Alex Kozinski and Marcy Tiffany file no-nonsense objection to class-action settlement

by Brian Wolfman

Ninth Circuit chief judge Alex Kozinski and his wife, Marcy Tiffany, own a Nissan Leaf, an all-electric car. Kozinski and Tiffany are absent class members in a federal class action in California in which the plaintiffs allege that the Leaf's battery is defective. (Kozinski and Tiffany seem to agree, saying that their battery does not perform as promised.)

A proposed settlement is now pending before the district court for approval. It would provide an extended warranty, attorney's fees for the plaintiffs' counsel, and $5,000 for each of the two named plaintiffs.

Kozinski and Tiffany objected on many grounds, saying, among other things, that the extended warranty is worthless, that the plaintiffs' lawyers took no discovery (and, thus, failed to live up to their duties to the clients to unearth Nissan's wrongdoing), and that the $5,000 payments distorted the named plaintiffs' incentives.

This article by Debra Weiss discusses the "scathing" Kozinski-Tffany objection in further detail.

Readers may be interested in taking a look at Kozinski and Tiffany's hard-hitting opposition to final approval of the settlement. It covers a wide range of topics and includes snappy headings like "the proffered valuation of the settlement is bogus." I found two arguments particularly interesting.

First, settling class counsel argued that a factor favoring approval was the low number of objectors. In small-claims consumer class actions that argument is invariably silly, yet class counsel invariably make it. Here's what Kozinski and Tiffany had to say:

Plaintiffs’ Counsel makes much of the small percentage of class members who objected or opted out. Motion for Final Approval 25–26. But a low number of objections and opt-outs isn’t unusual. People seldom object; doing so is a complicated process that requires understanding complex technical and legal issues and investing significant time and effort. Most class members have no idea of the legal consequences of opting out and fear losing a valuable benefit. The Class Notice helped bolster this fear by falsely advising class members that they would lose the benefit of the warranty if they opted out. Class Notice 1. Given the obfuscation and deception the parties have engaged in, the 134 class members who opted out or objected actually represent a tidal wave of opposition to the settlement. It is very likely that many more people would have objected, had they had the knowledge and legal wherewithal to evaluate the settlement, as do Objectors [that is, Kozinski and Tiffany].

Second, on the $5,000 payments to the named plaintiffs:

The only two people in this lawsuit who could possibly be in a position to make an objective judgment about the value of the proposed settlement, [named plaintiffs] Humberto Klee and David Wallak, have little incentive to do so because they get to walk away with the new warranty plus $5,000 to boot. That’s a materially different deal from every other class member, and it strips Klee and Wallak of any ability to judge the fairness of the settlement as to rank-and-file class members. If the Court wants to know what Klee and Wallak really think of the value of the so-called extended warranty, it should deny them the $5,000 (which they did nothing to earn) and ask them if they still think the settlement is such a swell deal. An objective Named Plaintiff, one who didn’t get a $5,000 sweetener, could easily recognize that the settlement provides no meaningful benefit to the class. Nissan has consistently told LEAF owners that the Li-Ion battery would retain 70% capacity after ten years. It’s what Nissan Senior Vice President Carla Bailo said publicly as recently as September 2012, just weeks before Plaintiffs’ Counsel sat down to negotiate with Nissan: “LEAF batteries will generally have 80 percent of their capacity under normal use after 5 years and 70 percent after 10 years.” Lurie Decl. in Support of Motion for Final Approval Ex. A; see also Ex. A 3.

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