BofA Class Action Defense Cases–In re Consumer Privacy: California Appellate Court Affirms Trial Court Approval Of Class Action Settlement And Award Of Attorney Fees Under Clear Sailing Agreement

Jul 30, 2009 | By: Michael J. Hassen

Trial Court did not Err in Approving Class Action Settlement in Class Action Against Bank of America for Invasion of Privacy Arising from Sale of Customer Information to Third Party Marketers and “Clear Sailing Agreement” as to Attorney Fee Award to Class Counsel did not Invalidate Award California Appellate Court Holds

Plaintiffs filed a putative class action against Bank of America and related entities alleging inter alia invasion of privacy arising from the Bank’s alleged disclosure of “personal and confidential information to third party telemarketers and direct mail marketers for a fee, to enable them to market services to plaintiffs”; the class action was coordinated with two similar class actions against the Bank, and a consolidated class action complaint was filed in 2003. In re Consumer Privacy Cases, ___ Cal.App.4th ___, 96 Cal.Rptr.3d 127, 130 (Cal.App. 2009). The trial court certified a state-wide class action, but deferred ruling on plaintiffs’ request for nationwide class action treatment until additional discovery had been completed. Id. The parties negotiated a settlement of the class action in early 2007 that included a provision that the Bank would not oppose any request by class counsel for attorney fees and costs, provided that the request did not exceed $4 million. Id., at 130-31. The trial court rejected objections to the proposed settlement, and approved the class action settlement; the court additionally awarded $2.9 million in attorney fees and $110,000 in costs. Id., at 131. Four of the objectors appealed the court order, id., at 131-32. The Court of Appeal affirmed.

The appellate court first addressed the objectors’ challenge to the award of attorney fees. See In re Consumer Privacy, at 132 et seq. The appellants did not “challenge the total amount of the fee award” or claim that “the award was excessive”; rather, appellants argued “that any settlement process that purports, as here, to separately provide for fees is a legal fiction which is pernicious and unethical, and inherently unfair to class members.” Id., at 132. The class action settlement in this case involved what is referred to as a “clear sailing agreement” with respect to attorney fees, id. After a detailed analysis, that we do not summarize here, the California Court of Appeal rejected this challenge because the trial court did not shirk its obligation to carefully analyze the fee request and to make a reasonable award. See id., at 132-37. The appellate court also rejected the claim that the difference between the amount of attorney fees and costs awarded by the trial court and the $4 million “no challenge” amount somehow belonged to the class. See id., at 137-38. Put simply, there was no “surplus” to be additionally awarded to the class. Id., at 138. Finally, the appellate court rejected the claim that objectors were entitled to attorney fees and costs for prosecuting an unsuccessful appeal, holding that the appeal was of no benefit to the class. Id., at 138-39. Accordingly, the appellate court affirmed the trial court judgment in its entirety, id., at 139.

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