In Cho v. Seagate Technology Holdings, Inc. (Klausner, Objector), Court holds that allegations of collusion, without evidentiary support, are insufficient to overturn settlement or allow discovery to objector

In Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116 (2008), the Court of Appeal (First Appellate District, Division Three) set aside a settlement and permitted an objector to obtain discovery to assess whether the settlement was "fair, reasonable and adequate."  See blog post.  However, the objector in Cho v. Seagate Technology Holdings, Inc. (Klausner, Objector) (September 15, 2009) did not achieve similar results, despite appealing to the very same First Appellate District, Divsion Three.

Cho alleged that Seagate overstated the size of its hard drives (its an ego thing, really) by using the decimal definition of “gigabyte” (equal to 1 billion bytes) which differed from the binary definition (equal to approximately 1.073 billion bytes) that was used by computer operating systems.  Slip op., at 2.  Eventually the matter settled, on the following terms:

For disc drives purchased before January 1, 2006, class members could choose either a cash payment equal to 5 percent of the net purchase price, or the Seagate Software Suite (the Software) that would allow users to perform enhanced computer and disc management functions. The estimated average cash benefit payable per hard drive was $7, and the Software had an estimated retail value of approximately $40. For disc drives purchased after January 1, 2006, when the packaging included more precise disclosures added by Seagate, class members were entitled to receive the Software.

Slip op., at 3.  One objection was filed.  The objector contended that "the notices of settlement were insufficient and inconsistent with the agreement.  He claimed it was not possible to determine 'whether someone who purchased a Seagate Hard Drive (‘Drive’) from a retailer that is not a Seagate authorized retailer, but that retailer purchased the Drive from an authorized distributor, is a class member under the
settlement agreement.'"  Slip op., at 4.  In response to the objection, Cho and Seagate agreed that "'the words "authorized retailer or distributor" in the settlement agreement--which are not defined terms--are meant to include drives purchased either directly or indirectly from the Authorized Retailers or
Authorized Distributors listed on the website, meaning that they include retailers who are not themselves listed on the website, but who purchased from one of the entities that are listed on the website. The only excluded resellers are those whose drive sales are of fake, grey market, used, or stolen drives.'"  Slip op. at 4-5.  The tiral court did not find the objector's concerns persuasive:

The trial court overruled Klausner’s objections. The order approving settlement states: “Mr. Klausner’s objection to the term authorized retailers or distributors, the limitation of claims to purchases from authorized retailers or distributors, and his related claims that the class is impermissibly narrowed, that plaintiff’s counsel have not adequately represented the class and the plaintiff is an inadequate class representative are overruled. The court finds that it is appropriate to limit the class to purchasers from authorized retailers or distributors. . . . The Court received no information that any class member, other than Mr. Klausner, was confused by the term authorized retailer or distributor. In that regard, neither the Agreement nor the form of notice caused any prejudice to the Plaintiff Settlement Class.” Klausner was granted leave to file his additional objections, which were overruled, but his request to undertake discovery was denied.

Slip op., at 6.  After discussing the current authority governing the review of class action settlements, the Court of Appeal concluded that mere inferences of collusion, with nothing more than accusations to support them, would not be considered:

There is no evidence that the parties to the settlement were intentionally deceptive or that they tried to mislead the court in seeking approval. We will not indulge Klausner’s suggestion that approval be reversed on the basis of misconduct by counsel.

Slip op., at 10.  On the other hand, the Court of Appeal was concerned about ambiguity in the Notice to the class:

A class definition that is ambiguous presents a problem of class ascertainability that “ ‘goes to the heart of the question of class certification, which requires a class definition that is “precise, objective and presently ascertainable.” ’ ” (Global Minerals & Metals Corp. v. Superior Court (2003) 113 Cal.App.4th 836, 858.) In the absence of an ascertainable class, “ ‘it is not possible to give adequate notice to class members or to determine after the litigation has concluded who is barred from relitigating.’ ” (Ibid.) The goal in defining the class is to use terminology that will convey sufficient meaning to enable persons hearing it to determine whether they are members of the class plaintiff wishes to represent.

Slip op., at 12.  Applied to the facts of the case before it, the Court of Appeal said:

We have no disagreement with the parties’ objective and no quarrel with the trial court’s finding that exclusion of “those who purchased outside of Seagate’s authorized retail channels” is “rationally based on legitimate considerations.”  The problem is that a fair reading of the class definition and the notice has the potential to lead some of those who purchased within Seagate’s authorized retail channels to conclude they are not members of the class.

Slip op., at 13.  The Court of Appeal then clarified that the defect in the Notice was not fatal to the settlement and vacated the trial court's Order approving the settlement so that a revised Notice could issue to the class.

The final issue, Klausner's request for discovery, was quickly rejected by the Court of Appeal.  The Court noted that objectors are not entitled to discovery unless some evidence of collusion existed.  Because Klausner presented no evidence to the trial court, the Court of Appeal affirmed the trial court's decision to deny discovery rights to the objector.