Posts Tagged ‘consumer class actions’

This report from Jim Williams of Chicago’s CBS affiliate, CBS 2, illustrates a common quandry facing lawyers in consumer class actions.  The report discusses a class action settlement involving allegations that packaged chicken contained excessive amounts of water, resulting in consumers getting less chicken for their money than advertized.  The article criticizes the settlement because class members are required to provide receipts as proof that they purchased the chicken, in order to obtain a 3% refund as part of the settlement.

Williams takes issue with the practical difficulties with requiring consumers to provide receipts for low-value purchases made years in the past.  He credits a law school dean with the stating the obvious, that the receipt requirement is “unrealistic.”

What was the alternative?  Should the plaintiffs worked harder to force the defendant to pay for the alleged harm caused by its conduct, whether or not that payment would ever reach the hands of those who suffered the alleged harm?  Or should the case never have been filed in the first place?

For those who see the primary purpose of class actions as retribution or deterrance for corporate wrongdoers, the proof of purchase requirement may seem as an unnecessary barrier to justice.  But class actions are a procedural device in civil lawsuits.  In other words, they are disputes between private litigants for redress of private wrongs.  Punishment and deterrance can be accomplished through criminal and admininstrative enforcement schemes.  Moreover, in a settlement, the parties are reaching a comprimise of disputed claims.  Typically, the settlement occurs before there has been a determination of whether the defendant did anything wrong.

If compensation is the primary objective, then there are few better alternatives for meeting that objective in a case involving the manufacture of retail products.  Possible alternatives in civil settlements, such as a cy pres award to charity, may serve to punish, but they do nothing to compensate actual alleged victims.  The parties could have allowed claims through sworn statements rather than documentary proof in the form of a receipt, but the news report suggests a scenario where many purchasers would have no memory of whether they ever purchased the products at issue in the case.

This dilemma raises the question whether there is a social benefit to allowing private attorneys to pursue a class action on behalf of a class of alleged victims whose identies can never reasonably be ascertained (note that most jurisdictions have procedural requirements that should prevent certification of classes whose members are not ascertainable, but how effective those requirements are in practice is a matter of some debate).  Even assuming that the wrongdoing can be proved, does forcing a defendant to pay money to private lawyers, a charity, or a random group of self-reporting consumers serve a societal benefit that would not be achieved through other means?  The answer to that question may have a lot to do with how much one trusts government regulators, attorneys general, and prosecutors to protect consumer interests–and of course how much one trusts trial lawyers to do the same.

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If you’re interested in what “appropriate” governmental officals could do after receiving notice of a federal class action settlement, here’s a case that might interest you.  (See my earlier entries on the official notice requirements of 28 U.S.C. 1715 dated March 28 and April 9).  In Figueroa v. Sharper Image Corp., Case No. 05-21251-CIV-ALTONAGA/Bandstra (S.D. Fla., Oct. 11, 2007) (Click Here for a Copy of the Order), the court denied final approval of a coupon settlement in no small part due to an amicus brief critical of the settlement filed by Attorneys General of about 35 states and the District of Columbia.  This is one of the rare cases after the passage of CAFA in which government officials have actually taken steps to comment on the settlement after receiving notice, but it reflects both the influence that government officials may have on a class action settlement if they believe that it is necessary to take action and  means by which they might take action if they choose to do so.  The statute does not prescribe or even expressly permit any particular action to be taken by officials in response to a CAFA notice, but as the Sharper Image decision illustrates, an amicus brief filed by one or more officials in objection to a settlement is likely to strongly influence the court’s final approval decision.

Many thanks to Andy McCallin of the Colorado AG’s office for tipping me off to this decision.  Andy gave a fantastic presentation today on the role of the “appropriate” state officials under CAFA for the inaugural CLE luncheon sponsored by the CBA Class Actions subsection.

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