In 2011, after I moved to Louisville to clerk for Judge Boggs, I signed up for a gym membership at the local Urban Active fitness center. Little did I know that five years later, that gym membership would serve as the basis for my first ever cert petition–a pro se one at that!
Between 2006 and 2012, Global Fitness (which owned the Urban Active facility in Louisville)–in the words of the Sixth Circuit–“incorrectly charged fees pertaining to cancellation, facility maintenance, and personal training contracts.” In 2013, Global Fitness reached a proposed settlement with Amber Gascho and other members of the class. In late 2013, I received a post card in the mail offering me the opportunity to partake in the class, or object. I chose the latter.
With the counsel of Ted Frank and the Center for Class Action Fairness (now part of the Competitive Enterprise Institute), I objected in December 2013. (I have uploaded most of the filed briefs and opinions here). Only a small fraction (less than 10%) of people who receive a postcard actually file a claim. However, the attorney’s fees for the proposed settlement were calculated based on a fictional response rate far greater than 10%. The plaintiffs and defendants responded to my objection in early 2014. Following a fairness hearing, in April 2014, the Magistrate Judge issued a report and recommendation, urging the district court to accept the proposed settlement. Over our objections, the district court agreed with the report and recommendation, and in July 2014 approved the settlement.
We timely appealed to the Sixth Circuit, with our opening brief filed in October 2014. (There was a strong sense of satisfaction that a case, which arose during my 6th Circuit clerkship, was appealed to that same court). The case was argued in June 2015 before Judges Keith, Clay, and Stranch. Eleven months later, a divided panel of the Sixth Circuit affirmed the district court’s judgment. Judge Stranch, joined by Judge Ketih, expressly recognized that their decision created a circuit split with Judge Posner’s opinion from the Seventh Circuit. Judge Clay dissented, and would have rejected the reasonableness of the settlement. Our petition for rehearing en banc was denied (Judge Clay would have granted the petition for rehearing).
On September 19, 2016, I filed a petition for certiorari as both the petitioner and counsel of record. Technically this is a pro se petition, although it is fairly rare that the petitioner–other than government officials (such as the U.S. Attorney General, State Attorneys General, or the Independent Prosecutor)–is also a member of the SCOTUS bar. Joining me on the briefs were Ted Frank and Adam Schulman of the Competitive Enterprise Institute.
Here is our Question Presented:
The Sixth Circuit Court of Appeals affirmed a district court’s approval of a class-action settlement whose value was calculated based on the value of payments to over 600,000 potential claimants, even though only 50,000 claims would actually be paid. So- called “claims-made” settlements are deliberately structured in this fashion because over ninety percent of the claimants will never make the claim. As a result, class counsel aggrandized for themselves sixty percent of the total cash recovery created by this settlement. Judge Posner has explained that this sort of windfall, calculated based on funds that would never be paid out to the class members, was premised on a “fiction.” The panel, over a dissent from Judge Clay, expressly disagreed with the Seventh Circuit, further splintering a deep circuit split.
The questions presented are:
1. Whether it is permissible to approve a “claims- made” settlement by calculating its value based on the value of payments to all potential claimants, rather than only payments to actual claimants, under Federal Rule of Civil Procedure 23(e)(2).
2. Whether it is permissible to approve a settlement that intentionally provides a disproportionate al- location of its pecuniary benefit to class counsel, under Federal Rule of Civil Procedure 23(e)(2).
Law360 covered the Sixth Circuit’s opinion. Bloomberg BNA’s Class Action Report wrote our cert petition. SCOTUSBlog selected our case as the Petition of the Day. Ilya Shapiro discussed Cato’s amicus brief at the Cato-at-Liberty blog.
In later posts, I will write more about the merits of this case, and why this is an ideal vehicle to resolve a deep circuit split.