Recently, I have commented on two types of objectors in class action settlements. This March 31 entry discusses the problem of so-called “professional” objectors. And this April 12 entry addresses objections raised by government officials. There is at least one other type of organized objectors to class action settlements: public interest organizations. (I use the term “organized objectors” to distinguish these types of objections from objections that may be sent in by individual class members who are not represented by separate counsel). Mechanically, objections by public interest organizations may be accomplished in a manner similar to that used by professional objectors: through the representation of one or more settlement class members by lawyers employed by or cooperating with the organization. However, unlike with professional objectors lawyers, the representation is usually pro bono. Alternatively. as with objections by government officials, public interest objections to a settlement may be accomplished through amicus briefs to the court.
There are a variety of public interest organizations that file objections to proposed class action settlements. These organizations have widely differing purposes and political agendas. For example, the Center for Class Action Fairness (CCAF) was founded by attorney and leading tort and class action reform advocate (and contributor to the popular law blog, Overlawyered), Ted Frank. CCAF is a nonprofit organization formed for the stated purpose of providing “pro bono representation to consumers and shareholders aggrieved by class action attorneys who negotiate settlements that benefit themselves at the expense of their putative clients.” In this April 18, 2011 press release, Frank summarizes various cases in which his organization successfully objected to class action settlements that “will result in class members receiving over $5 million more than what their class attorneys were willing to negotiate.”
At the other end of the political spectrum (at least from the perspective of tort reform) from CCAF, is Public Justice, an organization founded by leading trial lawyers that describes itself as “America’s public interest law firm.” A stated objective of Public Justice is to fight interests aimed at “closing the courthouse doors so victims can’t hold the powerful accountable,” including fighting “class action bans and abuses.” Like CCAF, Public Justice has successfully objected to or intervened in a variety of class action settlements. Some of its work in this area is summarized in the article “Fighting Class Action Abuse,” which is available on its website.
A third organization, Public Citizen, is a consumer advocacy group that has the stated goal of preserving the right of consumers to seek relief through class actions. However, according to its website, “[a]t the same time, we recognize that on occasion class action settlements may not be in the interest of all class members, and in such cases we have often represented class members in objecting to and seeking to improve the terms of such settlements.”
Although the political motivations of these organizations might be different, there are several key similarities between these groups. First, their interest in objecting to a settlement is based on a sincerely held belief that their involvement is necessary to protect the public interest. This means that they are not motivated by profit, but rather by a conviction that the settlement (or the system itself) is unfair. Like government objectors, their goal is to gain disapproval of or modification to the settlement, not to extort a portion of the fee.
Second, regardless of the ultimate motivating philosophy, even public interest groups with drastically different political agendas can find the same kinds of settlements or settlement terms objectionable. Not surprisingly, many of their objections are the same as those that a government official might make. Coupon settlements are a natural target. A conservative group formed to combat class action abuse might object to a coupon settlement because the fact that a coupon settlement was the best the plaintiffs’ could do for the putative class reflects that he case was a frivolous, lawyer-driven case that had no societal value in the first place. A consumer advocacy group might object to the same settlement because of a perception that it is unfair for a defendant to profit from its own wrongdoing. Where both groups might agree is that the court should not approve a settlement that includes little or no benefit to class members and a large payout to the plaintiffs’ lawyers.
One area in which right-leaning and left-leaning public interest groups may diverge is in their view of cy pres provisions in class action settlements, that is, distribution of any unclaimed funds to a charity. Class action reform advocates object to cy pres distributions because they don’t benefit the members of the class, and are sometimes simply a tool used by trial lawyers to raise funds for their own pet causes. Trial lawyers in turn, argue that cy pres is the best way to deal with unclaimed funds, because the alternative would be to let the money revert back to the defendant, which would allow the defendant to profit from its wrongdoing. (Although I want to stay neutral, as a defense lawyer, I am compelled to point out that the fallacy in this reasoning is the class action settlement context, the defendant hasn’t been found to have done anything wrong. Rather it has voluntarily agreed to provide some compensation in exchange for peace from further litigation).
As with objections by government actors, objections to class action settlements by public interest groups are rare, but they present a significant risk to approval of a settlement if they do occur. There are a variety of steps that counsel can make to avoid these types of objections, including:
- Ensure that the settlement notice is in plain English, understandable, and contains all information required by Rule 23(c)(2)(B). The Federal Judicial Center guidelines for plain English notice provide an excellent template, but the template obviously must be tailored to each case in order to provide effective notice. Hiring a qualified notice expert (not simply a settlement administrator) to help draft the notice and testify about the fairness of the notice plan can protect against possible objections to the fairness of the notice.
- Make sure that the notice is delivered in a way that makes it truly the best notice practicable. Intentionally using a method of notice that is unlikely to be read and appreciated by class members, in the hopes of reducing the response rate, is folly. If you don’t do everything reasonable possible to give class members adequate notice of a settlement, you risk having the entire settlement disapproved after you have incurred the significant notice costs. In many cases, direct mail is still considered the best way of distributing notice. Technology has made direct mail possible even in cases where the last known addresses of class members are a few years old. Old addresses can be updated through the post office change of address system, as well as through various private databases. Again, having a qualified notice expert can help. If it is truly impossible to reach a sufficient number of class members through direct mail, then a published notice can be used as a supplement, but it is better to think of published notice as a last resort.
- Avoid settlement terms or arguments that exaggerate the true value of a benefit to be given to the class. A settlement does not have to give class members 100% of the claimed damages in order to be fair. It is, after all, the result of a compromise. However, exaggerating the value of benefits, especially non-monetary benefits, is one of the surest ways to draw objections and skepticism from the Court.
- Avoid unnecessary publicity. Unnecessary publicity (by either the plaintiffs or the defendant) raises the risk that public interest groups will scrutinize it. This is another reason to use direct mail when possible.
- If the settlement does include a cy pres component, try to find an organization that is likely to benefit some or all of the class members directly. Distribution to any organization in which one of the lawyers has a personal affiliation or stake will raise a red flag. Donations to a victim’s assistance fund, for example, are less likely to receive scrutiny than a donation to a lawyer’s law school.
- In any settlement that may include unclaimed funds (whether those funds revert to the defendant, are distributed pro rata to other class members, or are distributed to a charity), above all else, do whatever you can to ensure that class members have a fair opportunity to participate in the settlement. You often can’t force class members to claim benefits, but you do have the power to make sure that there are no artificial barriers to participation.