Gittin v. KCI USA and Calloway v. CashNetUSA class action settlements
In these two California class action settlements over debt-collection practices, one strongly suspects the attorneys are trying to rip off their clients: notwithstanding the clear requirement of Rule 23(h) and In re Mercury Interactive Securities Lit., notice is going to the class without any disclosure of the requested attorneys’ fees. But in Calloway v. Cash America Net of California LLC, No. 09-CV-4858, 2011 WL 1467356 (N.D. Cal. Apr. 12, 2011), the Court ruled that the fact that the attorneys’ fees were being paid separately from a common fund meant that the class would not be affected by the fee award. This is economic nonsense: the fact that a denial of a fee request will revert to the defendant instead of the plaintiff is reason to give a settlement more rather than less scrutiny. And, indeed, the settlements in these cases pay a grand total of $212,500 to class members (compared to $6,000 for the two class representatives), a tiny fraction of the statutory damages available. So how can a court say that attorneys who settle for pennies on the dollar for their clients but reserve the right for a full fee award by insisting an admission from the defendant that the plaintiffs are “prevailing parties” aren’t potentially depriving the class? Imagine a hypothetical settlement where every class member gets a penny but the attorneys ask for a multiplied lodestar and get clear sailing: by Judge Seeborg’s reasoning, class members have no complaint because the fees aren’t coming from the class’s pockets. But class members do have a complaint when attorneys settle class actions with self-serving agreements that benefit the attorneys at the expense of the class: that prevailing-party clause surely comes at a cost to class recovery.
If there’s a member of one of these two classes who would like to timely object to this potential rip-off, the Center would be happy to represent them pro bono to vindicate the protections of Rule 23(h) in all class settlements. The second case is Gittin v. KCI USA, Inc., No. C-09-5843 RS (N.D. Cal.).