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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.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 27

TRENDING LEGAL ANALYSIS


About this Author

Stefen Meisner Attorney McDermott Will Emery
Partner

Stefan M. Meisner is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  Stefan is co-chair of the Firm’s Electronic Data Management, Privacy & Discovery group.

202 756 8344
Partner

Stephen Wu is a partner in the law firm of McDermott Will & Emery and is based in the Firm’s Chicago office. He focuses his practice on complex litigation, mergers and acquisitions, and counseling clients on pricing and distribution issues. Stephen has represented clients in a wide variety of industries including: aerospace, biotechnology, consumer products, energy, food, and health care.

Stephen has defended clients in private litigation against federal and state antitrust and unfair competition claims, and represented clients in criminal antitrust investigations. For mergers and acquisitions, Stephen has defended transactions before the United States Department of Justice and the Federal Trade Commission. Besides pricing and distribution issues, Stephen has also counseled clients on standards-setting and compliance with consumer protection laws.

Prior to joining the Firm, Stephen was an attorney for the Federal Trade Commission (FTC), where he participated in all aspects of the FTC’s merger enforcement program, from investigating multibillion dollar transactions to negotiating consent orders resolving the government’s competition concerns. At the FTC, he received an Award for Meritorious Service and its Stephen Nye Award, the FTC’s highest award given to a junior attorney, in 2001.

312-984-2180
Nicole L. Castle, Antitrust Attorney, McDermott Will Law firm
Associate

Nicole L. Castle is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office.  She focuses her practice on complex civil and criminal antitrust litigation.  She has extensive experience representing clients in class action antitrust litigations at the trial and appellate level and defending mergers and acquisitions before the U.S. antitrust agencies.  She has also counseled clients on strategies for addressing cartel prosecutions and defenses, from the inception of government investigations to the initiation of civil class action litigation...

212-547-5480
Michelle Lowery Antitrust Litigation Attorney McDermott Will & Emery
Partner

Michelle Lowery focuses her practice on complex antitrust litigation, transactional, and counseling matters and is a member of the firm’s antitrust and competition practice, which is designated “Global Elite” as one of the top 25 competition practices in the world by Global Competition Review. Michelle has been recognized by the Legal 500 USSuper Lawyers, and Benchmark Litigation as excelling in antitrust work.

Michelle has a decade of experience in achieving exceptional results for her clients in class action conspiracy, monopolization and...

312-984-2139
Matt Evola, Associate, Mcdermott Will Emery, Washington DC, Antitrust Lawyer, regulatory, litigation, consumer protection, government investigations, white collar defense
Associate

Matt Evola focuses his practice on antitrust, regulatory and litigation matters. He has additional experience in consumer protection, government investigations, and white collar defense.

During law school, Matt was highly involved in pro bono initiatives, working with the Washington Legal Clinic for the Homeless and DC Law Students in Court. He also acted as senior articles editor for the American Criminal Law Review (ACLR), actively contributing to the publication’s online blog Mens Rea, and as a legal extern to Judge James E...

202-756-8766