reduction of attorneys' fees.

Dennis v. Kellogg was a similar case in the Southern District of California, except over Frosted Mini-Wheats cereal, and Kellogg agreed to an even worse settlement: millions of dollars for the attorneys, less than a million dollars for the class, and cy pres to undisclosed charities indistinguishable from those Kellogg was already giving tens of millions of dollars to. CCAF didn't have a client in that case, so didn't object, and the judge rubber-stamped. But Friday, the Ninth Circuit, citing CCAF victories in Bluetooth and Nachshin v. AOL, reversed on two independent grounds.

First, the failure to identify cy pres recipients precluded appellate review: "trust me" is not an appropriate limiting principle. "To approve this settlement despite its opacity would be to abdicate our responsibility to be 'particularly vigilant' of pre-certification class action settlements." Second, even if the cy pres had been acceptable, the attorneys' fees, reflecting both a gigantic multiplier of lodestar and more than twice the class recovery, were excessive. [LA Times via Bashman; Dennis v. Kellogg (9th Cir. Jul. 13, 2012)]

CCAF has some Rule 28(j) letters to write.

In In re EasySaver Rewards Litig., No. 09-cv-2094 (S.D. Cal.), the attorneys (including Point of Law favorites Baron & Budd) and the class representatives have proposed a settlement agreement where they will collect $8.93 million, while the class will get less than $3 million in cash. The attorneys justify this because they're giving out about $40 million face value in coupons. Instead of complying with the Class Action Fairness Act's requirement that coupons be valued at redemption value, the trial lawyers claim that they're "conservatively discount[ing]" the coupons to 85% of their face value—though limited-use coupons like these more typically have a redemption rate of about 1 to 3%. (Who is going to use a $20 coupon for Internet flower delivery that can't be used on Valentine's Day or combined with any other coupon?) Defendants are barred by the settlement from taking a position on the value of the coupons. Even if one assumes a generous 10% redemption rate, the attorneys come out ahead of their putative clients. To top it all off, the settlement violates Nachshin v. AOL's restrictions on cy pres awards: local charities get the money, including an alma mater of one of the lead attorneys.

Today is the preliminary hearing on the question whether the Southern District of California judge will permit the settlement to go forward. One hopes that the judge unilaterally recognizes his duty to protect class members from violations of the Class Action Fairness Act, since the parties' briefing doesn't mention the applicable law.

And if the class does get notice, one hopes that a class member recognizes the ripoff and considers contacting a non-profit attorney willing to vindicate the class's interests. First the class is ripped off with $15/month loyalty programs, and then their own attorneys aggregate the majority of the value of the settlement for themselves.

The proposed class definition is "All persons who, between August 19, 2005 and the date of entry of the Preliminary Approval order, placed an order with a website operated by Provide Commerce, Inc. and were subsequently enrolled by Regent Group Inc. dba Encore Marketing International, Inc. in one or more of the following membership programs: EasySaver Rewards, RedEnvelope Rewards, or Preferred Buyers Pass." There are apparently about two million class members.

The "Contains Peanuts" warning on a peanut jar - PointOfLaw Forum

Stuart Mauney laughs at the "CONTAINS PEANUTS" and "Manufactured on shared equipment in a facility that processes peanuts" warnings on a package of "Hand-Cooked Virginia Peanuts" (presumably manufactured by Jumbo Virginia Peanuts, by Mauney's description). This offends Max Kennerly, who calls it a "harmless warning," and correctly notes that this particular wacky warning is mandated by the Food Allergen Labeling and Consumer Protection Act (FALCPA), rather than by in-house counsel responding to the threat of suit.

But one should note that it's not a harmless warning. As I blogged on Overlawyered in 2007,

David Rossmiller blogs:
My experiences growing up in NoDak and later working as a crime reporter may not be typical, and perhaps the people I came to know were by some measures outside, shall we say, the social mainstream, but my first thought when I saw these purportedly wacky, useless warning labels was this: "I can see someone doing that!" Personally I've seen folks do much more ridiculous things many times.
The issue is whether people doing "ridiculous things" should have a cause of action for their own failure of common sense, or whether we require manufacturers to treat all of their adult customers like infants on pain of liability.

Such overwarnings have real social costs: as numerous studies have documented, if one's personal watercraft manual says "Never use a lit match or open flame to check fuel level," one's going to be less likely to slog through the whole thing and find the warnings that aren't so obvious. In many cases, the "failure-to-warn" is really just a Trojan horse to force the deep pocket to become a social insurer. In the Vioxx litigation, Mark Lanier has accused Merck of making too many warnings, and thus "hiding" its warning of VIGOR cardiovascular data. This effectively holds a manufacturer strictly liable for failing to anticipate with perfect foresight what risks will accompany which consumers, and tailoring its warnings on that micro-level--and if anyone regrets taking the risk later, they can always complain that the warning was legally insufficient for failing to be scary enough.

The wacky warning awards are often entertaining fluff, to be sure; the marginal harm from a "Do not iron" warning on a lottery ticket is infinitesimal, and is probably there as an anti-fraud device rather than as a product-safety mechanism. But ATLA, abetted by sympathetic law professors and credulous or disingenuous journalists, has engaged in a mass campaign to make equally silly warning cases--such as the McDonald's coffee case, where Stella Liebeck complained that the warning on her cup of coffee wasn't "big enough" to adequately warn her not to spill her coffee in her lap and sit in the puddle for ninety seconds--aspirational, rather than outliers. The wacky warnings are the canaries in that coal mine.

See also. The silly warning cases aren't just hypothetical, either. As we discussed just a few days ago, a warning of "KEEP AWAY FROM FLAMES, PILOT LIGHTS, STOVES, HEATERS, ELECTRIC MOTORS, AND OTHER SOURCES OF IGNITION" was insufficient to protect Blitz USA from liquidation in bankruptcy after David Calder inserted the nozzle of a $3.99 gas can into his wood-burning stove and successfully sued Blitz for the resulting catastrophe. And 117 people lost their jobs, and an untold number of people will be injured because they will be using substitutes for gas cans that are less safe.

Now, perhaps the benefits of having a simple-to-apply regulation that successfully protects people against allergens outweighs the marginal overwarning cost of this particular "contains peanuts" warning. But it's far from clear, and the reformers who warn of the problems of overwarning caused by our jackpot-justice product-liability regime are identifying a real public-policy problem that on balance makes us less safe.

Bob Dorigo Jones has this year's finalists in the Wacky Warning contest. Of course, wacky warnings aren't just silliness created by the legal system. As I noted in 2010, wacky warnings cost consumers money, and make us less safe.

Related: Bluetooth class counsel claims wacky warning worth nearly a billion dollars.

On Tuesday, the First Circuit issued a landmark decision on cy pres, In re Lupron Marketing. Though odd litigation decisions by the objectors led to affirmance in that case, the First Circuit (quoting CCAF's victory in Nachshin v. AOL) made clear that it had "unease" with cy pres, and set a precedent generally requiring compliance with §3.07 of the ALI Principles of the Law of Aggregate Litigation. [Legal Newsline; FindLaw]

Coincidentally, the same day, the Center for Class Action Fairness filed its opening brief relating to the yet-to-be-proposed multi-million-dollar cy pres distribution in In re Baby Products, asking the Third Circuit to adopt §3.07; the district court held that the class wasn't even entitled to an opportunity to object to the as-yet-to-be-proposed recipients. Baby Products presents the additional problem of the sort of settlement where class members were artificially deterred from making claims to expand the amount available for cy pres; indeed, under the district court's order, the class counsel will walk away with over $14 million of the $35.5 million fund, and the class millions of dollars less, likely less than half of what the attorneys got. (Note that under the Brian Fitzpatrick methodology, this would count as a "33.3%" fee award, though that percentage in reality is off by at least a factor of two, and no one in the world will ever know how much the class actually receives; and under the district court's procedure, the class counsel might well be doubly compensated if the cy pres goes to a charity related to the class counsel.)

(CCAF is not affiliated with the Manhattan Institute.)

Courts still ignoring cy pres requirements - PointOfLaw Forum

Not even three weeks after Nachsin v. AOL, California federal courts continue to designate cy pres recipients entirely unrelated to the class—but perhaps related to the defendant? In re Accuray Sec. Lit. (N.D. Cal. Dec. 8, 2011) calls for residual amounts of the settlement fund to be paid to St. Jude Children's Research Hospital. Fortunately, it is unlikely there will be residual amounts of a settlement fund in a securities case.

Hans Bader on challenging class-action abuses - PointOfLaw Forum

Hans Bader, senior attorney and counsel for special projects at the Competitive Enterprise Institute, in a piece featured on CEI's blog OpenMarket.org, discussed recent challenges to class-action abuses focusing his commentary specifically on cy pres distributions.

In his discussion of Nachsin v. AOL, Inc., where the Ninth Circuit struck down cy pres to local Los Angeles charities unrelated to the class or the claims of the lawsuit, Hans cited the appeals court,

As the appeals court noted, judges have often wrongly used class-action settlements to enrich groups that have nothing to do with consumers' rights, like the ACLU: "courts have awarded cy pres distributions to myriad charities which, though no doubt pursuing virtuous goals, have little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved," such as "awarding $2 million from an antitrust class action settlement to fifteen applicants, including the San Jose Museum of Art, the American Jewish Congress, a public television station, and the Roger Baldwin Foundation of the American Civil Liberties Union of Illinois.

Ted Frank of PointofLaw and the Center for Class Action Fairness who represented the objecting consumer in the AOL settlement is also "challenging a settlement in a class-action lawsuit over mishandling of Native American trust accounts that massively enriched some favored claimants while ripping off others. CEI filed an amicus brief in support of that challenge in a case called Cobell v. Salazar."

Wherein CCAF is "justly lauded" - PointOfLaw Forum

More coverage of the AOL victory in a Washington Examiner op-ed. And Reuters Legal does a lengthy story.

AOL's attorney's comment is revealing: all they cared about was whether they were able to get rid of the frivolous claims against them in a nuisance lawsuit. But the Center cares more about establishing precedents and rules governing the long-term fairness of class actions than any individual result. That larger issue was irrelevant to AOL, so they think they have a victory, but the Center does, too. Reuters, through Professor Brian Fitzpatrick, questions whether it makes a difference: it does. Class actions are supposed to benefit the class first, rather than the attorneys. When the attorneys have carte blanche to choose cy pres recipients, they effectively get double-payment. To the extent Professor Fitzpatrick cares about defendant deterrence as a reason for class actions, he should be pleased that future defendants should not be allowed to dictate illusory cy pres that goes to their preferred charitable donee.

Interestingly, Kabateck Brown Kellner, whose attorneys had written a dishonest Daily Journal op-ed criticizing CCAF's defense of class members in cy pres settlements without revealing they were adverse to us in four cases (all four of which have now resulted in CCAF court victories), couldn't even be bothered to file a Ninth Circuit brief making a public-policy argument for their preferred tactic of abusive cy pres. Which leaves the question of why AOL spent money on its attorneys to do so.

November 23 roundup - PointOfLaw Forum

Fifth and Ninth Circuits crack down on cy pres abuse - PointOfLaw Forum

We've been at the forefront of noting the problem of abusive cy pres; originally intended as a last resort "second-best" way to benefit the class after resolution of a case where there is leftover money, too many class actions use cy pres as a first resort to exaggerate the class benefits, or to siphon some of those benefits to the class attorneys or the defendants or, shockingly, the judge. A couple of recent decisions speak out against free-flowing cy pres. In Klier v. Elf Atochem, the Fifth Circuit struck down cy pres given to local charities instead of to undercompensated class members; Alison Frankel has good coverage.

And yesterday, in a case I argued for the Center for Class Action Fairness LLC, Nachsin v. AOL, Inc., the Ninth Circuit adopted much of the reasoning of our briefs in striking down cy pres to local Los Angeles charities unrelated to the class or the claims of the lawsuit:

When selection of cy pres beneficiaries is not tethered to the nature of the lawsuit and the interests of the silent class members, the selection process may answer to the whims and self interests of the parties, their counsel, or the court. Moreover, the specter of judges and outside entities dealing in the distribution and solicitation of settlement money may create the appearance of impropriety.

Thanks to Darren McKinney for being willing to stand up to abusive class action settlements, even it meant admitting that he had an AOL account. Additional coverage at Forbes.com, Business Law Daily, and law.com.

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

Cy pres slush funds - PointOfLaw Forum

On the eve of my Ninth Circuit oral argument in the AOL cy pres case, Legal Newsline covers the cy pres controversy a bit sloppily, quoting me without interviewing me. WLF notes the recent Google Buzz settlement approval, where the slush fund for Chief Judge Ware was over $6 million. Most of the money was given to Google lobbyists, but Ware assigned $500,000 to a local university where he has affiliations. And if I knew he was going to give $500,000 to a non-profit objector to shut down their objection, I might have applied for some of that cy pres money if I could have thought of a way to do so without seeming like a hypocrite.

I'll be arguing the AOL cy pres case June 7 in Pasadena. (My record in Ninth Circuit oral arguments to date: 2-0, with one pending.) Come watch if you're interested in cy pres issues. If you're not interested in cy pres, but are interested in trademarks and pornography (and who isn't?), they're also arguing Roxbury Entertainment v. Penthouse Media ("The content of the film is primarily graphic sex scenes; however, the 'story line' to the extent there is one, concerns a young couple fleeing some unfortunate or unlawful event.") the same session.

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

Chris Sheean on the latest Google class action - PointOfLaw Forum

Christopher T. Sheean is a partner in the Chicago office of Swanson, Martin & Bell, LLP, and the chair of the firm's Class Action Practice Group, as well as co-chair of its Commercial Litigation Group. He is an active member of the Defense Research Institute's Commercial Litigation Section. Chris writes us about the latest class action against Google:

I'm honored that Skadden's John Beisner, one of the world's leading class action attorneys, Jessica Miller, and Jordan Schwartz today released a new paper on cy pres that heavily relies upon my work and the work of the Center for Class Action Fairness in the AOL case, even singling out that case as an example of abusive cy pres.

Stockholm Syndrome in the Nachsin v. AOL case - PointOfLaw Forum

The Center for Class Action Fairness filed its reply brief today in the Nachsin v. AOL appeal.

The principal-agent problem does not just affect class action plaintiffs' attorneys enriching themselves at the expense of their putative clients. I see it far too often in the case of class action defense attorneys beholden to the billable hour at the expense of their clients. I've had securities defense attorneys admit to me sotto voce that they don't want to see securities law reformed, because they're making money off the status quo. If I were a defense client, I'd worry about attorneys like that; they might prefer to lose their 12(b)(6) motion in the hopes of churning some billable hours in discovery disputes. In a notorious example, attorneys from defense firms lobbied the ABA to release a statement opposing preemption--something that would hurt their clients, though would certainly increase the demand for lawyers' services.

Lawrence McQuillan and Hovannes Abramyanof the Pacific Research Institute have been drawing on PRI's "2010 U.S. Tort Liability Index" for columns that connect the costs of the civil justice system with economic growth and jobs.

The recommendations for California are particularly apt. From "How Lawsuit Reform Could Help California Recover":

Asbestos awards in California's more plaintiff-friendly counties such as Alameda and San Francisco average $3 million more than in other counties, according to an article in the American Bar Association Journal. Every business day, on average, personal injury lawyers also file nearly five class-action lawsuits in the Golden State. That destroys jobs in California.

Entrepreneurs prefer to start, expand, or relocate businesses in states with balanced tort systems that discourage excessive litigation. These decisions matter a great deal. In 2006, job growth was 57 percent greater in the 10 states with the best tort climates than in the 10 worst states.

Business leaders remain leery of California because of its sky-high tort costs and skewed courtrooms, where business defendants lose at trial 65 percent of the time. The fear of lawsuits also causes companies to withdraw or withhold beneficial products.

Also, at AOL News, "Here's one way states can create jobs."

Tuesday, the Center for Class Action Fairness filed its opening brief appealing the approval of a class action settlement against AOL.  CCAF (which is not affiliated with the Manhattan Institute) focused its appeal on the problematic cy pres award in that case:

House rewrites maritime liability law...and more - PointOfLaw Forum

With little debate and on a voice vote, the House on Thursday passed H.R. 5503, the Securing Protections for the Injured from Limitations on Liability Act, i.e, the SPILL Act. Sponsored by Rep. John Conyers (D-MI) the bill expands liability for offshore accidents, retroactive to Deepwater Horizon accident of April 20, 2010.

In the floor debate (starting on Page H5330 of The Congressional Record), Rep. Conyers noted the presence in the House gallery of family members of those killed in the accident and argued: "We have found that the current state of law regarding these liability issues is outdated, unfair and operates against our national interests.The three key laws all date from the mid-1800s--the Death on High Seas Act, the Jones Act, and the Limitation on Liability Act." Speaker of the House Nancy Pelosi spoke on the floor to add to the emotional appeals.

The bill was considered on the suspension calendar, usually reserved for non-controversial items that require a vote of two-thirds of the House to pass. It looked the the Republicans were wary of being attacked as uncaring apologists for BP, but Rep. Lamar Smith (R-TX), the ranking member of Judiciary, and Rep. Ted Poe (R-TX), both criticized the legislation for unnecessarily rewriting other law. As we've reported previously, the bill undermines the Class Action Fairness Act, and Rep. Poe mentioned other examples of its far-reaching impact:

H.R. 5503 repeals the Limitation of Liability Act, which is a drastic fundamental change in American maritime law. This change would end the longstanding practice in the United States that all maritime claims be determined in one Federal forum.

It also ends the limitation on U.S.vessels owners' liability, a limitation which is in place in virtually every other country in the maritime industry. The loss of this limitation will handicap U.S. ship owners in the competitive world of shipping.

The minority's comments in the House report on the legislation, Rept. 111-521, summarized the objections, starting with the lack of any committee hearing on the legislation before the bill was marked up and sent to the floor for a vote:

2