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State AGs Ask Supreme Court to Review Unfair Lawyer Payout in Global Fitness Class Action Settlement

Thursday, October 20, 2016 8:33
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Attorneys general from 17 states have asked the U.S. Supreme Court to review a circuit court’s approval of a class action settlement agreement that leaves over 90 percent of the class with nothing while the lawyers get an outsized, 60 percent share of the settlement fund. The AGs filed an amicus brief on Wednesday in support of the Competitive Enterprise Institute’s petition for certiorari.

“We're grateful that 17 state attorneys general care enough about their consumers to ask the Supreme Court to intervene to stop abusive class-action practices and resolve the circuit split created by the Sixth Circuit,” said Ted Frank, director of CEI’s Center for Class Action Fairness. “If class action attorneys can get paid millions even when they intentionally structure settlements to prevent over 90 percent of their clients from recovering any money, it creates perverse incentives for attorneys to ensure that class actions benefit only themselves.”

“The Court’s guidance is needed because this is an independently important issue that is core to properly resolving class actions across the country,” the attorneys general told the court. “The Sixth Circuit’s approach places consumers nationwide at risk … by laying bare a split amongst the [circuit courts] and blessing a class action fee arrangement that allows class counsel and defendants to reach a mutually beneficial settlement arrangement to the detriment of class members.”

Attorneys General of Alabama, Arizona, Arkansas, Colorado, Georgia, Indiana, Louisiana, Michigan, Nebraska, Nevada, Oklahoma, South Carolina, Tennessee, Texas, Wisconsin, West Virginia, and Wyoming joined the amicus brief.

In challenging the settlement agreement in Gascho v. Global Fitness Holdings LLC, CEI seeks to protect the interests of the individuals who have come together to form the class action suit against self-dealing class counsel and deter other settlements rigged to benefit attorneys at the expense of their clients.

The original dispute involved allegations of consumer fraud over gym membership contracts with fitness club company Global Fitness Holdings, LLC. CEI challenged the 2013 settlement agreement over provisions such as: a lopsided, $2.4 million pay-out for the class attorneys; a claims process that ensures 90 percent of the class will receive nothing; and special protections added by attorneys to shield their fee award from any effort by the district court to reallocate that money back to class members.

A three-judge panel from the United States Court of Appeals for the Sixth Circuit ruled in favor of the settlement in May, 2016, in a 2-1 split, after a lower court had earlier approved it.

CEI’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Founded by Ted Frank in 2009, the Center has won millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, courts, and the general public.

Date: 
Thursday, October 20, 2016
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