Arizona Attorney General

Mark Brnovich

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AG Brnovich Urges US Supreme Court to Protect Consumers From Unfair Class Action Settlements

For Immediate Release: October 19, 2016
Contact: Mia Garcia (602) 339-5895 or Mia.Garcia@azag.gov

 

AG Brnovich Urges US Supreme Court to Protect Consumers From Unfair Class Action Settlements 
17 States Join Brief Urging Court to Review Gascho v. Global Holdings, LLC
 

PHOENIX - Today, Attorney General Brnovich, leading a coalition of seventeen Attorneys General from across the country, filed a brief in the United States Supreme Court as part of his continuing effort to protect Arizona consumers from abuse in the class action settlement process.  In the brief, Attorney General Brnovich asked the Supreme Court to create a nationwide rule that class action attorneys’ fees in common-fund cash settlements can only be based off the amount actually paid out to the consumers in the class.  This rule will help make sure that the class action process works to the benefit of consumers by ensuring that class action lawyers get paid only in direct proportion to the amount consumers actually get paid.
 
The brief was filed as a “friend of the court” under Attorney General Brnovich’s statutory authority to speak on behalf of Arizonans covered by federal class action settlements.  It urged the Supreme Court to review Gascho v. Global Fitness Holdings, LLC, a case arising out of the Sixth Circuit Court of Appeals, and set a firm rule that class action attorneys who settle cases by agreeing to the creation of a common settlement fund can only obtain their fee award as a percentage of what actually gets paid out of the common fund to members of the class.  Too often, class action lawyers agree to settle cases through these common funds and create the impression of a very large settlement (which supports an inflated fee request) when the claims process and other factors will ensure that only a small percentage of the fund will be paid out to the members of the settlement class.  Indeed, in Gascho v. Global Fitness Holdings, LLC, the class action lawyers agreed to a settlement fund of $15.5 million and sought a fee of $2.4 million based off of this fund, even though the consumers in the class only walked away with $1.6 million and the other 90% of the fund reverted back to the defendant.   
 
In filing today’s brief with the Supreme Court, Attorney General Brnovich asked the Court to not only review Gascho v. Global Fitness Holdings, LLC, but to also reject approval of the imbalanced settlement there and set ground rules that ensure that consumers come out better off than the class action lawyers in these kinds of cases.  Specifically, Attorney General Brnovich asked the Supreme Court to make the Seventh Circuit’s rule—that class action lawyer attorneys’ fees in these types of cases can only be based off the amount actually paid out to the class—the national rule. 
 
As Attorney General Brnovich explained in today’s brief, it is well established that attorneys’ fees are taken from funds that could otherwise go directly to benefit class members.  And applying a rule nationwide that links attorneys’ fees to money actually paid out to class members would ensure that the class action process works to the benefit of consumers by more closely aligning the interests of the class action lawyers and the members of the class.
 
The filing of today’s brief in Gascho v. Global Fitness Holdings, LLC represents a continuation of Attorney General Brnovich’s ongoing efforts to protect consumers from unfair class action settlements.  Attorney General Brnovich will continue to fight for consumers on these issues while urging other Attorneys General to join the ever growing coalition that is speaking out on consumers’ behalf.

To view a copy of the filing, CLICK HERE.