In May, we told you about a privacy case against Facebook that was settled without much benefit to the class. The case involved Facebook’s practice (called “Sponsored Stories”) of featuring the names and images of its users in advertising without the users’ consent. As alleged in the complaint, when a user interacts with a company on Facebook (for instance, by clicking "Like"), the interaction is repackaged by Facebook into an ad for the company. Public Citizen represents objectors to the settlement, and in September, we filed an appeal on behalf of five parents who objected to the settlement's allowance of the use of their kids' images for marketing without parent consent, in violation of several state laws.
In general, appellate filing fees are unlikely to exceed a few hundred dollars. But late last week, class counsel filed a motion asking the court to require that each one of the parent-objectors post an appeal bond of $32,000, almost all of which would be to cover "administrative expenses" associated with administering the settlement during appeal. That's one expensive appeal!
The motion, which appears to be an attempt to intimidate objectors from appealing, was filed not by Facebook but by class counsel, The Arns Law Firm, which stands to gain millions of dollars in fees if the settlement is affirmed, and whose fees will be reduced by settlement administrative expenses. This motion is troubling for a number of reasons.
First, the motion seeks to hold class action objectors responsible for "administrative expenses" incurred by the settlement administrator during appeal. That position is not supported by the governing case law. And rightly not. Our system does not require objecting class members to cover any “administrative expenses” associated with their original objections; if they were responsible for such expenses on appeal, the threat of massive liability would deter all but the wealthiest and most confident objectors from obtaining appellate review. Objectors play an important role in ensuring that class action settlements are fair to absent class members; this role continues on appeal. Huge appeal costs would all but eliminate objectors’ appeals.
Second, although class counsel estimates the total costs will be $32,000, the motion seeks a bond in that amount against each of 15 objectors (Public Citizen's clients, plus all of the others who have appealed). The purpose of a bond is to make sure a party recovers its costs. Even assuming counsel is entitled to $32,000 in administrative expenses if the settlement is upheld on appeal, imposing a $32,000 on 15 different people secures 15 times the amount of money counsel could actually claim. It's hard not to draw the conclusion that the goal here is intimidation of the objectors.
Third, the appeal-bond motion casts aspersions on the motivations of the objectors — "whose primary interest," class counsel intones (with no sense of irony), "is their own compensation." I can't speak for the motivations of anyone other than Public Citizen's clients, but the parents Public Citizen represents don't stand to gain a cent if their appeal is successful; the only issue they are raising on appeal is the privacy of their children.
Opponents of class actions denigrate them as a vehicle to enrich class counsel while providing little or no benefit to the class. Strong-arm tactics like trying to impose exorbitant bonds on objectors who assert their right to appeal are troubling not just because they hinder access to justice but also because they play into the negative stereotype about class actions and class counsel, distracting from the great good that class actions can do in helping to redress systemic wrongs that would be difficult or economically infeasible to tackle on an individual basis.
For a few examples illustrating the usefulness of the class action device, consider this case about illegal debt collection practices, this case about defective car brakes, and this case about deceptive marketing by a for-profit college.
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