Posts Tagged ‘class action settlements’

Ted Frank to argue cy pres at the Supreme Court

Congratulations to Ted Frank, profiled Oct. 15 by Adam Liptak at the New York Times for arguing his own case (Frank v. Gaos, on class action settlements) before the U.S. Supreme Court. The article does not mention one of Ted’s most salient public roles, namely co-blogging for years as my most inspired recruit at Overlawyered and at Point of Law.

Frank v. Gaos is a challenge to the cy pres elements of a privacy class action against Google [Federalist Society podcast with Ted, NLJ via CEI]. Ilya Shapiro at Cato (which has filed an amicus brief) describes some of the factual background:

Attorneys’ fees of $2.125 million were awarded out of the settlement fund, amounting to 25 percent of the fund and more than double the amount estimated based on class counsel’s actual hours worked.

But no class members other than the named plaintiffs received any money! Instead, the remainder of the settlement fund was awarded to six organizations that “promote public awareness and education, and/or…support research, development, and initiatives, related to protecting privacy on the Internet.” Three of the recipients were alma maters of class counsel.

This diversion of settlement money from the victims to causes chosen by the lawyers is referred to as cy pres. “Cy pres” means “as near as possible,” and courts have typically used the cy pres doctrine to reform the terms of a charitable trust when the stated objective of the trust is impractical or unworkable. The use of cy pres in class action settlements—particularly those that enable the defendant to control the funds—is an emerging trend that violates the due process and free speech rights of class members.

James Beck at Drug and Device Law writes that the settlement in question “features just about everything we don’t like about cy pres.” Quoting:

  • Excessive counsel fees – class counsel stands to walk away with fully 38% of the settlement as fees. 869 F.3d at 747.
  • Lack of classwide recovery – the court declared the entire settlement “non-distributable” because, even without opposition, neither the class members nor their damages could be determined. Id. at 742.
  • Excessive cy pres – nothing is more excessive than 100% ? six uninjured charities took 100% of what class counsel left behind, and the 129 million supposedly injured class members took nothing. Id. at 743.
  • Rampant conflict of interest? Three of the charities were law schools – and they all had ties to counsel in the case.
    Litigation industry self-perpetuation – cy pres recipients were expected solicit more lawsuits by “educat[ing]” the public and “publiciz[ing]” privacy issues. Id. at 746-47.

Oral argument before the Court will be held Oct. 31.

Class action roundup

  • “For instance, linalool, which is cited as a cockroach insecticide by the law firm, is found in plants like mints and scented herbs. While it’s also used in insecticides, it’s not poisonous for humans…” [Aimee Picchi, CBS News on suit claiming that LaCroix flavored water wrongly claims “all natural” status]
  • “Appeals Court Strikes $8.7M in Legal Fees Based on Coupons in Class Action Settlement” [Ted Frank objection in ProFlowers and RedEnvelope class action; Amanda Bronstad, The Recorder] “Judge: Lawyers must justify fee requests for investor suits withdrawn vs Akorn over proxy disclosures” [Ted Frank objection in investor class action against Akorn Inc.; Jonathan Bilyk, Cook County Record]
  • Study: class action lawsuits hit innovative companies the hardest [Alex Verkhivker, Chicago Booth on study by Elisabeth Kempf of Chicago Booth and Oliver Spalt of Tilburg University]
  • “It’s Possible Woman Suing Over Sugar In ONE Protein Bars Never Actually Ate One” [Mary Ann Magnell, Legal NewsLine] And it is surprising how many reports continue to indulge the notion that typical consumer class actions spring from consumer grievance as opposed to lawyers’ entrepreneurial spotting of chances [ABA Journal on slack-fill suits]
  • “DOJ Tells Court: Class Lawyers Already Got $60M in Fees. Now They Want More? [Marcia Coyle, National Law Journal on Native American farmer case] “noting that it was difficult for him to believe the few boilerplate documents entered into the record took hundreds of hours to create. ” [D.M. Herra, Cook County Record; Western Union text messages]
  • “State Street settlement fiasco has Arkansas lawmakers questioning state’s role in class actions” [John O’Brien, Legal NewsLine, earlier here, etc.]

Liability roundup

Department of Justice, state AGs intervene in class action settlements

Dusting off rarely used powers held under the Class Action Fairness Act, the U.S. Department of Justice and some state attorneys general have begun to file in opposition to class action settlements. In a case against defendants Ashburn Corporation and online discount wine retailer Wines ‘Til Sold Out (WTSO), which had already drawn objections from CEI’s Ted Frank, DoJ and AGs from 19 states succeeded in getting some settlement terms rewritten, in a deal then denied final approval by the trial judge, who saw additional problems. [Alison Frankel, Reuters; Perry Cooper, Bloomberg Law and more; Nicholas Malfitano, Legal Newsline] For Arizona Attorney General Mark Brnovich, the wine case was the ninth in which his office had intervened against a class settlement it viewed as unfair [Brnovich press release] “If your state’s AG isn’t joining the briefs of the bipartisan coalition led by Arizona defending consumers against class action abuse, you should be asking their office some tough questions.” [@tedfrank on Twitter]

Supreme Court takes Ted Frank’s Google cy pres case

The Supreme Court has agreed to review Frank v. Gaos, a case in which Ted Frank is objecting to a Google class action settlement. [Barbara Leonard, Courthouse News; Kieren McCarthy, The Register (U.K.)] From the latter piece:

Of the $8.5m that Google has agreed to pay out, not a single cent will go to the actual users whose privacy was violated. It will instead go to the lawyers that brought the case on behalf of those users ($2.125m, no less) and a group of seven organizations that the lawyers, along with Google executives, decided should become “cy pres” recipients.

Those recipients have been controversial from the moment they were named: three of them are law schools, and just so happen to be the same law schools that the lead lawyers went to; and the remaining four are organizations that Google has repeatedly given money to, in large part because they share the same values and goals as Google itself….

His position is quite clear: the use of cy pres – pronounced, fittingly, “sigh, pray” – should be a last resort, and if used, there should be no conflict of interests or even the appearance of a conflict, for those involved in drawing up the list for who gets the money.

Dubious use of cy pres has been a regular topic here at Overlawyered, even before the years when Ted blogged here:

Anthem data breach class action, cont’d — and a cy pres opportunity

“When you add up all the legal fees and costs, the lawyers would come out of the settlement with more money than the class members they represented. The payout to all the lawyers involved would be about $63 million.” More details on the Anthem data breach case discussed earlier here, and Ted Frank’s role in calling it into question [Bob Dorigo Jones]

Also, for those with access, Ted has written a piece for the Wall Street Journal on the need to rein in abuse of the cy pres doctrine in disbursing lawsuit proceeds, with a suitable vehicle on the horizon:

A bipartisan coalition of 16 state attorneys general is also urging the Supreme Court to hear Frank v. Gaos. They agree that the Ninth Circuit has created a standard that will make it far too easy for attorneys to siphon millions of dollars of consumers’ money into their own slush funds. Chief Justice John Roberts has previously expressed concern about cy pres abuses. We hope the Supreme Court will protect consumers who take part in class actions from being preyed upon by their attorneys.

Did bots fraudulently submit $400,000 in claims in a class action settlement?

“U.S. District Judge Jon Tigar asked federal prosecutors to investigate nearly 6,000 potentially bogus claims submitted in a $5.3 million settlement with app makers, including Twitter, Instagram and Yelp…. None of the [5,924] identified claims used unique claim numbers provided in email notices that were sent out to potential class members. In addition, numerous claims had different physical addresses but came from identical IP addresses.” [Ross Todd, The Recorder] Some used repetitive street addresses and unlikely or repetitive names of individuals, including at least one individual who was a legitimate member of the class but whose name was used by others to file claims. [Alison Frankel, Reuters (“The class action claim bots are coming! (Actually, they’re already here)”); ABA Journal]

CCAF contests $8.5 million Google privacy settlement

It’s a cy pres special: members of the injured class will get no part of an $8.5 million settlement Google negotiated with plaintiff’s lawyers over a data privacy lapse. “Instead, the money is to be split among the plaintiffs’ attorneys, who billed their time at $1,000 an hour, and others. The others are cy pres recipients, or organizations that are not parties in the suit: Carnegie Mellon University; World Privacy Forum; the Center for Information, Society and Policy at the Chicago-Kent College of Law; Stanford Center for Internet and Society; Harvard University’s Berkman Center; and AARP Inc.” Ted Frank’s Center for Class Action Fairness is asking the Supreme Court for a writ of certiorari after its objections were turned down by lower courts. [Dee Thompson, Legal NewsLine, earlier here and here (Beck: “cy pres abuse poster child”)]

Plus: Bank of America settlement will now yield cy pres windfall for five University of California law schools of $150,000 rather than $20 million. Easy come, easy go? [ABA Journal]

Burger workers class action makes Happy Meal for lawyers

Lawyers will get $858,000 of what is described as the nearly million-dollar settlement of a suit against McDonald’s franchisees in northeastern Pennsylvania that had used debit cards to compensate workers, leading to complaints of fees. “The eight employees named in the suit, or the lead plaintiffs, will receive $1,250 each plus the debit-card fees they paid, according to WNEP. All others — only a few hundred of the roughly 2,400 signed paperwork to collect — will get $100 plus fee reimbursement.” [AP/Wilkes Barre Times Leader]

Class action roundup