(Reuters) - The best class action lawyers I know may not particularly like Ted Frank and his colleagues at the Hamilton Lincoln Law Institute’s Center for Class Action Fairness. But they generally respect him. Frank and his team, as you doubtless know, specialize in objecting to class action settlements. By their reckoning, they play an invaluable role in the settlement approval process, when both class counsel and defendants are pushing for the court to bless their deal. Frank and CCAF consider themselves to be a bulwark against collusion and self-dealing, the only litigant whose sole objective is to protect class members’ interests.
CCAF believes the proposed Equifax data breach settlement falls short. On Tuesday, CCAF’s Melissa Holyoak filed an objection to the proposed settlement, which settlement proponents valued at $700 million, the biggest data breach deal in U.S. history. CCAF’s objection is on behalf of Frank himself, a class member who resided in Washington, D.C., at the time of the Equifax breach, and a Utah resident named David Watkins.
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In an email statement, co-lead class counsel Norman Siegel of Stueve Siegel Hanson said on behalf of all of his colleagues that CCAF’s objections are “without merit and (we) will address them in due course as part of our final approval papers.” The Equifax settlement has received preliminary approval from U.S. District Judge Thomas Thrash of Atlanta and is supported by the Federal Trade Commission.
CCAF frequently raises questions about fee requests by class counsel, so I wasn’t at all surprised to see its brief argue that class counsel from Stueve Siegel, Doffermyre Shields Canfield & Knowles, and DiCello Levitt Gutzler should receive only $16.27 million, 10% of the $162.7 million that CCAF believes to be the true recovery for the Equifax class. (Class counsel have requested nearly $79 million, or 20% of the $380.5 million that they say is available to consumers in cash recovery.) CCAF argues that class members are entitled, on average, to less than $1 in this settlement, so class counsel don’t even deserve to be paid their lodestar billings.
I’m more interested, though, in CCAF’s substantive arguments for why the Equifax settlement should not be approved. Broadly speaking, those contentions fall into three buckets: The settlement does not account for conflicts between class members from states that offer relatively big statutory damages for privacy breaches and those with small or no potential damages; Equifax and class counsel included terms in the settlement that made it very difficult for class members to object; and Equifax and class counsel throttled class members’ claims for $125 in cash when it became clear that the offer would be drastically oversubscribed.
The most promising of those arguments seems to me to be CCAF’s assertion that Equifax and class counsel failed to acknowledge and address potential conflicts among class members. The brief uses Frank and Watkins, the named objectors, to illustrate that point. In Watkins’ home state of Utah, he might be entitled to statutory damages of as much as $2,000 in claims arising from the Equifax breach. Frank, who lived in Washington, could have claimed statutory damages of $1,500. But New Yorkers in the Equifax class would be permitted only $50 for claims under New York general business law.
The class settlement, CCAF argued, does not establish subclasses to reflect the variation in damages available to class members from across the country. Nor did Equifax and class counsel seek the appointment of lawyers to represent the interests of class members from states with different damages schemes.
According to CCAF, 2018 changes in the federal class action rules specifically mandate subclasses and separate representation to assure that one group of class members’ claims are not favored at the expense of another group’s. There’s also precedent for appellate courts to strike down settlements that fail to account for such intraclass potential conflicts, the CCAF brief said. In addition, of course, to the U.S. Supreme Court’s seminal 1997 ruling in Amchem v. Windsor, which struck down a proposed asbestos class settlement that failed to protect the interests of future claimants, the CCAF brief cited the 2nd U.S. Circuit Court of Appeals’ 2011 decision in In re Literary Works. In that case, the settlement reflected that claims by authors suing Google fell into three categories, but no class representative represented class members whose claims fell only into the least remunerative bucket. The 2nd Circuit struck down the settlement.
CCAF has had limited success with the intraclass conflict argument in data breach litigation. In 2017, the group challenged approval of Target’s data breach class action settlement at the 8th Circuit, highlighting the trial court’s failure to analyze whether the settlement properly addressed potential conflicts between class members who had experienced identity theft or other tangible consequences of the breach and those who had not. The 8th Circuit remanded the case for additional analysis.
The following year, after the trial court re-approved the settlement, CCAF returned to the 8th Circuit to argue, among other things, that the settlement should not have been approved because of a conflict between class members from states with high statutory damages and those who were not entitled to significant recovery – precisely the argument CCAF is asserting in Equifax. The 8th Circuit held that CCAF’s client, a Texan, did not have standing to argue that class members from states with high statutory damages were disadvantaged by the settlement because the applicable Texas statute offered no damages at all.
That shouldn’t be an issue in Equifax, because Frank and Watkins, as the CCAF brief explains, are both from high-damages states. “The dangers of having no separate representation were realized for Frank and Watkins: Without separate counsel to help press their most compelling case, their respective subgroups could not maximize the litigation values of their statutory claims,” the objection said. “Instead, Frank and Watkins receive the same relief under the settlement as other class members and still waive all of their statutory-damages claims.”
At least a dozen Equifax class members have written to Judge Thrash, complaining that they felt deceived by the settlement’s initial language suggesting that claimants would be entitled to $125 in cash. The CCAF objection argues that when Equifax and class counsel sent followup notices explaining restrictions on the deal’s cash offer, class members may not have paid attention.
And according to CCAF, even if class member had a problem with the terms or administration of the Equifax deal, the settlement agreement imposes conditions that make it very difficult for them to object, requiring objectors, for instance, to provide dates on which they would be available for depositions.
The deadline for objectors is today, so we’ll see how many Equifax class members manage to jump through those hoops.
The views expressed in this article are not those of Reuters News.