Enforcing Mediated Settlement Agreements Post-Simmons v. Ghaderi

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Greatsealcal100What happens when Evidence Code section 1115, et seq. (the "mediation privilege"), collides with an allegation that an enforceable, oral settlement agreement was reached during a mediation?  The mediation privilege steamrolls the allegation.  This is true even where a party stipulates to events at the mediation, submits evidence of events at the mediation, and then, at trial invokes the mediation privilege for the first time.

In Simmons v. Ghaderi (July 21, 2008), the Supreme Court held "that the Court of Appeal improperly relied on the doctrine of estoppel to create a judicial exception to the comprehensive statutory scheme of mediation confidentiality and that the evidence relating to the mediation proceedings should not have been admitted at trial."  After reciting the policy behind the mediation privilege, and the basic rule of inadmissibility, the Supreme Court set forth the very particular requirements for admissibility of mediation statements:

“Sections 1122 and 1124 specifically lay out exceptions for the admission of evidence produced during mediation. As relevant here, section 1122, subdivision (a)(1) provides that “[a] communication or a writing . . . that is made or prepared for the purpose of, or in the course of, or pursuant to, a mediation or a mediation consultation, is not made inadmissible, or protected from disclosure, by provisions of this chapter if . . . the following condition[] is satisfied: [¶] (1) All persons who conduct or otherwise participate in the mediation expressly agree in writing, or orally in accordance with Section 1118, to disclosure of the communication, document, or writing.”

(Slip op., at p. 8.)  When entering into a mediation of a complex matter or class action, take note of sections 1122 and 1124.  If a settlement is reached, generate a memorandum of understaning on the spot and include a provision allowing disclosure of the document, signed by all parties.

The Supreme Court then spent another 8 or so pages of opinion discussing all the reasons why the mediation privilege is nearly impenetrable, what the Legislature intended, and so on.  A certain momentum (coupled with repetition) was building at this point in the discussion.  Then the Supreme Court discussed the highly limited scenarios where a policy consideration would overcome the privilege (such as where a child's due process right to confront a witness would be impeded).  After all of that, the Supreme Court then said:

“Despite the clear legislative intent, the Court of Appeal majority nonetheless estopped the defendant from invoking mediation confidentiality because she herself used and did not object to plaintiffs’ use of evidence describing the events of mediation.

(Slip op., at p. 16.)  At this point, it doesn't look too good for you if you are the Court of Appeal majority.  Thereafter, the Supreme Court concludes that implied waiver of the mediation privilege does not exist.  (Slip op., at pp. 22-23.)

Again, don't leave a mediation where a settlement was reached without at least memorializing the major terms in writing, with a waiver of the privilge to the full extent necessary to effectuate and enforce the settlement.

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Shortly after Sprint beat a class action challening early cancellation fees, Verizon settles similar class action for $21 million

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On June 12, 2008, The Complex Litigator reported that Sprint avoided liability after a California jury ruled in its favor in a trial involving the contentious issue of early termination fees (ETFs) in wireless service contracts.  At that time, other carriers set for trial on the same issue were believed to be watching the Sprint trial as an indicator of how their trials might resolve.  But, in a surprising twist, Verizon has apparently settled the class action suit it was facing after the start of its trial last week.  The settlement is described as having a value of $21 million dollars, although there is no immediate information about the terms of that settlement (i.e., whether it contains a "claims-made" component, or other provision that would impact Verizon's realized cost from the settlement).  Verizon spokesman Jim Gerace is reported to have said, "This suit was a distraction. This was a quick way to resolve it."

[Via Wireless and Mobile News.]

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Possible sale of private data by TransUnion provides an opportunity for fee credit monitoring

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If you've ever been curious about the many "credit monitoring" services advertised just about everywhere, you now have an opportunity to test one of those services for free as part of a class action settlement.  TransUnion, one of the three dominant credit repositories, was accused of selling consumers' personal data to marketers in violation of federal law.  Sixteen different class-action suits from around the country were consolidated into a single case against TransUnion in U.S. District Court in Chicago.

Under the terms of the settlement reached in the consolidated action, you are eligible for benefits if you opened a credit account (credit cards, student loans, auto loans or mortgages, for example) between Jan. 1, 1987, and May 28, 2008.  About 160 million consumers qualify for benefits under the settlement, which includes:

  • Nine months of free credit-file monitoring if you agree not to sue TransUnion seeking damages. In addition to monitoring—the bureau alerts you by e-mail within 24 hours of any significant change in your credit data—you can also lock your file so lenders, insurance companies and others cannot access your report without permission.  In addition, you can receive "unlimited daily access" to your credit report and TransUnion credit score, plus other credit analysis tools.  TransUnion estimates the retail value of this at $115.50.
  • Six months of free credit monitoring, credit-lock privileges and unlimited access to your credit report and score. This option, valued at $59.75, allows you to receive a possible cash payment out of the $75 million fund if any money is left over after paying lawyers' fees (I repeat, if any money is left over - it will be interesting to see if anything is left over), notification costs and named plaintiffs.
  • Even if you choose to sue the company, you can still receive six months of free credit monitoring.

There really isn't a good reason to pass on this settlement benefit.

UPDATE:  Call it "postus-interruptus," but I left out the last, crucial piece of information, where to submit a claim.   To submit a claim, visit the web site www.listclassaction.com, or call, toll-free, (866) 416-3470.

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Wage Law notes a recent California trend of disapproving of "claims made" settlements in wage & hour class actions

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Although it sounds a little bit like hearsay (or maybe just protection of confidential sources), Wage Law is reporting that some Superior Court judges, particularly in the Bay Area, believe that a "claims made" class action settlement should never be approved in a wage & hour case.  (The Emerging Trend Against Claims Made Wage & Hour Settlements (June 6, 2008) wagelaw.typepad.com.)  One opinion that may be swaying the hearts and minds of judges is the 2007 Order of Judge William Alsup denying preliminary approval of a class action settlement in Kakani v. Oracle Corp.  In his initial opinion, Judge Alsup said:

“Under the settlement, all wage-and-hour rights (not just overtime) of putative class members would be completely extinguished and replaced by an exclusive claims procedure. By expressly obligating itself only on a "claims-made" approach, Oracle would pay only those who submit claims up to a total of nine million dollars less all fees and expenses. Counsel wants $2.25 million in attorney's fees and $75,000 in expenses. In addition to their own shares of the settlement, $45,000 total would be paid to the three named plaintiffs as "incentive payments." Costs of administration would also be deducted. Because it will be a "claims-made" settlement, there will be no residue. All unclaimed amounts will revert to Oracle. Counsel now desire preliminary approval under Rule 23(e) and recommend notice be sent by mail to last known addresses of 1500 or so workers granting them a brief period for filing claims -- after which all of their claims and rights would be forever barred, even as to those who never receive actual notice or submit a claim.

The description of the terms is enough to telegraph where that one was going.  But this should come as no surprise.  Judge Alsup has made the news with his high-profile policing of class action settlements, particularly in options backdating suits.  (See this blog's posts of April 27 and June 17.)

As to the substance of Wage Law's observation, that "claims made" settlements in wage & hour matters are falling into disfavor, my own observations tend to confirm that view.  A primary argument for why "claims made" settlements in wage & hour matters are undesirable stems from the policies embodied by wage & hour laws generally.  If wages were earned but not paid to each class member, then each class member should get those wages, not just those that file a claim.  A core policy of labor laws is to ensure the full payment of all wages owed for work actually performed.

However, there are circumstances (probably not present in the Oracle suit) that weigh in favor of the "claims made" approach.  For example, small classes with relatively modest individual recoveries provide the majority of their benefit in the correction of violations, not in the sums paid to class members.  In those cases, it is cost efficient to reserve a modest class fund for those individuals willing to take the small step of submitting a claim.  In cases where records do not allow for an exact calculation of monies owed to each employee, such as meal break cases where records are absent, a "claims made" approach can be described as a proxy for a declaration of damages.

California in particular faces another issue in wage & hour class actions: the population of unlawfully present aliens (they are not exactly "illegal" aliens, because if they are not citizens, then they are, by definition, aliens - and it isn't illegal to be an alien, it's just illegal to be present in the U.S. without legal permission).  Employers whose workforce consists (allegedly) of unlawfully present aliens present a problem in wage & hour class actions - the workforce, if very transitory, may be hard to locate or unwilling to come forward to participate in any settlement.  So you can easily face a situation where the wage & hour violations are pandemic but the class is hard to locate.  In that instance, a "claims made" settlement is particularly suited to resolution.  Given the usually low hourly wages of this particular employee demographic, such classes often also include the problem of a low recovery level that provides its own justification for a "claims made" settlement.

See the balance of Wage Law's post for more choice words from Judge Alsup and commentary about settlement structure.

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Scrutiny of options backdating settlement results in massive increase to settlement offer

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In a post from April 27, 2008, this blog discussed a pair of noteworthy decisions, by Judge William Alsup of the United States District Court of the Northern District of California, in two options backdating lawsuits involving Zoran Corporation and CNET Networks.  As it turns out, Judge Alsup's intense scrutiny of those settlements has had a therapeutic effect on the value of the settlement.

As described by Forbes.com, Judge Alsup was less than pleased with the manipulation of the value of the settlement by Plaintiff's counsel:

“The lawyers painted the value of the package as $1.6 million, based on a Dec. 3, 2007, stock price of $21.99 a share. When Alsup asked how they arrived at that date, lawyers first indicated that was when they had signed a memorandum of understanding, but when Alsup ordered a copy of the memorandum, it turned out to have been signed Dec. 21 and wasn't filed with the court until Feb. 26. By then Zoran's stock was down 50%, and the options concessions were worth far less.

(Daniel Fisher, Fee Fixers (June 9, 2008) www.forbes.com.)  Judge Alsup described the initial settlement as having a value of, potentially, a meager $200,000, and quite possibly less.  In a revised settlement filed May 29, 2008, $3.4 million in hard cash materialized ($3 million from Zoran's insurance company and $395,000 from Zoran Chief Executive Levi Gerzberg and another executive).  Keller Rohrback, counsel for plaintiff, had the confidence (chutzpah? nerve? temerity?) to request $1.5 million in fees and expenses, $300,000 more than the first time around.  (Ibid.)

I would guess (and it is only a guess) that the publicity surrounding Judge Alsup's scrutiny and criticism of pigs with lipstick may rub off on other judges that routinely handle class action matters.  Thus, it would benefit both sides of the settlement equation to be sure that a motion for preliminary approval does not mislead the Court, hide negative facts, or avoid self-criticism.  A dose of introspection may lend credibility to the motion for preliminary approval.

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Ninth Circuit confronts Morton's Fork in Negrete v. Allianz Life Insurance Co.

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Ninth Circuit SealIn a decision issued yesterday, the Ninth Circuit struck down an Order by District Court Judge Snyder that would have prohibited the nominal target of the Order, defendant Allianz, from settling similar or identical class actions pending in other state and federal courts without including, or obtaining consent from, plaintiff's co-lead counsel in the certified nationwide class action matter pending before Judge Snyder. (Negrete v. Allianz Life Insurance Co. (9th Cir. Apr. 29, 2008) ___ F.3d ___.)  The Order at issue in Negrete provided:

Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs’ Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation.

(Slip op., at pp. 4579-80.)

Allianz argued that (1) the Order was actually an injunction, (2) the injunction in question was not proper under the All Writs Act, and, (3) even if it was, it was barred by the Anti-Injunction Act.  The Ninth Circuit agreed.  The Ninth Circuit first analyzed the Order and determined that, in effect, it was an injunction affecting the proceedings in other courts.  Turning to the All Writs Act, and theoretical circumstances where an injunction of this ilk might pass muster, the Court said:

Negrete Counsel floated out the specter of a reverse auction, but brought forth no facts to give that eidolon more substance. A reverse auction is said to occur when “the defendant in a series of class actions picks the most ineffectual class lawyers to negotiate a settlement with in the hope that the district court will approve a weak settlement that will preclude other claims against the defendant.” Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277, 282 (7th Cir. 2002). It has an odor of mendacity about it. Even supposing that would be enough to justify an injunction of one district court by another one, there is no evidence of underhanded activity in this case. That being so, if Negrete’s argument were accepted, the “reverse auction argument would lead to the conclusion that no settlement could ever occur in the circumstances of parallel or multiple class actions — none of the competing cases could settle without being accused by another of participating in a collusive reverse auction.” Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1189 (10th Cir. 2002) (internal quotation marks omitted).

(Slip op., at pp. 4587-88.)  Turning to the Anti-Injunction Act, the Court described its restrictive provisions:

The authority conferred upon federal courts by the All Writs Act is restricted by the Anti-Injunction Act, which is designed to preclude unseemly interference with state court proceedings. It declares that: “A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. Therefore, unless one of the exceptions applies, the district court erred when it issued the injunction in question here.

At the outset, it is important to note that the Anti-Injunction Act restriction is based upon considerations of federalism and speaks to a question of high public policy. It is not a minor revetment to be easily overcome; it is a fortress which may only be penetrated through the portals that Congress has made available.

(Slip op., at pp. 4588-89, footnotes omitted.)

In this particular instance, one can sympathize both with the District Court and the Ninth Circuit (which seems to get so little sympathy).  On the one hand, the Ninth Circuit was obligated to respect the notions of federalism and limited jurisdiction granted to the federal courts.  On the other hand, this decision seems to invite the johnny-come-lately filers that simply watch for class action filings and jump the train, rather than investing any energy or resources in developing their own cases.  But is the outcome all bad?  Certainly, if I was prosecuting what I believed to be a bona fide class action, one in which the defendant was coming to the table to talk class settlement, I'd be mightily aggravated if some district court in some far away state told the defendant that they couldn't talk to me about settling my case without including some other counsel from some other case.  On the other hand, if I were stranded by Negrete while a defendant dodged my case to sort out a settlement with other counsel, that woud surely tweak me as well.  In the later instance, I'd have to resort to intervening in settlement approval proceedings in the event that the settlement was demonstrably deficient.  Negrete will generate some troubling outcomes, but I suspect that there is no viable alternative.  We have to assume that preliminary and final settlement approval in class actions won't be handed out where it isn't justified.  Perhaps this blog's recent post about Judge Alsup's denials of preliminary approval offer some comfort that the system works without the need for district court's to engage in jurisdictional wars over cases with other state and federal courts.

And it really is Morton's Fork, and not Hobson's choice or the prisoner's dilemma.  Neither settlement collusion and crashing nor internecine conflict in the court system are desirable alternatives.

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The Complex Litigator mentioned at Overlawyered

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In a blog post roundup for April 29, 2008, Overlawyered noted an earlier post from The Complex Litigator, entitled "Coupon-only settlements are hard to sell."  (Olson, "April 29 roundup" (April 29, 2008) www.overlawyered.com.)  As I make mention of Overlawyered's link to this site, I find myself contemplating whether to include Overlawyered on my list of read-worthy blogs.  Do I succumb to self interest and avoid promoting a site that is essentially dedicated to cataloging the excesses and failures of the legal system?  Do I commend Overlawyered and work to effectuate positive change from within, by self-selecting laudable cases?

No doubt that the legal profession makes itself an easy target.  But for every one of Overlawyered's posts confirming the death of self-restraint and common sense, there is a story of justice dispensed wisely, after diligent effort by courageous attorneys and clients.  To Overlawyered's credit, that blog never suggests that all litigation is bad.  Rather, it offers, as its mission statement, the following:

Overlawyered.com explores an American legal system that too often turns litigation into a weapon against guilty and innocent alike, erodes individual responsibility, rewards sharp practice, enriches its participants at the public's expense, and resists even modest efforts at reform and accountability.

I suppose that I have answered my own question about the merits of including Overlawyered in the dialog here.  I am interested in using The Complex Litigator to explore all manner of subjects touching on class action and complex litigation.  Some topics, like technology issues, concern the implementation of efficiencies to make a litigator's life easier.  Others, such as the recent discussion about coupon settlements in class actions spans topics of class action settlment mechanics and ethics in the law.  The Complex Litigator is intended to become a community that, by its nature, includes diverse viewpoints and ideas.  All appropriately expressed thoughts are welcome.

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Recent opinions rejecting settlements in options backdating suits may have far-reaching consequences

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On April 7, 2008, Judge William Alsup, of the United States District Court of the Northern District of California, issued two opinions in two options backdating lawsuits involving Zoran Corporation and CNET Networks. These opinions, which rejected proposed settlements in two separate lawsuits, may have far-reaching consequences that could extend outside the realm of options backdating lawsuits (or securities litigation generally).

I first learned of this story on Ideoblog, which had an April 25, 2008 post chiding the "poor plaintiffs’ lawyers, [who] like so many others, fell for the notion that backdating was the scandal of the century." (Larry Ribstein, "Backdating's latest victims: plaintiffs' lawyers," (April 25, 2008) busmovie.typepad.com/ideoblog.)  Following the link trail, I found more information on the Wall Street Journal's Law Blog, Law.com, and extensive detail and commentary about the story from The D&O Diary, which has extensive coverage of options backdating lawsuits.  What I read should serve as a wake-up call to all class action/complex action practitioners, whether aligned with the plaintiffs' bar or the defense bar.

To briefly summarize the facts, the parties to the Zoran case entered settlement negotiations, resulting in a February 26, 2008 stipulation of settlement. "At the preliminary approval hearing, the plaintiffs’ damages expert, at the court’s request, presented a report calculating the plaintiffs’ maximum damages as $16 million (including prejudgment interest), which incorporated both the alleged damaged cause to company by the defendants’ option grants as well as by option grants to the rank-and-file employees." (Kevin LaCroix, "Uh-Oh! Serious Options Backdating Settlement Problems," (April 24, 2008) www.dandodiary.com.)  The proposed settlement included: the payment of up to $1.2 million of the plaintiffs’ attorneys’ fees and costs; the repricing or cancellation of certain officer defendants’ options (which repricing or cancelation was represented to the court to have a value of $1.65 million); the company’s adoption of certain corporate governance reforms; and, the grant of a broad claims release. (Ibid.)

Judge Alsup would have none of it.  The Court began its discussion by declaring that the class action procedure can “lend itself to abuse,” noting that “one form of abuse is a collusive settlement.” Judge Alsup said that a collusive settlement “usually comes with a cash award to counsel, a broad release of claims, and a cosmetic non-cash recovery for the abused shareholders.”  Judge Alsup explained the obligation of reviewing courts to ensure that absent shareholders are treated fairly.  The obvious outcome was the Court's determinatio that the proposed settlement “falls short of deserving preliminary endorsement.”

Meanwhile, In the Court's CNET Networks opinion, issued on the same day, Judge Alsup refused even to evaluate the a proposed settlement. The case was stayed pending directed discovery related to whether the plaintiff had satisfied the demand requirement. The parties then presented a joint motion to lift the stay for the purpose of seeking a preliminary approval of a settlement. The Court commented that the actions of the parties were “disappointing” because the parties did not, as they had represented to the court, conduct any discovery or file an amended complaint.

The D&O Diary is concerned that Judge Alsup's decisions "could well have an in terrorem effect on other litigants in other" options backdating suits, despite the fact that the decisions lack any precedential value.  But I am interested in whether these decisions have even broader consequences.  Judge Alsup's concerns are as relevant to proposed settlements in consumer fraud or wage & hour class actions as they are in an options backdating derivative suit.  The Wall Street Journal's Law Blog notes, "It’s perhaps too soon to say what impact Alsup’s rulings might have on other pending settlements."  (Ashby Jones, "Recent Rulings Pose Potential Threat to Backdating Settlements," (April 24, 2008) http://blogs.wsj.com/law/.)  Of course it's too soon to know about the ultimate impact of these rulings, but it isn't too soon to contemplate that impact.  The decisions of Judge Alsup essentially require some testing of the merits of a claim before a settlement will receive even preliminary approval.  If this analysis gains any momentum in other courts, plaintiffs and defendants alike may find it very difficult to receive preliminary approval for early settlements, particularly where the plaintiff's attorneys receive all or most of any cash changing hands.

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Coupon Settlement redux: Chavez v. Netflix

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In an unintended moment of synchronicity, the First Appellate District, Division One, was opining on class action coupon settlements yesterday, the same day that I published some thoughts in a post entitled “Coupon-only settlements are hard to sell." After reading yesterday’s opinion in Chavez v. Netlflix (April 21, 2008) ___ Cal.Rptr.3d ___, 2008 WL 1777550 (“Netflix”), I feel that some further discussion of coupon settlements is in order.

Yesterday, I cautioned against the use of coupon settlements, based upon the negative perception of such settlement arrangements. It appears that I didn’t do a good enough job of parsing the audiences for such messages. Netflix strongly suggests that California courts look with much more favor upon coupon settlements than do members of the public and the media covering high-profile coupon settlements. After explaining in some detail that the Trial Court had analyzed the settlement under the four factors set forth in Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794 (slip op. at pp. 8-10), the Netflix Court made some interesting observations:

Ellis makes no claim that any of the factors supporting a presumption of fairness is not present in this case. Instead, Ellis bases her entire argument on the premise that this is a coupon settlement and that such settlements are, in general, inherently suspect and improper. In fact, these premises are neither entirely accurate nor particularly useful for evaluating the fairness of the specific settlement terms before us.

(Slip op. at p. 10.)

The claim that coupon settlements are inherently suspect or improper is also not persuasive. Ellis relies on a law review article and a handful of cases not decided under California law. [Footnote omitted.] She also asserts that the federal Class Action Fairness Act of 2005 (CAFA) (28 U.S.C. § 1712), although inapplicable to this proceeding, is “highly suspicious” of coupon settlements because it requires the court to hold a special hearing to determine their value. But while the valuation of coupon settlements may pose special challenges, neither CAFA nor any of the authorities Ellis cites hold that coupon settlements are per se improper. Notably, Ellis does not discuss or distinguish California cases in which coupon settlements have been found to be fair and reasonable. (See, e.g., In re Microsoft I–V Cases, supra, 135 Cal.App.4th at pp. 711–713; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 247; Dunk, supra, 48 Cal.App.4th at pp. 1804–1805.)

(Slip op. at p. 11.)

Other than suggesting that a cash settlement would have had more value to class members and more deterrent value, Ellis fails to explain why the settlement terms are not fair and reasonable in relation to the range of possible results further litigation might have produced, including no class certification and/or zero or minimal recovery of damages by class members. The issue before the trial court was not whether the settlement agreement was the best one that class members could have possibly obtained, but whether it is “fair, adequate, and reasonable.” (Dunk, supra, 48 Cal.App.4th at p. 1801.)

(Slip op. at p. 12.)

I found the discussion about coupon settlements in Netflix very illuminating. Perhaps appellate justices are more sensitive (than the public and the media) to the challenges facing litigators and trial courts because almost all of the appellate justices followed that route to the appellate bench. In any case, if the panel in Netflix had been interested in getting up on the soapbox to pillory coupon settlements, they were given a slow pitch to hit. Instead of swinging, they brushed off most of the criticism. That isn’t intended to suggest that the Netflix decision described coupon settlements as “fantastic.” The Court simply noted that coupon settlements can readily qualify as “fair, adequate and reasonable.” (Ibid.)

There is more to say about Netflix, but a discussion about attorney fee awards in class actions deserves a post of its own (or two, or three…). It is enough right now to note that, at least in California’s state courts, coupon settlements are not categorically defined as an undesirable class settlement option.

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Coupon-only settlements are a hard sell

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"Class action attorney" is now routinely used as a pejorative.  Although a certain amount of the taint attached to class action attorneys certainly stems from marketing efforts by "big business" (another term now used as a pejorative), which has the most to lose from a robust class action device, the plaintiffs' bar is also to blame.  The chief culprit?  The despised coupon settlement:

Class-action cases haven't always served consumers' interests, admits Bailey. In notorious "coupon" settlements, millions of victims get near-worthless service credits or discounts, while lawyers who file the cases get millions in fees.

(Sullivan, The  End of Class-Action Lawsuits?, (April 1, 2008) redtape.msnbc.com.)

In my humble opinion, the "class action attorneys" of the world aren't doing themselves any favors with coupon-only settlements that are grist for the media mill.  Case in point, as reported by The UCL Practitioner last week a trial court granted final approval to a settlement in the Ford Explorer Cases, JCCP nos. 4266 & 4270.  The terms of that settlement, which involves coupons to Ford Explorer owners and substantial fees to attorneys, were not covered favorably in the media.  According to consumeraffairs.com, consumers "in California, Connecticut, Illinois and Texas will be able to apply for $500 coupons to buy or lease new Explorers or $300 coupons to buy or lease other Ford, Mercury or Lincoln" products.  (Enoch, Ford Class Action Settlement Leaves Consumers In The Dust (April 16, 2008), www.consumeraffairs.com.)  In that article, Enoch wrote:

But while trial lawyers who represented consumers in this case are likely to make about $25 million, most consumers will be lucky to get anything at all.

Many will never learn of the settlement results while those who do may well be unable to meet the strict requirements needed to qualify for the coupons, Ditlow said.

(Ibid.)  And a Texas newspaper, reporting on the objection filed by a local resident, said:

The compensation? Those who own an Explorer with a model year from 1991 to 2001 can submit a claim and receive a $500 voucher to buy another Explorer or receive a $300 voucher to purchase another Ford or Lincoln Mercury vehicle.

“Tell me why you’re going to spend $30,000 on a car to get the benefit of a $500 coupon,” Weinstein said Thursday.

While consumers are getting a coupon, attorneys in the case arranged their fees to be paid — in cash — to the tune of about $20 million.

Weinstein thinks that’s too much when the actual buyers of the vehicles are getting a coupon with no cash value.

(Larson, When is $500 worth nothing?  Local attorney thinks he knows (April 18, 2008), www.athensreview.com.)

Certainly, we don't (and won't) learn the full story behind why a particular settlement is accepted and recommended by counsel.  In any particular case, counsel for the class may conclude that there is little likelihood of success on the merits, despite the fact that certification appears likely or was achieved.  Despite not knowing the particular twists of the Ford case, it is a high profile matter that invites reporting like the examples above.

Personally, while I understand that there are occasions where coupon-only settlements are the only viable method for settlement and resolution, I prefer, at minimum, what I call "consumer choice settlements."  Under such settlements, a class member receives a choice of money in amount X or a coupon of value Y.  The parties can negotiate the values of X and Y to encourage one choice over the other, but the class member that wishes a clean divorce from the defendant can opt for the money, even if the coupon is of higher value.  "Class action attorneys" should consider the larger consequences of their settlement structures before legislative bodies take it upon themselves to do so for the attorneys.

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