Two consumer class actions recently hit a roadblock when courts denied final approval for class settlements. In In re Target Consumer Data Security Breach, the U.S. District Court for the District of Minnesota preliminarily certified a settlement class in early 2015 and approved the parties' agreement calling for a $10 million settlement fund to be distributed to the class. Subsequently, after overruling objections, including a challenge to the adequacy of the class representatives, the district court issued its final approval of the settlement. On appeal, the Eighth Circuit held that the district court did not properly analyze the requirements of Federal Rule of Civil Procedure 23(a) before certifying the class, either in its preliminary order or after the objections had been raised. Instead, the circuit court panel said the lower court merely recited the requirements of the Rule and concluded they had been met, and then subsequently refused to revisit its preliminary approval order in response to the objections. The Eighth Circuit emphasized the district court's continuing duty to evaluate certification throughout the litigation and, finding the court had abused its discretion in failing to do so, remanded for the district court to conduct the rigorous analysis required under Rule 23.
Meanwhile, the U.S. District Court for the Northern District of California denied final approval of a class action settlement after previously granting preliminary approval. The consumer lawsuit against Sony involved the company's removal of the "Other OS" functionality of certain gaming devices. The settlement called for the certification of two classes, members of which had to put forth certain proof of their purchase and, in some cases, their use of the Other OS feature. In September 2016, the court preliminarily certified the class. However, it then expressed concerns about the notice and claims process that followed. The court found that Sony was imposing unnecessary proof requirements on consumers without justification and noted that the claims rate — less than 1 percent of the 10 million total purchasers — was extremely low. Ultimately, the court stated it was unable to conclude that the settlement would fairly compensate injured consumers. With regard to attorneys' fees, the court also found that counsel had not substantiated the multi-million dollar lodestar provided for in the agreement. Thus, the court denied the motion for final approval of the settlement without prejudice.
In re Target Corp. Customer Data Security Breach Litig., No. 15-3909, No. 15-3912, No. 16-1203, No. 16-1245, No. 16-1408 (8th Cir. Feb. 1, 2017).
In re Sony PS3 "Other OS" Litig., No. 10-cv-01811 (N.D. Cal. Jan. 31, 2017).
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