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The Ninth Circuit recently held that multiple individual lawsuits constituted a removable “mass action” under Class Action Fairness Act (CAFA) where plaintiffs had sought to have the cases designated as “coordinated” and adjudicated by one judge under California state court procedural rules. See Corber v. Xanodyne Pharmaceuticals Inc. and Teva Pharmaceuticals USA Inc., 2014 WL 6436154 (9th Cir. 2014). Read More ›
“A fair day’s pay for a fair day’s work[!]” Court approves settlement in wage class action against top NYC restaurant, but criticizes systematic approval of class counsel fee applications
Sushi Yasuda has a reputation as one of New York City’s best restaurants, garnering rave reviews from critics and an exceptional 28 food rating (out of a possible 30) from Zagat’s. In 2012, several current and former employees filed a lawsuit against Sushi Yasuda, alleging the restaurant violated the Fair Labor Standards Act and New York Labor Law by failing to pay workers minimum wage during their training period, premiums for overtime work, spread of hours premiums for days in which they worked over ten hours or a split shift, or the gratuities left by customers. While the plaintiffs’ motion for class certification was pending, the parties reached a settlement.
In an order and opinion signed last week, Judge William H. Pauley III of the U.S. District Court for the Southern District of New York approved the $2.4 million settlement, but reduced the amount allocated as attorney’s fees to class counsel. Fujiwara v. Sushi Yasuda Ltd., 2014 WL 5840700 (S.D.N.Y. Nov. 12, 2014). Class counsel had originally sought to retain one-third of the settlement fund ($800,000) and subsequently reduced their request to one-fourth ($600,000) – apparently after heavy questioning from the court during the approval hearing. But the court went even further than that and, following a lengthy analysis and critique, limited class counsel’s fees to one-fifth of the total settlement fund ($480,000).
Calls from the bench for increased scrutiny of attorney’s fee allocations in class action settlements are nothing new. This blog recently reported on the Seventh Circuit’s opinion reversing a district court’s approval of the proposed class action settlement in Redman v. RadioShack Corp., in which Judge Posner emphasized the need for heightened judicial inquiry due to the conflict of interest inherent in most class action settlements:
A trial judge’s instinct, in our adversarial system of legal justice, is to approve a settlement, trusting the parties to have negotiated a just result as an alternative to bearing the risks and costs of litigation. But the law quite rightly requires more than a judicial rubber stamp when the lawsuit that the parties have agreed to settle is a class action. The reason is the built-in conflict of interest in class action suits. The defendant (as RadioShack’s lawyer candidly admitted at the oral argument) is interested only in the bottom line: how much the settlement will cost him. And class counsel, as “economic man,” presumably is interested primarily in the size of the attorneys’ fees provided for in the settlement.... The optimal settlement from the joint standpoint of class counsel and defendant, assuming they are self-interested, is therefore a sum of money moderate in amount but weighted in favor of attorneys’ fees for class counsel. Ordinarily – in this case dramatically – individual members of the class have such a small stake in the outcome of the class action that they have no incentive to monitor the settlement negotiations or challenge the terms agreed upon by class counsel and the defendant.
768 F.3d 622, 629 (7th Cir. 2014).
In Sushi Yasuda, Judge Pauley similarly observed:
Often, fee applications are unopposed. Defendants have little concern for what portion for what portion of the settlement goes to plaintiffs’ counsel. And unlike a securities class action, where the class likely contains sophisticated investors, most FLSA class members are not in a position to object. Those best suited to dispute the fees – the class representatives – would be forced to oppose their own lawyers and in any event are often placated by outsized service awards. The risks presented by class action settlement – and the need for judicial scrutiny – have long been recognized.
2014 WL 5840700 at *8.
But what is notable about the Sushi Yasuda opinion is the court’s indictment of two practices that may often lead to unfairly disproportionate fee awards:
- The court criticizes the tendency of district courts, in cases involving unopposed class settlements, to rely on proposed orders submitted by counsel – often including factual findings and conclusions of law – approving the settlement and fee allocation. The result is a growing body of fee award “precedent” that is in fact largely drafted by the class action plaintiffs’ bar with little judicial interference or scrutiny.
- The court also addresses the practice of some plaintiffs’ counsel to refer in their fee applications to high “standard” hourly rates, when those claimed rates are untested by the marketplace because the attorneys work solely on a contingency basis. If unquestioned, the claimed rates reduce the lodestar multiplier and thus make counsel’s requested fee allocation from the settlement appear more reasonable.
Class representatives recently filed suit against national retailers The Gap Inc., Banana Republic LLC, and Saks Fifth Avenue LLC, alleging that the defendants inappropriately mark certain items in a manner that is unfair and unlawful. In Malik v. Saks Fifth Avenue LLC and Rubenstein v. The Gap Inc., both venued in the Superior Court of California, Los Angeles County, the claimants allege that the defendants deceptively mark the price of certain items in a manner that manipulates the consumer into purchasing the item. The claimants assert that Saks Fifth Avenue marks items at outlet retail locations with two different prices. One price is the “Market Price,” which represents what the consumer would pay at a traditional retail location, while the second “Retail Price” represents the outlet price. Consequently, according to the claimants, the consumer believes that he or she is obtaining a significant discount. The claimants assert, however, that Saks Fifth Avenue manufactures the items for sale specifically at the outlet location, and the items are never on sale at the “Market Price” in a typical retail location. Read More ›
The Construction Law News Blog is a resource for today's construction industry professionals. The blog discusses a variety of legal issues. Some of these issues include risk management, contract preparation, payment disputes and dispute resolution.
On July 31, 2014, President Obama issued the latest in a series of executive orders impacting government contractors. This order, titled “Fair Pay and Safe Workplaces”, mandates contractors self-report any issues they may have had in complying with various labor laws. While the specifics of this new self-reporting requirement will be set out in forthcoming regulations, contractors can expect that their regulatory burdens have taken a substantial step up. In addition, the order impacts the enforceability of arbitration agreements contained in certain employment contracts. Each of these major changes is addressed below. Read More ›
On July 17, 2014, the Ohio Supreme Court continued its literal interpretation and application of construction contracts. In the case, Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp., Slip Opinion No. 2014-Ohio-3095, a general contractor hired a sub-contractor to provide electrical services for the installation of a pool at a hotel. The sub filed suit seeking payment of $44,000 that was never paid by the GC or project owner. The subcontract included the following language:
"(c) The Contractor shall pay to the Subcontractor the amount due under subparagraph (a) above only upon the satisfaction of all four of the following conditions: * * * (iv) the Contractor has received payment from the Owner for the Work performed by the Subcontractor. RECEIPT OF PAYMENT BY CONTRACTOR FROM THE OWNER FOR WORK PERFORMED BY SUBCONTRACTOR IS A CONDITION PRECEDENT TO PAYMENT BY CONTRACTOR TO SUBCONTRACTOR FOR THAT WORK." Read More ›
It is sometimes difficult to tell whose insurer will be liable for certain occurrences on a construction project. The whole purpose of contracting is to allocate risk—hopefully to the party that is better situated to deal with that risk. In allocating that risk, all parties need to know which party is ultimately responsible for insuring against certain risks. While some court opinions can leave a reader unsure of the ultimate holding and its application, the Indiana Court of Appeals recently issued a clear and concise opinion regarding issues of insurer liability in the context of interpreting an American Institute of Architects (AIA) standard form agreement. Read More ›
The Distress to Success blog, based off of the book by Bobby Guy, focuses on distressed investing, events in the acquisition markets, and restructuring issues. “Distress to Success” is written for the business leader struggling to return a company from the “red” into the “black.”
On Monday, we released three new research indices tracking distress in U.S. financial markets. Read More ›
One of the interesting tensions in the healthcare industry right now is the need for consolidation versus antitrust consolidation prohibitions. Read More ›
When it comes to distressed healthcare M&A, the thorniest issues often ride on provider agreement liabilities with Medicare and Medicaid. Read More ›
The Financial Services Blog offers the latest information on banking development and litigation trends. Topics range from commercial and consumer lending through bankruptcy, lender liability defense, and the Dodd-Frank Act through Regulations JJ.
TD Bank recently agreed to pay $850,000 as part of a multi-state settlement agreement with state attorneys from Connecticut, Florida, Maine, Maryland, North Carolina, New Jersey, New York, Pennsylvania, and Vermont. While the assurances in the settlement agreement only bind TD Bank, other companies with electronic records containing consumers’ personal information can benefit from this agreement by interpreting its requirements as minimum standards for their internal security policies and procedures. Read More ›
What Banks Large and Small Need to Know About “Prior Express Consent” Under the Telephone Consumer Protection Act
The Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, has become the darling of the plaintiff class action industry. Too often the press has reported on very large dollar settlements arising out of TCPA claims. Recent examples include a September 2, 2014, approval of a $32 million settlement of six pending TCPA class action suits against Bank of America, involving 7 million class members. Similarly, Capital One recently agreed to pay $75 million after plaintiffs’ alleged the financial institution used an auto-dialer to call customer cell phones without the required consent. While the large dollar settlements involving large institutions may catch the headlines, all financial institutions should understand that the TCPA applies to them, and even indirectly to them, if certain vendors violate the Act. There is also concern that an opportunistic plaintiffs’ bar will soon seek to replicate their litigation business model by bringing copy-cat lawsuits on a more local level against smaller institutions. Read More ›
On the heels of the Sixth Circuit Court of Appeals’ decision in the RL BB Acquisition case that we wrote about a couple of weeks ago comes a contrary decision from the Eighth Circuit on exactly the same issue. Is a credit guarantor an “applicant” for credit, so that the protections of the Equal Credit Opportunity Act (ECOA) extend directly to a credit guarantor? The Eight Circuit says no. Read More ›
The International Services Group Blog is a resource for business leaders within the international commerce industry. Frost Brown Todd's international lawyers discuss the latest challenges for international trade and regulation, as well as solutions for those challenges.
According to the U.S. Department of Commerce, China is now the world’s second largest market for medical equipment. According to the Hong Kong Trade and Development Council (HKTDC), the Chinese medical device market was worth about $34.51 billion in 2013. The annual growth rate of China’s medical device market has been between 15% and 20% depending on the product sector. The major driving forces behind this growth include increasing demand for healthcare services due to improved and complete coverage for Chinese nationals and the increasing aging population in China. Hospitals are major distribution portals for medical devices accounting for more than 75% of the market share according to the HKTDC. Medical device makers from the United States, Europe and Japan take up roughly three-quarters of China’s medical device market. This is mostly because Chinese consumers consider foreign products better in quality and are technologically advanced. To no one’s surprise, China has been speeding up the development of its own medical device industry and promoting domestic products in its recent “Buy China” efforts. Read More ›
The Changing Labyrinth of China’s e-Commerce - New Requirements of an Online Standard Terms Agreement
China is transitioning from a manufacturing-based economy to a more service and consumption-driven economy. E-commerce is at the center of this transition and it is growing at a rapid pace. In 1995, there were approximately 60,000 Internet users in China. Today, the Boston Consulting Group predicts China’s Internet population will reach 730 million in the next two years and its online shopping headcount is expected to reach 380 million. The value of China’s e-commerce market is also astonishing. By 2015, KPMG estimates China’s e-commerce transactions to reach $540 billion. Read More ›
China’s Ministry of Commerce has taken another step to deregulate over time the approval process for Chinese citizens and companies to invest overseas. This remains a controlled process, but the new rules described in the link below should assist in increasing China’s going abroad. Frost Brown Todd often works with Jun He on mutual client matters. Click here for a summary of the new measures in English and in Chinese.
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