L-3 Communications EOTech sells a variety of holographic weapons sights to consumers and the U.S. military. But they had defects in certain weather conditions; the government complained, and EOTech paid a $25.6 million fine under the False Claims Act in November 2015 for their Department of Defense sales. Nine days later, class-action lawyers sued: why investigate new wrongdoing when you can just rent-seek and piggyback on what taxpayer-funded lawyers have already discovered? That case is Foster v. L-3 Communications EOTech, No. 6:15-CV-03519-BCW (W.D. Mo.).
EOTech has been offering well-publicized refunds for scopes since November 2015 in the wake of the bad publicity from the government lawsuit. This left the lawyers very little to sue over, because consumers who wanted refunds for the alleged defects haven’t actually been injured. Nevertheless, the litigation continued, and now a settlement has been constructed in which the lawyers are the main beneficiaries to the tune of $10 million, likely over $1000/hour—though we don’t know for sure, because the attorneys are violating the law by failing to give the class notice of their fee application until after the objection deadline.
Consumers can get coupons if they make a claim, even if they’ve already received a refund. But if all 200,000 class members made claims for the $22.50 coupons for other EOTech products, that would only add up to $4.5 million in coupons—and given that there has been no individualized notice to any owners who haven’t already received refunds, it’s doubtful that even 10% of the class will redeem the coupons, even for the $100 coupons that class members who refuse refunds are entitled to. (The parties no doubt are trying to get around federal restrictions on coupon settlements by calling the coupons “vouchers,” but come on!)
The attorneys would almost certainly receive more than 2000% of what the class redeems in settlement coupons. The attorneys will likely rationalize their windfall by taking credit for the full cash value of the refunds—though these have been available since January and, economically, the refunds are simply an undoing of the original transaction with no value, since the consumer is effectively selling the scope back to the manufacturer at retail price. Since every dollar going to attorneys is a dollar that won’t be going to the class, that’s an egregious abuse of the class-action system—though not as bad as a $0 settlement in another case from one of the Foster firms, Faruqi & Faruqi. We’re arguing that one in the Fifth Circuit on June 5.
We’ve successfully represented individuals pro bono in the past who filed objections to similarly abusive settlements, but only a class member offended by attorneys ripping them off may object.
With little notice for the settlement, the parties are likely hoping no one objects and points this out to the court. One hopes a class member comes forward to object to the settlement and vindicate the class’s rights, but the May 23 deadline is coming up quickly.
We’ve previously discussed coupon settlements with the New York Times, and have a challenge to a particularly silly coupon settlement pending in the Ninth Circuit.