Close Scrutiny for Class Settlements Where Plaintiff Attorneys Take Lion’s Share

Two recent US antitrust class action settlements drew additional scrutiny from federal judges, showing that the allocation of settlement funds between a proposed class and their attorneys will be carefully reviewed for fairness to class members.

WHAT HAPPENED:

  • On January 17, 2020, Judge Janis L. Sammartino denied a motion for preliminary approval of a settlement between Chicken of the Sea and a proposed class of caterers, restaurants and commercial food preparers from 27 states and DC regarding allegations of price-fixing for canned tuna.
    • The proposal would allocate about 77% of the total settlement to attorney fees, costs and expenses, and leave the proposed class with $1.5 million or less of the total $6.5 million settlement amount.
    • The judge indicated concern that the agreement may not have been negotiated at arm’s length, that the filings lacked a claim administration plan and that “class members will collectively receive approximately 6.85% of the damages they attribute to [Defendants]. This seems a modest amount considering that in criminal antitrust proceedings [Defendants] admitted to price-fixing, thus essentially conceding liability in this action for civil damages. Nevertheless, [Plaintiff]s provide no discussion of the weaknesses of their claims, strengths of [Defendants]’s defenses, collection difficulties, or other relevant circumstances to justify the modest recovery.”
    • Though the settlement approval motion was denied, the judge allowed for re-filing to potentially remedy the deficiencies of the original proposal.
  • On January 21, 2020, Judge Joy Flowers Conti requested briefing to justify a proposed settlement between an 11,000-member class of small-group insurance customers and Highmark Inc. regarding allegations of collusion with the University of Pittsburgh Medical Center to block small insurance plans from the market.
    • The proposal would allocate about 79% of the total settlement to attorneys, leaving about $1.6 million of the $7.5 million settlement for the proposed class.
    • Plaintiff attorneys had not yet submitted their official request for costs and fees to the court, but a draft notice to potential class members attracted the judge’s attention and prompted the required briefing “to address the notice and [Plaintiff’s] reasons for the award of fees and costs as set forth on the record.”
    • Plaintiff attorneys sparred with the judge over the cause of the increased costs with Plaintiffs noting the court required a special master, additional discovery and expert reports from both parties and the judge responding that if issues had been properly raised initially, there would not have been a need for additional hearings and discovery.
    • The briefing regarding attorney fees is due February 4, 2020.

WHAT THIS MEANS:

  • Companies who become defendants in antitrust class action litigation should be aware that courts may reject a proposed class settlement if attorney costs and fees represent too great a portion of the total settlement amount, despite the parties’ desire to resolve the case. If the parties are not able to successfully address concerns raised by judges regarding settlements, it may be back to the negotiation table to devise a new deal that could result in a higher settlement amount.
  • The fairness of class settlements is a central consideration for antitrust agencies and courts. Where the vast majority of a proposed settlement will never reach the allegedly injured class, a judge will consider the fairness of the proposed settlement and its distribution in approving a settlement. The FTC’s Class Action Fairness Project held a recent workshop relating to notice and has studied the impact of compensation amounts and consumer perceptions in trying to better understand the issues involved in class actions.
Nicole CastleNicole Castle
Nicole L. Castle provides legal counsel on complex civil and criminal antitrust litigation. She regularly represents clients in complex, multidistrict class action antitrust litigation alleging Sherman Act violations. She also defends mergers and acquisitions before the US Department of Justice (DOJ) and Federal Trade Commission (FTC). Nicole counsels clients on strategies for addressing cartel prosecutions and defenses, from the inception of government investigations to the initiation of civil class action litigation. Read Nicole L. Castle's full bio.


Michelle LoweryMichelle Lowery
Michelle S. Lowery focuses her practice on antitrust and competition. Michelle has experience in a broad range of antitrust litigation, transactional and counseling matters. Her practice focuses on complex litigation, government investigations, mergers and acquisitions, and counseling. Read Michelle Lowery's full bio.


Matt EvolaMatt Evola
Matt Evola assists clients with premerger analysis and notification under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act and in defending mergers and acquisitions before the US Federal Trade Commission (FTC), US Department of Justice (DOJ), state antitrust authorities and foreign competition authorities. He also counsels clients in relation to complex antitrust litigation and government investigations. Matt has experience in a variety of industries, including representing clients in the healthcare, pharmaceutical, packaging, aggregates, consumer products, and telecommunications industries. Read Matt Evola's full bio.


Stephen WuStephen Wu
Stephen Wu focuses his practice on antitrust litigation, defending mergers and acquisitions before antitrust enforcement agencies and counseling clients on antitrust compliance issues. He represents clients in a wide variety of industries ranging from aerospace to consumer products and food, with a particular concentration on health care antitrust matters. He is co-chair of the Firm’s Health Antitrust Affinity Group. Read Stephen Wu's full bio.


AvatarMcDermott Will & Emery



STAY CONNECTED

TOPICS

ARCHIVES