Class Action Notice Requirements:
Challenges for Plaintiffs and Defendants Leveraging Electronic and Media Notice Efficiencies; Meeting Plain Language and CAFA Requirements
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TUESDAY, JULY 31, 2012
Presenting a live 90-minute webinar with interactive Q&A
Matthew M. Walsh, Partner, Winston & Strawn, Los Angeles
Shannon Wheatman, Vice President, Kinsella Media, Washington, D.C.
Paul G. Karlsgodt, Partner, Baker Hostetler, Denver
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Traditional and Non-Traditional Options in Class Action Notice
Month Day, 2012
Shannon Wheatman, Ph.D.
Kinsella Media, LLC
202.379.1150
• Long Form
• Summary
• Postcard
• TV
• Radio
• Magazines
• Newspapers
• Banners
• Keyword
Search
• Mobile
• Social Media
Traditional
Internet
Emerging Notice
Reaching Class Members
When comprehensive lists of class members exist,
direct mail (by post or email) should be the primary
method used for notification.
Additional noticing efforts (including paid media)
must be undertaken when comprehensive lists are
not available.
7
Source: MPA,
Newspapers
Magazines
Radio Stations
TV Stations
Apps
Websites
"Our ability to produce media has outstripped our ability
to consume it."
David Carr
The New York Times
Sept. 6, 2010
2,300
3700
500
--
--
--
1,400
7,100
9,600
2,300
250,000+
200 million
Source: MPA, Netcraft, FCC.
Media Options Exploding
8
Traditional Media Remains Dominant
92.6% of adults watch TV
Watch an average of 4.5 hours per day
92% of adults read magazines
On average, read 10 magazines per month
50% of adults 45+ read a Sunday newspaper
31% of adults 25-44 read a Sunday newspaper
9
Radio
Television
Internet
Mobile
Outdoor
Media Fragmentation
10
Re-inventing the Business Model
Online
Print Edition
Digital Edition
With Time Everything Evolves
11
The Online Landscape
176 million unique visitors 18+ in June
2012
Total online usage averages just over 1
hour per day for each user
650 billion pages visited per month
12
Online Advertising
Display
• Website
• Banners, Text, Video
Search
• Keyword Sponsorships
• Text Ads
13
Online Advertising: Display
Display advertising is served to site visitors along
with content
14
Contextual Targeting
Behavioral Targeting
Online Capabilities
Behavioral Targeting is the ability to
serve online advertising based on
profiles from an individual user’s
viewing behavior.
Example: User browses sports content
from different websites, and is served
with a banner regarding razors for
men.
Contextual Targeting serves
advertising messages based on
content being viewed on an
individual Web page.
Example: User is browsing within
the food category and gets a banner
message regarding a sale on a food
product.
Contextual Targeting
15
Mobile Phones
6 billion globally
234 million users in United States (53%
Smart Phones)
43% of users access mobile Internet
Mobile Internet usage expected to overtake
computer access in 2014
16
Social Media
65 million adults visit daily
Heaviest users teens and young adults
Use for text ads but limited utility otherwise
41 million monthly visitors
40% of users are 12-34
Promotional tweets
181 million blogs on the Internet
Highly targeted to narrow niches
Uncontrolled content
Blogs
17
Facebook Ad Placement
18
Connect & Share – Other Options
19
Text Messaging – another way to continue the
conversation with interested class members.
QR Codes – extend the information you provide in a notice (video, sound clip, online claim form)
Traditional Media Trumps New Media for Mass Reach
Traditional
• Mass audiences for national and state-wide settlements
Internet
• Display Banner advertising a contributing component
• Keyword sponsorship to facilitate search
Emerging
• Niches to complement mass media
• Will evolve in the future
20
Due
Process
Direct Notice
21
Due
Process
Direct Notice
Magazines Newspapers TV/Radio
22
Due
Process
Direct Notice
Magazines Newspapers TV/Radio
Internet: Display, Contextual, Behavioral
23
Due
Process
Direct Notice
Magazines Newspapers TV/Radio
Internet: Display, Contextual, Behavioral
Third Party Outreach
Keyword Search
Earned Media
24
Due
Process
Direct Notice
Magazines Newspapers TV/Radio
Internet: Display, Contextual, Behavioral
Third Party Outreach
Keyword Search
Earned Media
Emerging Media – Mobile, Social Media
25
Due
Process
Direct Notice
Magazines Newspapers TV/Radio
Internet: Display, Contextual, Behavioral
Third Party Outreach
Keyword Search
Earned Media
Emerging Media – Mobile, Social Media
Due Process
26
Due Process
“But when notice is a person’s due, process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it.”
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 315 (1950). Rule 23 can “comport with constitutional standards of due process only if there is a maximum opportunity of notice to the absentee class members . . .”
Greenfield v. Villager Indus., Inc., 483 F. 2d 831
(3d Cir. 1973).
27
Court Reactions to Non-Traditional Notice
Courts have long accepted traditional paid media as
a form of adequate notice:
“It is well settled that in the usual situation first-class mail and
publication in the press fully satisfy…notice requirements
…and the due process clause.” Zimmer Paper Prods., Inc. v.
Berger & Montague, P.C., 758 F.2d 86, 90 (3d Cir. 1985).
New media and other non-traditional options that
come in as supplemental elements to a broader
based media program have not been questioned.
28
Questions?
Shannon Wheatman, Ph.D.
Vice President
Kinsella Media, LLC
202.379.1150
29
© 2012 Baker & Hostetler LLP
Paul Karlsgodt 303.764.4013
Casie Collignon
Plain Language in
Class Action Settlements
The Struggle Between Simplicity and Accuracy
31 Baker Hostetler
Rule 23’s Plain Language
Requirement FRCP 23(c)(2)(b) - Notice
For any class certified under Rule 23(b)(3), the court must direct to class members the
best notice that is practicable under the circumstances, including individual notice to all
members who can be identified through reasonable effort. The notice must clearly and
concisely state in plain, easily understood language:
(i) the nature of the action;
(ii) the definition of the class certified;
(iii) the class claims, issues, or defenses;
(iv) that a class member may enter an appearance through an attorney if the member so
desires;
(v) that the court will exclude from the class any member who requests exclusion;
(vi) the time and manner for requesting exclusion; and
(vii) the binding effect of a class judgment on members under Rule 23(c)(3)
32 Baker Hostetler
Constitutional Plain Language
Requirement
• Kaufman v. American Exp. Travel Related Services, Inc., 2012 WL 2401671
(N.D. Ill. 2012) (“Class members are entitled to the best practicable notice,
not just because the Rules require it, but ‘as a matter of due process.’”,
quoting Lemon v. Int'l Union of Operating Eng'rs, Local 139, 216 F.3d 577,
580 (7th Cir. 2000)).
• Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (“An
elementary and fundamental requirement of due process ... is notice
reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to
present their objections.”).
33 Baker Hostetler
The Risks of Unclear Notice
• Preliminary approval denied
• Costs to defend against objectors
• Costs to re-issue notice
• Portions of settlement modified after fairness hearing
(e.g. fees)
• Rejection of settlement in its entirety after fairness
hearing
• Failure to get the benefits of the class action settlement
release
34 Baker Hostetler
Preliminary Approval Denied
• In re Cadence Design Systems, Inc. Securities Litig., No.08-cv-04966 (N.D.
Cal. Aug. 26, 2011)
– Preliminary approval of the settlement and certification of the class was
denied because the court was not able to determine whether the
proposed Notice was adequate, in part, because the parties did not
submit an example of one of the notices that was to be sent to
claimants.
35 Baker Hostetler
Plain Language Objections
• Objection filed by the Center for Class Action Fairness LLC, In re Pampers Dry Max Litig., No. 10-cv-00301 (S.D. Ohio Aug. 29, 2011)
– Objector claimed that neither the Notice nor the settlement disclosed the total amount that would be sought in incentive awards or the identity the cy pres recipient.
• Brief of Objector, In re: Baby Products Antitrust Litig., Nos. 12-cv-1165, 12-cv-1165(L); 12-cv-1166; 12-cv-1167 (E.D. Pa. April 24, 2012)
– Objector noted that neither the Notice nor the settlement identified the cy pres recipients; instead the settlement agreement stated that the plaintiffs and defendants would each recommend two recipients to the court at a future date.
– Objector also noted that the Claim Form did not provide a complete list of all methods that could be used to provide proof of purchase necessary for entitlement to settlement proceeds.
• Objection filed by Public Citizen Litigation Group, Duhaime v. John Hancock Mut. Life, Ins. Co., No. 96-cv-10706 (D. Mass. Oct. 2, 1997)
– Objector claimed that both the pre and post settlement Notices did not adequately inform class members of the nature, value, and significance of the relief or that certain class members would waive future claims unless they submitted a claim in the settlement.
36 Baker Hostetler
Notice Had to Be Reissued
• Kaufman v. American Exp. Travel Related Services, Inc., 2012 WL 2401671
(N.D. Ill. 2012)
– Court noted that generally, “[w]here notice to a class has been inadequate, it
may be appropriate to reject the settlement in its entirety.”
– However, instead of rejection, the Court appointed “an expert in class
notification, as advised by the Federal Judicial Center's Class Action Checklist
2010.”
– Court also ruled that after “receiving the expert's report, the court will then order
the Settling Parties to undertake a second round of notice, the form and content
of which will be determined by the expert's recommendations.”
37 Baker Hostetler
Modifications to Settlement
After Fairness Hearing • In re Excess Value Insurance Coverage Litig., 598 F. Supp. 2d 380 (S.D.
N.Y. 2005)
– Court denied Plaintiff’s motion for incentive compensation to the class
representatives because the long form and short form Notice failed to mention it.
• Montgomery v. Aetna Plywood, Inc., 231 F.3d 399, 410 (7th Cir. 2000)
– Court affirmed denial of incentive fee, in part because of “counsel's failure to
include” adequate information about the request “in the most recent notice to the
class.”
38 Baker Hostetler
Rejection of Settlement in its
Entirety • Orrill v. AIG, Inc., 38 So. 3d 457 (La. Ct. App., 4th Cir. 2010)
– Court vacated settlement approval, in part, because “most lay persons do not know what res judicata means” and therefore class members would not understand that by not opting out of one case, their claims would not be litigated in another and they could lose thousands of dollars.
• Larson v. Sprint Nextel Corp., 2009 WL 1228443, 10 (D.N.J. 2009) – Court rejected settlement because “it failed to apprise class members of their right to opt out
of the action. Telling an individual that he may be part of a certified class that has a claim for damages in a class action settlement is markedly different from informing that individual not only that he might be a member of a certified settlement class but that his failure to opt-out of the action eliminates his future right to ever bring that claim.”
• In re Veritas Software Corp. Securities Lit., 496 F.3d 962 (9th Cir. 2007) – Court vacated final approval of settlement, ruling: “The notice in this case clearly did not
satisfy the requirements of the PSLRA….The notice said that recovery could be greater if fewer than expected class members filed claims, saying in no uncertain terms ‘you could get more money,’ but gave no indication of the possibility that recovery could be less if more class members than expected filed claims. In the absence of any disclosure to the contrary, a reasonable class member would conclude that the per share estimates were based on all of the class members filing claims.”
• Greenfield v. Villager Indus., 483 F.2d 824 (3d Cir.1973) – Court vacated class action settlement, in part, because the form of notice did not provide a
long enough period for a claimant to be properly notified of their opportunity to object and appear at the hearing.
39 Baker Hostetler
Insufficient Notice Prevented
Release • Twigg v. Sears, Roebuck & Co., 153 F.3d 1222, 1228 (11th Cir. 1998)
– Language of class action notice was insufficient to notify present plaintiff that
claims like his were being litigated in the action, and thus claim preclusion could
not be applied consistent with due process.
• Bogard v. Cook, 586 F.2d 399, 408 (Miss. App. 1978)
– Plaintiff's claims for money damages were not precluded by judgment in prior
class action awarding injunctive and declaratory relief when class notice did not
alert him to possibility that he could seek individual money damages.
40 Baker Hostetler
Strategies for a Successful
Plain Language Notice
41 Baker Hostetler
Strategies for a Successful
Plain Language Notice • Include the basic information required under Rule 23.
• Avoid legalese (How would you speak to your best non-lawyer friend?).
• Be short and to the point; longer is rarely better.
• Avoid specific language that may be confusing; opt for a more general approach to describe relevant settlement terms.
• Avoid unnecessary words, use active voice, and avoid footnotes.
• Follow the FJC guidelines and use its checklist.
• Hire an expert.
– Federal Judicial Center, Judges Class Action Notice and Claims Process Checklist & Plain Language Guide, 1–2 (2010) (“In order to find the ‘best practicable’ notice as Rule 23 requires, your own expert report may be advisable. This is especially true in the diminished adversarial posture in which settlement places the parties.”)
– Loef v. First Am. Title Ins. Co., No. 2:08–cv–311, 2012 WL 640887, at *1 (D. Me., Feb. 28, 2012) (“[I]t would have been wholly insufficient for Plaintiff to propose a plan of notice by publication without including a declaration of a professional with credentials similar to Dr. Wheatman's.”)
42 Baker Hostetler
FJC Checklist Items for
Plain Language Do the notices contain sufficient information for a class member to make an informed decision?
Consider the amount of information provided in the notice. Watch for omission of information that the lawyers may wish to
obscure (such as the fee request) but that affects class members nonetheless.
Do the notices include the Rule 23 elements? Even the summary notice?
Summary notices, whether mailed or published, encourage readership, and the FJC illustrative notices show that even
summary notices can include all elements required by Rule 23(c)(2)(B). But an overly short summary notice, one that mostly
points interested readers to a detailed notice, can result in most class members (who read only the summary notice) being
unaware of basic rights.
Have the parties used or considered using graphics in the notices?
Depending on the class definition or the claims in the case, a picture or diagram may help class self‐identify as members, or
otherwise determine whether they are included.
Does the notice avoid redundancy and avoid details that only lawyers care about?
It is tempting to include “everything but the kitchen sink” in the detailed notice. Although dense notices may appear to provide a
stronger binding effect by disclosing all possible information, they may actually reduce effectiveness. When excess information
is included, reader burnout results, the information is not communicated at all, and claims are largely deterred.
Is the notice in “Q&A” format? Are key topics included in logical order?
The FJC illustrative notices take the form of answers to common questions that class members have in class action cases. This
format, and a logical ordering of the important topics (taking care to include all relevant topics) makes for a better
communication with the class.
Are there no burdensome hurdles in the way of responding and exercising rights?
Watch for notice language that restricts the free exercise of rights.
43 Baker Hostetler
For further study
• FJC Class Action Notices Page, http://www.fjc.gov/.
• Bruce D. Greenberg, Keeping the Flies out of the Ointment: Restricting Objectors to
Class Action Settlements, 84 St. John’s L. Rev. 949 (2010).
• Paul Karlsgodt & Raj Chohan, Class Action Settlement Objectors: Minor Nuisance or
Serious Threat to Approval? 12 Class 744, (BNA Class Action Lit. Rep., August 12,
2011), http://classactionblawg.files.wordpress.com/2011/09/bnaartic.pdf.
• Shannon R. Wheatman & Terri R. LeClercq, Majority of Class Action Publication
Notices Fail to Satisfy Rule 23 Requirements, 30 REV. LITIG. 53 (2011).
• Todd B. Hilsee, Shannon R. Wheatman & Gina M. Intrepido, Do you really want me
to know my rights? The ethics behind due process in class action notice is more than
just plain language: A desire to actually inform. GEO J. LEGAL ETHICS, 18 (4), 1359-
1382 (2005).
CAFA Notice Requirements
Matthew M. Walsh
Partner, Winston & Strawn
(213) 615-1865
© 2012 Winston & Strawn LLP 45
Presentation Overview
• Basics of the CAFA Settlement “Notice to Regulators”
Requirement
• Why Does Notice Matter?
• Consequences of Failure to Give Notice
• Planning for Class Membership Disclosure
• CAFA Applies to Every Class Action in Federal Court
• What Do Regulators Do After Receiving Notice?
• Supplemental Notice
© 2012 Winston & Strawn LLP 46
The Basics
• The CAFA Notice Requirement is at 28 U.S.C. § 1715(b)
• Within 10 days after filing a proposed class action
settlement, each defendant must serve notice upon the
“appropriate Federal Official” and the “appropriate State
Official.”
• NOTE: CAFA obliges each defendant to serve this notice
– there is no such obligation for the plaintiff.
© 2012 Winston & Strawn LLP 47
The Basics
(cont’d)
• “Appropriate Federal Official”
• Usually, the Attorney General of the United States.
• For Federal and State depository institutions, depository holding
companies, foreign banks, and subsidiaries of the above, notice
goes to the appropriate Federal regulator or supervisor.
• EXCEPT: if the class action is not about their banking activities.
• For example, in a class action alleging discriminatory hiring by a
bank, notice would go to the Attorney General.
© 2012 Winston & Strawn LLP 48
The Basics
(cont’d)
• “Appropriate State Official”
• State official who regulates, supervises, or licenses defendant’s
activity, or otherwise authorizes them to conduct business.
• EXCEPT: if the class action is not about activity subject to regulation
or supervision by this official.
• If there is no such official, then notice goes to the state Attorney
General.
• NOTE: defendant must notify the appropriate state official in
each state where a class member lives. 28 U.S.C. § 1715(b).
© 2012 Winston & Strawn LLP 49
The Basics
(cont’d)
• Practice Tip
• CAFA states that Federal depository institutions meet the
requirement just by serving notice on their Federal regulator.
• 28 U.S.C. § 1715(c)(1).
• For banking organizations supervised by the Federal Reserve,
the Fed’s guidance is that notice should also go to the
defendant’s state bank supervisor, if any.
© 2012 Winston & Strawn LLP 50
The Basics
(cont’d)
• Notice consists of:
1. The complaint, any amended complaint(s), and all materials
filed with the complaint(s);
2. Notice of any scheduled judicial hearing in the class action;
3. Any proposed or final notification to class members about
(1) their opt-out rights, if any, or (2) a proposed settlement;
4. Any proposed or final class action settlement;
5. Any settlement or other agreement between class counsel and
defense counsel;
© 2012 Winston & Strawn LLP 51
The Basics
(cont’d)
• Notice consists of (cont’d):
6. Any final judgment or notice of dismissal;
7. “If feasible,” the names of class members who reside in each
state, plus the estimated proportionate share of their claims to
the total, to the appropriate State official. If not feasible, then a
“reasonable estimate” of the number of class members in each
state and their estimated proportionate share of the total
settlement; and
8. Any written judicial opinions in the case regarding numbers 3-6
above.
• 28 U.S.C. § 1715(b)(1) – (8).
© 2012 Winston & Strawn LLP 52
Why Does Notice Matter?
• One practical reason:
• A Federal court cannot approve a final class action settlement
until 90 days after defendant serves notice on the appropriate
Federal and State regulators.
• 28 U.S.C. § 1715(d).
© 2012 Winston & Strawn LLP 53
Why Does Notice Matter?
(cont’d)
• Legislative Policy Goal:
• “New section 1715 is designed to ensure that a responsible state
and/or federal official receives information about proposed class
action settlements and is in a position to react if the settlement
appears unfair to some or all class members or inconsistent with
applicable regulatory policies.”
• S. Rep. No. 109-14, at 32 (2005).
• The underlying concern is class action abuse, in which attorneys
arrange coupon settlements that provide them large fees but
create little deterrence or public benefit.
• Id. at 33.
© 2012 Winston & Strawn LLP 54
Consequences of Failure to Give Notice
• “A class member may refuse to comply with and may
choose not to be bound by a settlement agreement or
consent decree in a class action if the class member
demonstrates that the notice required under subsection
(b) has not been provided.”
• 28 U.S.C. § 1715(e)(1).
• This language means that if defendant does not provide the
required notice, even a class member who received notice of the
settlement, and who failed to opt out, can later choose not to be
bound.
• Upshot: CAFA compliance is key to the integrity of
settlement agreements.
© 2012 Winston & Strawn LLP 55
Planning for Class Membership Disclosure
(Overview)
• The key requirement – notice to state officials
• Providing names or estimating numbers
• Which states?
• Unsettled law – mobile class members
• Legislative history
• One approach: last known address
• Most prudent (but most costly) approach
© 2012 Winston & Strawn LLP 56
Planning for Class Membership Disclosure
• Most significant notice requirement: providing to each
state official the names of class members in their state “if
feasible” plus their estimated share of the settlement. If
that is not feasible, a “reasonable estimate” of the
number of class members in their state, plus their
estimated share of the settlement.
• 28 U.S.C. § 1715(b)(7).
• Because CAFA requires defendant to serve notice within
10 days of filing the proposed settlement, work on the
notice must begin in parallel with settlement
negotiations.
© 2012 Winston & Strawn LLP 57
Planning for Class Membership Disclosure
(cont’d)
• Determining the name and location of each class
member will be infeasible in many cases, so a
reasonable estimate will frequently be needed.
• CAFA provides no definition of a “reasonable estimate”
of the number of class members in each state.
• Prudent defense counsel should hire an economist to make this
estimate, and should ensure the economist is available to testify
if the settlement is challenged.
© 2012 Winston & Strawn LLP 58
Planning for Class Membership Disclosure
(cont’d)
• What happens if class members move to different
states?
• E.g. Statewide class action filed under California law, but some
class members may have moved to other states by the time the
parties agree and file a proposed settlement.
• Can such people choose not to be bound if defendants
do not serve their new state’s Attorney General with
notice?
• Does every class action now effectively require notice to
state officials in all 50 states?
© 2012 Winston & Strawn LLP 59
Planning for Class Membership Disclosure
(cont’d)
• There is no case law on this so far, but legislative history
suggests not:
• “The [Senate Judiciary] Committee wishes to make clear that [28
U.S.C. § 1715(e)(1)] is intended to address situations in which
defendants have simply defaulted on their notification obligations
under this provision; it is not intended to allow settlement class
members to walk away from an approved settlement based on a
technical noncompliance (e.g. notification of the wrong person,
failure of the official to receive notice that was sent), particularly
where good faith efforts to comply occurred.”
• S. Rep. No. 109-14, at 35.
• (Available online at http://www.gpo.gov/fdsys/pkg/CRPT-
109srpt14/pdf/CRPT-109srpt14.pdf).
© 2012 Winston & Strawn LLP 60
Planning for Class Membership Disclosure
(cont’d)
• Some defendants are successfully using class members’
last known address, and filing a “Declaration of
Compliance” with the court.
• Thieriot v. Celtic Ins. Co., 2011 WL 109636 (N.D. Cal. Jan. 13,
2011).
• California state law claims only; notice sent to 21 states.
• Hopson v. Hanesbrands Inc., 2008 WL 3385452 (N.D. Cal. Aug.
8, 2008).
• California and federal Claims; notice sent to 34 states.
• Garner v. State Farm Mut. Auto. Ins. Co., 2010 WL 1687832
(N.D. Cal. Apr. 22, 2010).
• California state law claims only; notice sent to 42 states.
© 2012 Winston & Strawn LLP 61
Planning for Class Membership Disclosure
(cont’d)
• Until there is judicial guidance on this, when in doubt the
most prudent course is to cover your bases and notify all
50 states, plus Puerto Rico and the District of Columbia.
• CAFA allows the complaint, all attached materials, and
any amended complaints to be distributed electronically
through the Internet, which will reduce costs.
• 28 U.S.C. § 1715(b)(1)
© 2012 Winston & Strawn LLP 62
CAFA Applies to Every Class Action in
Federal Court
• The CAFA notification requirements apply to:
• [A]ny civil action filed in a district court of the United States under
rule 23 of the Federal Rules of Civil Procedure or any civil action
that is removed to a district court of the United States that was
originally filed under a State statute or rule of judicial procedure
authorizing an action to be brought by 1 or more representatives
as a class action.
• 28 U.S.C. § 1715(a)(2)
• Upshot: even though CAFA is famous for making
removal easier, its notification requirements apply to
class actions in federal court under any theory.
© 2012 Winston & Strawn LLP 63
What Do Regulators Do After Receiving Notice?
• CAFA does not expand the authority of state or federal
officials, nor does it give them new duties.
• 28 U.S.C. § 1715(f).
• Federal and state officials have time to comment and
object to proposed settlements during the mandatory 90-
day waiting period.
• Laguna v. Coverall N. Am., Inc., 2012 WL 607622 at *2 n. 4 (N.D.
Cal. Feb. 23, 2012) (describing the 90-day period after notifying
federal and state officials as a “window” during which they
should respond if they plan to do so).
© 2012 Winston & Strawn LLP 64
What Do Regulators Do After Receiving Notice?
(cont’d)
• Federal and/or state officials may attempt to upset the
settlement through the objection process.
• Garner v. State Farm Mut. Auto. Ins. Co., 2010 WL 1687832 at
*14 (N.D. Cal. Apr. 22, 2010) (“CAFA presumes that, once put on
notice, state or federal officials will raise any concerns that they
may have during the normal course of the class action
settlement procedures.”).
• Figueroa v. Sharper Image Corp., 517 F. Supp. 2d 1292 (S.D.
Fla. 2007) (denying final approval to a coupon settlement, based
in part on objections by the attorneys general of 35 states and
the District of Columbia).
© 2012 Winston & Strawn LLP 65
What Do Regulators Do After Receiving Notice?
(cont’d)
• Wilson v. DirectBuy, Inc., 2011 WL 2050537
(D. Conn. May 16, 2011).
• Members-only discount shopping club sued for failing to offer
supplier’s prices to its customers, as promised.
• Club membership requires initial sign-up fee of several thousand
dollars, plus $200 annual renewal.
• Proposed settlement releases claims in exchange for giving
each class member two free months’ membership.
• Attorneys General of 39 states file amicus brief objecting to this
settlement.
• Court denies settlement, finding Attorneys General opposition
undermines substantive fairness claims.
© 2012 Winston & Strawn LLP 66
What Do Regulators Do After Receiving Notice?
(cont’d)
• Figueroa v. Sharper Image Corp., 517 F. Supp. 2d 1292
(S.D. Fla. 2007).
• False advertising class action based on air purifier.
• Parties submit proposed settlement to the court, providing
each purchaser a $19 merchandise credit usable only at
Sharper Image.
• Attorneys General from 35 states and DC file a motion for
leave to file an amicus brief opposing the settlement –
additional opposition filings as the settlement is amended.
• Court finds this opposition undermines the parties’ assertion
of substantive fairness, and denies settlement.
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What Do Regulators Do After Receiving Notice?
(cont’d)
• True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052
(C.D. Cal. 2010).
• Suit under California UCL/FAL, Consumer Legal Remedies Act,
and common law unjust enrichment.
• Suit claimed that the Honda Civic Hybrid did not achieve the
advertised miles per gallon.
• Proposed settlement of $1,000 credit toward purchase of a
Honda or Acura during the next 19 months, plus $100 cash for
those customers who previously made a documented complaint.
• Consolidated amicus brief opposing the settlement filed by
officials in 26 states.
• Court rejects settlement, finding that state opposition “weighs
against approval of the settlement.”
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Supplemental Notice
• CAFA contains no requirement for supplemental notice
to State and Federal regulators if settlement terms
change, but prudent counsel should send supplemental
notice if there is a material change after initial notice is
served.
• Garner, 2010 WL 1687832 at *17 (N.D. Cal. Apr. 22, 2010)
(stating that defendant provided supplemental notice following
the court’s Preliminary Approval Order and revisions to the
Settlement Notice).
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Summary
• CAFA’s notice requirements:
• Apply to every class action in federal court;
• Deliberately invite state and federal officials to intervene in the
settlement process; and
• Impose logistical challenges that require advance planning.
• An expert may be needed to create a “reasonable
estimate” of the number of class members in each state.
• Until there is judicial guidance on the problem of mobile
class members, defense counsel should err on the side of
notifying too many state officials, rather than too few.
• Supplemental notice is advisable if the settlement terms
change materially.
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