Class Action Lawsuits – Do They Benefit Class Plaintiffs?

According to Senior Circuit Judge Andrew J. Kleinfeld, the recent Facebook class action settlement does not benefit the class plaintiffs.  The Court of Appeals for the Ninth Circuit upheld the settlement, but Judge Kleinfeld wrote a dissenting opinion:

Facebook logo Español: Logotipo de Facebook Fr...

Facebook logo Español: Logotipo de Facebook Français : Logo de Facebook Tiếng Việt: Logo Facebook (Photo credit: Wikipedia)

I respectfully dissent. This settlement perverts the class action into a device for depriving victims of remedies for wrongs, while enriching both the wrongdoers and the lawyers purporting to represent the class.

Under the settlement, the class members get no compensation, the class lawyers get approximately $2.3 million, and Facebook would pay approximately $6.5 million to a foundation, basically controlled by Facebook, to protect privacy rights.

The lawsuit was filed in response to Facebook’s 2007 “Beacon” program, which allowed users “friends” to see what they bought from companies that had contracted with Facebook. Users could opt out, but only if they engaged the opt out pop up, which appeared on their screen for only ten seconds.

The lead plaintiff, Sean Lane, purchased a ring for his wife on Overstock.com, which Facebook’s “Beacon” program broadcasted to his more than 700 “friends.”  There were also broadcasts regarding Blockbuster movie rentals (perhaps X-rated) and Zappos purchases (perhaps extravagant), among other disclosures.

Addressing his concerns with the settlement, Judge Kleinfeld explained in his dissent that:

[Class action lawsuits have] obvious attendant risks, because class counsel’s “clients” are not clients at all in the traditional sense; they do not hire the lawyer, they do not agree on a fee with him, and they do not control whether he settles their case. They are in no position to prevent class counsel from pursuing his own interests at their expense.

*     *     *

Defendant and class counsel, in any class action, have incentives to collude in an agreement to bar victims’ claims for little or no compensation to the victims, in exchange for a big enough attorneys’ fee to induce betrayal of the interests of the purported “clients.” The defendant’s agreement not to oppose some amount for the fee creates the same incentive as a payment to a prizefighter to throw a fight. A real client may refuse a settlement that is bad for him but benefits his lawyer, but a large class of unknown individuals lacks the knowledge or authority to say no.

Critics of the settlement, including the Center for Class Action Fairness, recently filed a petition asking the U.S. Supreme Court to review the Appellate Court’s upholding of the settlement.

The lesson for legal consumers?  Do your homework before joining any class action lawsuit.  The Center for Legal Practice Reform educates clients so they can decide whether to join class action lawsuits by helping them understand whether the particular lawsuit would be worthwhile for them and further the greater good so that the clients don’t end up with nothing while facilitating a windfall for the class lawyers.

You’ve got options.  The Center for Legal Practice Reform can help you navigate the attorney/client relationship and level the playing field.  Call LPR today for a free consultation – (301) 351-7970.

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