Opening Brief in Gascho v. Global Fitness Holdings

So let’s inaugurate the 2014 Holiday Season with the opening brief in this appeal of an unfair settlement over gym memberships: Gascho v. Global Fitness Holdings, LLC, No. 14-3798 (6th Cir.). (You might remember this settlement from November 2013, when it was winding its way through the district court.)

Joshua Blackman, a class member, Texas citizen, law professor, former Sixth Circuit clerk, current client of CCAF, blogger, and author, objected to this settlement, which paid $2.4 million to class counsel and representatives, yet only $1.6 million to the class: a Redman ratio¹ of 60%.

Main Question: Is it fair for a settlement to so privilege attorneys with “preferential treatment” over their clients? Sixth Circuit law suggests the answer is, “No.”

Bonus Question: What is the value to the class of a settlement that pays the class $1.6 million? The answer: $8.5 million, according to the magistrate judge below, who literally split the difference between the amount that class members actually received and the $15.5 million they would have received if every single one of them–even those who hadn’t been notified of the settlement–submitted a claim. Respectfully, CCAF and Professor Blackman believe that’s a legally erroneous approach.

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¹“The ratio that is relevant to assessing the reasonableness of the attorneys’ fee that the parties agreed to is the ratio of (1) the fee to (2) the fee plus what the class members received.” Redman v. Radioshack Corp., — F.3d –, 2014 U.S. App. LEXIS 18181, *16, 2014 WL 4654477 (7th Cir. Sept. 19, 2014) (Posner, J.). The higher the ratio, the worse the settlement.