United States: The Bitter And The Sweet

Last Updated: November 14 2018
Article by Joseph H. Lang Jr.

On October 3, the Eleventh Circuit Court of Appeals affirmed the district court's approval of a class settlement, an award of attorney's fees to class counsel, and the provision of an incentive award for the class representative. The court affirmed in the face of objections to the class representative's Article III standing, the notice pursuant to Rule 23(h), the award of attorney's fees, and the incentive award to the class representative.

The basic background is as follows. This class action alleged violations of the Fair and Accurate Credit Transactions Act (FACTA). Dr. Muransky filed his class action against Godiva Chocolatier, Inc. for allegedly violating FACTA by giving him a receipt that showed his credit card number's first six and last four digits (FACTA prohibits merchants from printing "more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.")

The case settled. Dr. Muransky moved for preliminary approval, explaining that the parties agreed to a settlement fund of $6.3 million from which all fees, costs, and class members would be paid and that no settlement funds would revert to Godiva. Dr. Muransky indicated he intended to apply for an incentive award of up to $10,000 and that class counsel would move for an award of attorney's fees of up to one-third of the settlement fund, which would be $2.1 million. The district court preliminarily approved the settlement.

Only 15 class members opted out of the class that encompassed 318,000 class members (approximately 47,000 people submitted claims). Five class members, including Mr. Price and Mr. Isaacson, objected to the settlement. In their objections, Mr. Price and Mr. Isaacson said they were members of the settlement class and that they timely submitted claim forms. The district court approved the settlement. The objectors appealed. The Eleventh Circuit's affirmance is notable for two jurisdictional discussions.

First, the Eleventh Circuit examined whether objectors to a Rule 23(b)(3) settlement, who can opt out of the settlement, are "parties" with the right to appeal from the district court's judgment when they do not opt out. It held that they are, falling in line with the only circuit courts of appeal to have decided this issue since Devlin v. Scardelletti, 536 U.S. 1 (2002) (similar holding in a mandatory class setting). "[W]e know that actual class members who object but do not opt out of a Rule 23(b)(3) class settlement are still bound by the judgment approving the class settlement."

Second, the Eleventh Circuit addressed whether Dr. Muransky had Article III standing in the first instance. On this point, it is not clear that Godiva would agree that Dr. Muransky had standing and it is very clear that Godiva would have preferred that the Eleventh Circuit not address the issue in determining the fairness of the settlement. But, as a somewhat bitter part of an otherwise sweet affirmance for Godiva, the Eleventh Circuit confronted the issue and expressly decided the Article III standing issue in Dr. Muransky's favor.

In its answer brief, Godiva made the following observation:

Mr. Isaacson’s objection that Dr. Muransky lacks standing will not benefit the Class in any way. It may benefit Mr. Isaacson personally, if he can extract a payoff from his objection. But the District Court was looking to the Class’s interests and, in doing so, was exercising its discretion wisely, not abusively. More to the point, Mr. Isaacson’s eleventh-hour interjection of standing obscures the real issue: whether the settlement was "fair, reasonable, and adequate." Mr. Isaacson has no argument against the settlement itself – indeed, has waived any argument that the settlement was not fair, reasonable, and adequate – so he repairs to a jurisdictional issue. But regardless of whether Dr. Muransky and the Class had standing for their underlying claims, they certainly have a vested interest in the settlement into which they have entered with Godiva, and that standing should be sufficient under article III. At least one decision has held that a federal court’s authority "to review and approve" a class-action settlement that compromises a disputed jurisdictional question exists independently of how the jurisdictional question would have played out – that is, a plaintiff’s "standing to bring the FCRA claims underlying this settlement is irrelevant to whether she has standing to enforce the parties’ settlement agreement."

Godiva also emphasized that, "[a]t the time of the negotiations, there was significant uncertainty regarding whether federal courts would have jurisdiction over cases such as this, and the settlement allowed both sides to manage any resulting risk." It stressed that the Eleventh Circuit need not reach the issue of Article III standing: "Though Objector-Appellant Isaacson raises the issue of standing and would have this Court assess the implications of Spokeo, in fact this Court need not reach that issue."

It remains only to note that Judge Jordan wrote a separate concurrence questioning whether the objector himself had standing to challenge Dr. Muransky's standing: "I write separately to note that Mr. Isaacson, a class member and one of the appellants, may lack Article III standing to challenge the Article III standing of Dr. Muransky, the named plaintiff and class representative."

Muransky v. Godiva Chocolatier, Inc., Nos. 16-16486; 16-16783, 2018 WL 4762434 (11th Cir. Oct. 3, 2018).

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