10-3806-cv(L) In re Sony Corp. SXRD (Ouellette)
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 23rd day of September, two thousand eleven.
PRESENT: GUIDO CALABRESI, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges. - - - - - - - - - - - - - - - - - - - - - - - - - -x
In re SONY CORP. SXRD
MICHAEL OUELLETTE, on behalf of himself and all others similarly situated, et al., 10-3806-cv(L) Plaintiffs-Appellants, 10-3814-cv(con) 10-3824-cv(con) - v - 10-3829-cv(con) 10-3871-cv(con) SABRINA CARDENAS, 10-3873-cv(con) Plaintiff-Appellee, 10-3874-cv(con) 10-3888-cv(con) - and -
SONY CORPORATION et al., Defendants-Appellees. - - - - - - - - - - - - - - - - - - - - - - - - - - x
FOR PLAINTIFFS-APPELLANTS: ARTHUR R. MILLER (Sanford P. Dumain, Milberg LLP, Robert I. Lax, Lax LLP, Joseph J.M. Lange, Jeffrey A. Koncius, Lange & Koncius, LLP, on the brief), New York, New York.
FOR PLAINTIFF-APPELLEE: WILLIAM B. FEDERMAN, Federman & Sherwood, Oklahoma City, Oklahoma. FOR DEFENDANTS-APPELLEES: JOHN S. PURCELL (Richard I. Werder, Jr., on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York.
FOR APPELLANTS: GREGORY P. JOSEPH (Mara Leventhal, Maura Eileen O'Connor, on the brief), Gregory P. Joseph Law Offices LLC, New York, New York.
Appeals from a final judgment and related orders of the
United States District Court for the Southern District of New
York (Patterson, J.).
These are appeals in seven consumer class actions that
were consolidated below. Plaintiffs-appellants are named
plaintiffs in five of the cases; they appeal the district court's
opinion and order of August 24, 2010 approving the settlement of
the consolidated cases. Appellants are lawyers (and their law
firms) who were publicly reprimanded by the district court in a
decision filed July 22, 2010; they appeal the sanctions order.
We assume the parties' familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal. UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is AFFIRMED,
except that its order imposing Rule 11 sanctions against
appellants is VACATED.
1. Approval of the Settlement
Rule 23(e) of the Federal Rules of Civil Procedure
provides that the settlement of a class action must be approved
by the district court. Fed. R. Civ. P. 23(e). A district court
-2- may approve a settlement of a class action only if it determines
that the settlement is "fair, adequate, and reasonable, and not a
product of collusion." Joel A. v. Giuliani, 218 F.3d 132, 138
(2d Cir. 2000). This analysis requires the court to consider
both "the settlement's terms and the negotiating process leading
to settlement." Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396
F.3d 96, 116 (2d Cir. 2005) (citation omitted). "A 'presumption
of fairness, adequacy, and reasonableness may attach to a class
settlement reached in arm's-length negotiations between
experienced, capable counsel after meaningful discovery.'" Id. (quoting Manual for Complex Litigation (Third) § 30.42 (1995)).
In making this determination, courts consider what are
commonly referred to as the Grinnell factors: (1) the complexity,
expense, and likely duration of the litigation; (2) the reaction
of the class; (3) the stage of the proceedings and discovery
completed; (4) the risks of establishing liability; (5) the risks
of proving damages; (6) the risks of maintaining a class action
through trial; (7) the ability of defendants to withstand greater
judgment; (8) the range of reasonableness of the settlement fund
in light of the best possible recovery; and (9) the range of
reasonableness of the settlement fund in light of the attendant
risks of litigation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974), abrogated on other grounds, Goldberger
v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000); see also Wal-Mart, 396 F.3d at 117-19 (applying Grinnell factors).
-3- Public policy favors settlement. Wal-Mart, 396 F.3d at
116-17; accord Williams v. First Nat'l Bank, 216 U.S. 582, 595
(1910) ("Compromises of disputed claims are favored by the courts
. . . ."); TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456,
461 (2d Cir. 1982) (noting "the paramount policy of encouraging
settlements"). Consequently, when evaluating a settlement
agreement, the court is not to substitute its judgment for that
of the parties, nor is it to turn consideration of the adequacy
of the settlement "into a trial or a rehearsal of the trial."
Grinnell, 495 F.2d at 462. We review a district court's determination that a
settlement is "fair, reasonable, and adequate" for abuse of
discretion. McReynolds v. Richards-Cantave, 588 F.3d 790, 800
(2d Cir. 2009). The district court's factual findings relating
to the settlement are reviewed for clear error, while its rulings
of law are reviewed de novo. Id.
Here, we conclude that the district court did not abuse
its discretion in approving the settlement of the consolidated
class actions relating to the second generation SXRD rear
projection televisions (the "Settlement"). The district court
carefully and thoroughly considered both the terms of the
Settlement and the negotiation process that led to it. Indeed,
in connection with the approval of the Settlement, the district
court required extensive briefing, conducted hearings over five
days, and subjected the parties and their attorneys to a
searching inquiry. The terms of the Settlement were similar to
-4- -- if not better than -- the terms of the court-approved
settlement of the class actions relating to the first generation
SXRD televisions, where the class was represented by some of the
same counsel now representing the parties claiming the Settlement
is inadequate.
As the district court found, plaintiffs' counsel here
took extensive confirmatory discovery, and the Settlement was
reached only after extensive negotiations and with the assistance
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10-3806-cv(L) In re Sony Corp. SXRD (Ouellette)
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 23rd day of September, two thousand eleven.
PRESENT: GUIDO CALABRESI, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges. - - - - - - - - - - - - - - - - - - - - - - - - - -x
In re SONY CORP. SXRD
MICHAEL OUELLETTE, on behalf of himself and all others similarly situated, et al., 10-3806-cv(L) Plaintiffs-Appellants, 10-3814-cv(con) 10-3824-cv(con) - v - 10-3829-cv(con) 10-3871-cv(con) SABRINA CARDENAS, 10-3873-cv(con) Plaintiff-Appellee, 10-3874-cv(con) 10-3888-cv(con) - and -
SONY CORPORATION et al., Defendants-Appellees. - - - - - - - - - - - - - - - - - - - - - - - - - - x
FOR PLAINTIFFS-APPELLANTS: ARTHUR R. MILLER (Sanford P. Dumain, Milberg LLP, Robert I. Lax, Lax LLP, Joseph J.M. Lange, Jeffrey A. Koncius, Lange & Koncius, LLP, on the brief), New York, New York.
FOR PLAINTIFF-APPELLEE: WILLIAM B. FEDERMAN, Federman & Sherwood, Oklahoma City, Oklahoma. FOR DEFENDANTS-APPELLEES: JOHN S. PURCELL (Richard I. Werder, Jr., on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York.
FOR APPELLANTS: GREGORY P. JOSEPH (Mara Leventhal, Maura Eileen O'Connor, on the brief), Gregory P. Joseph Law Offices LLC, New York, New York.
Appeals from a final judgment and related orders of the
United States District Court for the Southern District of New
York (Patterson, J.).
These are appeals in seven consumer class actions that
were consolidated below. Plaintiffs-appellants are named
plaintiffs in five of the cases; they appeal the district court's
opinion and order of August 24, 2010 approving the settlement of
the consolidated cases. Appellants are lawyers (and their law
firms) who were publicly reprimanded by the district court in a
decision filed July 22, 2010; they appeal the sanctions order.
We assume the parties' familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal. UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is AFFIRMED,
except that its order imposing Rule 11 sanctions against
appellants is VACATED.
1. Approval of the Settlement
Rule 23(e) of the Federal Rules of Civil Procedure
provides that the settlement of a class action must be approved
by the district court. Fed. R. Civ. P. 23(e). A district court
-2- may approve a settlement of a class action only if it determines
that the settlement is "fair, adequate, and reasonable, and not a
product of collusion." Joel A. v. Giuliani, 218 F.3d 132, 138
(2d Cir. 2000). This analysis requires the court to consider
both "the settlement's terms and the negotiating process leading
to settlement." Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396
F.3d 96, 116 (2d Cir. 2005) (citation omitted). "A 'presumption
of fairness, adequacy, and reasonableness may attach to a class
settlement reached in arm's-length negotiations between
experienced, capable counsel after meaningful discovery.'" Id. (quoting Manual for Complex Litigation (Third) § 30.42 (1995)).
In making this determination, courts consider what are
commonly referred to as the Grinnell factors: (1) the complexity,
expense, and likely duration of the litigation; (2) the reaction
of the class; (3) the stage of the proceedings and discovery
completed; (4) the risks of establishing liability; (5) the risks
of proving damages; (6) the risks of maintaining a class action
through trial; (7) the ability of defendants to withstand greater
judgment; (8) the range of reasonableness of the settlement fund
in light of the best possible recovery; and (9) the range of
reasonableness of the settlement fund in light of the attendant
risks of litigation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974), abrogated on other grounds, Goldberger
v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000); see also Wal-Mart, 396 F.3d at 117-19 (applying Grinnell factors).
-3- Public policy favors settlement. Wal-Mart, 396 F.3d at
116-17; accord Williams v. First Nat'l Bank, 216 U.S. 582, 595
(1910) ("Compromises of disputed claims are favored by the courts
. . . ."); TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456,
461 (2d Cir. 1982) (noting "the paramount policy of encouraging
settlements"). Consequently, when evaluating a settlement
agreement, the court is not to substitute its judgment for that
of the parties, nor is it to turn consideration of the adequacy
of the settlement "into a trial or a rehearsal of the trial."
Grinnell, 495 F.2d at 462. We review a district court's determination that a
settlement is "fair, reasonable, and adequate" for abuse of
discretion. McReynolds v. Richards-Cantave, 588 F.3d 790, 800
(2d Cir. 2009). The district court's factual findings relating
to the settlement are reviewed for clear error, while its rulings
of law are reviewed de novo. Id.
Here, we conclude that the district court did not abuse
its discretion in approving the settlement of the consolidated
class actions relating to the second generation SXRD rear
projection televisions (the "Settlement"). The district court
carefully and thoroughly considered both the terms of the
Settlement and the negotiation process that led to it. Indeed,
in connection with the approval of the Settlement, the district
court required extensive briefing, conducted hearings over five
days, and subjected the parties and their attorneys to a
searching inquiry. The terms of the Settlement were similar to
-4- -- if not better than -- the terms of the court-approved
settlement of the class actions relating to the first generation
SXRD televisions, where the class was represented by some of the
same counsel now representing the parties claiming the Settlement
is inadequate.
As the district court found, plaintiffs' counsel here
took extensive confirmatory discovery, and the Settlement was
reached only after extensive negotiations and with the assistance
of a mediator (a retired judge who assisted in resolving the
issue of attorneys' fees). The district court specifically
considered the issue of collusion and found none, and plaintiffs-
appellants' counsel conceded at oral argument that, indeed, the
record contains no evidence of collusion. Moreover, in a class
of over 352,000 members, only eighty-three opted out and only
twenty objected.
We have considered appellants' other arguments with
respect to the approval of the Settlement and have found them to
be without merit. We are satisfied, based on our review of the record, that the district court's findings were well-supported by
the record, that it gave due consideration to the Grinnell
factors, and that it did not abuse its discretion in approving
the Settlement. 2. The Sanctions Order
We vacate the district court's sanctions order. We
understand why the district court felt the need to impose
sanctions; we agree, for example, that (1) the Meserole
-5- plaintiffs' counsel did not have evidentiary support for certain
of the assertions in the second amended complaint, (2) they took
a statement attributable to a former Sony employee out of
context, thereby making it misleading in terms of time, and (3)
they filed motion papers supporting the confidential source
allegations even after defendants had served the Rule 11 motion.
We agree with the district court that we expect counsel to do
better.
Nonetheless, we conclude that the district court's
order imposing sanctions against the Meserole plaintiffs' counsel
should be vacated. Counsel did eventually withdraw the offending
allegations (albeit after the safe-harbor period had expired),
the district court found that counsel did not act in bad faith,
and the district court's order to show cause did not give
specific notice of the second basis for the imposition of
sanctions (the delay in striking the contested allegations). CONCLUSION
Accordingly, the judgment of the district court is
AFFIRMED, except that its order imposing Rule 11 sanctions
against appellants is VACATED.
FOR THE COURT:
CATHERINE O'HAGAN WOLFE, CLERK
-6-