Inordinate Fee Distributions, Clear Sailing Provisions, And Reverter Of Reduced Fees Award To Defendant Were Storm Warnings In This Particular Case.
Briseno v. Henderson (ConAgra Foods, Inc.), Case No. 19-56297 (9th Cir. June 1, 2021) (published) is a must review for any clients and practitioners in the class action area. It certainly shows the Ninth Circuit will use In re Bluetooth Headset Products Liab. Litig., 654 F.3d 535 (9th Cir. 2011) [discussed in our August 25, 2011 post] to judge class action settlement fee terms at the post-certification stage (even though Bluetooth was at the pre-certification stage). Numerous “red flags” led to a reversal and remand of the fee award in this case, with the Ninth Circuit indicating that the presence of these factors, singularly or in the aggregate, would not lead to a reversal unless the circumstances dictate otherwise—as they did in this case.
The class action case involved a challenge to a natural labeling of Wesson Oil which was alleged to be deceptive. The parties reached a small per unit of oil bottle settlement with the class, with the parties valuing the settlement at around $95 million, $67 million for cash payouts and $27 million for injunctive relief—with the Ninth Circuit determining that the injunctive relief valuation was virtually worthless later on in the published opinion. However, the actual “redemption” results showed only $8 million was shelled out, with $7 million going to class counsel for fees and costs (net result: $1 million to the class). There were other areas of the settlement which showed a hefty settlement was reached with the defense at the largesse for class counsel, such that the result had to be overturned for a restudy.
The Ninth Circuit, in strong terms, reversed and remanded. Three factors primarily led to this result: (1) plaintiffs’ counsel was going to receive a disproportionate distribution of the settlement, roughly 90%, despite the small “redemption rates” and the worthless injunction evaluation; (2) the parties agreed to a “clear sailing clause,” which could be neutral, but was not here given ConAgra’s settlement negotiations indicating they would not pay anywhere near the set upward “optics” established in the overall compromise (put another way, it was banking on a low “redemption” rate); and (3) the settlement contained a “reverter” where any reduced fees to class counsel went back to ConAgra, another indication of collusion.