Litigation has been an important part of CEI since its earliest years—from our NYC rent control case in the 1980s, to our lawsuits against the lethal aspects of federal fuel economy standards several years later, to our constitutional challenges to the Big Tobacco deal (unsuccessful) and Sarbanes Oxley (successful). More recently, there was our Supreme Court Obamacare case, decided this past June (tragically unsuccessful) and our newly-revived Dodd Frank case, reinstated by a D.C. Circuit panel in July.
Today we announce CEI’s merger with the Center for Class Action Fairness (CCAF), a young nonprofit outfit that has racked up an extremely impressive track record of objecting to abusive class action settlements. These are class actions and shareholder derivative cases in which the plaintiff class wins little or nothing, while their attorneys walk away with huge fees.
CCAF was founded in 2009 by attorney and former AEI scholar Ted Frank. In the years since then, Ted and his small staff have succeeded in directly returning tens of millions of dollars to consumers and shareholders through attorney fee reductions, in winning several precedent-winning cases, and in drastically weakening the incentives for behind abusive class actions that bring no benefit to the public.
Ted got the idea for CCAF after he personally objected to the proposed settlement in a class action suit over Grand Theft Auto. The class was supposedly injured by the allegedly unexpected violence of the video game; it received all of $26,000, while its attorneys were to get a million dollars in fees—until Ted’s objection led the court to reduce the award to zero.
“Fairness hearings” in class actions are supposed to prevent such abuses, but such hearings lack the adversarial element to which judges are accustomed. After all, a hefty negotiated attorney fee award amply satisfies the class attorney, while the defendant company and the court are glad to end the case. Theoretically, class members can object, but they usually know practically nothing about the existence or basis for the outsized award.
Ted realized that, with a small group of lawyers and a systematized way of picking cases carefully, he might be able to produce some major changes just by making sure that judges were considering the right questions when looking at settlements.
To me personally, CCAF means that I no longer automatically toss the convoluted Notices of Class Action Settlement that I get in the mail. They’re now opportunities for righting some wrongs, as in Kazman v. Frontier Oil. (In this settlement of a challenge to a corporate merger, 1300 totally superfluous words were added to the proxy materials, in return for which the class attorneys were set to be paid over $600,000, or nearly $500 per word—until CCAF objected, that is.)
To CEI, our merging with CCAF means that we can take on another aspect behind the growth in overregulation. And it means that we’ll have several most excellent new legal minds to assist in our legal endeavors, while we assist them in theirs.
So while certain aspects of the legal front may look bleak (did I mention the Obamacare ruling?), overall the future looks pretty bright.