We have often reported on controversies over cy pres class action settlements, in which part or all of a settlement fund goes to charities, universities, advocacy groups, or other unrelated institutions as opposed to actual victims of the sued-over conduct. Most appeals courts have agreed that cy pres raises distinctive issues that call for judicial oversight, yet the various federal circuits have marched off in different directions as to the appropriate nature and extent of such oversight, leading to inconsistency at least, and perhaps also to forum-shopping by lawyers seeking lenient standards.
Now figures well known to many of our readers — Ted Frank of the Center for Class Action Fairness, and David Rifkin and Andrew Grossman of Baker & Hostetler — have petitioned the Supreme Court for certiorari in a case arising from a privacy suit against Facebook over its Beacon program that eventuated in a cy pres settlement. “More than $6 million of [the] money was directed to the establishment of a new Internet privacy foundation with an advisory board that includes a Facebook representative and a plaintiffs’ lawyer from the case.” [Alison Frankel; Ted Frank/PoL; CCAF] Related: the “real problem with cy pres has never been that it is too costly. The real problem is that it creates an incentive for class counsel to act against the interests of the class.” [Andrew Trask]
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]
It may be worse than before class action lawyers got involved, argues Ted Frank [Point of Law]
Ted’s successful 7th Circuit objection in June in a Sears shareholder class action (Easterbrook: “The only goal of this suit appears to be fees for the plaintiffs’ lawyers”), which raised widespread discussion, is just one in a string of wins for his Center for Class Action Fairness in recent months. In a settlement involving complaints against Classmates.com, the judge agreed with the arguments of CCAF client (and George Mason lawprof) Michael Krauss, rapped class counsel’s knuckles with a $100,000 sanction for discovery tactics that amounted to harassment (see section III-D), and ordered a better deal for class members [PoL] And in yet another noteworthy case: “The Third Circuit Court of Appeals has rejected a settlement of a class action over potentially leaky Volkswagen sunroofs that would have paid the lawyers who negotiated it $9.2 million in fees and the majority of car owners nothing.” [Daniel Fisher/Forbes, Ted at PoL, earlier]
Ted makes it big with a profile that focuses on his class-action objection work (as opposed to his stellar blogging at this site). More: Larry Ribstein.
Ted Frank’s class action settlement reform group, the Center for Class Action Fairness, has announced “multiple victories” in ongoing cases arising from settlements by Apple, Classmates.com, Toyota, HP, and gasoline retailers. Among the topics addressed in objection: exaggeration of benefits supposedly provided for the class, excessive attorney fees, and diversion of proceeds to groups unrelated to the class. Details here.