Litigation: Open

The CEI’s Center for Class Action Fairness (CCAF) represents an objector to a settlement over allegedly mislabeled food that proposes to pay class counsel over half the settlement fund, $1.35 million ($2593/hour), while ensuring that the class receives virtually no benefit. The proposed settlement resolves claims that Quorn Foods, Inc. mislabeled Quorn meat substitute by failing to disclose that the ingredient mycoprotein derives from mold rather than another type of fungus. CCAF filed the objection on March 30, 2017 in the Central District of California.

According the class counsel, the settlement should be treated as a $120 million constructive common fund because class members could receive full refunds if they provided itemized grocery receipts since 2012. In fact, this will not occur because documentation is required to receive even five dollars from the settlement, and class counsel failed to provide direct notice to any class member, instead relying exclusively on internet banner ads. Settlements without direct notice typically have a claims rate less below 0.25 percent.

Under Ninth Circuit law, the appropriate benchmark for fees is 25 percent, but class counsel requested $1.35 million, which is 54 percent of the $2.5 million settlement fund. The class likely receives ten percent of the fund or less. If class claims are low, nearly $1 million of the $2.5 million fund will be diverted to an unrelated cy pres beneficiary rather than the class, which further exacerbates the imbalance between attorneys’ fees and class recovery.

The fairness hearing is scheduled for September 1, 2017.

In November 2016, a Boston Globe’s Spotlight team reporter contacted Theodore H. Frank, director of CEI’s Center for Class Action Fairness (CCAF) concerning double-billing the Globe had spotted in a recent class action settlement by politically active Thornton Law Firm of Massachusetts. Thornton, along with two large plaintiffs firms, Labaton Sucharow LLP and Lieff Cabraser Heimann & Bernstein, LLP had received nearly $75 million in fees for their work on the case, and on November 10, 2017 the lead firm Labaton wrote to the court to advise it had double-counted hours from 17 different “staff attorneys” hired on a temporary basis, with charges worth over $4 million. The class attorneys asserted in the letter and still assert that the attorneys’ fee award in this matter was reasonable and should not be reduced.

In 2013, CCAF (now part of CEI) objected to the fees in a securities class action in which class counsel sought an outsized percentage of the $590 settlement fund. Class counsel had submitted a $100.3 million fee request, which they claimed represented a lodestar (time they spent on the case multiplied by their hourly billing rates) of $51.4 million. But in reality, class counsel greatly exaggerated its lodestar by attributing $500-per-hour billing rates to temporary, $25-32-per-hour attorneys doing basic administrative work. To put it in perspective, the fee request would have amounted to over $900-per-hour spend on the case by temporary contract attorneys making $25-per-hour. And over 15 percent of the fee request was billed after the case had settled. 

Based on CEI's objection, the U.S. District Court for the Southern District of New York reduced the fees substantially in August 2013, returning $26.7 million to the class. The case received national publicity and encouraged other courts to scrutinize fee requests more closely.

After settlement funds were distributed to shareholder class members over several years, class counsel returned to court on February 5, 2016 to request distribution of the remaining amount, $374,000, to three third party advocacy groups. The court granted this request on February 16, before allowing only 14 days for interested parties to file an opposition under the rules. CEI moved to reconsider the order and objected to the distribution, arguing that the advocacy groups chosen by class counsel did not meet the legal standards for cy pres as the “next best” recipients. “Next best” means people, after class members themselves, who best represent the interests of the class – in this case, Citigroup shareholders.

On September 16, 2016, CEI filed an objection to the proposed settlement in In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation. This settlement is the result of class action litigation following the Volkswagen emissions scandal that erupted in 2015. In re Volkswagen ʺClean Dieselʺ Marketing, Sales Practices, and Products Liability Litigation follows from Volkswagen's disclosure to the EPA and California Air Resources Board that Volkswagen installed software in certain diesel vehicles that was designed to bypass emissions standards.

In the case, CEI objected to class counsel’s breach of fiduciary duty in negotiating a settlement that imposes costs on class members with zero marginal benefits. Class counsel misinformed class members that they could not obtain the relief provided by the class action settlement if they “opt out,” when the same benefits are available through settlements with the Department of Justice and the Federal Trade Commission. Further, class counsel provided insufficient information regarding their fee request, which could be as high as $332.5 million, though a competitive bidding process would have likely reduced that by more than 90 percent and returned hundreds of millions more to the class.

CEI asked the U.S. District Court for the Northern District of California to postpone the fairness hearing and order class counsel to provide corrected notice, its attorneys’ fee request, and any agreement with Volkswagen regarding those fees. CEI also asked the court to order the FTC settlement to take effect immediately, so as to not let the class-action litigation further delay relief to Volkswagen owners.

The court approved the settlement on October 25, 2016. CEI attorney Anna St. John said the following about the settlement approval:

October 2013: CEI filed a FOIA request for work-related emails that John Holdren, Director of the White House Office of Science and Technology Policy (OSTP), kept on his private email account at his former employer, the environmental-pressure group Woods Hole Research Center. OSTP turned down the request, claiming that Holdren’s private account was outside its control and therefore wasn’t subject to FOIA.

May 2014:  CEI filed a lawsuit to force OSTP to produce the emails as the use of non-official accounts for agency business frustrates federal open-government laws, undermines government accountability, and evades congressional oversight efforts.

March 3, 2015: U.S. District Court Judge Gladys Kessler upheld the agency’s position. She ruled that FOIA applied only to agency records controlled by the agency, and that Holdren’s private email account was off-limits. CEI appealed this decision arguing that personal email accounts of the White House top science advisor, John Holdren, should not be off-limits from the Freedom of Information Act. 

August 10, 2015: CEI filed its opening brief before the U.S. Court of Appeals for the District of Columbia Circuit. In the brief, CEI argued that FOIA applies to the work-related records of agency employees regardless of where they are stored, and that agencies routinely instruct their staff to preserve any such documents that they have on their personal email accounts. The brief also argued that given the growing scandals over other top officials’ private emails, a reversal of the lower court’s ruling would be essential to putting teeth into FOIA, especially in light of President Obama’s claim that his administration is the most transparent in history.

Plaintiffs sued Google seeking trillions of dollars in statutory damages for alleged federal privacy violations over their search engine, but class counsel negotiated a settlement that provided $0 to class members and $8.5 million to be divided between class counsel and third-party charities, including class counsel's alma maters, and several charities Google routinely donated to.

The district court approved the settlement over CCAF's objection. CCAF has appealed to the Ninth Circuit, and oral argument was heard on March 13, 2017. An opinion resolving the appeal will be issued later.

View the video of the March 13, 2017 oral argument below or here on Youtube.

The Center for Class Action Fairness represents National class member Michael Barton in objecting to this nationwide class action. CCAF filed an objection on behalf of Barton April 11, 2016 before District Court for the Southern District of New York. 

The settlement pays plaintiffs' attorneys $3.6 million, while only New York class members recover any cash. The divergence in recovery between the New York Class and the National Class evidences a conflict of interest for which class members’ interests were not adequately represented. Even if the Court does not decertify the classes on this ground, Barton argues that the settlement should be rejected as unfair due to the severe disproportion between class counsel’s recovery and class members’ recovery.

Other than the $100 recovered by the New York class, class members of both classes recover only a "date voucher," which the parties value at $450 but which cannot be transferred for any consideration and is useless to any class member who is not single or otherwise not interested in using IJL's date-matching services, and injunctive relief that only even potentially benefits future clients of IJL. Class counsel requests its full lodestar of $3.6 million based on a settlement valuation that assumes an entirely unrealistic 100% claims rate and redemption rate of the date coupons.

On March 10, 2017, the district court denied approval of the settlement. From the bench, and for many of the reasons discussed in Barton's objection, the Court observed that the proposed settlement provided little to no benefit to the national class and, thus, class members were better off retaining their rights than settling for the relief provided by the settlement.

In July 2012, a CEI adjunct analyst posted a column on CEI’s blog, criticizing climate scientist Michael Mann and the 2010 investigation of his work by Penn State, where Dr. Mann teaches.  Mann is a leading advocate of global warming alarmism, and was responsible for the controversial and much-disputed hockey stick temperature graph.

Shortly after being posted, the column, "The Other Scandal in Unhappy Valley,"  was excerpted by syndicated columnist Mark Steyn in a piece on National Review Online. Dr. Mann demanded a retraction of the article by National Review and, several weeks later, by CEI as well.  His demands were rejected.  This article became the basis for Mann’s defamation lawsuit against CEI, the adjunct analyst who wrote the piece, National Review and Mark Steyn.

Mann filed his complaint in D.C. Superior Court in October 2012. The defendants responded with motions to dismiss, invoking D.C.’s Anti-SLAPP statute and resting on Mann’s status as public figure.  These motions were denied, and three of the defendants (CEI, the adjunct analyst, and National Review) filed an interlocutory appeal of that denial with the District of Columbia Court of Appeals. In April 2014, the appeals court permitted this appeal to go forward on an expedited basis.

A number of amicus briefs were filed in support of the defendants, on behalf of such organizations as the ACLU, the Reporters Committee for Freedom of the Press, Time, The Washington Post, and dozens of other major First Amendment entities. Oral argument was held in November 2014, before a three-judge panel. 

On behalf of objector David G. Duggan, CCAF is appealing the approval of the settlement of a shareholder suit in which the plaintiffs' attorneys received $575,000, while the shareholders recovered only immaterial supplemental disclosures. The district court refused to apply the Seventh Circuit's landmark ruling against disclosure-only settlements in In re Walgreen Co. Stockholder Litigation, noting the lack of similar Fifth Circuit precedent.

The Center of Class Action Fairness (CCAF) was appointed as a special amicus curiae to defend the judgement of the U.S. District Court for the Western District of Arkansas, which reprimanded five plaintiffs’ attorneys for acting in bad faith for the improper purpose of forum selection.

Instead of protecting the interests of their clients, plaintiffs’ attorneys signed a settlement to dismiss the case from federal court, where it had been removed, and immediately refiled in Arkansas state court, which was more likely to approve their questionable fee request. The settlement provided plaintiffs’ attorneys $1.85 million in fees, but only provided class members at most $300,000. After learning about this agreement from the Arkansas Business newspaper, the district court judge ordered that the attorneys show cause why they should not be sanctioned. After two rounds of briefing and hearings, the district court issued reprimands to five of the fifteen attorneys that had appeared, finding that these counsel abused the judicial process in bad faith. CCAF filed the brief following appointment as amicus by the Eighth Circuit because there was no appellee to defend the district court's decision. 

Listen to the February 7th oral argument here.

CEI’s Center for Class Action Fairness objected to an unfair settlement deal resulting from the much-publicized 2013 data breach at retail giant Target Corporation. Forty-one million consumers had credit card information stolen and 60 million consumers had personal information stolen as a result of the data breach. But the subsequent settlement deal helped class attorneys far more than class members. The terms of the deal provided a $10 million fund to class members that, in reality, is unlikely to be exhausted, gave class counsel a disproportionate $6.75 million fee, and left a large subclass of class members with zero recovery.

Representing class member Leif Olson, CEI attorneys argued that the class action could not be certified because it froze out millions of class members, releasing their claims for no recovery, without separate representation. CEI further objected to the excessive fee request and the inclusion of a "kicker" clause, whereby any decrease in the fee request would revert to the defendant (Target).

Nonetheless, the United States District Court for the District Of Minnesota approved the settlement deal, and in 2016, CEI appealed the case to the U.S. Court of Appeals for the Eighth Circuit. The appeal challenged both the district court’s error that class certification could not be revisited once granted and the violation of a federal rule requiring attorneys who represent a class to fairly and adequately protect the interests of the class.

In February 2017, CEI received an important ruling on its appeal. The Eighth Circuit remanded the case back to the district court, finding that the lower court abandoned its ongoing duty to ensure class certification was proper when the court had failed to consider CEI’s objections. Additionally, the judge reversed the lower court’s ruling for an unlawful appeal bond, resulting in $46,872 being returned to CEI.

Class member and CCAF attorney Anna St. John objected to settlement approval, class certification, and the request for attorneys' fees in Saska v. Metropolitan Museum of Art. The case involved the Museum's "pay what you wish" admission policy, in particular claims that the policy deceived the public in violation of state law. The proposed settlement provides class members with near-worthless injunctive relief, primarily in the form of changes to the wording of the admission price: "suggested" and "the amount you pay is up to you" will be substituted for "recommended."

At the same time, and in a clear signal of who the settlement was structured to primarily benefit, the class attorneys are seeking fees of $350,000. The proposed settlement suffered from the further defect that the proposed relief benefits only future museum visitors, while the class is defined to include only past visitors—many of whom will not visit the museum in the future and therefore will not recover even nominal value from the proposed policy changes.

On behalf of class member Joshua Holyoak, CEI objected to class counsel's excessive fee request in this case. Under Ninth Circuit law, the appropriate benchmark for fees in a common fund case is 25%. Here, class counsel sought nearly 40%. CEI urged the court to reduce the percentage of fees to 25% of the fund, after excluding notice and administrative costs that do not benefit the class, which would allow the class to recover an additional $7.2 million.

In the original class action case, plaintiffs sued Google for alleged federal privacy violations over Google's circumvention of Safari browser users' privacy settings, but class counsel negotiated a settlement that provided $0 to class members and $5.5 million to be divided between class counsel and third-party charities. One of those charities is a non-profit for which co-lead counsel serves as chairman of the board, and several others are charities to which Google routinely donates, bringing into question the benefit to the class.

The Center for Class Action Fairness (CCAF) objected to the settlement, but was overruled by U.S. District Court for the District of Delaware on February 2, 2017.

The Center became involved in the case in 2014 when it objected to a class action settlement that would have provided attorneys $4.5 million but less than $900,000 to the class. On appeal, the Seventh Circuit agreed and reversed approval of the “selfish” settlement. Thanks to the Center’s objection, the parties negotiated a new settlement providing the class with more than $3 million additional recovery. The new settlement was approved August 25, 2016.

The new settlement was opposed by three professional objectors—that is, objectors who threaten to hold up a class action settlement unless they are paid to go away. Courts and commentators have criticized professional objectors, who essentially demand blackmail from settling parties. In this case, defendants paid professional objectors to drop their appeals, which they did November 7.

New York Attorney General Eric Schneiderman's office denied CEI’s May 5, 2016 request for any Common Interest Agreements, which was made under New York’s Freedom of Information Law (FOIL).  His office claimed the records are exempt from disclosure.  

CEI is seeking all Common Interest Agreements entered into by the Office of the Attorney General and which are signed by, mention or otherwise include the AGs for other states or territories, as well as certain environmental activists.  CEI suspects that these agreements may be a pretext for simply shielding documents from public disclosure.

After supplying a Common Interest Agreement to CEI, AG Schneiderman moved to dismiss our FOIL case against his office. Our October 26, 2016 filing opposes that motion to dismiss on the grounds that there could be more relevant documents yet to be produced, and we also want the common interest agreement ruled invalid, so that it stops functioning as a shield against disclosure of information by AGs.  

On November 22, 2016 a New York Supreme Court justice ruled for the Competitive Enterprise Institute (CEI) and against the state Attorney General, holding that the AG’s office violated the state’s Freedom of Information Law (FOIL) statute.  In fact, the court stated that the AG’s attempt to dismiss the case was a “complete failure” and ordered the AG to respond, within 30 days, to CEI’s original FOIL request in a manner that “fully complies with the intent and purpose” of the statute.  Further, the Court granted CEI permission to file for attorneys fees. 

The Competitive Enterprise Institute (CEI) and the Rutherford Institute sued the Transportation Security Administration (TSA) on May 2, 2016, over its airport body scanner rule, which was published after lengthy delays on March 3, 2016.

CEI argues that the TSA arbitrarily downplayed the intrusiveness of its scanners, which are replacing walk-through metal detectors at many airports. As a result, the agency ignored the fact that the scanners will cause many would-be air travelers to drive instead. But because car travel is much riskier than air travel, the net result could be an increase in overall travel fatalities.

Last July, CEI and the Rutherford Institute sued the TSA for failing to issue a final body scanner rule after over two years had passed since the TSA came out with its proposal in 2013. The TSA released the proposal itself only after a 2011 court in EPIC v. DHS ordered the agency to “promptly” produce a final rule.

CEI’s petition was filed in the U.S. Court of Appeals for the D.C. Circuit. CEI filed its opening brief on September 26, 2016. The TSA will issue a reply brief in the coming weeks.

CEI’s Center for Class Action Fairness is appealing a class action settlement involving Subway’s “footlong” sandwiches. The proposed settlement benefits only nine people in the class but awards over half a million dollars to the class attorneys. CEI argues this gross disparity is a flagrant violation of rules meant to protect class members.

Moreover, the lower court’s approval of the award is contrary to case law, which establishes that class actions should not be allowed to proceed when their only effect is to enrich the lawyers for the class while producing no relief for the class members themselves.

The original class action lawsuit had alleged that sandwiches sold by the Subway restaurant franchise sometimes fell short of the chain’s "footlong” marketing claims. But there was no dispute that the actual weight of the dough and the amount of ingredients was, in fact, uniform for each sandwich; and even the named plaintiffs in the lawsuit conceded that the exact length of the sandwiches didn’t affect their purchases or change their future plans to eat at Subway. In addition, prior to the litigation, the company had already taken steps to reduce the minor disparities that occasionally occurred in the length of its bread rolls during baking.  

The case is on appeal from the United States District Court for the Eastern District of Wisconsin, which approved the settlement in February 2016, to the United States Court of Appeals for the Seventh Circuit. Argument in the appeal was heard on August 8, 2016, where Judge Diane Sykes suggested that the underlying lawsuit “was opportunistic entirely.” A decision is expected in the coming months.

Listen to the September 8 oral argument here.

The Competitive Enterprise Institute (CEI) is suing the Environmental Protection Agency (EPA) over its so-called Clean Power Plan in the U.S. Court of Appeals for the District of Columbia. CEI is joined by 11 co-petitioners, including the Buckeye Institute in Ohio, the Independence Institute in Colorado, and the Rio Grande Foundation in New Mexico, arguing the Clean Power Plan goes beyond the EPA’s legal authority and would significantly raise the cost of electricity for many Americans.

EPA’s Clean Power Plan ignores court rulings and legal interpretations, and rests on a novel interpretation of the Clean Air Act’s section 111(d). By setting emission limits for each state’s energy sector rather than for specific sources, EPA is attempting to force states to act—a commandeering tactic that is contrary to both the Clean Air Act’s structure of cooperative federalism and to the Constitution’s protection of state authority. And what is worse, the agency’s cost-benefit analysis is fundamentally false, resting on the alleged benefits of reducing co-pollutants rather than carbon dioxide.

CEI and the state organizations had previously filed regulatory comments with EPA, arguing the EPA is trying to force states to do their dirty work and enact their own state regulations. This is exactly why we have the Constitution, so that the federal government can’t bully the states with its agenda.

In January 2016, CEI's lawsuit was consolidated with challenges from 28 states and more than 120 companies and organizations into one multi-party case, State of West Virginia, et al. v. EPA. On May 16, 2016, the D.C. Circuit canceled the June 2 hearing before a three-judge panel and rescheduled our Clean Power Plan oral argument for en banc review--before the full court--on September 27, 2016. An en banc hearing indicates the judges consider it a matter of exceptional importance. 

In 2013, CCAF objected to and then appealed the approval of a nationwide class settlement where 0.2% of the class received cash (a total of $225k) and the remaining class members received low-value coupons, while $8.85 million went to plaintiffs' lawyers and $3 million to local San Diego universities including class counsel's alma maters. On appeal, the Ninth Circuit vacated the settlement approval and remanded for further consideration.

Plaintiffs claimed that defendants' gift- and flower-delivery websites violated state and federal law by enrolling customers in rewards programs after luring them with the promise of worthless coupons. Oddly, class counsel negotiated a settlement whose many component was low-value coupons to class members: the coupons expired after a year, were devalued because they precluded the use of standard freely-available 20% discounts, and could not be used on major holidays such as Valentine’s Day. Nevertheless, the district court again approved the settlement on August 9, 2016, and the CCAF again appealed.

Due to plaintiffs’ filing of a motion for summary affirmance, the parties are awaiting a decision and briefing schedule in the Ninth Circuit.