N.J. judge withholds $14 million Sprint settlement over weak response
NEWARK, New Jersey – Brad Lakin complained in federal court months ago that former teammate Paul Weiss and telephone company Sprint cooked up a class action notice that hardly anybody would notice, and facts have borne out Lakin's prophecy.
On April 30 U.S. District Judge Jose Linares withheld approval of a $14 million settlement between Weiss and Sprint because of weak response to the class notice.
Among 15 million persons, he wrote, only 568 called a number in the notice.
About 60,000 clicked into a website, but that didn't impress Linares either.
The web hits equaled four tenths of a percent of the class, he wrote, and web hits don't count as responses anyway.
Linares ordered Weiss and Sprint to write a new notice plan in 21 days, and he gently suggested they rewrite the settlement too.
He granted preliminary approval in December, but in January Lakin intervened on behalf of a class he represents against Sprint in Madison County.
Lakin accused Weiss of running a "reverse auction" by rushing to settle with Sprint for less than Lakin would have obtained in Madison County.
Lakin alleged that Sprint and Weiss deliberately designed a notice that would not reach a significant number of class members.
He pointed out that if class members don't claim all the money, Sprint would distribute calling cards to charities.
Lawyers in a California case joined Lakin in objecting to the settlement.
After a settlement hearing in March, Linares decided the notice failed so badly that it ruined his jurisdiction under federal Rule 23 governing class actions.
"Until notice is properly administered, the court cannot evaluate the reasonableness of the settlement," he wrote.
He chided Sprint and Weiss for neglecting to tell him last year that they had a list of subscribers from the California litigation.
"Having now become aware of that list, the court finds that Sprint and class counsel were required to provide those individuals with Rule 23 compliant individual notice," he wrote.
An insert that Sprint stuffed into bills didn't include necessary information or advise readers that they could opt out of the class, he wrote.
He found a notice in daily newspaper USA Today "nearly as deficient as the notice sent via the bill inserts."
He wrote that Sprint and Weiss could send notice by e-mail or text messages.
As Sprint and Weiss scramble to create a notice plan, they must bear in mind a warning Linares delivered at the end of his order.
He wrote that class action settlements commonly provide for "cy pres" distributions of unclaimed funds to charities.
"However, in the context of this settlement, this court is concerned with a provision in which defendant retains the remaining cash and offers prepaid calling cards as an alternative," he wrote.
"While this opinion does not address the reasonableness of the settlement, the court simply highlights its concern with the provision outlined above and asks the parties to be prepared to argue for its merits should it remain in the settlement agreement," he wrote.