f/k/a archives . . . real opinions & real haiku

January 29, 2004

Posner At His Best Sinking Fleet’s Class Action Settlement

Filed under: pre-06-2006 — David Giacalone @ 1:23 pm

Class action lawyers will surely be heading their shopping carts away from the 7th Circuit’s check-out aisle, after today’s decision in Mirfasihi v. Fleet Mort. Corp.  And district court judges might be slipping out the backdoor, too. (7th Cir, No. 03-1069, Jan. 29, 2004)  In a tour de force of Posnerian logic and rhetoric, the class action settlement involving Fleet’s distribution of customer information was unanimously set aside today. (Thanks to Howard for the pointer)


compass gray . . .


You didn’t need a compass to tell which way this opinion was heading, once Judge Richard A. Poser asked (emphasis added): 


Would it be too cynical to speculate that what may be going on here is that class counsel wanted a settlement that would give them a generous fee and Fleet wanted a settlement that would extinguish 1.4 million claims against it at no cost to itself?”

Judge Poser’s patience was also wearing a bit thin, when he penned (emphasis added): “Fleet, joined by the class counsel, argues that the members of the pure information-sharing class didn’t really receive nothing in exchange for giving up their claims; they received the emotional satisfaction of knowing that Fleet had been forced to give up its profits. That is a preposterous argument. . . . The idea that a rational fiduciary would surrender a claim worth $35 million in exchange for the satisfaction of knowing that his wrongdoer had been forced to pay $243,000 to members of another class staggers the imagination.”

 

Here are a few other points made in the opinion, which chides the plaintiffs’ attorneys for overlooking their fiduciary duties and the district court judge for ignoring his obligation to assure (emphasis added): 


A colorable claim may have considerable settlement value (and not merely nuisance settlement value) because the defendant may no more want to assume a nontrivial risk of losing than the plaintiff does.

“The part of the $2.4 million that is not claimed will revert to Fleet, and it is likely to be a large part because many people won’t bother to do the paperwork necessary to obtain $10, or even a somewhat larger amount.


“The district judge has approved a handsome fee for the class lawyers, $750,000, despite the meagerness of the relief agreed to in the settlement.


“Because class actions are rife with potential conflicts of interest between class counsel and class members [cites omitted], district judges presiding over such actions are expected to give careful scrutiny to the terms of proposed settlements in order to make sure that class counsel are behaving as honest fiduciaries for the class as a whole.”


“Unfortunately the district judge’s decision approving the settlement does not discuss the settlement’s questionable features—not only the one we’ve stressed, namely the denial of any relief to an entire class, the kind of thing that led to rejection of the settlements in Crawford v. Equifax Payment Services, Inc., 201, but also the reversion of unclaimed refunds to the putative wrongdoer and the fact that the class that was denied relief did not have separate counsel from the counsel for the favored class.”


“In Reynolds v. Beneficial National Bank, supra, 288 F.3d at 284-85, we emphasized the district judge’s duty in a class action settlement situation to estimate the litigation value of the claims of the class and determine whether the settlement is a reasonable approximation of that value.  [cites omitted] The district judge in this case made no estimate of the value of the legal claims of the information-sharing class.”


Summing up, “So the settlement cannot stand.”

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