Suppose that the central issue in a putative class action is a legal issue pending before the Supreme Court. Depending on how the Supreme Court rules, the plaintiffs will recover either nothing or up to $600 million. But rather than rolling the dice and waiting for that decision, the parties agree to a class action settlement that can only work if it’s approved before the decision is issued. Conceptually that seems like something parties should be able to do. Settlements often happen because the defendant doesn’t want to risk being held liable for a huge exposure, and plaintiffs don’t want to risk being left empty handed. But litigation takes time, and if there are objections to the settlement and an appeal, that will all occur after the merits issue is decided. At that point, the deal will look much better or worse for one side. A recent decision from the Eleventh Circuit provides several lessons for lawyers negotiating class settlements and presenting them to a district court for its approval.

In Drazen v. Pinto, No. 21-10199, 2024 WL 2122466 (11th Cir. May 13, 2024), the plaintiffs alleged that the defendant violated the Telephone Consumer Protection Act (TCPA) by using an autodialer to make telephone calls and send text messages. The parties agreed to a claims-made settlement of up to $35 million in cash and vouchers for those class members who made claims, with up to $10.5 million for attorney’s fees. The district court granted preliminary approval. Shortly after notice was emailed to the class, the Supreme Court granted certiorari to decide whether a device must have certain capabilities to constitute an autodialer under the TCPA. If the Supreme Court ruled for the defendant, the Drazen case would be worthless, and if it ruled for the plaintiff, the claims would be worth potentially up to $600 million. Several months after final approval of the settlement, the Supreme Court decided the issue in favor of the defendant.

Judge Tjoflat’s opinion vacating the approval of the settlement is lengthy. Here is what I found most significant for purposes of parties seeking approval of future settlements:

  1. Sufficient Notice to Class Members of Attorney’s Fees Motion: The schedule proposed by the parties and adopted by the district court provided class members with only 7 days to review the attorney’s fees motion before the objection deadline, and the notice did not specify when that motion would be filed.  The opinion strongly criticized this timing.
  2. Notice of “the Class Claims, Issues or Defenses”: The court held that this requirement is conjunctive and required notice to the class members of not merely the claims asserted but also the issue pending before the Supreme Court and how its decision would impact the case. The Eleventh Circuit opinion suggested that a supplemental notice should have been issued regarding this development.
  3. Opt-Out Requests: The court of appeals took issue with the parties requiring that class members seeking to opt out submit a detailed letter under penalty of perjury.
  4. Release: The opinion takes issue with what it refers to as an “overbroad release,” pointing to language that released the defendant’s “past and present parents, predecessors, successors, affiliates, holding companies, subsidiaries, employees, agents, attorneys, board members, assigns, partners, contractors, joint venturers or third-party agents with which it has or had contracts, and/or their affiliates.” This type of language in large part is fairly standard. It’s hard to imagine a defendant settling a class action while leaving open potential claims against its affiliated entities, officers, and employees. The district court interpreted the release as limited to claims that were made or could have been made in the lawsuit, although Judge Tjoflat’s opinion indicated that the district court improperly “amended” the settlement agreement in reaching that conclusion.
  5. CAFA’s Coupon Settlement Provisions: The settlement provided class members with an option of either $35 in cash or a $150 voucher redeemable for any of the defendant’s products and services and freely transferable. The Eleventh Circuit held that this was a “coupon settlement” subject to stricter requirements for approval under the Class Action Fairness Act (CAFA), ruling in essence that any credit or discount on the defendant’s goods or services is a “coupon.” If you want to avoid this, the best approach would be an all-cash settlement.
  6. Attorney’s Fees: In a “coupon settlement” under CAFA, attorney’s fees for class counsel may be based on the value of the coupons that were redeemed, the lodestar method, or both. Only 1.9% of class members made claims, valued at approximately $2.3 million. The district court awarded a $7 million fee (20% of the $35 million potentially available if all class members made claims), where the lodestar amount was approximately $2.8 million. In vacating the settlement, the court of appeals explained that in “many cases” the district court should wait until after the coupons’ expiration date to decide on attorney’s fees, although a district court may estimate a redemption rate and receive expert testimony for that purpose. Here, the district court erred by basing the attorney’s fees on a percentage of the total amount potentially available to class members rather than the much smaller amount of relief obtained.

Ultimately, this case goes back to the district court, and it is unclear what will happen. The district court might only reduce the attorney’s fees or disapprove the settlement. Given the outcome on the merits issue in the Supreme Court, the defendant would obviously be pleased if the settlement is disapproved because it will prevail on the merits. But the deal was structured so that the parties could hedge their bets on the merits. In any event, the parties likely could have avoided some or all of the issues identified above in preparing the settlement documents and seeking approval of the settlement.

It is worth noting that two of the three judges on the panel filed a concurring opinion stating that they would have addressed only the coupon settlement and attorney’s fees issues. So, the remainder of the opinion, which appears to be the opinion of only Judge Tjoflat, may not carry the typical weight of a regular full panel opinion.

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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.