9th Circuit Overturns Tinder Dating App Class Action Settlement

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Federal Rule of Civil Procedure 23(e)(2) requires courts to subject proposed class action settlements to scrutiny to ensure that they are fair, reasonable, and adequate. In some recent decisions, the Ninth Circuit has reversed district court approvals of class action settlements, finding that the district courts did not sufficiently exercise that function. I had the privilege of discussing two of these cases and their practical significance for class action lawyers with Adam Polk, co-chair of the American Bar Association’s Class Actions and Derivative Suits Committee, in the committee’s “Common Questions” podcast. Our first conversation concerned the case of Kim v. Allison and a proposed settlement concerning the Tinder dating app. Our second conversation, which has not yet been published, concerned an even more recent decision involving a franchisor of massage services. A link to our conversation in the Tinder case can be found here.

Class Action Settlements and the Duty of Candor Toward the Tribunal

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I have written before about one of the peculiar characteristics of a class action settlement; namely, that once a class action settlement is reached, the interests of the named plaintiffs and the defendant in obtaining settlement approval are aligned, which makes the court’s role as fiduciary to the members of the class all the more important. That lack of adversity is present in class counsel’s fee petition as well. A defendant is generally indifferent to the amount of fees to be awarded to class counsel, because the fee award often represents nothing more than an amount to be allocated to class counsel out of a larger sum that the defendant has already agreed to pay. Class members, on the other hand, often have a real stake in the amount of the fee award, because the larger the attorneys’ slice of the settlement pie, the less pie remains for distribution to the class. At the time the fee petition is presented, therefore, class counsels’ interests conflict with

Cutting to the Chase: The Relief, the Release, and the Rest.

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Class action settlements are complicated affairs. They can take months or even years to negotiate, followed by months to send notice and obtain trial court approval, and months or years longer if an approval order is appealed. The agreements memorializing class action settlements are often dozens of pages long or longer. They sometimes involve claims processes run by third-party vendors who are hired to manage years of complex data. Objections can require extensive briefing and at times result in evidentiary hearings. Between the attorneys’ fees incurred in the settlement process as well as costs of administration, class action settlements often result in expenditures of hundreds of thousands of dollars if not more.

So why do parties and their lawyers on both sides subject themselves to such a burdensome, time-consuming and expensive process? When you cut through all the posturing and all of the carefully crafted details of the written agreement and court submissions, what are the core terms at the heart of the settlement?


A Circuit Split on Incentive Awards

A few months ago, I posted about a surprising decision of a divided panel of the Eleventh Circuit which held that incentive awards (a/k/a “service awards”) in class action settlements are prohibited by arguably analogous Supreme Court decisions from the 1880s. While we wait to see whether the Eleventh Circuit will grant a pending petition for rehearing en banc in Johnson v. NPAS Solutions, LLC, we should take note of a per curiam decision of the Sixth Circuit reaching a different result. In Shane Group Inc. v. Blue Cross Blue Shield of Michigan, 2021 WL 129067 (6th Cir., Jan. 14, 2021), the court rejected an objection to service awards to be paid to certain named plaintiffs, holding that they did not amount to an unlawful “bounty.” The Sixth Circuit thus implicitly rejected the reasoning of its sister court. In upholding the service awards, it held, “[o]n this record, . . . those payments correlate to the

A Little Good News

As I hope my readers know, I write this blog to share insights and new developments concerning class action settlements and mediation with those who are engaged in, or thinking of embarking on, those paths. My goals are to help readers experienced in these areas to stay informed of important decisions and trends, and to demystify the class action settlement and mediation processes for those who are new to them.

Although it was never my goal to be considered for an award, I was pleasantly surprised to learn recently that the National Law Review has included me among this year’s recipients of its annual Go-To Thought Leadership Awards in the area of “Litigation: Class Action Mediation,” largely for my posts to this blog. The recognition (along with my innate interest in the area) will certainly keep me motivated to continue sharing my thoughts and legal updates on these pages. More information about the National Law Review’s awards can be found here.

What’s So Different About Class Action Mediation?

The author presented the following paper at the 2020 Class Actions National Institute of the American Bar Association.

What makes mediating a class action different from mediating an individual case? In both settings, parties seeking to resolve their disputes agree to a non-binding process designed to get them to “yes.” In both settings, the parties engage a third-party neutral who will bring them together, then separate them, then bring them together again, employing a variety of techniques to reach an accord. And in both settings, the parties are usually represented by counsel who will advocate for them and advise them about the risks and probabilities they face.

So, again, what makes mediating a class action different from mediating an individual case? Plenty. Here are some of the key differences.

The Timing of the Mediation

Class action litigation shares many of the attributes of individual litigation. It begins with the filing of a complaint, is often

Are Incentive Payments the New Fly in the Ointment?

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For years, class action settlements typically have included incentive payments to named plaintiffs. The payments usually represent a very small percentage of the overall settlement payout, and are designed to compensate named plaintiffs for their time and trouble in service to the class. By way of a simple hypothetical, a million dollar settlement might include an incentive payment of $5,000 to a named plaintiff, in addition to that person’s share of the payment to the class. Class counsel invariably request incentive payments as a component of the overall settlement, defendants generally agree to them, class members rarely object to them, and courts typically approve them. Because incentive awards tend to be such a small percentage of the settlement,  usually dwarfed by the fees and costs class counsel request, the settling parties and the court spend very little time on them. After all, the thinking goes, named plaintiffs did have to do some work in representing the class, so it is only fair that they get compensated.


The Seventh Circuit Clears a Roadblock to Settlement

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As I have discussed in earlier posts, there are multiple stakeholders to class action settlements, including named plaintiffs, absent class members, class counsel, defendants, and the courts. Conflicts can arise within some of these groups, and perhaps most often arise among the class members themselves. A settlement that looks good to one named plaintiff or their counsel, for example, might not look good to another member of the class or their counsel. The ability of dissenting class members to object to a proposed settlement is one safeguard that can assist a court in determining whether a class action settlement satisfies Rule 23(e)(2)’s “fair, reasonable, and adequate” standard.

When an objection is brought in good faith and has merit, it can result in a better deal for the class. Unfortunately, not all objections are made in good faith. Rather, some are made with the sole objective of enriching the objector and the objector’s counsel, with no accompanying benefit to the settlement class. And often parties and their

Keys to Class Action Settlements: Understanding the Interests at Stake

Fundamental to the ability to settle a class action is understanding the interests that are being represented by the parties and other stakeholders. Although any given case might present its own unique circumstances, in general the interests can be described as follows.

  1. Named Plaintiffs. The interests of the named plaintiffs are the most obvious and immediate, yet also can be viewed, and often are treated, as the least important. That’s because the named plaintiffs have chosen to serve as representatives of a larger group, and in so doing, have agreed to pursue the greater good rather than simply act in their own self-interest. That they have done so does not mean that they have relinquished their personal interests in the settlement; only that they have assumed a responsibility to look beyond them to support a settlement that is fair to everyone they seek to represent, which by sheer math dilutes their own stakes in the outcome. And because most named plaintiffs do not

Virtual Mediation (Part 2): The Challenge of Establishing Trust

Like most aspects of litigation, mediation is a very personal pursuit. So much depends on the credibility and communication skills of the participants. Equally important are the participants’ non-verbal cues, including tone of voice, facial expressions, and body language. And a key to success of many mediations is the ability of the mediator to develop a rapport and trust with all of the players. Just as online poker cannot truly replicate the in-person card game, so virtual mediation is not a perfect substitute for a mediation that takes place around an actual table.

Despite its deficiencies, virtual mediation has some advantages. If some participants are not located where the mediation is taking place, it can save them the time and cost of travel. It also may provide some greater flexibility in how the mediation is structured. And, of course, in times like these, there may simply be no alternative than to mediate online. But parties who do not have to go to the trouble and expense