Aug 292011
 

According to a recent article published by The National Law Journal, the 9th Circuit reversed and remanded a settlement in the class action involving Motorola Bluetooth headsets, concluding that the District Court judge, in approving the settlement, did not adequately assess whether the legal fees were reasonable.

The settlement’s fee provision awarded the plaintiffs’ attorneys $800,000. Following the district court judge’s approval of the settlement, an appeal was filed by seven objectors of the agreement.  Essentially, the objectors argued that the attorneys received significantly more than the class members. Under the settlement, the class received $12,000 to be distributed to nine class representatives. The settlement also provided for $100,000 in charitable gifts.

The 9th Circuit agreed that the “disparity between the value of the class recovery and class counsel’s compensation raises at least an inference of unfairness.” Because of the disproportionate nature of the settlement, the court stated that the District Court judge was “required to examine the negotiation process with even greater scrutiny than is ordinarily demanded.”  The court did not, however, conclude that the deal was unfair or unreasonable.

At least one plaintiffs’ lawyer is confident that the settlement will be approved on remand, stating that the District Court judge will “find that the settlement is fair, adequate and reasonable, and that the attorney fees are appropriate in the case.”

Ted Frank, one of the objectors of the settlement, described the 9th Circuit’s ruling as a “landmark decision,” stating that “[i]t will now be much more difficult for attorneys to abuse the class action system to negotiate low-value settlements that provide handsome compensation for themselves.”