June 26, 2018
In this class action plaintiffs alleged violations of the Securities Exchange Act of 1934 and the Securities Act of 1933 arising from allegedly material misstatements and omissions by Brazilian majority-state-owned oil company Petrobras about the value of its assets and other financial matters, internal controls over financial reporting, and the transparency of its management and operations.
The settlement reached in the case will distribute funds to class members who purchased Petrobras securities in both domestic and foreign transactions. Foreign-transaction purchasers have no claim under U.S. securities laws, however, and, as a result, the allocation of funds to them dilutes the recovery for U.S. shareholders with valid claims.
This result was reached by counsel representing both sets of purchasers, despite their sharp conflict of interests. On behalf of class member William Thomas Haynes, CEI is objecting to the inadequate representation provided by class counsel as evidenced by this settlement process and result, as well as to the excessive fees sought by class counsel. Class counsel is seeking fees of $285 million based on nearly $100 million in overbilling in their alleged lodestar where no multiplier of the value of their time is warranted due to the low risk of the litigation or the result where the size of the recovery is largely due to the size of the class, scope of misconduct, and prior government enforcement actions.
Settlement approval is currently pending before the U.S. District Court for the Southern District of New York.
June 26, 2018
The Center became involved in the case in 2014 when it objected to a class action settlement that would have provided attorneys $4.5 million but less than $900,000 to the class. On appeal, the Seventh Circuit agreed and reversed approval of the “selfish” settlement. Thanks to the Center’s objection, the parties negotiated a new settlement providing the class with more than $3 million additional recovery. The new settlement was approved August 25, 2016.
The new settlement was opposed by three professional objectors—that is, objectors who threaten to hold up a class action settlement unless they are paid to go away. Courts and commentators have criticized professional objectors, who essentially demand blackmail from settling parties. In this case, the settling parties are believed to have paid the three appellants to drop their appeals, which they did November 7.
On July 31, 2017, CEI filed its opening brief in its appeal of the district court’s handling of the new settlement in the 7th Circuit Court of Appeals.
May 25, 2018
Last year the Center for Class Action Fairness (CCAF) and CEI won an appellate victory over the self-serving Walgreens shareholder settlement, where the Seventh Circuit labelled merger strike suits a “racket” that “must end.”
On September 18, 2017, CCAF attorney Theodore H. Frank moved to intervene and vindicate Walgreens’ directive to end such strike suits. The underlying cases concern the acquisition of Akorn, Inc. by pharmaceutical giant Fresenius Kabi AG. Plaintiffs in these suits have convinced Akorn to pay $322,500 in attorneys’ fees, although no benefit has accrued to the class—only immaterial supplemental disclosures, just as in Walgreens. The award of attorneys’ fees constitutes an end-run around Walgreens precedent and also appears to violate the Private Securities Litigation Reform Act (PLSRA) and basic principles of federal class action law.
The Akorn cases illustrate plaintiffs’ shift in tactics since CCAF’s win in Walgreens. Instead of settling merger strike suits, plaintiffs dismiss with the understanding they will apply for “mootness fees,” of hundreds of thousands of dollars per merger. This tactic has spread like wildfire in Delaware and the Federal Courts, and has enabled a dramatic uptick in merger strike suit filings. Suits against 95 merging companies were filed in the first half of 2017 compared to only 28 in the first half of 2016.
By intervening in the Akorn cases, Frank and CCAF hope to disgorge attorneys’ fees unjustly appropriated by strike suit files, and enjoin or at least discourage the filing of frivolous strike suits nationwide.
May 16, 2018
In November 2016, a Boston Globe’s Spotlight team reporter contacted Theodore H. Frank, director of CEI’s Center for Class Action Fairness (CCAF) concerning double-billing the Globe had spotted in a recent class action settlement by politically active Thornton Law Firm of Massachusetts. Thornton, along with two large plaintiffs firms, Labaton Sucharow LLP and Lieff Cabraser Heimann & Bernstein, LLP had received nearly $75 million in fees for their work on the case, and on November 10, 2017 the lead firm Labaton wrote to the court to advise it had double-counted hours from 17 different “staff attorneys” hired on a temporary basis, with charges worth over $4 million. The class attorneys asserted in the letter and still assert that the attorneys’ fee award in this matter was reasonable and should not be reduced.
May 15, 2018
This class action relates to a data breach of Anthem's computer system containing personal information of 78.8 million people, with a claims-made settlement that proposes to pay $40.95 million to class counsel, $23 million to settlement administrators, and $52 million to the class in the form of credit monitoring and cash.
On behalf of class member Adam Schulman, CEI is challenging the excessiveness of the attorneys' fee request. In particular, CEI is arguing that because this is a megafund case, any fee award should be significantly less than the 25% benchmark; the unusually sizable settlement-administration costs require reduction in the valuation of the settlement; and plaintiffs' counsel drastically overstated their lodestar with millions of dollars of work by contract attorneys billed at excessive rates and with duplication of effort.
CEI asked the court to investigate overbilling that was not disclosed to the court or the class. Judge Koh agreed and appointed a special master to investigate overbilling in the Anthem case on February 8, 2018.
On April 24, 2018, the U.S. District Court for the Northern District of California released retired Santa Clara County Superior Court Judge James Kleinberg's special master report and recommendations based on his review of the time and expenses spent litigating the Anthem case.
May 11, 2018
CEI's Center for Class Action Fairness objected to a cynical class action settlement in Campbell v. Facebook, Inc. This class action arose from Facebook's alleged practice of capturing and using URL content in its users' personal Facebook messages without their consent. The parties reached a lopsided settlement in which the plaintiffs' attorneys recover $3.9 million while the class gets injunctive relief consisting of 22 words regarding Facebook's practices added to a Facebook help page.
Class member Anna St. John objected to the unfairness of this disproportionate allocation and to the inadequacy of the class representatives who tried to foist such a settlement on the class with no notice other than postings on the law firms' websites.
The fairness hearing was held on August 9, 2017. The U.S. District Court for the Northern District of California approved the settlement on August 18, 2017.
"We had hoped the court would recognize that this settlement exemplifies the worst of lawyer-driven class actions and should not be approved under existing law,” said CCAF director Ted Frank about the decision. “The class relief is entirely illusory and yet the attorneys claim they are entitled to millions of dollars in fees."
CCAF has appealed to the Ninth Circuit.
April 30, 2018
On April 30, 2018, the U.S. Supreme Court agreed to hear the case Frank v Gaos. On appeal from the Ninth Circuit, this case originates from an unfair class action settlement in Gaos v Google, a privacy lawsuit where plaintiffs sued Google for trillions of dollars in statutory damages for alleged federal privacy violations over their search engine.
CEI's Center for Class Action Fairness (CCAF) objected to the class action settlement negotiated by the plaintiffs' lawyers and Google because it provided $0 to class members, but divided $8.5 million between the plaintiffs’ lawyers and cy pres recipients. Under the settlement, the class members who claim harm are entirely ignored, while the class attorneys collect more than $2 million and a handful of third-party organizations—called cy pres recipients—receive over $5 million.
What’s worse is in this case, the cy pres recipients include class counsel's alma maters and several organizations that Google already supports through donations. This means Google was able to get rid of a lawsuit brought by 100 million class members by making no material changes to its practices and simply donating to many of the same groups it supports anyway. This unfair settlement is a textbook example of cy pres abuse and should be struck down by the court.
April 30, 2018
In the original case, Gaos v. Google, plaintiffs sued Google seeking trillions of dollars in statutory damages for alleged federal privacy violations over their search engine. CEI's Center for Class Action Fairness objected to the class action settlement negotiated by the plaintiffs' lawyers in Gaos v. Google because it provided $0 to class members and $8.5 million to be divided between the plaintiffs’ lawyers – who received $1000/hour on this case – and cy pres recipients. Cy pres recipients included organizations that were not parties in the litigation, including class counsel's alma maters, and several organizations that Google already supports through donations.
The U.S. District Court for the Northern District of California approved the settlement in Gaos v. Google over CCAF's objection. CCAF appealed the settlement approval to the Ninth Circuit, and oral argument was heard on March 13, 2017. On August 22, 2017, the Ninth Circuit affirmed the district court’s order approving a cy pres only settlement. On September 5, 2017, CCAF requested a rehearing.
CCAF has been a pioneer of protecting consumers and shareholders from the abusive practice of cy pres, winning landmark appellate decisions on the question in 2011, 2013, 2014, and 2015. The Ninth Circuit court’s decision on this case could affect future class-action settlements, especially the use of cy pres awards.
On September 5, 2017, CCAF requested a rehearing, but the Ninth Circuit denied motions for rehearing and rehearing en banc October 5, 2017. CCAF petitioned the U.S. Supreme Court to review the case on January 3, 2018. The Court has previously expressed interest in addressing cy pres issues.
Watch the March 13 oral argument below or on YouTube.
April 23, 2018
\In this class action plaintiffs alleged that the extended overdrawn balance charges that Bank of America, N.A. charged on consumer checking accounts violated the usury provision of the National Bank Act. Under the settlement, class members--those who were charged an EOBC that was not refunded during the class period--will receive a pro rata share of the $37.5 million cash fund or, if their account was closed with a negative balance, "debt reduction" up to $35 at a collective value of $29.1 million.
Class counsel sought attorneys' fees of more than $7700 per hour of work on the case. They requested fees of $16.6 million while their claimed lodestar is only $1.4 million. The alleged lodestar itself appears to be overinflated meaning that they are asking the court to award them between 11 and 18 times the value of the time they spent working on the case. At the same time, class members recover less than 10% of the potential value of their claims. On behalf of a class member, CCAF is objecting to the windfall fees requested by class counsel.
April 17, 2018
Cannon v. Ashburn is a class action involving claims that Wines 'Til Sold Out (WTSO) sold wines with advertised "Original Prices" and percentage discounts that were deceptive because the wines were never sold at that original price, and as a result, consumers were erroneously led to believe they received a greater discount than they did.
Under the first proposed settlement, class members who submit a claim would receive "credits" in an amount between $0.20 and $2.00 that can be used to purchase wine from Wines 'Til Sold Out through its website for a period of one year.
Although the parties failed to address the Class Action Fairness Act in their court filings, this settlement contained a number of abusive features that the Act sought to stamp out:
- Class members cannot choose cash in place of a "credit," meaning they are required to do business with the defendant in order to recover;
- the credits are only available through a claims process;
- the credits expire in one year; and
- a maximum of $2.00 in credits can be used toward each purchase.
Claims and coupon redemption rates in low-value consumer settlements such as this are notoriously low. While class members would receive nominal benefits under the settlement, class counsel negotiated $1.7 million in fees and expenses, unopposed by Wines 'Til Sold Out, without regard to the actual recovery by class members. The result was a settlement that impermissibly allocated the bulk of the settlement benefit to the class attorneys rather than class members.
April 10, 2018
Class member and CCAF attorney Anna St. John objected to settlement approval, class certification, and the request for attorneys' fees in Ma v. Harmless Harvest, Inc. The legal claim involved whether Harmless Harvest’s labeling representations that their products were “100% organic” and “raw” were accurate. The proposed settlement provides class members with worthless injunctive relief, simply codifying labeling changes that Harmless Harvest voluntarily made in 2015. At the same time, and in a clear signal of who the settlement is structured to benefit, the class attorneys and named representatives are seeking combined payments of $575,000.
Following a fairness hearing, the district court issued an order denying approval of the settlement and attorneys' fee award. The court agreed with CEI that the settlement is not fair, reasonable, and adequate, and cited the Subway Footlong case CEI previously won on the same merits.
CEI attorney Adam Schulman said, “The district court properly recognized that obligating the defendant to do what it was already doing benefits no one. When plaintiffs' attorneys seek a half-million-dollar payday, they must first confer a reciprocal benefit upon the absent class members. The court also found something even worse, that to the detriment of the class, class counsel was 'less than frank' about the benefit to the class and showed a 'willingness to avoid scrutiny.”
April 2, 2018
In this antitrust price-fixing case, the settlement includes a nationwide class indirect purchasers of lithium ion batteries in a variety of electronic equipment. Only about 26 states provide a cause of action for such indirect purchasers, however, and under federal law such purchasers do not have a cause of action.
As a result, a nationwide class of indirect purchasers unfairly disadvantages--and dilutes the recovery of--those indirect purchasers who have a legal cause of action in violation of Rule 23. One of the disadvantaged class members, Frank Bednarz, objected to the class certification and settlement fairness.
The district court approved the settlement on October 27, 2017.
“The class certification here not only ran roughshod over fundamental differences in state law, but contradicted Supreme Court and Ninth Circuit precedent, and the district court's own analysis,” said CEI Director of Litigation Ted Frank. “This is no mere technicality, but one that cost class members tens of millions of dollars.”
Bednarz has appealed to the U.S. Court of Appeals to the Ninth Circuit.
March 29, 2018
In March 2012, CEI’s Center for Class Action Fairness objected to the proposed settlement in a class action lawsuit against Wal-Mart and Netflix over the price of online DVD rentals.
Later that month, the district court approved the settlement, agreeing with the settling parties that a coupon isn't a coupon if they call it a "gift card" instead, and that the restrictions on coupon settlements in the Class Action Fairness Act (CAFA) didn't apply.
CCAF disagreed with the district court and believed the ruling was contrary to Seventh Circuit precedent. CCAF appealed this decision to the Ninth Circuit. The Ninth Circuit affirmed.
On March 13, 2015, Ted Frank petitioned for a rehearing en banc of the decision but that was denied on June 18, 2015. The Ninth Circuit issued its final mandate on June 29, 2015.
In June 2016, CCAF objected to the cy pres distribution of the settlement funds remaining due to uncashed and voided checks, undeliverable e-gift cards, and unused reserve funds. On August 31, 2016, the U.S. District Court for the Northern District of California issued its order. As a result of CCAF’s objection, more than $2.3 million was distributed to class members instead of unrelated organizations such as the Geena Davis Institute on Gender in Media. The parties had originally requested that these dollars be awarded to organizations unrelated to the litigation, a practice known as cy pres.
“One of the leading ways class action attorneys benefit themselves at the expense of the class is through cy pres settlements,” said CCAF director Ted Frank. “It exacerbates existing conflicts of interest in class action settlements and gives attorneys an incentive to breach their fiduciary duties to the class.”
January 30, 2018
In Leung et al. v. XPO Logistics, Inc., CEI is objecting to a class action settlement fee request in a case involving an IKEA contractor’s alleged violation of the Telephone Consumer Protection Act (TCPA). The TCPA is a law that protects consumers from telephone solicitations, and the IKEA contractor allegedly violated the law by calling customer cell phones for them to take an automated survey about recent furniture delivery by the contractor.
CEI argues the plaintiffs’ attorneys are attempting to overpay themselves by taking over one-third of the net settlement fund, or $2.33 million, which is substantially more than the median fee award in similar cases. The settlement proposes to distribute checks from a $7 million fund—less attorneys’ fees and administration costs—to the fraction of 313,000 class members who file claims. In TCPA class actions settlements, the median fee recovery for lawyers is 25 percent of the net recovery. Applying a more appropriate 25 percent fee structure in this case would return over $600,000 to the class members.
Plaintiffs’ attorneys also failed to document the time they spent on the case. Based on past TCPA cases, it’s likely a $2.33 million fee award is five or ten times the base amount of hourly fees (called a “lodestar”) that the attorneys would normally receive. Therefore, even a 25% award likely overcompensates attorneys.
December 4, 2017
The Center for Class Action Fairness (CCAF) at CEI filed an appeal brief in the Transpacific Passenger Air Transportation Antitrust Litigation on November 4, 2015, in the U.S. Court of Appeals for the Ninth Circuit.
The underlying class action litigation alleged a conspiracy of numerous international air carrier defendants to fix prices in violation of the Sherman Act and sought recovery for passengers who had purchased transpacific air travel from the defendants and their alleged co-conspirators. Eight of the thirteen defendants have settled. This appeal relates to the district court’s approval of five of these settlements.
The case settlement contained excessive attorney fee requests of over $16 million and improper settlement class certification. Though class members had claims of wildly differing values, there was only one settlement class that treated all class members the same, leaving a settlement that was not proportional to the harm. The district court approved the settlements, but reduced class counsel's request for attorneys' fees and expenses by over $5.1 million, for the benefit of the class.
CCAF argues that the settlements inappropriately treat all class members identically despite facing materially different affirmative defenses, creating intraclass conflicts that preclude a finding of adequate representation.
Oral argument before the Ninth Circuit was held on April 21, 2017. The court ruled against CCAF's objection on June 26, 2017. CCAF subsequently filed for en banc review before the Ninth Circuit on July 10, 2017.
On August 10, 2017 the court denied CCAF’s request for en banc review.
On October 31, 2017, CEI filed a petition for writ of certiorari before the U.S. Supreme Court.
On December 4, 2017 the U.S. Supreme Court denied CEI's cert petition.
November 20, 2017
On May 2, 2017, CEI's Center for Class Action Fairness (CCAF) filed an objection on behalf of a class member to the proposed settlement in Kumar v. Salov North America Corp. This is a settlement over claims marketers of Filippo Berio olive oil deceived consumers by including the label “Imported from Italy” on their olive oil bottles, when many of the olives used to make the olive oil came from Greece, Tunisia, and elsewhere.
The settlement provides up to $5, without proof of purchase, to any consumer who is willing to attest that they relied on the product's “Imported from Italy” labeling when purchasing it. This limitation applies even though the class includes everyone who made a purchase, regardless of whether they relied on the “Imported from Italy” labeling. The settlement also enjoins Defendant from using the phrase “Imported from Italy” on its products - which matches what the company has been doing since 2015. The settlement provides attorneys’ fees and expenses of $982,500, which is four times the amount of cash they “won” for class members—a mere $210,985.
CCAF is challenging class certification, settlement fairness, and attorneys’ fees in this case. The fairness hearing was held on May 30, 2017, in Oakland, California. On July 7, 2017, the district court granted final approval of the settlement, even though more than 80 percent of the settlement fund would go to class counsel rather than the class members.
CCAF has appealed this decision to the Ninth Circuit and its opening brief was filed on November 20, 2017.
Read more about the Center for Class Action Fairness here.
October 26, 2017
On behalf of Jonathan M. Crist, CEI’s Center for Class Action Fairness objected to plaintiff's renewed motion for attorneys' fees and expenses in a shareholder suit arising out of Verizon’s acquisition of Vodafone’s interest in Verizon Wireless.
As in the overwhelming majority of strike suits, the settlement in Gordon v. Verizon did not provide any monetary relief to shareholders. Instead, it provided immaterial supplemental disclosures and corporate governance change. For example, among the four disclosures class counsel identified as the “greatest hits” was one that simply put previously provided information into tabular form. In the renewed motion, plaintiff's attorneys sought $2 million in fees and expenses for their role in recovering this insignificant relief for the shareholder class.
The motion was filed on remand from the Appellate Division: The New York Supreme Court initially denied approval of the settlement. While, on appeal, the Appellate Division found there were minimal settlement benefits sufficient to approve the settlement and remanded for a determination of fees, the Appellate Division did not find that the benefit warranted the excessive $2 million sought by the attorneys and instead noted that fees should be commensurate with the benefit achieved, with minimal benefit resulting in minimal fees.
This objection is in a similar vein as CEI's victory in Walgreen, as we seek to expand to other jurisdictions the steps taken by the Seventh Circuit and Delaware to limit rent-seeking by plaintiffs' lawyers in deal litigation.
At a hearing on October 26, 2017, the court awarded a reduced amount of $1.5 million in fees and expenses.
Read more about CEI’s Center for Class Action Fairness here.
September 15, 2017
On November 12, 2015, the Center for Class Action Fairness (CCAF) at CEI filed an objection in the U.S. District Court for the Northern District of Ohio to class action settlements reached in a case alleging that polyurethane foam manufacturers and suppliers had violated antitrust laws.
The settlements were entered with nine defendants in the indirect purchaser class and created a settlement fund of $151,250,000. Upon entering the settlements, class counsel filed a fee request seeking 30% of the settlement fund, plus an additional $5.1 million in expenses. CCAF objected that the requested fee was excessive and would provide a windfall to the plaintiffs’ attorneys at the expense of class members. Due to economies of scale, “mega-fund” recoveries tend to be the result of class size rather than attorney skill and, thus, the percentage awarded should be in a lower range. CCAF further objected that the fee request overstated the value of the time that plaintiffs’ attorneys and their staff devoted to the case and should be reduced to reflect market rates. As a consequence, and to deter plaintiffs’ attorneys from submitting such overinflated fee requests in the future, CCAF argued that the fee award should be reduced further.
Under the settlement agreements, $10 million is not due for full payment until mid-2017, and another $9.25 million is contingent upon two of the defendants’ recovery in separate litigations against a third party. CCAF objected to any fee award that was based on those amounts before they were available for disbursement to the class. CCAF additionally objected to any allocation among the firms requesting fees that was not undertaken by the Court, in accordance with the federal rules, and, further, that the notice provided to class members was defective in that it failed to disclose information material to a class member’s decision to remain in the class or opt-out.
UPDATE: January 28, 2016:
September 15, 2017
CEI’s Center for Class Action Fairness objected to an unfair settlement deal resulting from the much-publicized 2013 data breach at retail giant Target Corporation. Forty-one million consumers had credit card information stolen and 60 million consumers had personal information stolen as a result of the data breach. But the subsequent settlement deal helped class attorneys far more than class members. The terms of the deal provided a $10 million fund to class members that, in reality, is unlikely to be exhausted, gave class counsel a disproportionate $6.75 million fee, and left a large subclass of class members with zero recovery.
Representing class member Leif Olson, CEI attorneys argued that the class action could not be certified because it froze out millions of class members, releasing their claims for no recovery, without separate representation. CEI further objected to the excessive fee request and the inclusion of a "kicker" clause, whereby any decrease in the fee request would revert to the defendant (Target).
Nonetheless, the United States District Court for the District Of Minnesota approved the settlement deal, and in 2016, CEI appealed the case to the United States Court of Appeals for the Eighth Circuit. The appeal challenged both the district court’s error that class certification could not be revisited once granted and the violation of a federal rule requiring attorneys who represent a class to fairly and adequately protect the interests of the class.
In February, 2017, CEI received an important ruling on its appeal. The Eighth Circuit remanded the case back to the district court, finding that the lower court abandoned its ongoing duty to ensure class certification was proper when the court had failed to consider CEI’s objections. Additionally, the judge reversed the lower court’s ruling for an unlawful appeal bond, resulting in $46,872 being returned to CEI.
September 6, 2017
CEI’s Center for Class Action Fairness appealed the approval of several settlements in multi-district litigation concerning the sale of motor fuel, which has been ongoing for many years. In 2006-07, plaintiffs sued retailers for selling gasoline by volume, alleging that such sales failed to account for fuel expansion and contraction with temperature and constitute consumer fraud for failure to disclose the laws of physics. The cases were consolidated in the U.S. District Court for the District of Kansas.
Collectively, the settlements provide plaintiffs’ attorneys with nearly $19 million in attorneys’ fees, while absent class members receive nothing.
Costco was the first defendant to settle, offering zero dollars to the class, but millions of dollars in attorneys’ fees, and injunctive relief—a promise to install automatic temperature correction (ATC) pumps in certain states if it is legal. Currently, no state expressly allows fuel to be sold by anything except volume, and sales using ATC would actually harm consumers. A cost benefit analysis by the California Energy Commission concluded in 2009 that non-volumetric sales would result in a “negative or a net cost to society under all the options examined.” For these reasons, CEI successfully objected on behalf of class members to the Costco settlement in 2010, but the parties secured approval of a revised settlement in 2013. The district court would not decide fees until 2016.