Tuesday, August 3, 2010

First District Publishes Class Objector Opinion: Cellphone Fee Termination Cases

On July 27, 2010, the First District (Division five) issued an order changing the publication status of the Cellphone Fee Termination Cases, __ Cal.App.4th __ (2010) from unpublished to published. The opinion, which deals with an objector appeal to a class settlement, discusses several issues relating to settlement notice standards, and the propriety of incentive payments to the named plaintiff.

First, the Court rejected an objection to the use of an abbreviated “short-form notice” which referred class members to a website containing a more detailed “long-from notice.” As reasoned by the Court, this method of providing notice was the most practicable and met minimal standards of due process:
A similar procedure for notice of a class settlement, utilizing a summary notice directing class members to a Web site containing more detailed notice, was approved in Chavez as a “perfectly acceptable” manner of giving notice. (Chavez, supra, 162 Cal.App.4th at p. 58.) We agree with the observation in Chavez that “[u]sing the capability of the Internet in [this] fashion was a sensible and efficient way of providing notice, especially compared to the alternative [objector] apparently preferred—mailing out a lengthy legalistic document that few class members would have been able to plow through.” (Id. at p. 58, fn. omitted.) We do not look for perfection. “[A] large body of case law reflect[s] the view that ‘the whole concept of a large class-action might easily be stultified by insistence upon perfection in actual notice to class-members … .’ [Citation.]” (Hypertouch, supra, 128 Cal.App.4th at p. 1540.
Slip Opinion, at 12-13.

[More on electronic class notice may be found in an article I authored, located here]

Second, citing to federal authority, the Court concluded that minimal standards of adequacy of the notice does not require disclosure of class size:
Zobrist also argues that notice was defective in failing to disclose the “enormous size” of the class to the EFT Assessed Class. She contends that this did not provide the class members with adequate information for the members to make an informed decision about whether to participate, object, or opt out. She cites no authority for her position that information as to the size of the potential class, or the contingencies of recovery in any particular amount, is required. Courts which have considered such objections in the context of class settlement have rejected the claim. n18 “[T]here is no requirement that the class size be specified in the notice [citations] … .” (In re Lorazepam & Clorazepate Antitrust Litigation (D.D.C. 2002) 205 F.R.D. 369, 379; see also In re Insurance Brokerage Antitrust Litigation (D.N.J., Feb. 16, 2007, MDL No. 1663, No. 04-5184(FSH)) 2007 U.S. Dist. LEXIS 11163 [nonpub. opn.] [rejecting objection to notice that it “do[es] not provide details about the size of the class and the actual individual settlement values”]; In re: Managed Care Litigation; Class Plaintiffs v. Aetna Inc. (S.D.Fla., Oct. 24, 2003, MDL No. 1334, No. 00-1334-MD-Moreno) 2003 U.S. Dist. LEXIS 27228 [nonpub. opn.] [rejecting objection to notice that there was “no way to calculate the actual value of the settlement as to each class member since no estimate of size of class was provided”].)
Slip Opinion, at 13.

Finally, the Court rejected the objector’s argument that incentive awards provide preferential treatment to the named plaintiff that amount to a breach of the named plaintiff’s fiduciary duty to the class. As reasoned by the Court, incentive payments are a necessary aspect of class litigation, in that such compensation may be required to induce the representative to participate in the suit, but that such payments must be proportionate to the circumstances of the case:
“[T]he rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.” (Clark, supra, 175 Cal.App.4th at p. 806.) An incentive award is appropriate “‘if it is necessary to induce an individual to participate in the suit.’ [Citation.]” (Id. at p. 804.) “[C]riteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. [Citation.]” (Van Vranken v. Atlantic Richfield Co. (N.D.Cal. 1995) 901 F.Supp. 294, 299.) These “incentive awards” to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. (See Dornberger v. Metropolitan Life Ins. Co. (S.D.N.Y. 2001) 203 F.R.D. 118, 124–125.)
Slip Opinion, at 21-22.

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