Karen Lee Torre, in the Sep. 28 Connecticut Law Tribune, hates cy pres even more than I do. See also Peggy Little at Point of Law.
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cy pres
The Sep. 21 issue of Forbes magazine, now on newsstands, has a lengthy profile by Dan Fisher of my founding of the Center for Class Action Fairness, complete with a photo of my ugly mug gracing the story.
Of interest is a new revelation in the infamous Toshiba class action:
After few consumers availed themselves of a $2 billion settlement over supposedly defective laptop computers in 2000, for example, Toshiba America handed $353 million to a Beaumont charity whose chairman was plaintiff attorney Wayne Reaud, the lawyer on the case. Six years later the charity was still sitting on $250 million and the Texas attorney general sued for breach of fiduciary duty, including paying its president, W. Frank Newton, $560,000 in 2004. Newton is the former president of the State Bar of Texas.
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The settlement discussed in this space July 17 — in which lawyers nabbed more than $25 million in fees and expenses, while fewer than 100 consumers redeemed Ford coupons worth $37,500 — was covered by the Associated Press last week, which stirred outrage in many quarters [Krauss/PoL, Greenfield, Cal Biz Lit]. As Cal Civil Justice notes, the settlement was purportedly on behalf of owners who suffered no rollover or other mishap. Instead, it sought damages for losses in the vehicle’s resale value due to adverse publicity, a nicely circular theory, since the adverse publicity was in good measure propelled by various allies of the plaintiff’s bar. Interestingly, several groups that had opposed the settlement dropped their objections after it was rejiggered to require Ford to provide a $950,000 donation to what are described as nonprofit auto-safety groups (which ones?). Plaintiff’s firm Lieff Cabraser, in a letter to AP, cited that and changes in Ford advertising as reasons why the settlement provided more benefit to the customer class than can be measured by the coupons alone.
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Those of you who remember my earlier posts about the settlement and my brief on behalf of objectors might be interested in seeing the briefs that putatively settling plaintiffs and defendants submitted in support of the settlement.
So as not to clutter Overlawyered with these posts, I have started a new weblog focusing on my class action work. You can also keep up with this work by becoming a Facebook supporter of the Center for Class Action Fairness.
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Readers may recall our discussion of the Bluetooth Headset class action settlement, which remarkably granted zero to the class while asking for substantial attorneys’ fees. I asked if anyone was interested in objecting, and the response was overwhelming. Today I’ve filed an objection on behalf of seven clients.
There were more objectors out there than I could feasibly represent. If you wanted to object, but I was unable to represent you, you can still join this objection. Follow the instructions for notifying the court and attorneys of your objection, and simply state, in addition to your name and address and phone number, that you join the objection of William J. Brennan et al., docket number 107. I won’t be your attorney, but you can have the pleasure of “voting” for the objection I wrote.
And anyone in Los Angeles July 6 who wants to watch the hearing, please join in the fun. I’ve got my plane ticket.
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“If you bought a Bluetooth headset between June 30, 2002 and February 19, 2009, the settlement of a class action lawsuit may affect your rights.” And if you want to know why your instruction manuals are overwhelmed with worthless wacky warnings, the settlement of this class action lawsuit may explain why.
We’ve covered other ridiculous failure-to-warn-of-hearing-loss consumer-fraud lawsuits, but somehow missed this one filed by the Garcia Law Firm, which was eventually consolidated with twenty-six other lawsuits against Motorola, Plantronics, and GN Netcom (which makes “Jabra” headsets) alleging that the insufficiently advertised risk of hearing loss from turning the volume up too high on a Bluetooth headset was consumer fraud meriting damages, yadda yadda, because, without a wacky warning, people might not know that loud sounds can cause hearing loss.
The settlement is remarkable: the defendants are spending approximately $1.2 million to give notice of the settlement that offers $0 to the class. That’s, right $0. There’s a total $100,000 cy pres award to four charities selected by the plaintiffs, and the manufacturers agree to provide a wacky warning that “Exposure to loud noise from any source for extended periods of time may temporarily or permanently affect your hearing.” Only lawyers like warnings like this. Such warnings make the rest of us worse off; when people see so many warnings “crying ‘wolf,’” it inures them to meaningful warnings.
In return, the trial lawyers are going to ask for up to $850,000 in fees and costs—a remarkable infinite-percentage attorneys’ fee. Nine representative plaintiffs will ask the court for a total of $12,000 in “incentive” payments.
Walter and I often get inquiries on what readers can do when they get notice of a class-action settlement that benefits lawyers to the expense of consumers and businesses. The answer all too often is nothing: asking for exclusion doesn’t prevent the lawyers from cashing in; objecting without the help of an attorney will almost always be brushed off by the court; there is no financial incentive for an attorney to get involved, unless an objector wants to pay their tremendous fees–and there is certainly not an incentive for an objector to spend thousands of dollars to hire an attorney to object to a settlement like this.
The lawsuit is plainly meritless; but it costs Motorola and the other defendants a lot of money to have Kirkland & Ellis and Arnold & Porter litigators dealing with the case. Without a loser pays rule, it’s cheaper for the defendants to pay trial lawyers protection money to go away. Because no one has an incentive to object, the settlements get rubber-stamped, and the trial lawyers go on to file the next extortionate lawsuit. And we all pay higher prices as a result: the $2 million being spent on notice and plaintiffs’ attorneys doesn’t include the hundreds of thousands (and very likely over a million) spent by these companies on defense and in-house attorneys on three years of litigation to date.
In the Grand Theft Auto case, I was a class member, so could file an objection on behalf of myself. I don’t own a Bluetooth headset, so I can’t do that here. But the fairness hearing is in Los Angeles, I’m a member of the California bar and Central District of California bar, and I wouldn’t mind having an excuse to be in California on July 6.
I’m going to float a trial balloon here (and perhaps get my friends at Kirkland mad at me). If you are a reader, and you are one of the tens of millions of members of the class (and please read the notice to ensure that you are), and you find this settlement objectionable, I may be willing to represent you pro bono to file an objection similar to the one I filed in the Grand Theft Auto case, where I argued that the settlement was evidence that the case was meritless and should be dismissed, and in no event should the attorneys get paid off. Please understand that:
- Such an objection, if fully successful in decertifying the class, will preclude you from receiving any money in the class action settlement; you would get zero financial benefit from the objection and would be doing this solely to keep these particular attorneys from stealing $850,000 from consumers, and to be some small deterrent to future trial lawyers against bringing this type of lawsuit;
- There is a non-zero chance that the trial lawyers will ask for your deposition in an attempt to intimidate or harass you, though I suspect that they wouldn’t want to spend the time or money to engage in a fruitless one-hour deposition;
- There is a chance that the judge will ignore the objection and approve the settlement anyway, though we would have the right to appeal to the Ninth Circuit.
What say you, readers? Have you bought a Bluetooth headset, are you sick of extortionate lawsuits, and are you mad enough to go on the public record to say that you don’t think these attorneys should get $850,000?
This is not an April Fools’ joke; this is not an AEI-approved project. This is me, willing to spend my own spare time and money to do some real pro bono work in the original sense of pro bono publico if there is a disgruntled class member out there. (Of course, if there is a outpouring of readers who also want to donate money to defray expenses, let me know, and I’ll set up an Amazon or Paypal donation button.)
(Update: Thanks for the overwhelming response. I’ve selected five volunteers who will be the objectors, which will be more than enough. Stay tuned to Overlawyered for updates on the case.)
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- Two topics of recent interest on the site — cremation and service monkeys — together in one post [The Urn Garden]
- Please don’t tell us an aggressive stance by music copyright holders is going to kill Pandora radio, one of the bright stars of the Internet [WaPo, more]
- “Citizens in Chains: The High Cost of Prisoner Lawsuits to California Taxpayers” [CALA, PDF]
- Navajo plaintiffs: spraying artificial snow on our sacred mountain is spiritually injurious [Volokh]
- Remember those anti-poverty non-profit groups that were going to represent the culmination of John Edwards’ life work, aside from running for you-know-what? Him neither [Silverstein, Harper's via Folo]
- Toxic tort class action in Saudi Arabia proves unsuccessful [Arab News]
- Fending off patent trolls has been expensive for high-tech Massachusetts firm Cognex [NLJ]
- Arizona law professor’s creative denials in paternity suit have furnished faculty-lounge chuckles for years [Caron/TaxProf, Jack J. Rappeport]
- New at Point of Law: big ruckus over proposal to compel accounting projections of lawsuit exposure; guestblogger Peggy Little on Connecticut vs. Countrywide, the ABA in judicial selection and more; cy pres litigation slush funds assailed as constitutionally dubious; Trial Lawyers Inc. series tackles the state of Ohio; MBIA mulls suing hedge fund that’s sniped at its stock; more on med-mal “loss of a chance”; and much more.
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I’m quoted at length in a National Law Journal story about criticisms of cy pres awards, the ostensibly charitable contributions demanded in class-action settlements that actually serve to inflate attorneys’ fee awards without requiring actual payments to actual class members. Plaintiffs’ attorneys are using the device to try to get around the requirements of the Class Action Fairness Act, which made it more difficult for attorneys to inflate the nominal value of settlements through coupons, the pre-CAFA means by which plaintiffs’ attorneys inflated settlements. (I’m actually misquoted in one sentence: I said “putative class” to the reporter, and it was written in the article as “punitive class.” Update: corrected in on-line edition.) (Amanda Bronstad, National Law Journal/law.com, Aug. 11).
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William Gallion takes the stand in the Kentucky fen-phen settlement criminal trial:
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Full proof that I don’t think all pro se representation is a bad thing: Following up our previous discussion of the GTA class action settlement and my objection: This morning, Friday, June 6, I filed this brief (which unlike the previous brief, I wrote myself), in opposition to the plaintiffs’ motions for court approval of the settlement and attorneys’ fees, in the Southern District of New York and served it upon counsel. With luck, I didn’t file the wrong brief.
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We now know how many people signed up for the Grand Theft Auto: San Andreas class action settlement out of the millions of members in the purported class.
Tier 1 (up to $35.00) (no exchange required): 416
Tier 2 (up to $17.50) (exchange required): 22
Tier 3 ($10.00) (exchange required): 131
Tier 4 ($5.00) (no exchange required): 2,050
Disc Exchange w/o cash: 57
2676 total claimants, receiving a total cash value of at most $26,505, though likely even less than that, given that the plaintiffs’ attorneys record no actual cash distribution.
The seven “representative” class members are asking for approval to receive another $24,500, or nearly half of the total cash recovery.
Of course, as we’ve discussed, none of these people had a legitimate cause of action or suffered any legally cognizable injury. But how much are the plaintiffs’ attorneys (from thirteen different offices of twelve different law firms!) asking for for this travesty of a lawsuit and settlement–one that was entirely redundant of the taxpayer-funded investigation conducted by the Los Angeles district attorney? They claim their time devoted to the litigation was worth $1,317,433, but are “generously” claiming a 28% discount for a total fees-and-costs request of $1 million.
Recognizing that this 3774% contingent fee looks fishy to the least scrutinizing of judges applying Rule 23 review, the plaintiffs have sought to inflate the appearance of accomplishment through a $870,000 cy pres award to the National PTA and ESRB. (As I’ve discussed, cy pres awards that do not directly benefit class members should not be used to justify fee awards.) They also inflate the award by claiming that the costs of notice, administration and disk replacement should be attributed to the size of the accomplished result, thus puffing matters up to over $2 million, consisting nearly entirely of empty calories for the plaintiffs they purport to be representing.
Alas, I was the only class member to docket a formal objection to this rip-off. (While it was my idea to object, I can take no credit for the objection brief, which was written by my attorney, Larry Schonbrun.) On Thursday, the plaintiffs’ attorneys filed a brief defending the settlement, with many cites to Overlawyered as ad hominem attacks on the objection. The court’s hearing is June 25.
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The name does have a clean, daisy-fresh smell to it, like a good laundry. In this case the laundering being done was of settlement money in the Kentucky fen-phen scandal. (WSJ law blog, Louisville Courier-Journal, Lexington Herald-Leader, Krauss @ PoL).
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- Joe Nocera’s recent column on the Vioxx settlement infuriated loyalists of the plaintiff’s bar, and they won’t like his new one on lead paint litigation much better [NY Times]
- Trial of Overlawyered favorite Jack Thompson over ethical charges leveled by Florida bar wraps up, but judge won’t rule right away [GamePolitics earlier, more recent posts]
- Two joggers hit by driver alongside Pacific Coast Highway will share $49 million from city of Dana Point — allegedly the bike lane was too wide — so now here come the concrete barriers [LA Times]
- Do makers of anti-PC documentary “Indoctrinate U.” owe cash to Indiana U. for infringing on its logo? [Maloney, OpinionJournal, Coleman] Update Dec. 11: settled.
- Casselberry, Fla. cop who sued parents after boy’s near-drowning in pool has now lost her job following public outcry over the incident [Orlando Sentinel; earlier]
- Lawyer who says he was defamed by commenters on DontDateHimGirl.com is back in court [Pittsburgh Post-Gazette, Ambrogi, On Point; earlier here, here, etc.]
- Outspoken blog of BU prof Dr. Michael Siegel ticks off “tobacco control” activists [Beam, Globe]
- Warning label alert: old Sesame Street episodes unsafe for children? [Stier, Wash. Times]
- Furor mounts in and out of Canada over “human rights” complaint against Maclean’s over Mark Steyn book excerpt [Wente, Globe and Mail; Eteraz, UK Guardian; Steyn, NRO; Kimball]
- Judge rejects lawsuit by animal rights group challenging UCSF animal testing [SF Chronicle]
- New at Point of Law: How do all those big cases wind up in Judge Jack Weinstein’s court, anyway?; latest Richard Epstein podcast is on antitrust, Microsoft, AT&T, etc.; abuse of the Family and Medical Leave Act; welcome new contributor Marie Gryphon; Yale Law clinic sues Yale-New Haven Hospital; bar official dismisses concerns about cy pres slush funds; breastfeeding accommodation on the job, via lawsuit?; just what New York needs, a new state law school at Binghamton; and much more.
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One of the tricks states have used in recent years to raise money without raising taxes is to sue companies for the products they manufacture, on the legal theory that the use of those products lead to increased state health care spending. (The most prominent example, obviously, is the tobacco Master Settlement Agreement.) Not surprisingly, it often turns out that this legal theory is more of a pretext by state attorney generals to get their names in the paper than it is to actually remedy the alleged harms caused by the companies.
In 2004, West Virginia settled with Purdue Pharma, the manufacturer of Oxycontin, over the increased Medicaid costs allegedly caused by addiction to the drug. The settlement was worth $10 million. Logically, then, that $10 million should have gone to the state’s Department of Health and Human Resources to defray Medicaid costs. But there was a problem. Two problems, actually. The first was that giving the money to the DHHR wouldn’t allow Darrell McGraw, the state Attorney General, to dole out money as he saw fit. The second was that the state shares its Medicaid expenses with the federal government, so giving money to the DHHR would enable the federal government to recover part of the settlement.
The first issue has caused political controversy in West Virginia, because McGraw has given out the settlement proceeds to pretty much everybody except the underfunded DHHR, including private law firms that he hired to work on the case. But even the money that the state actually kept was handed out by McGraw based on his personal whims ($500,000 to establish a state pharmacy school (!) at the University of Charleston) rather than by the state legislature, which is constitutionally tasked with making spending decisions about state money.
But the second issue may be causing legal controversy. Legalnewsline reports that the federal government is now investigating the state’s handling of the funds, trying to find out why it hasn’t been credited for its share of the Medicaid funds. But it’s not as if it’s a secret; the deputy attorney general recently testified as to their thinking:
“We have arranged a methodology that has prevented the federal government from coming back and seizing money,” Hughes said.
Or maybe not. If you’re going to try to cheat the federal government, you should probably be a little more subtle about it. No formal charges have been filed, to be sure, and the federal government may simply resolve the problem by withholding future federal payments to the state. But that certainly won’t fix the problem caused by McGraw’s behavior; it will leave a large hole in the state’s budget which could make them worse off than if he hadn’t sued Purdue in the first place.
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Massachusetts consumer protection law includes “item pricing” regulations.” A shopper who picks up an item marked $3.19, but is charged $3.59 at the checkout, has been the victim of a violation of these rules. If a state wishes to address such incidents, a practical question arises: how to enforce legal rules when they involve such trifling amounts of money per incident? Enter class action lawyers, naturally. According to the Boston Globe, Massachusetts Attorney General Thomas Reilly has farmed out the enforcement of these rules to a group of private attorneys — who are doing quite well for themselves. Cases against Home Depot and Wal-Mart have been settled; a settlement with Walgreen is pending. If the Walgreen settlement is finalized, the outcome of all this acitivity will be the payment of $3.2 million to the private attorneys, $3.9 million to “an eclectic group of charitable, consumer, and nonprofit groups,” and $425,000 to the AG’s Office. The list of favored groups includes, among others, the Roscoe Pound Institute and Public Citizen. The Globe points out that “it would be impossible to identify consumers hurt by item-pricing failures”; one of the private attorneys claims in the story that the payments to the favored groups will benefit Massachusetts residents, with most being used to “spur greater awareness of consumer rights.” Cases against other retailers (in addition to Walgreen) are pending. (Bruce Mohl, “Reilly turns to private enforcement of item pricing,” Boston Globe, June 27)
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