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.
May 11, 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.
May 3, 2018
In May 2016, CEI requested copies of all “common interest agreements” that were made with or that mentioned other state attorneys general or certain environmental activists from New York Attorney General Eric Schneiderman. The request was made under New York’s Freedom of Information Law (FOIL). The common interest agreements at issue were the organizing documents behind the AG Schneiderman’s multi-state coalition to shut down free speech about the climate science debate. More on this campaign can be found at cei.org/climatesubpoena.
AG Schneiderman’s office denied the request, claiming that the documents were exempt from disclosure. CEI challenged the denial in a lawsuit, CEI v. The Attorney General of New York, filed in New York State court on August 31, 2016. AG Schneiderman moved to dismiss the case. Among his claims was that the lawsuit was moot because a copy of the agreement, released by some other source, had become available on the Internet.
On November 22, 2016, the court ruled in favor of CEI, holding that CEI was entitled to an official copy of the agreement. It characterized AG Schneiderman’s claims as “nothing more than a parroting of statutory language, and thus a complete failure of its obligation ‘to fully explain’” its refusal to produce the document. The court also invited CEI to file for attorney fees under the New York FOIL.
When CEI submitted its attorney fee petition, the AG Schneiderman challenged it, and also took issue with the court’s FOIL ruling. On April 19, 2017, the court granted CEI’s fee petition in large part, and once again criticized AG Schneiderman’s failure to comply with New York’s FOIL.
AG Schneiderman appealed the court's fee award to the New York Supreme Court (Appellate Division, Third Department). The five-judge panel heard argument on March 27, 2018.
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 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 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.”
March 2, 2018
After nearly a year and a half without response from the agency, the Competitive Enterprise Institute is representing individuals taking the Federal Communications Commission to court over the 2016 Charter/Brighthouse/Time Warner cable merger. Arguing that the FCC has an obligation to respond to CEI’s June 2016 petition, the lawsuit requests the court to, urge the agency to respond to CEI.
The agency imposed harmful merger conditions on Charter that have nothing to do with the merger itself, which is why CEI filed a petition in 2016. CEI argued in their 2016 petition that the FCC doesn’t have the authority to put conditions in place when it comes to corporate mergers. These conditions will increase costs for consumers who will have to foot the bill for an overreaching federal agency.
In this lawsuit, CEI represents plaintiffs against the FCC in the U.S. Court of Appeals for the District of Columbia requesting a writ of mandamus.
On January 31, 2018, the D.C. Circuit ordered the FCC to respond to CEI’s petition. Briefing is complete, and we await either a ruling or a scheduling of oral argument.
February 7, 2018
The Competitive Enterprise Institute filed a lawsuit against the U.S. Department of State to force it to comply with four Freedom of Information Act (FOIA) requests related to its work on the Paris Climate Agreement.
CEI’s FOIA requests seek to gain a better understanding of why the Paris Climate Agreement was not considered a “treaty” by the Obama Administration when it was signed in 2015, and of what steps the State Department took to orchestrate that signing. The requests seek information about the State Department's use of "validators" on this issue—outside experts and groups who agreed to provide commentary in support of the State Department’s agenda.
This information is important to the American public, as the Trump administration still needs to provide a plan and timeline for withdrawing the United States from the Paris Agreement. Information on the State Department’s use of validators will give Americans a better understanding of why certain claims were made by some experts and news organizations, and why these newsmakers supported the State Department’s claim that the Paris Agreement was not a treaty.
CEI is also seeking online communications such as the encrypted app WhatsApp that State Department officials use to communicate about the agreement.
The State Department had 20 working days to provide CEI with its estimate of the number of relevant documents and what it planned to withhold from disclosure. It failed to do so, and CEI is asking the court to order the production of the documents.
Read CEI’s complaint and the original FOIA requests below.
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.
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.
November 13, 2017
CEI v. State Department seeks records under two Freedom of Information Act requests for documents relating to the December 2015 Paris climate agreement, including regarding State’s arguments about Paris’s “legal form”. Requests were sent Oct. 6 and Oct. 10, 2017, for emails of Trigg Talley, presently in Bonn at the Paris treaty talks, and Alexandra Costello, a Hill liaison who, a previous FOIA productions shows, corresponded with aides including Senate FRC Chairman Corker’s lawyer, to calm concerns after the NYT reported in August 2014 that Obama would declare Paris was not a treaty. Corker’s lawyer objected to the “disturbing contempt” for the Senate’s constitutional treaty role. CEI seeks to educate the public on State’s efforts to avoid Senate scrutiny.
October 5, 2017
The Competitive Enterprise Institute sued the Department of Justice for emails from former Attorney General Loretta Lynch’s alias email address that used the name “Elizabeth Carlisle." In yet another example of a high ranking official in the Obama administration using an alias email address, CEI sought emails from the Carlisle account which were to or from Rhode Island Senator Sheldon Whitehouse. To date the DOJ has failed to provide any response to CEI’s August, 2017, Freedom of Information Act request for these emails, so CEI is suing the department. CEI noted in its original FOIA request, a colloquy between former Attorney General Lynch and Sen. Sheldon Whitehouse at a March 2016 hearing of the Senate Committee on the Judiciary addressing Justice Department Operations. Ms. Lynch, responding to Sen. Whitehouse’s question about using the Racketeer Influenced and Corrupt Organizations Act, or RICO, against political opponents of the ‘climate’ agenda, stated:
“This matter has been discussed. We have received information about it and have referred it to the FBI to consider whether or not it meets the criteria for which we could take action on”.
This exchange rightly generated numerous headlines questioning this use of DOJ resources. This lawsuit is a next step in CEI’s investigation into Sen. Whitehouse's call for federal racketeering investigations of opponents of the political agenda pushed in the name of climate change. In previous document productions under state open records requests, CEI encountered the Senator corresponding (via his Cox.net account) with a Senate aide, a Judiciary Committee lawyer and various college faculty activists. Subsequently, Sen. Whitehouse engaged in a colloquy at a Judiciary Committee hearing with then-AG Lynch about using the DOJ for this purpose. Lynch stated indeed it was a matter her Department had considered.
October 3, 2017
In September 2017, in response to mounting information about the role of outside influence in developing the controversial Paris climate treaty, CEI submitted a Freedom of Information Act (FOIA) request for records relating to three top former officials in the Obama administration State Department. These requests included correspondence pertaining to two officials' work with two named environmentalist pressure groups which, records show, the officials had particularly close relationships in developing the pact. The officials are former Special Envoy for Climate Change Todd Stern and former "climate change legal advisor" Sue Biniaz.
The requests also sought certain emails and attachments pertaining to Mr. Stern's and Ms. Biniaz's roles in developing the Paris treaty's "legal form", including State's Circular 175 process and memo. Circular 175 establishes a procedure for determining whether a proposed international agreement should be negotiated as a treaty requiring Senate advice and consent through the Article II, Section 2 of the U.S. Constitution.
Finally, the requests sought Stern and Biniaz correspondence with former State Department Director of Policy Planning Jake Sullivan.
To date, State has provided none of the required demonstration it is processing CEI's request. With the list of stonewalls, including but not limited to litigation, which the Trump administration has yet to address, CEI filed suit Monday, October 2, 2017 to seek prompt production of records that could prove critical in the ongoing fight to get President Trump to reverse his June 1, 2017 pledge to withdraw from Paris.