Most ridiculous lawsuits: How lawsuit against ended in paltry $3.93 payouts

Attorneys got paid $800,000; judge on the case sees the injustice.

Nearly 700,000 people received e-mails yesterday notifying them of a payment available to them through PayPal. Good news, but just barely: the payment was for $3.93, just about enough to cover your afternoon latte. The payment was the result of a class-action lawsuit filed in 2009 earlier against that affected about 60 million users in all.

Some class members took the time yesterday to tweet about the irrelevance of such a meager sum. „I just got $3.93… Woo, hoo, yawn,“ wrote Bart Everson, in a typical reaction. „Shall I get it all in pennies and roll around on the bed in it?“ joked Lisa Pett. „I knew high school would pay off eventually,“ quipped @onedavedeep.

In 2011, Classmates users who took the time to actually object to the settlement weren’t so humorous. Many expressed outrage that the lawyers who filed the class-action had asked for $1.05 million, while they were going to be offered $10 or less.

„I registered as a user of and have in no way, shape or form been damaged by whatever the asshole attorneys are claiming,“ wrote Curt Miller, one of the 375 objectors whose e-mail became part of the public record. „This is a complete waste of time for all involved.“

US District Judge Richard Jones read those hundreds of objections and took them to heart. In a June 2012 order approving the settlement, Jones describes the long, winding road to the $3.93 payment that popped up in almost 700,000 in boxes yesterday. Turns out, Jones is about as happy with the results as many of the objectors were.

One long negotiation with „almost no individual benefit“ to users

„The overwhelming majority of those 60 million users will receive nothing,“ acknowledged Jones in his final order (PDF). „About 700,000 of them submitted claims, and will receive less than four dollars each for their efforts.“ Classmates will pay $2.75 million to class members, $800,000 to the lawyers who negotiated the settlement, and more than $1 million in administration costs, as well as its own legal costs, Jones noted. „If the purpose of class action litigation is to impose hefty costs on corporations accused of wrongdoing, one could view this settlement as a success. But class actions, as the lingo implies, are supposed to be about class members. From their perspective, it is difficult to muster much enthusiasm for this settlement.“

The $3.93 sum came about from dividing the $2.75 million payout  by the nearly 700,000 users that made a claim. (Full disclosure: the author of this article received one of those $3.93 payouts.)

The case originated with two lawsuits claiming that had sent out millions of deceptive e-mails telling users that an old friend was trying to contact them, and had viewed their profile or signed their „guestbook.“ For the great majority, that wasn’t true; no one at all had shown an interest in their profile. About 60 million users were contacted, and about 3 million actually took the bait, paying between $10 and $40 to Classmates.

Classmates users may not be thrilled with the current settlement, but an earlier version that was thrown out was far worse.

The current settlement is „underwhelming,“ acknowledged Judge Jones, but it’s a „dramatic improvement“ over a proposed 2010 settlement. That one would have let Classmates off the hook by paying class members around $52,000 in all, while paying the lawyers who brought the case more than $1 million. „This case is a powerful example of the need to be wary of class counsel’s inherent conflict of interest once settlement negotiations begin.“

The earlier settlement would have given most users a $2 coupon for—a service they may not have even wanted. “This is the hallmark of a promotion for Classmates, not of a benefit conferred,“ wrote Jones in an order slamming the earlier proposal. „Class members mocked the $2 coupon… and, almost uniformly, decried a settlement that provided them with little benefit while making more than a million dollars available for class counsel’s fees.“

After the e-mail blasts were sent out to users, two attorneys took it upon themselves to interject themselves in the case: Christopher Langone, a Classmates user and attorney who filed a pro se objection once he heard about the settlement in 2010; and Charles Chalmers, a California attorney who filed on behalf of two other objectors. Judge Jones described Lagone’s input in the case as „not helpful,“ and not any more useful than the dozens of objections from regular citizens who didn’t have attorneys. That didn’t stop Lagone from asking the court for $180,000 in attorney fees, as well as a $50,000 „service award.“ Jones denied the request. Chalmers, for his part, thought he was entitled to around $14,000, and was turned down as well.

A third objector, Michael Krauss and his lawyers at the Center for Class Action Fairness, actually did help in Jones‘ eyes. CCAF makes a habit of objecting to class action settlements it deems unfair across the country. „Mr. Krauss provided substantial legal authority for his positions, much of which was helpful to the court,“ noted Jones.

Krauss didn’t ask for fees for his attorneys‘ work, but class lawyers went on the attack against him and CCAF. They barraged CCAF with document requests seeking its tax returns, verification of its not-for-profit status, and information about its ownership and funding sources. The resulting subpoenas were „vastly overbroad and overreaching,“ wrote Jones, and „amounted to a witch hunt.“ There was no reason „to engage in the litigation assault that class counsel chose here.“ Jones sanctioned by cutting their fees by $100,000, down to a total of $800,000.

Documents from the case are available on a website describing the class-action lawsuit.

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