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Norton Rose Fulbright: No More Rubber Stamps: Courts Critical Of Class Action Settlements

By Lauren Shoor

A number of recent cases show courts taking a more active role in approving class action settlements, more closely scrutinizing settlements meant to benefit class members.

Just last month in Redman v. RadioShack Corporation [enhanced opinion available to subscribers], the Seventh Circuit rejected a class action settlement providing for dissemination of $10 coupons to class members and $1 million in attorneys’ fees to class counsel.

Although there were an estimated 16 million RadioShack customers in the class, notice of the proposed settlement was sent to less than 5 million. Of those receiving notice, only 83,000 submitted claims for the coupon—about one half of one percent of the entire class.

This made the attorneys’ fee award tantamount to a 55 percent contingent fee.

In his opinion, Judge Posner rejected as “naïve” the magistrate judge’s finding that the fact that 99.99 percent of class members had not objected to the proposed settlement or opted out suggested that the class generally approved of the settlement’s terms and structure.

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