Laguna v. Coverall N.A.

Coverall N.A. settled a class action over janitorial franchises by paying a $1M attorney fee and setting up a claims-made process that would pay about $56,625 to the class. The parties justified this settlement by pointing out injunctive relief that some class members would be eligible for; if the maximum number of class members took advantage of the injunctive relief, they said, it would be worth $20 million. Wait a second, complained an objector: most class members will never take advantage of the injunctive relief because they’re not eligible for it, and the court should get that data from the defendant to find out the true value of the injunctive relief before approving a settlement that might run afoul of Bluetooth. The district court approved the settlement without engaging in the inquiry: meh, maybe the injunctive relief isn’t worth $20 million, but if it were worth $4 million, the settlement would be fair. (After all, perhaps the settling parties might exaggerate the value of injunctive relief by 400%, but what monster would ever exaggerate the value of injunctive relief by 20-fold or 100-fold?)

The objector (not represented by us) appealed. On June 3, the day after Eubank v. Pella Corp. was decided, the Ninth Circuit affirmed on abuse-of-discretion grounds, over a fervent dissent that pointed out the decision contradicted both Pampers and existing Ninth Circuit precedent. 

Now here’s where it gets interesting. The objector petitioned for en banc review. While the petition was pending, Coverall paid him $15,000 to drop his appeal (more than a quarter of the cash relief paid to the class), and the objector did so. But Ninth Circuit judges can request a vote for en banc review sua sponte, and the Ninth Circuit issued an order demanding a response to the petition. That order granted leave to amici to file briefs on the subject, and how could the Center for Class Action Fairness resist? The appellant’s en banc petition focused on conflicts with Ninth Circuit law, so our amicus focused on the circuit split created by Laguna, as well as the interesting and largely unresolved jurisdictional issues.