When big class actions are brought on behalf of hundreds -- or thousands -- of consumers, how many actually end up with a piece of the settlement pie? Fewer than you might think. But that may change in the future.
One company included as a plaintiff in a major antitrust class action has brought the whole matter into court. And while the company has lost its case at the U.S. Court of Appeals in Philadelphia, the outcome may help a lot of other firms in similar situations in the future.
What seems to have happened is, simply, that the company did not receive notice that a settlement had been reached. So it sued the lawyers involved, claiming they had a duty to their clients who made up the plaintiff class to try harder to make sure they got the word.
The antitrust suit involved alleged price-fixing in the paper industry, and it produced a final settlement pot of just over $20 million. The award was to be shared by 1,550 customers of the defendants, or as many of the customers who came forward to claim their portion. But in fact, only 187 responded to the notice of the distribution plan, and they divvied up the money in slices that ranged from $1.5 million down to $21.28.
But after the money was gone, one company that figured it should have gotten about $250,000 complained. Its executives argued that, while they had received six copies of a notice of an earlier, partial settlement, they got none of the seven copies of the final settlement that supposedly were mailed. The notices should have gone out by certified mail, not regular first-class, the company claimed, and there should have been followup to try to reach the 88 percent of the class action's members who did not respond.
The judge listened to the arguments, then summarily threw out the case, finding that the lawyers had no obligation to do more to reach the defendants. The appellate court majority agreed, but it suggested that maybe a judge should have imposed such an obligation. "In the future, district courts should carefully review the specific characteristics of a class action to determine whether more thorough notice procedures are justified by the circumstances," Judge Arlin M. Adams cautioned in his March 22 opinion in Zimmer Paper Products v. Berger & Montague. That suggests that when a huge number of persons have a right to not very much money, first-class mail may be okay, but in a case where there is a manageable group and there's enough money in the pot to pay for more expensive classes of mail, a wise lawyer will try harder to see that the notices actually get to the companies involved.
Perhaps even more persuasive than the majority's exhortations, however, is the view of the dissenting voice in the 2-to-1 decision. Judge Joseph F. Weis Jr. thought that the whole issue of whether or not the lawyer owed damages to the out-of-luck company should not have been disposed of summarily but should have gone to a full jury trial. The specter of an ordeal such as that is enough to prompt most class-action lawyers to use certified mail.
In other cases, courts ruled that:
Government agencies cannot hide a proposed regulation change in the gray type of the Federal Register and pretend that they have conducted a public debate on the matter. The U.S. Court of Appeals in Washington bowed to union objections and threw out part of a Labor Department regulation revision that limited the reach of the Service Contract Act, which protects jobs of employes of companies selling services to Uncle Sam. The statute has force only within the United States but had been applied to any part of the contract done in the country. In October 1983 revisions, the Labor Department tried to narrow that applicability to only those contracts on which a "substantial" part of the service was provided in the United States. The revision had been suggested in earlier Federal Register filings but was never highlighted as a major change; as a result, opponents had had no adequate chance to object, the judges explained in tossing out the revision. (AFL-CIO v. Donovan, March 22)
A bloc of spectators from a pressure group attending a trial can lead to a mistrial. The West Virginia Supreme Court threw out the felony drunk driving conviction of a defendant targeted as a prime example of highway hazard by the state's newly formed chapter of Mothers Against Drunk Driving (MADD). At least 10 MADD members were in the courtroom audience at all times, wearing bright yellow identifying buttons and, in many cases, cradling infants in their laps. The judge should never have allowed it, the high court justices admonished. While members of the public have a constitutional right to attend trials, when they are clearly identified as backing one side in the controversy, they become too strong a potential influence on the jury to be allowed, the ruling says, even if the group members are in no way disruptive.(State v. Franklin, March 1)