Ted Frank, formerly of AEI,has started up a new consumer protection organization called “The Center for Class Action Fairness.” This is a worthwhile enterprise. The purpose of the organization is to protect consumers from collusive and unfair settlements of class action cases, especially cases that generate massive fees for class counsel with trivial benefits to consumers.
This is an issue that I worked on extensively while I was at the FTC, so I have some familiarity with how outrageous some of these settlements are and how important work like Ted’s is in protecting consumers. In particular, what I became aware of is how many of these lawsuits are essentially settled in a collusive bargain between class counsel and the defendant. Usually the defendant pays a couple million dollars to the lawyers and gives coupons or some similar redress to the members of the class. In one case a judge noted that the coupons–which allowed class members to get discounts on future purchases–essentially amounted to a request for a court-ordered promotional scheme. An example (in a case well after I left the Commission) was the FTC’s intervention in the Netflix settlement.
Ted is taking this on. Here’s an example of one of the settlements to which he has filed an objection.