Docket numbers: 11-cv-7972 (N.D. Ill.); 17-2275; 19-3095 (7th Cir.)
Citations: 772 F.3d 778 (7th Cir. 2014); 893 F.3d 980 (7th Cir. 2018); 968 F.3d 827 (7th Cir. 2020)
The Center became involved in the case in 2014 when director and class member Theodore H. Frank 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, the settling parties are believed to have paid the three appellants to drop their appeals, which they did November 7. CCAF attempted to intervene to discover and disgorge these payments for the benefit of the class, but was denied by the district court in a minute order.
CCAF appealed, and the Seventh Circuit agreed with Frank that he had standing to request intervention. Upon remand, Frank quickly discovered that the defendant paid all three objectors for dismissing their appeals. However, the district court denied Frank’s motion to disgorge this money for the benefit of the class on September 23, 2019, which Frank appealed.
On appeal, Frank filed a sealed appendix in line with the other objectors’ and Target’s position that their settlement agreements were confidential. The Seventh Circuit agreed with Frank that they were not and unsealed the appendix on January 7, 2020, which revealed publicly that two of the “selfish” objectors were each paid $70,000 simply to drop their appeals and a third objector—a disbarred attorney filing pro se—was paid $10,000. Oral argument will occur via Zoom on June 4.
On August 6, the Seventh Circuit reversed the district court, agreeing with Frank that the other objectors struck a “selfish deal” in securing payment for dismissing their objections. The “fruit” of these deals properly belongs to all class members, which the Seventh Circuit found should be deposited into a constructive trust for their benefit. The panel also agreed that the case should be assigned to a different district judge for further proceedings.
Following remand, on December 16, 2022, Judge Bucklo of the Northern District of Illinois ordered that the “selfish” objectors disgorge their side-payments for the class common benefit. Following the Seventh Circuit, and under terms of the Settlement Agreement dealing with leftover money, this will result in cy pres donations to the Orthopedic Research and Education Foundation. CCAF continues to pursue repayment by the selfish objectors.
This case was originally brought by the Center for Class Action Fairness. From October 2015 to January 2019, it was a project of the Competitive Enterprise Institute. It is now being actively litigated by the Hamilton Lincoln Law Institute.
Case Documents