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(Reuters) - Judge Kenneth Lee of the 9th U.S. Circuit Court of Appeals is not exactly a subtle writer, based on the evidence of his snarky, pop culture-laden opinion on Tuesday in Briseno v. Henderson.
In the Briseno case, University of Chicago Law School professor Todd Henderson objected to the class action settlement of claims that ConAgra Foods Inc falsely labeled Wesson vegetable oil as “100% all natural,” even though the oil contained GMO ingredients. Henderson and his lawyer, Ted Frank of the Hamilton Lincoln Law Institute, argued that the trial judge erred in approving a deal in which class members, who had to submit claims to receive 15-cent refunds, were slated to get just under $1 million, while class counsel were awarded nearly $7 million in fees and costs. (That award, to be clear, was only about half of class counsel's lodestar billings.)
In Tuesday’s ruling, the 9th Circuit reversed approval of the settlement and remanded the case for reconsideration of the fee award. The appeals court tagged the trial judge, U.S. District Judge Cormac Carney of Los Angeles, with two errors. First, the 9th Circuit said, Carney should have scrutinized the fee request by class counsel under the appellate court’s 2011 “Bluetooth test,” which spells out three warning signs of self-dealing by plaintiffs lawyers. The 2018 amendment of the federal rules for class actions, the court held, requires searching scrutiny of fee requests, so Bluetooth applies even when settlements occur after class certification.
Moreover, the court held, Carney should not have given any credit to class counsel for obtaining an injunction to block ConAgra from using the all-natural label in future Wesson oil packaging. The injunction, according to the 9th Circuit, was “virtually worthless” because ConAgra no longer owns the Wesson brand, which it sold before entering the class action settlement.
Those are important holdings for the class action bar, but Lee was unwilling to let the court’s findings speak for themselves. Here, for instance, is how he began the opinion for a panel that also included Judge John Owens of the 9th Circuit and U.S. District Judge David Ezra of San Antonio, Texas: “We can perhaps sum up this case as ‘How to Lose a Class Action Settlement in 10 Ways.’ The parties crammed into their settlement agreement a bevy of questionable provisions that reeks of collusion at the expense of the class members.”
Lee said the deal “raises a squadron of red flags billowing in the wind and begging for further review.” He referred to class counsel’s persistent class certification efforts, which included fending off ConAgra’s petition for U.S. Supreme Court review, as “hoping to strike oil.” He derided the procedural complexities of Erie doctrine as mostly a matter for law professors like objector Henderson and Samuel Issacharoff of New York University, who represented class counsel at the 9th Circuit.
The judge also packed in pop-culture references, comparing the allegedly worthless injunction both to a marriage proposal on The Bachelor and to an imaginary promise from George Lucas that Disney wouldn’t debase the Star Wars franchise. He threw in an “all right, all right, all right” quote, albeit without specifying whether it was a reference to The Doors’ song or actor Matthew McConaughey’s catch phrase.
At the end of the opinion, Lee quoted several lines from the musical Hamilton. In politics, he said, maybe it’s okay if no one else is in “the room where it happened,” but not in class action settlements.
I’d argue that the flippant tone of the opinion obscures not just the significance of the 9th Circuit’s holdings in the ConAgra decision but also a broader question this case provokes about consumer class actions: How should federal courts balance the interests of allegedly deceived consumers and their lawyers?
We want plaintiffs lawyers, after all, to bring consumer class actions when companies lie to their customers. But fees for class counsel come out of the pockets of class members – even, arguably, in a settlement like this one, in which ConAgra agreed to pay class counsel’s fees apart from its payment of class members’ claims.
Objectors’ counsel Frank contends such fee agreements between class counsel and class action defendants are a smokescreen. Defendants like ConAgra, he argues, fundamentally think of class action settlements as a single bucket of money to be allocated between class members and their lawyers, regardless of how the allocation is structured. (Lee more or less adopted that view, although the 9th Circuit declined formally to hold that the entire $8 million that Conagra agreed to pay in class claims and attorneys’ fees and costs should be construed as a common benefit fund.)
So, according to Frank, the best way for trial judges to align the interests of class members and their lawyers is to award class counsel a percentage of the class recovery. Here, Frank said, ConAgra was willing to put about $8 million on the table, $1 million for the class and nearly $7 million for class counsel. In a proper allocation, Frank asserted, the class should have received $6 million.
I pointed out that the ConAgra settlement was a so-called claims-made deal, in which ConAgra would have been on the hook for nearly $70 million if all consumers had filed claims. In the end, less than 1% of the class filed claims.
Frank said class counsel and ConAgra could have boosted the claims rate by designing the deal differently: notifying Wesson oil purchasers based on grocery store records; streamlining the claims process; and electronically depositing payments from ConAgra.
“You’re doing this wrong if you don’t get $6 million in claims,” said Frank.
Class counsel from Tadler Law, DiCello Levitt Gutzler and Milberg Coleman Bryson Phillips Grossman said in an email statement that they did, in fact, work with the claims administrator to boost claims, even if the 9th Circuit "inexplicably and unfortunately" left that out of its opinion.
Class counsel said they brought the ConAgra case based on laws with fee-shifting provisions that acknowledge lawyers may recover more money than individual clients in hard-fought litigation like this. Their fee, class counsel said, was proposed by the retired federal magistrate who served as mediator and was less than they might have received had they won at trial.
"Given that the relief to the class was higher by virtue of the settlement, we proceeded with the best interests of the class in mind," the statement said. "The decision is disappointing and we’re evaluating appropriate next procedural steps."
ConAgra counsel Angela Spivey and Rachel Lowe of Alston & Bird didn’t respond to my email query.
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