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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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United States District Court Judge Janet C. Hall issued an order today rejecting the proposed settlement in Wilson v. DirectBuy, Inc., No. 3:09-CV-590 (JCH) (D. Conn. May 16, 2011) (Here is a link to the slip opinion).  The controversial settlement had been opposed by 39 attorneys general, a nonprofit consumer rights organization, and had been singled out by commentators for criticism as a model for class action abuse. 

Judge Hall’s order found fault with many aspects of the settlement, including both the proposed settlement’s procedural and substantive fairness.  Procedurally, Judge Hall was concerned with the nascent stage of the record at the time of the settlement and the lack of discovery performed before the settlement.  Among the court’s substantive concerns were that the in-kind benefits provided under the agreement were similar to a coupon settlement, that the parties had overstated the risks to class members of litigating the case to trial, and that the maximum value of the settlement was too low in comparison to the best possible recovery in order for the settlement to be within the range of reasonableness. 

The court’s opinion expressly does not rule on, although it does discuss, several of the other issues raised by objectors, including the sufficiency of the email notice given to class members and an order by the magistrate judge enjoining a similar lawsuit filed by the State of West Virginia.

It is important to note that the court’s opinion does not at all portend a win for the class at trial.  In fact, pointing to the potential for statewide class actions under individual state consumer protection laws and enforcement actions by individual state attorneys’ general:

[t]he court notes that these state consumer protection statutes may not be suitable for litigation on a nationwide class action basis. . . . However, it appears to the court that they may be well suited for statewide class actions, especially within the states with broadly written consumer protection statutes.  This attempt is already being made in California and Missouri. . . . Further, investigations by state attorneys general are under way in at least a couple states, and, in some states, consumer protection actions can be brought on behalf of consumers. . . .

Therefore, in light of these statutes and the evidence that public and private attorneys are prepared to enforce them, class members appear to have substantially stronger claims than the RICO claims alleged in this case. Because the parties seek to release these state claims via the Settlement Agreement, the strength of these claims must be accounted for in this court’s analysis of the fairness, adequacy, and reasonableness of the Agreement. . . .

Slip op. at 26 (internal citations omitted).

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Rita Robinson, who writes the Boomer Consumer blog for the Seattle Post-Intelligencer, posted an entry titled Attorneys general oppose DirectBuy’s class-action lawsuit settlement discussing an amicus brief filed by Attorneys General from 34 states, Puerto Rico, and the District of Columbia objecting to a proposed settlement in a consumer fraud class action brought against online wholesale club DirectBuy, Inc. in the U.S. District Court for the District of Connecticut.

A copy of the brief is available for download here courtesy of the Washington Attorney General’s website.   The essential theory of the case was that the defendant “represented that paid DirectBuy memberships entitle customers to purchase goods from manufacturers and suppliers at actual cost when, in fact, Defendants receive kick-backs from the suppliers and manufacturers out of the purchase price paid by DirectBuy members — resulting in members paying more than the actual cost for such goods.”  Amicus Brief at 4.   The 34-page brief raises a variety of objections to the settlement, but the primary beef is that only benefit to claimants was membership extensions or discounts on future memberships, which they argue amounts to a “coupon” settlement.

The case illustrates the practical impact of a key but often overlooked component of the Class Action Fairness Act of 2005, the requirement that “appropriate” government officials be given notice of a proposed class action settlement in federal court.   This is a topic that was the subject of a series of CAB posts in 2008, which you can access at the links below:

As noted in June 25, 2008 entry, although CAFA requires that notice be given to state and federal officials, it is rare for those officials to take any action to object to the settlement after they receive it.  One exception, as exemplified by the DirectBuy case, is a coupon settlement.  (The other thing that can get officials’ attention is where the release in a proposed settlement purports to bind state officials, such as a clause that purports to release parens patriae claims by the state.)

Although CAFA requires notice to state officials, it does not give them any power to prevent the settlement.  In fact, state officials do not even have the express power to formally object to a settlement, which is why when they do act, it is usually in the form of an amicus (friend of the court) brief.  Ultimately, approval or disapproval of the settlement is still up to the trial court.  However, it should go without saying that if you’re a party or attorney seeking approval of a class action settlement, it’s much better not to have government officials filing an amicus brief critical of your settlement.

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