CEI Seeks Supreme Court Review of Unfair Lawyer Payout in Global Fitness Class Action Settlement
The Competitive Enterprise Institute (CEI) is asking the U.S. Supreme Court to review a challenge to a lopsided class action settlement agreement that leaves over 90 percent of the class with nothing while the lawyers get an outsized, 60 percent share of the settlement fund.
“Class counsel secured a $2.4 million payday for themselves and a small number of class representatives, while over 90 percent of the class will receive nothing,” said Ted Frank, director of CEI’s Center for Class Action Fairness. “When lawyers enrich themselves over their own clients, that is a breach of the lawyers’ fiduciary duty and an abuse of the class action system meant to protect people.”
In challenging the settlement agreement in Gascho v. Global Fitness Holdings LLC, CEI seeks to protect the interests of the individuals who have come together to form the class action suit against self-dealing class counsel and deter other settlements rigged to benefit attorneys at the expense of their clients.
The original dispute involved allegations of consumer fraud over gym membership contracts with fitness club company Global Fitness Holdings, LLC. CEI challenged the 2013 settlement agreement over provisions such as:
- A $2.4 million pay-out for the class attorneys, compared to $1.6 million spread over 600,000 class members.
- A claims process that, instead of funding direct distributions to class members, distributes a share of the settlement fund only to those class members who submit a claim. That arrangement, in effect, ensures 90 percent of the class will receive nothing.
- Special protections added by attorneys to shield their fee award from any effort by the district court to reallocate that money back to class members.
A three-judge panel from the United States Court of Appeals for the Sixth Circuit ruled in favor of the settlement in May, 2016, in a 2-1 split, after a lower court had earlier approved it. The dissent in the Sixth Circuit ruling noted the great disparity between the recovery by class counsel and the class itself, a disparity that should have “flunked a fairness inquiry,” and criticized the methodology used to credit class counsel millions of dollars for claims that were never even made.
CEI’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Founded by Ted Frank in 2009, the Center has won millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, courts, and the general public.
- View more about the case, Gascho v. Global Fitness.