“Judge Richard Posner of the Seventh Circuit Court of Appeals has unleashed another zinger at class-action attorneys, trashing a settlement over joint-pain pills that would have paid attorneys $2 million in fees, more than double what their clients got.” [Daniel Fisher, Forbes, whose own writing gets cited; opinion in Pearson v. NBTY] From the ABA Journal:
The opinion was a victory for Ted Frank of the Center for Class Action Fairness, who objected to the settlement as a class member. He told the Am Law Litigation Daily he will be citing the case in new objections to class-action settlements. So far, he says, his group has persuaded courts to wipe out $271 million in attorney fees in the 39 cases in which the center achieved some success.
“This is the best opinion out there” on class settlement issues, Frank told the Litigation Daily. “I think it will have a dramatic effect on class action settlements negotiated.”
“A federal appeals court has rejected an ‘inequitable — even scandalous’ class-action settlement, removed the lead lawyer and reinstated ‘defrocked’ lead plaintiffs who had objected to the deal.” The ruling, involving a class action against the Pella Corp., window manufacturers, is another triumph for Ted Frank, former contributor to this blog and now a prominent objector through his Center for Class Action Fairness. [ABA Journal, Chicago Daily Law Bulletin ("attorneys would receive $11 million in fees while their clients would get, at most, $8.5 million — and likely much less")]
Information hardly ever gets onto the public record about what percentage of notional claims are actually redeemed following a class action settlement, which means there’s generally no way to evaluate participants’ forecasts of robust redemption rates (these forecasts help support not only large fee requests by lawyers in the case at hand, but also the general repute of the class action mechanism as one with genuine benefits for class members — the “consumers win $30 million” sorts of headlines). One class of people who do know a lot about this question are settlement administrators, those who manage the mostly obscure private firms set up to handle payout requests as they come in. But they don’t talk to the press.
That’s why a declaration submitted last month in a false-labeling class action involving Duracell batteries is so tantalizing. … defense lawyers at Jones Day submitted a declaration from Deborah McComb, a senior consultant at Kurtzman Carson Consultants, a settlement administrator. KCC is administering the Duracell settlement, and the point of McComb’s declaration is that the rate of claims in this case is consistent with what KCC typically sees in similar settlements that have received final approval.
McComb provides some hard numbers to support the point — and this is why the declaration is significant. KCC, she said, has administered hundreds of consumer class actions in which class members received notice indirectly rather than directly through the mail. These cases “will almost always have a claims rate of less than 1 percent,” she said.
In fact, the “median claims rate for cases in the KCC analysis” was .023 percent, far lower than 1 percent. The Duracell settlement was said to be worth $49 million, including a stated $6 million to charity, but the amount headed to class members was likely going to come in below $345,000. Class actions with mail notice to class members may perform somewhat better — it’s hard to know how much so — but these revelations tend to back up reformers’ belief that where dollar amounts per claimants are not large enough to justify the time and trouble of redemption, the great majority of redistribution will go on for the benefit of lawyers and other middlemen. [Alison Frankel, Reuters; Daniel Fisher, Forbes]
Among the key reasons, argues Max Kennerly: it released third parties including amateurs who weren’t being asked to pay anything. More: NYT (quoting Ted Frank).
Who benefits from the federal law that allows the filing of class actions against retailers and others who print too much information on credit card receipts? In a St. Louis federal case called Albright v. Bi-State Development Agency, as described by Ted Frank here, it’s $742.50 at most to class members, $2,500 each to two class representatives, and $190,000 in attorneys’ fees and expenses, down from a request by the lawyers of $400,000. Is that pretty much as expected these days? Earlier on FACTA here, here, etc.
Insist that class counsel’s attorneys’ fees be handled separately from the negotiation of relief to the class — and then don’t roll over for those fees the way defendants usually do. “They [Starbucks' lawyers] contend that the $4.2 million request is ‘breathtakingly inflated,’ considering that class counsel managed to win certification of only one of 13 alleged subclasses [in a West Coast wage-hour class action].” [Alison Frankel, Reuters]
Longtime Overlawyered blogger Ted Frank just saved class members more than $25 million in a case in which his Center for Class Action Fairness had objected to the attorneys’ fee request in a settlement against Citigroup. Ted argued that the plaintiff’s lawyers were marking up to associate-level rates, at $400/hour or more, the work of contract attorneys who were being paid $50/hour or less for document review and similar tasks. Accepting the critique in part, the “order by U.S. District Judge Sidney Stein in New York cut the fee award to Kirby McInerney by $26.7 million to $70.8 million.” [Daniel Fisher/Forbes, WSJ, Point of Law and more]
In April, an extensive New York Times investigation by Sharon Lafreniere confirmed and extended what writers associated with the late Andrew Breitbart had been charging for more than two years: the so-called Pigford settlement, in which the U.S. Department of Agriculture agreed to make payments to persons charging racial bias in agriculture programs, is riddled with fraud. If you thought this might stand in the way of a payday for plaintiff’s lawyers in the case, you’re wrong: U.S. District Judge Paul Friedman has just approved a payout of $90.8 million to the lawyers, over objections. That represents the maximum (7.4 percent) of what was being asked for: “The deal set out a fee range between 4.1 percent and 7.4 percent.” [BLT]
“Wayne County, Mich. Judge Kathleen MacDonald slapped a Dearborn man with an injunction ordering him to take down his Facebook comments critical of a class-action settlement of a case against McDonald’s for selling non-halal meat.” [Daniel Fisher, Forbes; Paul Alan Levy, Public Citizen; Ted Frank, PoL] More: Blue Dog Thoughts.