Defense Negotiated Class Action Settlement with Florida Class Action Counsel Instead of California Class Action Counsel because of Leverage Over Class Counsel and Class Action Settlement Procedurally and Substantively Unfair Florida Federal Court Holds
Numerous class action and individual lawsuits were filed against Sharper Image alleging that its Ionic Breeze air purifier does not clean and purify the air as advertised and is harmful in that it omits excessive ozone; one such class action was filed in the Florida federal court and ultimately the parties sought court approval of a settlement of the class action. Figueroa v. Sharper Image Corp., ___ F.Supp.2d ___ [Slip Opn., at 1] (S.D. Fla. October 11, 2007). In broad terms, the class action settlement provided for $19 Sharper Image coupons or merchandise credits, an OzoneGuard “to protect against ozone emission,” injunctive relief, and $2 million for class counsel. Id., at 1-2. Defense attorneys stressed that the coupon represented the primary financial benefit to the class, not the OzoneGuard, id., at 2 n.2. The settlement provided to the court for final approval was the third amended class action settlement; the district court had given preliminary approval to an earlier version of the settlement agreement in January 2007, and a hearing on final approval of the proposed settlement was held in August 2007. Id., at 1. The federal court refused to approve the settlement.
The lawsuit was filed in May 2005 as a nationwide class action on behalf of purchasers of Sharper Image “ionizing air purifiers,” including the Ionic Breeze®, and sought damages for breach of contract, breach of warranty, money had and received, and unjust enrichment. Figueroa, at 2. In essence, the class action alleged that Sharper Image engaged in the “unlawful conduct of marketing and selling ionizing air purifiers that do not remove impurities from the air and that fail to perform as advertised and sold” and that “the ionizing air purifiers exposed consumers to hazardous levels of ozone.” Id. Defense attorneys moved to stay, dismiss or transfer the class action on the grounds that it simply copied several class action lawsuits filed in California; in response, plaintiffs’ lawyer sought leave to amend the complaint to add the inventor, Zenion Industries, as a party defendant, so the district court denied the defense motion as moot and granted plaintiffs leave to amend. Id., at 2-3. The federal court subsequently dismissed Zenion from the class action for lack of jurisdiction, id., at 5.
Before the district court ruled on plaintiffs’ motion to certify the lawsuit as a class action, the parties advised the court that “an agreement on all aspects of the class claims on a nationwide basis, and that what remained to be resolved was the issue of attorney’s fees.” Figueroa, at 5. The court therefore continued the hearing on the class certification motion in order to allow the parties to present a “complete package” for approval by the court. Id. Soon thereafter, however, class counsel for the certified nationwide class action pending in California contacted the district court and advised that he had “reason to believe that the parties here are attempting to settle the claims belonging to the California Actions class, without the knowledge or consent of the class representatives or Class Counsel” and that the parties to the Florida class action had refused voluntarily to provide information in this regard. Id., at 5-6. California counsel also sought discovery of documents filed under seal with the Florida district court, id., at 5, and, following a hearing and over defense objection, the federal court ordered defense counsel to produce certain documents, id., at 6. At that time, the court expressed concern “with the parties’ practice of filing documents under seal in a purported class action lawsuit.” Id., at 6.
The parties filed a proposed class action settlement that, which the district court summarized at pages 6 and 7 as follows: “The essence of this first Settlement Agreement was to provide to class members, limit one per household, a $19 merchandise credit, valid for one year, for use at Sharper Image retail stores on Sharper Image branded products. The first Agreement also provided class members the ability to purchase (during a six-month period of time) an OzoneGuard attachment, for Ionic Breeze® floor models only, for $7. Sharper Image also agreed to make modifications with respect to its advertisements of the Ionic Breeze®, for example, to not state that the Ionic Breeze® is a medical device and to remove the British Allergy Foundation and the Asthma and Allergy Foundation of America seals from its advertising.” The parties also represented to the court that the Florida class action was “significantly broader” than the California class action, particularly as the California class actions were “limited to claims under California state law,” and jointly moved the court to enjoin competing class actions from proceeding “in order to facilitate an efficient and expeditious settlement and approval process, and to preserve the Court’s jurisdiction to adjudicate the settlement.” Id., at 7. The federal court characterized as a “consistent theme” the argument that Sharper Image “was on the verge of bankruptcy, and that the proposal then under consideration was the best deal that could be arranged.” Id., at 30.
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