The biggest target of Frank’s ire, however, are settlements that award what he sees as excessive legal fees to the plaintiffs attorneys. He’s currently challenging the proposed $590 million settlement of a class action brought in 2008 on behalf of Citigroup Inc. shareholders who accused the financial giant of misleading investors about the risks of its derivative business.
“The settlement has resulted in a troubling, and, according to counsel for the parties, surprising allocation of the settlement fund,” the judges said. “Though the parties contemplated that excess funds would be distributed to charity after the bulk of the settlement fund was distributed to class members through an exhaustive claims process, it appears the actual allocation will be just the opposite.”
Fewer than 20,000 class members have bothered to go through the arduous claim procedures in the Bayer Corp. class action, which caps recovery for most of those class members at $4 unless they saved several-year-old receipts for aspirin products. The class will ultimately receive well under $500,000.
As a result of the Center’s objection, the parties modified the settlement to increase direct payments to the class by over $5.8M. Our second objection resulted in a third-party recipient of settlement funds that better suited the purpose of the litigation.
The Center for Class Action Fairness objected to and then appealed the approval of a nationwide class settlement where 0.2% of the class received a cash benefit, a total of $225,000, and the remaining class members received low-value coupons. In the same settlement, $8.85 million went to the plaintiffs' lawyers and $3 million to local San Diego universities.
The Center represented a shareholder objecting to a securities class action wherein the $16.5M plaintiffs’ attorneys’ fee request was 4.2 times their normal billing rate. The district court reduced the excessive fee request by $3M.
CCAF objected to the fees in a securities class action in which class counsel sought an outsized percentage of the $590 settlement fund. Ultimately, the parties agreed to waive their cy pres provision in favor of distributing more money to class members.
The Center for Class Action Fairness is putting that question to the test by asking the District of New Jersey to dismiss shareholder litigation that makes cosmetic changes to corporate governance, and then presents a $10.45 million bill to shareholders—150% of the already high "lodestar"—for the involuntary consulting arrangement
“If Facebook is already giving money to these charities, then this isn’t a “$10 million settlement,” it’s just a change in accounting entries,” he said.
CCAF represented an objecting class representative on appeal. The Eighth Circuit adopted all of CCAF's arguments; it held that charitable donation of class monies was inappropriate and that cy pres payments should only be used if further distribution to the class is not feasible. In addition, the court criticized the choice of the cy pres recipient because the St. Louis legal aid society was unrelated to the securities injuries alleged in the lawsuit.
