Orange County Superior Court Judge Stephen Sundvold recently approved a $500,000 class action settlement in a case brought by a group of current and former employees of consumer lender Speedy Cash (Rivas v. Speedy Cash). The case involved alleged for denials of meal and rest periods. Though we aren't intimately familiar with the case, it appears, from some of the court records, that the settlement was previously given preliminary approval, including approval of a class representative enhancement of $10,000 and approval of an attorney's fee to the class counsel of $166,666.
Unfortunately for the class counsel, only $67,600 of the class fund was claimed by the interested employees. The judge wasn't about to trash the entire deal over that, but the apathy of the claimants certainly influenced his final approval decision, as he slashed the fees (from $166,666 to $45,000) and class representative enhancement (from $10,000 to $1,500). The ruling published last week was as follows:
The Settlement is fair, adequate and reasonable. It is approved.
This Action and its settlement cause the Court to ponder the efficiency and efficacy of the use of the time and efforts of Plaintiff’s Counsel. Barely 30% of the potential class members have made claims. This is a sad reflection on the Action, especially since each will receive in excess of $500 for a total of $67,600.
The requested attorney fees in the amount of $116,666 amount to nearly 200% of the benefits paid to the class members.
There is no legal justification for an enhancement of $10.000. An enhancement of $1,500 is awarded. Attorney costs in the amount of $2,433.35 are awarded. Administrative costs of $16,500 are approved. Attorney fees in the amount of $45,000 are granted. This amounts to over 66% of the payout to the class.
Who is the lucky beneficiary of these reductions? If the settlement was a typical "claims made" settlement, then the money is kept by the defendant rather than spread among the class members who made claims.
At a recent class action defense seminar I attended, one of the key pieces of advice offered to class action defendants was this:
"Do not ever tie the class counsel's fees to the number or amount of submitted claims."
The implication of that advice is that, unless the class counsel's recovery depends upon it, they will not actively seek to rally the class members to submit claims. But, as the Speedy Cash case demonstrates, even if the defendant does not correlate those two figures, the court might. And while some class lawyers will recite the old cliche about leading a horse to water, the prudent class counsel will always make sure he is not only leading the horses to water, but that he is also strongly encouraging them to drink.