Thursday, August 03, 2006

II. BACKGROUND: 'They Said That $10.76 Million Was as High in Value as the Claims Could Ever Be'

This is the second excerpt of the objectors' motion to the Second Circuit Court of Appeals to strike the settlement parties' "corrected" briefs. The introduction to the motion is in the previous post. A facsimile of our brief is viewable in three parts (http:/,, and and in a few days will be viewable in a single file,


This is an appeal of a class action settlement approval. A settlement provision called the "C Reduction" figures prominently. Appellants, objectors to the settlement, objected to it and argue on appeal that it is unfair and evidence of inadequate representation of the class. (Brief for Objectors-Appellants, pp. 15-16, 26-31.) Appellees (plaintiffs and defendants) defended the C Reduction below by asserting their certainty that it would never be implemented. "[T]he risk is exceedingly remote." (A490) "[N]o basis in reality." (A611) "As a factual matter there is no chance ..." (A1446) "[I]t appears inconceivable ..." (A1571)

The C Reduction reduces the compensation of one of three compensation categories, the C category, if the total value of all claims for three categories (A, B & C) exceeds the net settlement amount available for claims. That amount is the "trigger" and it is $11.8 million. The total settlement is $18 million, but $6.2 million goes to attorneys' fees, claim administration, and cost of notice to the class.

The plaintiffs and defendants filed separate briefs. Both stated the total, final value of all class member claims, assuming the claims to be valid. They said the value of all "prima facie valid claims" was $10.76 million. (Brief for Plaintiffs-Appellees, p. 13, footnote 7; Brief for Defendants-Appellees, pp. 16, 25.) The parties made strong arguments based on these new facts. Defendants argued:

It would be absurd to reverse class certification on this ground, since the claim period expired last September and the submitted claims as reported by the claims administrator make plain that there will be no C reduction whatever, even if every claim asserted were valid.

(Brief for Defendants-Appellees, p. 25.) Defendants confirmed that the meaning of "prima facie valid claims" is "if every claim asserted were valid" in the above quote. In other words, they asserted that $10.76 million was as high in value as the claims could ever be. Plaintiffs said these facts made the C Reduction argument moot. (Brief for Plaintiffs-Appellees, p. 37, ftnt 15.)



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