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Posts Tagged ‘class action settlement’

Strafford Publications is sponsoring a webinar on class action settlement objectors next Thursday, January 10, 2013 at 1:00 EST. This is a reprise of a webinar that I did with New Jersey Appellate Law blogger Bruce Greenberg a year or so ago.  Due to a scheduling conflict, I won’t be able to participate this time, but my partner Casie Collignon will share her valuable insights instead.  For more information and to register, click the title of the program below:

Class Action Settlement Objectors

Minimizing and Defending Against Challenges by Professional Objectors, Government Officials and Public Interest Groups

A live 90-minute CLE webinar/teleconference with interactive Q&A


Thursday, January 10, 2013 (5 days) 1:00pm-2:30pm EST, 10:00am-11:30am PST

Description

Objections by outside attorneys, government officials and public interest groups can jeopardize or delay class action settlements. Both sides can face problematic objections from “professional objectors” who may appear to be motivated solely to extract part of the fee or take over as class counsel.

Government official objections are usually aimed at coupon settlements and settlement release language intended to bind state officials. Public interest groups that file objections have varied purposes and political agendas. Coupon settlements and cy pres provisions are natural targets.

Both plaintiff and defense counsel may take advantage of several key preventative measures and tactics to ward off and protect proposed settlements from non-class counsel objectors as well as government and public interest objections.

Listen as our panel of experienced class action attorneys provides a review of trends and case law developments in settlement objections from non-class attorney objectors and government or private interest objectors. The panel will discuss best practices for plaintiff and defense counsel to minimize and overcome challenges from objectors.

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My partner, Casie Collignon, recently attended CLE International’s conference Class Actions: Plaintiff and Defense Perspectives in Chicago earlier this month, and she graciously agreed to share a summary of her notes.  Here they are for anyone who was unable to attend.  I’ll be attending the ABA’s 16th National Institute on Class Actions next week, so stay tuned for my notes from that conference as well.

On October 4th and 5th, esteemed panels of class action plaintiff and defense lawyers, along with multiple reputable class action administrators, gathered for panel discussions involving class action trends across the country from all perspectives. Below are just a few of the highlights from the conference:

  • Class Actions are not dead after DukesDukes may not have had the one-sided effect that everyone anticipated. Program Co-Director Francis Citera of Greenberg Traurig noted that class certification decisions after Dukes have been, despite popular opinion, very balanced.  In the federal courts since Dukes, there have been 32 cases certified, 33 denials of class certification, and 15 cases where certification was denied in part and granted in part.
  • Manageability remains key to certification – Even though the Dukes, Concepcion, and Comcast trends are on the tips of all class action practitioners’ tongues, manageability is still a top concern from all perspectives.  The Honorable William J.  Bauer of the Seventh Circuit opined about the importance of being able to be able to show the Court what a class action trial will actually look like.  This sentiment was echoed by plaintiff’s class action lawyer Kenneth Wexler of Wexler Wallace, who suggested that all plaintiffs’ class certification motions should be accompanied by an actual trial plan.  Defense attorney Sascha Henry of Sheppard Mullin Richter & Hampton opined  that the defense practitioner can take advantage of both the existence of a plaintiff’s trial plan or the lack of a trial plan in the manageability context.  For example, if there is no trial plan at all, the defendant can argue that the plaintiffs   have not alleged a practical way to manage the case and therefore have not met their burden of proving the manageability requirement.  Alternatively, if a plan is submitted, then the defendant has a precise manageability roadmap to attack. 
  • New settlement notice program trends – While traditional mailers and post card notices still reign supreme for claim rates, Patrick Izie of Class Action Services discussed some new media trends in class action settlements.  He opined that new media, such as QR codes, mobile device notifications, and coupon websites can have a dramatic impact on your claims rates without increased costs. And, even though the parties may not have intended their class settlements to appear on websites such as duckydeals.com, once these types of sites start listing your class action settlements, you can expect claims rates to spike.
  • Class Certification may never truly be over –   Attorney for the plaintiff in McReynolds v. Merrill Lynch, Linda Friedman of Stowell & Friedman, and class action defense lawyer Andrew Trask of McGuireWoods, both agreed that an important lesson to be learned from both the Merrill Lynch case and the recent denial of the motion to dismiss in the smaller Walmart case which is back pending in the Northern District of California, is that no ruling in the class certification context is ever truly permanent. Thus, the class action community should be on the lookout for second and even third bites at the apple with smaller proposed classes and arguments for issue class certification.

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Reuters contributor Alison Frankel authored an insightful column published August 20, 2012 entitled Foretelling the End of Money-for-Nothing Class Actions, that touches on issues similar to those raised by Brian Wolfman in two recent articles summarized in this August 15 CAB post.  In her column, Frankel comments on a recent trend, particularly in data privacy class actions, where large fee awards are requested in settlements for which no meaningful relief is provided to class members.  Oftentimes, the fee awards are justified by the value of prospective injunctive relief or by the fact of a large cash payment to charity in the form of a cy pres award, but not by any direct benefits to the class members themselves.

Frankel predicts that we have seen the “high point” in what she terms “money-for-nothing” class action settlements, pointing to a growing skepticism among judges who are asked to approve them.  While it remains to be seen if this prediction will come true, Frankel’s article, like Wolfman’s articles, should at least give pause to class action attorneys who are willing to sell out a class for personal gain: you may be getting away with this now, but at some point the courts will begin to look beyond the desire to clear their dockets and begin to question the societal value of these settlements.

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Brian Wolfman, Co-director of the Institute for Public Representation at Georgetown University Law Center, has two excellent recent posts on Public Citizen’s Consumer Law and Policy Blog that provide food for thought on the need for class action reform, and the best way to achieve reform if it is needed.

In the most recent of the two articles, Paying the Lawyer’s Expenses in Class Actions, Wolfman discusses the social importance of allowing plaintiffs’ attorneys to recover their reasonable costs incurred in successfully pursuing a class action settlement or judgment, but discusses a recent case in which two attorneys from a prominent plaintiffs’ firm were sanctioned for having claimed reimbursement for fancy dinners and first class airline tickets.  Wolfman warns about the negative impact that this type of conduct has on public perception of class actions, and makes the valuable point that even minor abuses of the system for personal gain threatens to bring scrutiny to the class action mechanism more generally, which limits access to justice that class actions may provide in meritorious cases.

In an earlier article, Important 7th Circuit Decision Rejecting Shareholder Derivative Suit, Wolfman applauds Judge Frank Easterbrook’s opinion throwing out the settlement of a shareholder derivative suit after finding that the underlying suit lacked merit and should be dismissed.  Wolfman makes the point that rather than approving a settlement that provides little or no benefit to class members on the grounds that the merits of the claims are weak, the better solution from a public policy perspective is to dismiss the case entirely.  He sums up this point concisely, “[a]n obviously meritless case should not benefit the lawyers and no one else.”

The two articles illustrate two important conceptual principles on which many consumer advocates and corporate interests may find themselves in complete agreement: First, it is the potential for abuse of class actions, and not the class action mechanism itself, that often provides the basis for legitimate criticism.  Second, courts can preserve the fairness and integrity of class action mechanism without the need for systematic reform simply by applying common sense restraints in the face of clear abuse.  I think that both of these points are correct as a matter of principle, and they are both eloquently illustrated by Wolfman’s posts.

My only question is whether the idea of preventing abuse through the application by the courts of common sense constraints, while pure in theory, is truly realistic in practice.  It only works to the extent that all judges will act as carefully and thoughtfully as the judges in the two cases highlighted above.  If courts do not dismiss all frivolous cases when a defendant files a motion to dismiss, what choice does a defendant have as a practical matter but to consider buying peace on the best terms possible, which often means paying off the lawyers at the expense of a class that the defendant doesn’t believe was harmed anyway?  And, if some courts continue let frivolous claims proceed in the hopes that the parties will settle, or turn a blind eye to small excesses in fee and cost petitions, then basic human nature says that some (but certainly not all) plaintiffs’ lawyers will continue to commit these abuses, and some (but not all) defense lawyers will play along to serve their own interests.  In the end, the cynic will question whether relying on the diligence and intellectual honesty of the judiciary and the professional integrity of the bar is a realistic path to reform.

On the other hand, for those of us who are practitioners and not policymakers, professional responsibility, appeal to reason, diligence, and intellectual honesty are the only tools we have at our disposal at maintaining the integrity of the judicial process.

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My apologies for the late notice (I’ve been on vacation), but I’ll be speaking at a Webinar on class action notice requirements tomorrow, and it’s not too late to sign up.  The panel also includes Winston & Strawn Partner Matthew Walsh and notice expert (and occasional contributor to this blog) Shannon Wheatman.  Here’s a brief description of the program: 

Attorneys’ options for delivering notice of class actions and settlements to members have increased, even as they must adhere to more stringent standards to ensure due process. Courts are more receptive to notice in forms like email, websites, postcards and ordinary course mailings.

Even as delivery methods evolve, the words themselves remain a vital consideration for attorneys. Recent F.R.C.P. Rule 23 revisions require notices be drafted in plain and simple language. Attorneys are often not meeting the plain language standard, which can potentially jeopardize judicial review.

Defendants are obliged to comply with increased notice requirements under the Class Action Fairness Act. Failure to provide notice of a class action settlement to federal and state regulators can also lead to opt-outs by class members.

Listen as our panel of experienced litigators examines the vital notice requirements affecting due process in class actions. The panel will review email and other nontraditional means of delivering notice to members, explain avoidable mistakes that compromise meeting the plain language requirement, and discuss defendants’ need to provide proper notice of settlements.

For more information and to register for the program, visit the program page on Strafford’s website.

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Editor’s Note: I don’t often use this blog as a platform to brag about my firm, but I thought a recent success by my partner, Bob Abrams, and his cross-office antitrust team in Washington, DC and Los Angeles, was noteworthy.  Abrams’ group came over to Baker Hostetler last year from Howrey, and they have been a fantastic addition to our class action practice, adding depth and expertise in the antitrust area.  Congratulations to the team on achieving a great result.

Baker Hostetler represents a certified class of dairy farmers located in 14 Southeastern States against Dairy Farmers of America, Dean Foods and a number of other defendants in an action alleging violations of Section 1 of the Sherman Act.  The lawsuit alleges that Defendants and alleged Co-Conspirators violated federal antitrust laws and as a result prices paid to dairy farmers were lower than they otherwise would have been.

After recently approving antitrust class settlements with Dean Foods and two other defendants worth $145 million and significant structural relief, the United States District Court for the Eastern District of Tennessee granted in its entirety Baker Hostetler’s motion for fees and expenses, noting “the quality of the work done by class counsel has been exceptional, not only with respect to the pleadings filed but also the oral advocacy during oral argument on various motions.” 

In commenting on the wide-scale complex litigation led by Baker Hostetler partner Bob Abrams and his team, the Court noted:

Class counsel, who have extensive experience in complex class action litigation, have efficiently and competently managed their enormous task and have vigorously and effectively, prosecuted the case on behalf of the class. They have also been opposed by equally experienced and highly competent counsel for defendants and have achieved an excellent result for their clients.

Baker Hostetler continues to litigate against non-settling defendant Dairy Farmers of America and others, and trial in the matter is set for November 6, 2012.

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Editor’s Note: The following is a post that I contributed to the Baker Hostetler Class Action Lawsuit Defense Blog.  Please be sure to visit the firm’s blog for more great class-action related content!

What to do with unclaimed settlement funds is a common problem facing class action litigants.  There are at least four methods of distributing unclaimed settlement funds:  (1) reversion of unclaimed funds back to the defendant; (2) payment to those claimants who did make claims on a pro rata basis; (3) letting the funds escheat to the state; and (4) a cy pres award to a charitable organization.  All of these methods have been the subject of criticism, but the practical reality is that something has to be done with funds from a class action settlement that are not claimed by class members.

Recently, the First Circuit Court of Appeals issued a decision that outlines the circumstances under which a court may approve a cy pres distribution of unclaimed settlement funds.  In In re: Lupron Marketing and Sales Practices Litigation, Case Nos. 10-2494, 11-1329 (1st Cir., Apr. 24, 2012), the parties had agreed to a provision that gave the trial court discretion on the distribution of any unclaimed funds from a settlement of claims alleging overcharging for the medication Lupron.  The Court had ordered that $11.4 million in unclaimed funds be distributed to a non-profit cancer center for the purpose of treating diseases for which Lupron was commonly prescribed.  Although the First Circuit expressed “unease with federal judges being put in the role of distributing cy pres funds at their discretion,” it found that the trial court had not abused its discretion.

In reaching this decision, the First Circuit adopted the “reasonable approximation” test for evaluating whether a district court’s cy pres award constitutes an abuse of discretion.  Under the “reasonable approximation” test, which had previously been applied by the Seventh, Eighth, and Ninth Circuits, the Court looks to whether the cy pres distribution is to a recipient that reasonably approximates the interests being pursued by the members of the class.  The Court listed a number of non-exclusive factors to be considered in making this determination:

(1)        the purposes underlying statutes claimed to have been violated;

(2)        the nature of the injury to the class members;

(3)        the characteristics and interests of the class members;

(4)        the geographic scope of the class;

(5)        the reasons why the settlement funds have gone unclaimed; and

(6)        the closeness of the fit between the class and the cy pres recipient.

The opinion more generally has an interesting discussion of some of the policy arguments for and against each potential alternative method of disposing of unclaimed funds.  Relying on the American Law Institute’s Principles of the Law of Aggregate Litigation, the First Circuit rejected the presumption suggested by the concurrence in Klier v. Elf Atochem North America, Inc., 658 F.3d 468 (5th Cir. 2011), that any residual funds in a class action settlement should be returned to the defendant.  The Court also cited the ALI Principles in rejecting escheat to the state as the preferred option of disposing of unclaimed settlement funds.  The opinion lists a variety of policy reasons why unclaimed funds should not be given pro-rata to the claimants who do participate, including that this method creates a windfall and leads to perverse incentives to prevent participation in a settlement by absent class members.

Like the Fifth Circuit’s decision in Klier last year, the First Circuit’s decision in In re: Lupron Marketing and Sales Practices Litigation illustrates the need for parties to be specific in the settlement agreement about the means of distributing unclaimed settlement funds.  Failure to take care in specifying how unclaimed funds are to be distributed can lead to additional unwanted and expensive litigation with objectors, and can force the court to make a public policy-driven decision that may be inconsistent with the desires of both parties to the settlement.

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David Lat posted an article on the legal industry blog Above the Law yesterday that caught my eye.  Lat’s post, entitled Benchslap of the Day: Second Circuit Rebukes Rakoffdiscusses the Second Circuit Court of Appeals’ per curium decision granting a stay pending the appeal of the lower court’s refusal to approve the settlement in SEC v. Citigroup Global Markets Inc., No. 11-5227-cv (2d Cir., Mar. 15, 2012).  Although the case is an SEC enforcement action and not a class action, I would argue that the following sentiment from the Second Circuit’s opinion applies with equal force in the class action context:

It is commonplace for settlements to include no binding admission of liability. A settlement is by definition a compromise. We know of no precedent that supports the proposition that a settlement will not be found to be fair, adequate, reasonable, or in the public interest unless liability has been conceded or proved and is embodied in the judgment. We doubt whether it lies within a court’s proper discretion to reject a settlement on the basis that liability has not been conclusively determined.

There is a corollary to this statement, which holds that a settlement does not have to fully compensate alleged victims in order to be fair and reasonable.  Too often, I hear statements by the media, members of the public, and even lawyers and judges, that are critical of a class action settlement because it does not fully compensate the members of a class or because it does not force a defendant to fully pay for the alleged harm.  As the Second Circuit panel’s opinion reminds us, a settlement is a compromise.  Except perhaps in the rare case where liability has already been proven, it is not unfair or unreasonable that a class action settlement does not provide full relief for the alleged victims of some as-yet unproven wrong.  You can bet that I will be citing this decision the next time I face that sort of argument in a class action settlement.

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Cornerstone Research has published a new study on trends in securities class action settlements concluding that the total number of securities class action settlements, the total amount of settlement dollars, and the average settlement value, fell to their lowest levels in 10 years in 2011.  Michael J. de la Merced of the New York Times authored this article summarizing the study’s key findings and analyzing the potential causes of the decrease.

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For those who can’t make the live presentation, or those who simply can’t wait until tomorrow, here are the Program Slides for tomorrow’s Strafford webinar, Class Action Settlement Objectors, Minimizing and Defending Challenges by Professional Objectors, Government Officials and Public Interest Groups.  We hope you can make it!

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