Supreme Court Denies Challenge to Judge’s Practice in Appointing Class Counsel

Supreme Court Denies Challenge to Judge’s Practice in Appointing Class Counsel

 WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court on Nov. 18 denied a petition for review filed by a class member who objected to the settlement of a class suit accusing Sirius XM Radio Inc. of antitrust violations in connection with the 2008 merger of the only two providers of satellite radio, and Justice Samuel A. Alito Jr. commented that a judge’s requirement that class counsel reflect the class as to race and gender may warrant “future review” (Nicholas Martin v. Carl Blessing, et al., No. 13-169, U.S. Sup.; See October 2013).

Justice Alito commented that “[t]he petition in this case challenges a highly unusual practice followed by one District Court Judge in assessing the adequacy of counsel in class actions. This judge insists that class counsel ‘ensure that the lawyers staffed on the case fairly reflect the class composition in terms of relevant race and gender metrics.’ . . . The uniqueness of this practice weighs against review by this Court, but the meaning of the Court’s denial of the petition should not be misunderstood.”

Justice Alito noted that U.S. Judge Harold Baer Jr. of the Southern District of New York has relied on race and gender in assessing the adequacy of class counsel in several other cases.

“Based on the materials now before us, I am hard pressed to see any ground on which Judge Baer’s practice can be defended. This Court has often stressed that ‘[r]acial discrimination has no place in the courtroom, whether the proceeding is civil or criminal.’  Edmonson v. Leesville Concrete Co., 500 U. S. 614, 630 (1991) [an enhanced version of this opinion is available to lexis.com subscribers]. Court-approved discrimination based on gender is similarly objectionable, and therefore it is doubtful that the practice in question could survive a constitutional challenge,” Justice Alito said.

“If the challenged appointment practice continues and is not addressed by the Court of Appeals, future review may be warranted,” Justice Alito commented.

Chief Justice John G. Roberts Jr. took no part in the consideration or decision of the petition.

Radio Merger

Carl Blessing filed a class suit against Sirius XM Radio Inc., individually and as the successor in interest to Sirius Satellite Radio Inc. and XM Satellite Holdings Inc., in the District Court. He alleged that the defendants violated federal antitrust laws, state consumer protection statutes and state common law when, on July 28, 2008, XM and Sirius — the only two providers of satellite digital audio radio service in the United States — merged to form Sirius XM.

A settlement ultimately was reached and approved by the District Court. The settlement provides, in part, that class members can renew their subscriptions at the current price for five months and that class members who were no longer customers would receive a coupon for one month of free service. Class members will not receive any cash remedy.

More than two dozen objectors appealed the District Court’s Aug. 25, 2011, final order and judgment approving the settlement of the class action and order awarding class counsel $13 million in attorney fees and expenses. They argued that Judge Baer erred when he found the settlement and attorney fees to be fair and reasonable and when he directed the candidates for class counsel to address diversity concerns in staffing the case.

No Standing

The Second Circuit panel affirmed the District Court’s orders.

As for the attorney fee award, the panel ruled that it is consistent with the Class Action Fairness Act. Finally, the appellate panel opined that “[a]lthough objectors allege that staffing a case with an eye to diversity ‘may interfere with [counsel’s] ability to provide the best representation for the class,’ . . . they never contend that class counsel’s representation was actually inferior. As objectors failed to state an injury-in-fact, we find that they lack standing to challenge the district court’s diversity request in its class certification order.”

Jeannine Miller sought rehearing en banc, arguing that the panel decision conflicted with Second Circuit precedent by “affirm[ing] a settlement with impermissible intra-class conflicts by creating a disfavored subgroup that is deprived of any relief” and that the panel decision conflicted with decisions of other circuits by “fail[ing] to consider all factors of impermissible self-dealing . . . , most notably the disproportionate class counsel award.”  Moreover, “[b]ecause this settlement in this case is to be considered a coupon settlement under Synfuel [Technologies v. DHL Express (USA) (463 F.3d 646 [7th Cir. 2006]) [enhanced version]], 28 [United States Code] § 1712 requires a district court to apply ‘heightened judicial scrutiny.’”

In addition, Nicholas Martin sought rehearing, claiming that the District Court “imposed an unprecedented race and gender requirement on class counsel in a class certification order.”

The Second Circuit denied the objectors’ petitions on March 5.

High Court Petition

Martin petitioned the U.S. Supreme Court on Aug. 2, seeking review of the District Court’s requirement that class counsel reflect the class as to race and gender.

“While race discrimination should have had nothing to do with this antitrust litigation, the district judge gratuitously introduced his standard class-action diversity requirements in the class-certification order. In ruling that objecting class members like Martin lack standing to challenge racial discrimination in court proceedings, the Second Circuit conflicts not only with the principle that ‘the injury caused by the discrimination is made more severe because the government permits it to occur within the courthouse itself,’ Edmonson v. Leesville Concrete Co., 500 U.S. 614, 628 (1991); see also Campbell v. Louisiana, 523 U.S. 392, 407-08 (1998) [enhanced version]; Vasquez v. Hillery, 474 U.S. 254, 262-63 (1986) [enhanced version]; Batson v. Kentucky, 476 U.S. 79, 100 (1986) [enhanced version]; Rose v. Mitchell, 443 U.S. 545, 556-57 (1979) (collecting cases) [enhanced version], but also with several other facets of the doctrine of standing,” Martin wrote.

The plaintiffs who wish to settle opposed Martin’s petition. In their Aug. 20 brief in opposition, they argued that Martin may not appeal “because the factual predicate needed for proper consideration and adjudication of the purported issue is absent here. In particular, there is no basis for any belief that the provision in the order that Martin challenges had any discriminatory impact whatsoever. Martin did not contend and did not demonstrate that any lawyer was assigned or not assigned to the case because of that provision in the order. Furthermore, no law firm other than those appointed moved for appointment as class counsel, so there can be no suggestion that any firm was denied appointment because of that provision in the order. There simply was no discrimination, and hence no injury, from the order.”

Sirius XM waived its right to respond. Pacific Legal Foundation and The Center for Individual Rights filed amicus curiae briefs in support of Martin.

On Sept. 19, Martin filed a supplemental brief, arguing that “[t]he Sixth Circuit’s [In re Dry Max Pampers Litig. (6th Cir. Aug. 2, 2013; 2013 U.S. App. LEXIS 15930) [enhanced version]] decision splits with the Second Circuit’s Blessing decision in three ways that undermine the settlement and attorney-fee award that the District Court approved and the Second Circuit upheld. First, on the threshold issue of the presumption to afford class-action settlements, Pampers is less deferential to the parties. Second, on the central issue of valuing the settlement, Pampers puts the burdens of both production and proof on the settling parties, whereas Blessing puts those burdens on the objectors. Third (and related to the first two), Pampers rejects any artificial bifurcation of attorney-fee settlement funds from class-relief funds.”

Counsel

Lawrence J. Joseph of Washington and Theodore H. Frank and Adam E. Schulman of Center for Class Action Fairness in Washington represent Martin.

Paul F. Novak of Milberg in New York, Jay W. Eisenhofer, James J. Sabella and Shelly L. Friedland of Grant & Eisenhofer in New York and Christopher B. Hall and P. Andrew Lampros of Cook, Hall & Lampros in Atlanta represent Blessing and the other plaintiffs. Todd R. Geremia of Jones Day in New York represents Sirius XM.

Michael E. Rosman and Michelle A. Scott of The Center for Individual Rights in Washington filed an amicus brief on behalf of The Center for Individual Rights. Joshua P. Thompson, Meriem L. Hubbard and Jonathan Wood of Pacific Legal Foundation in Sacramento, Calif., filed an amicus brief on behalf of Pacific Legal Foundation.

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