Posts belonging to Category Settlements

McDonald’s has opted to settle a class action rather than risk further litigation of allegations that it falsely advertised its chicken products as being halal (prepared according to Islamic dietary law). See Settlement Agreement, Ahmed v. McDonald’s Corp., No. 11-014559-CZ (Mich. Circ. Ct. filed Nov. 23, 2011). The suit, filed in Michigan state court, targeted two Dearborn-based McDonald’s franchises that allegedly served non-halal McNuggets and McChicken sandwiches after advertising those products as being halal.

A portion of the settlement proceeds will be paid to a pair of Michigan-based Muslim organizations. Of the $700,000 settlement fund, $274,000 will be paid to the Health Unit on Davison Avenue, Inc., a medical clinic serving a predominantly Muslim clientele, and approximately $172,000 will go to Dearborn’s Arab American National Museum. The settlement agreement also provides for $233,333 in attorneys’ fees and a $20,000 incentive award for the named plaintiff.

The parties acknowledge the decision to forego direct payments to class members — customers at just two McDonald’s franchises — describing such disbursements as being “impractical,” and touting the settlement’s benefits to Michigan’s Muslim community. See Settlement Agreement at 9-10. Notice of the settlement is to be posted in numerous area mosques.

Though modest by class action standards, the Ahmed settlement is likely to send a signal to defendants facing similar claims involving religious dietary restrictions that settlement is more prudent than risking a substantial judgment attendant to class certification and subsequent findings of liability.

In one of the largest settlements of its type, oil refinery workers and ConocoPhillips Co. have reached a $15 million settlement of allegations that the workers were not relieved of all duties during meal breaks, as required by law. The settlement is now before Judge Phillip Guitierrez, who has granted plaintiff’s motion for preliminary approval, and before whom parties will conduct a fairness hearing on April 1, 2013. See United Steelworkers v. ConocoPhillips Co., No. 08-2068 (C.D. Cal. Dec. 12, 2012) (order granting preliminary approval).

The case was originally filed in Los Angeles Superior Court in 2008 and was removed to U.S. District Court later that year. In the intervening years since, the state of California’s meal and rest break laws have gone through a period of great transition, leading up to the California Supreme Court’s landmark decision in Brinker in April of 2012. Although Brinker is widely viewed as a mixed result for the plaintiffs’ bar, favoring employers in some respects while also creating employee-friendly doctrines, the substantial settlement here suggests that workers may benefit most from the Court’s ruling in Brinker. The $15 million total value of this settlement makes it the largest post-Brinker settlement of meal break claims.

The settlement agreement includes $15,000 incentive awards for the three named plaintiffs, which they will collect in addition to their recovery as class members. The award also includes an allocation of $3.5 million in attorneys’ fees, which amounts to less than the 25% benchmark that the Ninth Circuit has set for such fees.

Bank of America agreed to two settlements this week in connection with the home mortgage meltdown and Bank of America’s ill-fated acquisition of now-defunct mortgage lender Countrywide. In doing so, the bank took substantial, if costly, steps to shed itself of the Countrywide albatross.

The first settlement, between Bank of America and Fannie Mae, is valued at $11.6 billion and seeks to resolve claims resulting from mortgage-backed derivative investments. The value of these investments precipitously fell as some borrowers were unable to repay home loans, while others with “underwater” mortgages – in which the outstanding balance on mortgages exceeded appraised home values – simply opted to stop making regular payments. Under the terms of the settlement, Bank of America has agreed to repurchase some of the $6.75 billion in loans that Countrywide had sold to Fannie Mae, and also make a direct cash payment of $3.6 billion in cash to Fannie Mae. An additional $1.3 billion will be paid as effectively a punitive assessment for Bank of America’s delayed response to foreclosures.

The second settlement arises from a suit brought by the federal government against Bank of America and a host of other mortgage lenders. This settlement is valued at $8.5 billion and is intended to benefit individual consumers. While substantial, the settlement is only expected to yield payments to about ten percent of the 4 million consumers who were subject to foreclosure.

Bank of America’s common stock declined in value by only 8 cents per share in trading following the announcement of the more than $20 billion in settlements, suggesting that the prospect of settlements of this magnitude was already largely reflected in the share price.

Bank of America’s Countrywide acquisition was inauspiciously finalized in the summer of 2008, just weeks before the demise of Lehman Brothers set off the events underlying the “Great Recession.” Countrywide was not Bank of America’s only problematic acquisition, as last fall, Bank of America agreed to pay $2.43 billion to settle a class action related to its similarly troubled $20 million Merrill Lynch acquisition.

The past year saw a substantial range of complex litigation settlements benefitting consumers and workers. The California Supreme Court’s long-awaited Brinker decision, a mixed bag for employees, confirmed that employers still face substantial class-wide liability for violations of meal and rest laws, making settlement a prudent option. On the consumer front, numerous settlements put cash directly into the pockets of those victimized by deceptive practices. The year was also notable as several prosecutions by federal and state government entities led to meaningful results for plaintiffs. The following is an overview of 2012’s most notable impact litigation settlements.

Consumers Benefit from Substantial Settlements

The popular “Madden” video game was the subject of the settlement in Pecover v. Electronic Arts Inc., No. 08-2820 (N.D. Cal.). The settlement provides for aggregate payments of more than $27 million to plaintiffs who had alleged that video game leader Electronic Arts violated antitrust and consumer-protection statutes. The preliminarily approved settlement will pay class members as much as $70 each in compensation for Electronic Arts’ having exploited its monopoly-pricing advantage.

After a first attempt at settlement was rejected by a federal judge, the parties in Fraley v. Facebook, No. 11-01726 (N.D. Cal.) came back with a second settlement that addressed the first attempt’s most glaring deficiency — no payments to class members — in resolving the plaintiffs’ allegations that Facebook has effectively conscripted its members, without pay or consent, to endorse Facebook’s “Sponsored Stories.” On December 4, 2012, Judge Richard Seeborg granted preliminary approval to a settlement that provides broader injunctive relief than the first settlement proposal and payments of up to $10 per class member. The Fraley final approval hearing is scheduled for June of 2013.

Another web-based business, LivingSocial, agreed to settle a class action alleging that the company violated consumer-protection laws that mandate a minimum five-year redemption period for gift certificates in In re LivingSocial Mktg. & Sales Practices Litig., No. 11-0472 (D.D.C.).

In In re Bayer Corp. Combination Aspirin Prods. Mktg. & Sales Practices Litig., No. 09-02023 (E.D.N.Y.), the well-known aspirin maker and global pharmaceutical concern settled a class action for $15 million that alleged Bayer’s marketing had been misleading, specifically that particular products were sold without FDA approval and without proof that the medications were safe and effective as advertised.

In Hohenberg v. Ferrero U.S.A., No. 11-0205 (S.D. Cal.), the parties reached a $3 million settlement by which the class members are entitled to receive $4 per jar of Nutella purchased, up to a maximum of five jars, to resolve allegations that Nutella was deceptively advertised as a healthy food. In addition to providing monetary relief to consumers, Nutella will also be required to remove misleading health claims from its packaging, website, and advertising.

Brinker Affirms Continued Vitality of Wage and Hour Class Actions

Oil refinery workers and ConocoPhillips Co. settled meal break claims for $15 million in United Steelworkers v. ConocoPhillips Co., No. 08-2068 (C.D. Cal.), underscoring that despite being a mixed result, the California Supreme Court’s Brinker decision affirmed the relevance of meal break class actions.

Clarifying Reliance Doctrine

In a settlement more notable for having expounded on the “fraud on the market” doctrine than its terms, in In re Am. Int’l Grp., Inc. Secs. Litig., No. 10-4401 (2d Cir.), the Second Circuit Court of Appeals held that securities fraud plaintiffs need not prove that fraud-on-the-market applies to satisfy the predominance requirement for certification of a settlement class. The decision is expected to be an impetus to settling securities class actions.

Government Prosecutions Yield Substantial Settlements

In re Am. Int’l Grp. also yielded perhaps the year’s largest settlement, with Bank of America agreeing to pay $2.3 billion to resolve claims related to its 2008 acquisition of Merrill Lynch. The settlement’s principal beneficiaries will be the pension funds that suffered substantial losses in their Bank of America investments following the ill-fated Merrill Lynch acquisition.

A $22.5 million settlement was reached between Google and the Federal Trade Commission in U.S. v. Google Inc., 12-04177 (N.D. Cal.), to resolve charges that Google tracked users of Safari (the Apple web browser) without their knowledge or permission. The settlement received final approval from federal district judge Susan Illston in November. The Google Safari settlement will be the largest penalty the FTC has ever obtained for a consent violation.

The federal Consumer Financial Protection Bureau (CFPB) — the continued existence of which might have been in jeopardy had the presidential election turned out differently — mandated its first major enforcement action this past July, negotiating a $210 million settlement with Capital One Bank to resolve charges of deceptive marketing. Of the settlement fund, fully $150 million is dedicated to paying restitution to customers who bought “add-on” credit card services that were deceptively marketed.

In In re Electronic Books Antitrust Litigation, No. 11-02293 (S.D.N.Y.), another enforcement action brought chiefly by government entities, the U.S. Justice Department and various state attorneys general negotiated settlements with publishers alleged to have colluded and charged above-market prices for e-books. By the preliminarily approved settlement’s terms, consumers will receive refunds in their online accounts on iTunes, Amazon and Barnes & Noble, while those who bought their e-books through Google or Sony will receive checks.

Finally, a relatively rare public/private partnership between the Orange County District Attorney and a private plaintiff’s firm has yielded a $1.3 billion settlement in In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, and Products Liab. Litig., No. 10-02151 (C.D. Cal.).  This settlement is one of the largest of 2012, and possibly the largest automobile defect settlement in U.S. history.