Last week the Second Circuit issued a new decision affirming, with one exception, the approval of a $5.6 billion revised class action settlement in the long-running Visa/Mastercard antitrust litigation. (See my blog post on the Second Circuit’s reversal of a prior settlement in 2016.)  The opinion and two concurrences in Fikes Wholesale, Inc. v. HSBC Bank USA, N.A., — F.4th –, 2023 WL 2506455 (2d Cir. Mar. 15, 2023) addressed various issues, two of which I’ll discuss here.    

First, objectors to the settlement challenged service awards to the named plaintiffs totaling $900,000, including two awards of $200,000 each, approximately 100 times the amount they would get as part of the settlement. I don’t think I’ve seen a case with service awards anywhere near that high, but this settlement was obviously of extraordinary size. The majority opinion concluded that named plaintiff awards were “likely impermissible” under a Supreme Court decision from 1881. In that case, which long predates the creation of the modern class action, the Supreme Court concluded that a creditor bringing suit on behalf of others could not be compensated for services and expenses in bringing suit. In 2020, the Eleventh Circuit held that the Supreme Court decision precluded the use of named plaintiff service awards in class actions (see my blog post) but other circuits have disagreed (see, for example, my summary of a Ninth Circuit decision on this issue). In Fikes Wholesale, the Second Circuit panel concluded that, while it agreed with the Eleventh Circuit, it was bound by two prior Second Circuit decisions upholding named plaintiff awards, although without analyzing the old Supreme Court case in any detail. We might well see a petition for rehearing en banc (but those are very rarely granted in the Second Circuit) or a petition for certiorari to the Supreme Court on that issue. The Second Circuit did find the service awards to be excessive in one respect—to the extent the amount awarded was based on work performed by the plaintiffs lobbying for legislative reform, the district court was instructed to reduce the award accordingly.  

From the defense perspective, I’m not sure there is much that can be done here other than to negotiate the best deal you can, and have a provision in the settlement agreement that the amount of the award is solely in the district court’s discretion and if a lower amount (or even nothing) is awarded, the settlement remains fully enforceable.

Second, in Fikes Wholesale, objectors challenged the fairness of the settlement for newer merchants, who would get minimal monetary payments but release their claims going forward for five years into the future. The Second Circuit declined to reach this issue because the settlement agreement had a severability provision stating that the release “extend[s] to, but only to, the fullest extent permissible by federal law.” So even if part of the release was not enforceable, the settlement remained fully enforceable. The question of whether the release of future claims is enforceable will have to be decided in a future case, when a new suit is filed and then one or more defendants seek to enforce the release.

The release language here is an interesting technique that might be worth considering in some class action settlements. It prevented a possible (and it appears serious) concern about the scope of the release from derailing the enforceability of this settlement. But the defendants will likely have to deal with that in future litigation, and Judge Jacobs’s concurrence casts doubt on whether the release of future claims will be enforceable as to the newer merchants. Defendants trying to buy complete peace in entering into a class settlement may not want to agree to this type of severability clause and leave an issue like that for another day.

Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.