aGameOfThrones
08-05-2013, 12:45 AM
The Sixth Circuit Court of Appeals rejected a class-action settlement that would have paid the lawyers who negotiated it $2.73 million, absolved Procter & Gamble PG -0.43% of any future liability, and handed $1,000 each to the named plaintiffs who were supposed to safeguard the interests of the thousands of consumers who supposedly were the reason for the lawsuit in the first place. There was only one problem with this deal, the appeals court said: The lawyers hadn’t done anything for their clients.
It was another victory for Center for Class Action Fairness, the group founded by lawyer Ted Frank that intervenes in class action where it thinks the lawyers are getting a better deal than their clients. Last week, a judge in New York slashed $23 million from a proposed fee award in a Citigroup settlement after hearing evidence lawyers there sought to mark up $32-an-hour contract attorneys by 20-fold or more and wasted thousands of hours on document review after negotiating the deal.
The Pampers lawsuit was utterly typical of the consumer class-action business. After a government agencies in the U.S. and Canada launched investigations into whether P&G’s Dry Max diapers caused severe diaper rash, ever-vigilant plaintiff lawyers swung into action. Having read the headlines, they sued. And when the regulators found no evidence the diapers caused severe rashes, they pivoted into settlement mode. Before discovery even began, they began discussing a deal under Rule 23(b)(2) of the Federal Rules of Civil Procedure. Rule 23(b)(2) is especially attractive to corporate defendants, because it is a mandatory class, which snuffs out, forever more, the claims of anyone who felt ripped off because Pampers didn’t warn them about the unproven risk of diaper rash.
After a fairness hearing that lasted less than an hour, U.S. District Judge Timothy Black in Ohio approved a settlement that paid the lawyers a couple of million, some 40 class representatives $1,000 each and gave P&G what it wanted, which was absolution. The rest of the clients? Well, they’d get an extension of a one-box-per-household refund deal that required them to come up with the receipt for each box of Pampers, and wording on a website that might offer some warning about diaper rash, and some completely unrelated legal-aid groups would get $400,000 in cy pres donations because, well, somebody thought that was a good idea.
If CAFA hadn’t intervened, that would be that. But the Sixth Circuit took up CAFA’s appeal, and Judge Raymond Kethledge, a George W. Bush appointee, unloaded with both barrels. (Judge R. Guy Cole, a Clinton appointee, dissented.)
Rather than paraphrase, I’ll use Kethledge’s own words.
On the risks in class actions, where plaintiff lawyers represent “clients” who often don’t even know the lawsuit exists:
There is always the danger that the parties and counsel will bargain away the interests of unnamed class members in order to maximize their own. This case illustrates these dangers.
http://www.forbes.com/sites/danielfisher/2013/08/04/appeals-court-flushes-pampers-settlement-that-paid-lawyers-2-73-millionclients-zero/?partner=yahootix
It was another victory for Center for Class Action Fairness, the group founded by lawyer Ted Frank that intervenes in class action where it thinks the lawyers are getting a better deal than their clients. Last week, a judge in New York slashed $23 million from a proposed fee award in a Citigroup settlement after hearing evidence lawyers there sought to mark up $32-an-hour contract attorneys by 20-fold or more and wasted thousands of hours on document review after negotiating the deal.
The Pampers lawsuit was utterly typical of the consumer class-action business. After a government agencies in the U.S. and Canada launched investigations into whether P&G’s Dry Max diapers caused severe diaper rash, ever-vigilant plaintiff lawyers swung into action. Having read the headlines, they sued. And when the regulators found no evidence the diapers caused severe rashes, they pivoted into settlement mode. Before discovery even began, they began discussing a deal under Rule 23(b)(2) of the Federal Rules of Civil Procedure. Rule 23(b)(2) is especially attractive to corporate defendants, because it is a mandatory class, which snuffs out, forever more, the claims of anyone who felt ripped off because Pampers didn’t warn them about the unproven risk of diaper rash.
After a fairness hearing that lasted less than an hour, U.S. District Judge Timothy Black in Ohio approved a settlement that paid the lawyers a couple of million, some 40 class representatives $1,000 each and gave P&G what it wanted, which was absolution. The rest of the clients? Well, they’d get an extension of a one-box-per-household refund deal that required them to come up with the receipt for each box of Pampers, and wording on a website that might offer some warning about diaper rash, and some completely unrelated legal-aid groups would get $400,000 in cy pres donations because, well, somebody thought that was a good idea.
If CAFA hadn’t intervened, that would be that. But the Sixth Circuit took up CAFA’s appeal, and Judge Raymond Kethledge, a George W. Bush appointee, unloaded with both barrels. (Judge R. Guy Cole, a Clinton appointee, dissented.)
Rather than paraphrase, I’ll use Kethledge’s own words.
On the risks in class actions, where plaintiff lawyers represent “clients” who often don’t even know the lawsuit exists:
There is always the danger that the parties and counsel will bargain away the interests of unnamed class members in order to maximize their own. This case illustrates these dangers.
http://www.forbes.com/sites/danielfisher/2013/08/04/appeals-court-flushes-pampers-settlement-that-paid-lawyers-2-73-millionclients-zero/?partner=yahootix