[00:00:00] Speaker 02:
I think the way they organized the captions, they just put the plaintiff and the objectors on the same side of the V. So I just read what they hand me, but I appreciate the clarification.

[00:00:14] Speaker 05:
Good morning.

[00:00:15] Speaker 05:
May it please the court, Scott Sims, for the appellants.

[00:00:19] Speaker 05:
I'm going to attempt to reserve five minutes before rebuttal.

[00:00:23] Speaker 05:
There are numerous issues raised in the briefs that we believe require reversal, but for purposes of today, I'd like to focus on four issues.

[00:00:32] Speaker 05:
First, I'm going to talk about adequacy under Rule 23A4.

[00:00:36] Speaker 05:
Second, I'm going to talk about the appropriate legal standard for purposes of evaluating whether the proposed attorney's fees constitute a disproportionate amount of the settlement for purposes of a Bluetooth collusion analysis as opposed to the fee award itself.

[00:00:50] Speaker 05:
Third, I'm going to talk about the claims made for virginary structure of the settlement.

[00:00:55] Speaker 05:
And fourth and related, I'm going to talk about the proposed revertor of any unwarded attorney's fees back to Lufthansa.

[00:01:04] Speaker 05:
starting first with adequacy under Rule 23A4.

[00:01:07] Speaker 05:
The district court abused its discretion in certifying the settlement class because it did not find there was an adequate class representative at the time the settlement was reached.

[00:01:22] Speaker 05:
So at the time the settlement was reached, there was a binding term sheet

[00:01:27] Speaker 05:
quote-unquote, binding term sheets signed at a mediation between Miss Marie, Class Council, and Lufthansa.

[00:01:36] Speaker 05:
At that time, Miss Marie was the only named plaintiff in the case.

[00:01:42] Speaker 05:
The district court recognized that there were problems with Miss Marie's adequacy, and the district court ended up punting

[00:01:50] Speaker 05:
not deciding whether or not she was adequate.

[00:01:53] Speaker 05:
Those problems were a result of the fact that Ms.

[00:01:57] Speaker 05:
Marie's case was stayed while there was an appeal to this court of whether or not she was going to be required to arbitrate her claims and couldn't proceed on a classified basis.

[00:02:09] Speaker 02:
The district court at that time... And who was the appellant in that appeal?

[00:02:13] Speaker 05:
The appellant in that appeal was Lutanzi, Your Honor.

[00:02:16] Speaker 05:
So Lufthansa was appealing that this was prior to the Supreme Court's decision that there was an automatic stay, which came in Coinbase in, I think, 2023.

[00:02:24] Speaker 05:
So the district court, in order for there to be a stay pending the appeal, had to find that that appeal presented a substantial question.

[00:02:32] Speaker 05:
And what Judge Fitzgerald said is, I denied the motion.

[00:02:36] Speaker 05:
I think I'm right.

[00:02:37] Speaker 05:
But he recognized that it was really an open question, OK?

[00:02:41] Speaker 05:
The problem that presented for Ms.

[00:02:43] Speaker 05:
Marie was her case was stayed, and she's faced a material risk.

[00:02:47] Speaker 05:
No guarantee, but a material risk.

[00:02:49] Speaker 02:
What happened with that appeal?

[00:02:50] Speaker 02:
It seems from the docket it just sort of trailed away.

[00:02:53] Speaker 05:
What happened is they settled.

[00:02:55] Speaker 05:
This is the problem.

[00:02:56] Speaker 02:
It seemed like it was dragged out.

[00:02:59] Speaker 02:
I mean, was it wrapped up in the settlement?

[00:03:01] Speaker 05:
Yeah, when they settled, they dismissed the appeal or stayed the appeal one way or the other.

[00:03:07] Speaker 05:
And so the problem was, as Judge Fitzgerald recognized prior to refusing himself, he noted that the case being stayed and the fact that she was potentially subject to individual arbitration gave her, meaning Miss Marie, a stronger reason to settle than class members who weren't subject to arbitration.

[00:03:25] Speaker 05:
So Miss Marie had purchased her tickets through Expedia.

[00:03:29] Speaker 05:
Expedious terms and conditions have an arbitration provision.

[00:03:32] Speaker 05:
Lufthansa was trying to enforce that as a third-party beneficiary.

[00:03:35] Speaker 05:
Those are who we call indirect purchasers in the briefs.

[00:03:38] Speaker 03:
So, last I checked the docket, that case was still pending.

[00:03:42] Speaker 03:
And that was, I checked last week maybe, something's happened.

[00:03:47] Speaker 05:
You mean the appeal of, you'll have to ask Lufthansa and class counsel.

[00:03:54] Speaker 05:
It went into the abyss essentially when they settled, I guess.

[00:03:56] Speaker 05:
You can inquire with them.

[00:03:59] Speaker 05:
But the problem was, because Ms.

[00:04:01] Speaker 05:
Marie had a stronger incentive to settle, under this court's opinion and Kim V. Allison too,

[00:04:06] Speaker 05:
that stronger incentive to settle was going to render her an inadequate class representative.

[00:04:11] Speaker 05:
The district court recognized the problem, but I said, punted.

[00:04:15] Speaker 05:
And they punted.

[00:04:15] Speaker 05:
And what Judge Wilson said was, well, they added a plaintiff after the settlement was reached.

[00:04:22] Speaker 05:
And he found this later added plaintiff, Mr. Gerdaud, was adequate.

[00:04:26] Speaker 05:
That was an abuse of discretion.

[00:04:28] Speaker 05:
Rule 23A4 is clear that the class representative has to fairly and adequately protect the interests of the class.

[00:04:36] Speaker 05:
If you're not a class representative when the binding settlement is reached, you can't do that.

[00:04:42] Speaker 05:
It's impossible.

[00:04:43] Speaker 05:
This court in Radcliffe also noted that the unbiased judgment, quote, unbiased judgment, end quote,

[00:04:50] Speaker 05:
is critical for a class representative.

[00:04:53] Speaker 05:
Well, if you're not a class representative and not a named plaintiff when the settlement is reached, you can't provide that unbiased judgment.

[00:05:00] Speaker 05:
So there was this binding term sheet signed.

[00:05:03] Speaker 05:
That's in the record to ER 305 paragraph 9.

[00:05:07] Speaker 05:
And at the original preliminary approval hearing before Judge Fitzgerald, Judge Fitzgerald pinned down class counsel.

[00:05:15] Speaker 05:
And he asked, did Mr. Gerdad have anything to do with this case?

[00:05:20] Speaker 05:
in connection with the mediation or prior to it?

[00:05:22] Speaker 05:
And the answer was no, because he was added after they reached the binding term sheet.

[00:05:29] Speaker 05:
That's in the record at 2ER 121, line 18, through 2ER 122, line 4, that Mr. Garadad had nothing to do with this case until after the deal was done.

[00:05:43] Speaker 05:
So for that reason, we believe the court needs to reverse the certification of the settlement class on grounds there's no class representative.

[00:05:50] Speaker 05:
The Kim II problems would also disqualify class counsel.

[00:05:56] Speaker 05:
Moving on, with respect to the appropriate legal standard for purposes of evaluating whether or not the proposed attorney's fees would constitute a disproportionate amount of the class recovery.

[00:06:09] Speaker 05:
Under Bluetooth, that's one of the subtle signs of collusion that the district court has to look for.

[00:06:15] Speaker 05:
That's undisputed.

[00:06:17] Speaker 05:
The issue is, what is the legal standard for looking at that?

[00:06:21] Speaker 05:
And under this court's opinions, and Kim Viales in one, and in Lowry, the appropriate legal standard is you look at the proposed fees on the one hand and compare them to the actual amount that the class is going to be paid on the other hand.

[00:06:38] Speaker 05:
And when I say actual amount, how much is actually going to go into a class member's pocket?

[00:06:43] Speaker 05:
Not some common fund that's going to revert back to the defendant if every single class member submits a claim and every single class member then gets paid.

[00:06:50] Speaker 05:
It's the actual amount, not a hypothetical common fund.

[00:06:55] Speaker 05:
The district court did not apply that legal standard.

[00:06:58] Speaker 05:
In looking at whether or not the proposed fees would constitute a disproportionate amount of the class recovery, what the district court looked at is they said, class counsel seeking $875,000 in fees.

[00:07:09] Speaker 05:
There's a $3.5 million settlement cap.

[00:07:13] Speaker 05:
that if a whole bunch of class members, essentially every one, submits a claim, then there's some hypothetical world in which that 3.5 might be claimed.

[00:07:22] Speaker 05:
And 875,000 is 25% of 3.5.

[00:07:27] Speaker 05:
So that's the ninth surrogate's 25% benchmark.

[00:07:30] Speaker 05:
The problem is the actual amount that the class is going to be paid isn't 3.5 million.

[00:07:37] Speaker 05:
It was a claims-made settlement.

[00:07:39] Speaker 05:
The actual amount the class is going to get paid

[00:07:41] Speaker 02:
is only half a million dollars.

[00:07:47] Speaker 02:
the claims at issue seem to change from earlier in the case to the final settlement, because it seemed to be a case about the actual refunds.

[00:07:58] Speaker 02:
And then when you get to the settlement, it seems to be just about interest, because as I read it, the settlement doesn't even release the actual refund claims themselves.

[00:08:08] Speaker 02:
So those are actually not being settled.

[00:08:11] Speaker 02:
It's just sort of this

[00:08:13] Speaker 02:
accrued interest.

[00:08:14] Speaker 02:
Am I reading that right, and how does that affect this analysis?

[00:08:19] Speaker 05:
Well, so for purposes of Rule 23A and adequacy in class certification, not at all.

[00:08:24] Speaker 05:
for purposes of this second conversation related to collusion and fairness and that aspect of the settlement, it went something like this.

[00:08:33] Speaker 05:
When they originally went to mediation, it appeared that the release was going to release everything.

[00:08:38] Speaker 05:
Then the Castanaras plaintiff stood up and said, whoa, hold on.

[00:08:41] Speaker 05:
And the release now does is limited to just interest claims.

[00:08:46] Speaker 05:
That is correct.

[00:08:47] Speaker 05:
But the statement in the briefs by the respondents

[00:08:53] Speaker 05:
that Judge Fitzgerald dismissed the claims for refunds is false.

[00:08:59] Speaker 05:
He did not.

[00:09:00] Speaker 05:
What Judge Fitzgerald said is, with respect to the named plaintiff, Miss Marie, and the Castanaras plaintiffs and the related case, when they filed suit, they had not been paid refunds.

[00:09:13] Speaker 05:
Lufthansa then attempted to pick them off, to use the phrase in this court's opinions in Pitts and Chen, that you can't pick off a class representative and moot the class action by paying them after they sue.

[00:09:26] Speaker 05:
And Lufthansa did that because it had a policy, which is in the record, which came out in Discovery.

[00:09:32] Speaker 05:
They had a policy of only paying people who filed suit or complained to the Department of Transportation.

[00:09:38] Speaker 05:
So they did that.

[00:09:40] Speaker 05:
But although the named plaintiffs, because they were paid after they filed suit, wouldn't eventually be able to get their refund, they could only get their interest, the named plaintiffs could still pursue on behalf of the class, pursuant to the original complaint, the full refunds.

[00:09:55] Speaker 05:
which is exactly what the operative complaints do, including the third amended complaint filed by Ms.

[00:10:01] Speaker 05:
Marie after she's settled.

[00:10:02] Speaker 05:
It continues to plead a claim for a full refund.

[00:10:05] Speaker 05:
So it is true that the interest is the only item released, but there are unrefunded customers

[00:10:12] Speaker 05:
who are owed over $30 million in refunds that still haven't been paid.

[00:10:17] Speaker 05:
They didn't get a flight.

[00:10:19] Speaker 05:
They haven't been paid.

[00:10:20] Speaker 05:
And they're entitled to not only their refund, but they're entitled to interest.

[00:10:24] Speaker 05:
Lufthansa has been holding onto their money for three plus years now.

[00:10:27] Speaker 05:
So even if they get their refund today, they're not going to be made anywhere near whole because of the time value of money.

[00:10:35] Speaker 05:
So if that answers your question, Your Honor.

[00:10:39] Speaker 02:
So it essentially reduces even further

[00:10:43] Speaker 02:
recovery because it's just a recovery with respect to interest and yet the fees are

[00:10:50] Speaker 05:
I guess you could put it that way, Your Honor.

[00:10:53] Speaker 05:
Class counsel, I suspect, is going to get up and argue that in evaluating his proposed attorney's fees, that you should consider the, quote unquote, full refunds that could be paid under the settlement.

[00:11:06] Speaker 05:
You can't do that under this court's opinion in Brasenio, because as is again admitted in Lufthansa's answering brief, and as is in the record from the trial court, Lufthansa was always paying refunds.

[00:11:19] Speaker 05:
to people who asked.

[00:11:21] Speaker 05:
Now, blatantly, we allege, but they always were paying refunds to people who asked.

[00:11:27] Speaker 05:
And what this court's opinion in Brasenio says is, if the defendant is already doing something, then agree to do it in the settlement is not new consideration and cannot be considered value delivered to the class for purposes of calculating attorney's fees.

[00:11:44] Speaker 05:
We've also cited, I believe, the Pampers case from the Sixth Circuit.

[00:11:49] Speaker 01:
Yeah, so on the issue of the refunds, Judge Wilson in his August 21 order says that class members who have already received their refund may choose either a $10 cash option or a $45 voucher.

[00:12:06] Speaker 01:
So these are people who have refunds.

[00:12:08] Speaker 01:
And then he says, he goes on to say, class members who have not received the refund can submit a claim for their full ticket price

[00:12:16] Speaker 01:
Plus 1%.

[00:12:18] Speaker 01:
Is he misdescribing the settlement agreement?

[00:12:21] Speaker 05:
No, that's accurate, Your Honor.

[00:12:23] Speaker 05:
So there were two different paths depending on whether you were a refunded or unrefunded customer.

[00:12:28] Speaker 05:
The refunded customers were required to submit a claim or else get nothing.

[00:12:32] Speaker 05:
86% of them will get nothing because it was a claims-made requirement, even though their contact information was known, their credit card information was known, they could have been directly paid.

[00:12:42] Speaker 05:
But they had an option to submit a claim for either $10 in cash or a $45 voucher.

[00:12:48] Speaker 05:
That's one path.

[00:12:49] Speaker 01:
Also, on that, the settlement required every single person to get notice, so they could make a claim.

[00:12:59] Speaker 05:
They did get notice.

[00:13:00] Speaker 05:
That's correct, Your Honor.

[00:13:02] Speaker 01:
Which finds it wasn't required to do, absent the settlement.

[00:13:06] Speaker 05:
So if you're talking about for purposes of the full refund, we don't dispute that for purposes of looking at attorney's fee to include the administrative costs, which would be the notice cost, that that could be included in looking at the percentage of attorney's fees.

[00:13:23] Speaker 05:
If you include the notice cost in the $500,000 going to the class, class counsel is seeking 56% of settlement monies.

[00:13:30] Speaker 05:
believe is that under Brasenio, as well as the Sixth Circuit's opinion in Pampers is, since they were already providing refunds to anybody who asked, any full refunds cannot be included for purposes of calculating an attorney's fees, because it's not new consideration.

[00:13:45] Speaker 05:
But Judge Warlow, back to your question, the second path was these unrefunded customers, and unrefunded customers also had to submit a claim

[00:13:54] Speaker 05:
But they didn't have an option.

[00:13:55] Speaker 05:
It was just one path, submit a claim.

[00:13:57] Speaker 05:
And if you submitted a claim, then you could get the full refund, like you always could have gotten if you asked Lutonza, and to this day still can, in addition to 1% of your ticket price.

[00:14:08] Speaker 05:
Not 1% interest, but 1% of your ticket price.

[00:14:12] Speaker 02:
You want to save time for rebuttal?

[00:14:14] Speaker 05:
Yes, Your Honor, I would like to.

[00:14:16] Speaker 05:
Let me just make one, if I run out of time, I'll run out of time, but claims made reversionary settlements.

[00:14:22] Speaker 05:
They're disfavored.

[00:14:23] Speaker 05:
At page 61 of its answering brief, Lufthansa says, and again, it was willing to pay $3.5 million here.

[00:14:32] Speaker 05:
$2 million is going to revert to Lufthansa.

[00:14:35] Speaker 05:
There's no reason for that.

[00:14:36] Speaker 05:
The only reason that happened is they knew this was going to happen.

[00:14:39] Speaker 05:
They set up a settlement that guaranteed Lufthansa would pay $2 million less than it was willing to pay.

[00:14:44] Speaker 05:
Why do I say they knew it?

[00:14:46] Speaker 05:
Because they admit in their answering briefs.

[00:14:48] Speaker 05:
Page 31 of Marie's brief says the claims rate was exceptionally high.

[00:14:53] Speaker 05:
Page 54 of Lufthansa's answering brief, the claims rate was outstanding.

[00:14:59] Speaker 05:
So even with an outstanding and exceptionally high claims rate, $2 million is going to go back into the pockets of Lufthansa.

[00:15:08] Speaker 05:
The claims were less than half a million dollars.

[00:15:10] Speaker 05:
They structured the settlement to guarantee Lufthansa would have to pay a minimal amount, while class counsel would come in and seek fees based upon a fictional $3.5 million number, even though Lufthansa admits it was willing to pay $3.5 million.

[00:15:24] Speaker 05:
Thank you.

[00:15:25] Speaker 02:
Thank you, counsel.

[00:15:26] Speaker 02:
We'll hear now first from Mr. Roberts.

[00:15:31] Speaker 02:
OK.

[00:15:44] Speaker 04:
You all can hear me OK?

[00:15:45] Speaker 04:
Yes.

[00:15:45] Speaker 04:
OK.

[00:15:47] Speaker 04:
Good morning, your honors.

[00:15:48] Speaker 04:
Max Roberts, Bursar, and Fisher for the plaintiffs, Marie and Gurdod, and class counsel.

[00:15:53] Speaker 04:
Your honors will be the third, fourth, and fifth judges to evaluate this settlement, which has gone through two preliminary approval hearings, a motion for reconsideration, a year's worth of confirmatory discovery and now this appeal.

[00:16:05] Speaker 04:
To say the settlement has been under a microscope is an understatement.

[00:16:08] Speaker 04:
And in light of that, to say that the district court clearly abused its discretion in approving the settlement is without support.

[00:16:14] Speaker 02:
Well, before he recused himself, Judge Fitzgerald was quite concerned about the behavior that occurred in this case.

[00:16:21] Speaker 02:
He basically suggested that

[00:16:23] Speaker 02:
matters had been misrepresented to him in terms of not disclosing the stay requests were actually in order to conduct unbeknownst to the district court and to others these negotiations.

[00:16:41] Speaker 02:
So, you know, counting him as one of the judges who has reviewed this, he didn't seem to be too favorable while it was in his hands.

[00:16:51] Speaker 04:
Nonetheless, Your Honor, he never issued an order on preliminary approval.

[00:16:55] Speaker 04:
And the judge who ultimately did, Judge Wilson, did not find that the settlement bore hallmarks of collusion or that our adequacy is impaired.

[00:17:02] Speaker 04:
In particular, he found that it was done with a third-party mediator, Neutral, that we were sufficiently informed of the fact that— I mean, procedurally, there were some—there was some evidence, arguably, of collusion that Judge Fitzgerald was worried about.

[00:17:18] Speaker 02:
But if you look at the Bluetooth factors,

[00:17:21] Speaker 02:
Um,

[00:17:22] Speaker 02:
Why aren't there some red flags here that warranted?

[00:17:25] Speaker 04:
Well, sure, Your Honor.

[00:17:26] Speaker 04:
So the one Bluetooth factor that I think Judge Wilson and Objectors Council focus on is the claims made structure.

[00:17:34] Speaker 04:
And not with saying that claims made settlements are not per se unreasonable, here, Lufthansa is paying out $3.4 million under the settlement, which is basically the cap that we negotiated.

[00:17:48] Speaker 04:
And that goes back to, should we count the full refunds as part of the value of the settlement?

[00:17:52] Speaker 04:
Now, Mr. Sims just got up here and he said, Lufons is still holding on to about $30 million worth of refunds.

[00:17:59] Speaker 04:
So it is true that these refunds are just not being paid to class counts, to class members.

[00:18:05] Speaker 04:
That's something that we agree on.

[00:18:06] Speaker 04:
And as a result of this settlement, there are now a thousand class members claiming $1.82 million in refunds who are now getting refunded.

[00:18:15] Speaker 04:
They were informed of the right to get one.

[00:18:16] Speaker 04:
They didn't have to call up the airline and try and procure one, which I'm sure, as your honors know, if your flights have ever been canceled is not exactly an easy process.

[00:18:23] Speaker 04:
They're just getting it with a nice, easy claim form.

[00:18:26] Speaker 04:
And they're getting 1% of their ticket price, which is the interest, effectively, we negotiated in Lufanza's delay on issuing refunds in general.

[00:18:37] Speaker 02:
So do we include the refunds in evaluating what the recovery is to the class versus the attorney's fees, or do we not?

[00:18:47] Speaker 04:
Yes, Your Honor, because one, it was what was actually claimed by class members, and two, because those class members were not refunded prior.

[00:18:55] Speaker 04:
In Brasenio, there was an injunctive relief that was negotiated that was already happening.

[00:19:00] Speaker 04:
This wasn't a case where Lufanza was

[00:19:02] Speaker 02:
But when you look at the final settlement, it's a settlement of interest claims.

[00:19:09] Speaker 04:
Well, Your Honor, it provides a mechanism to get full refunds plus interest.

[00:19:14] Speaker 04:
It does release the interest claims only, but it nonetheless provides an avenue.

[00:19:18] Speaker 04:
And it's an avenue that we were not allowed to pursue and Casanaris plaintiffs were not allowed to pursue because our clients were found to not have standing.

[00:19:26] Speaker 04:
And I understand Mr. Sims' argument that if someone wasn't refunded, they could pursue a full interest claim or full

[00:19:32] Speaker 04:
a refund claim on behalf of the class.

[00:19:34] Speaker 04:
But that wasn't the case for us, for Ms.

[00:19:36] Speaker 04:
Marie, or for the Castaneras plaintiffs, because they had already been refunded.

[00:19:41] Speaker 04:
We argued before the district court that it was a pick-off attempt, but Judge Fitzgerald didn't agree.

[00:19:46] Speaker 04:
So those claims were dismissed, and the settlement is now actually providing relief that wasn't available in the litigation, and that the 1,002 class members who did not get refunds are now getting.

[00:19:57] Speaker 04:
I mean, Lufanza was sitting on that money, and now they're going to get it.

[00:20:00] Speaker 02:
Can you address the adequacy of the class members?

[00:20:04] Speaker 02:
I mean, how can someone who played no role and shows up after everything's over be an adequate class representative?

[00:20:10] Speaker 04:
Sure, Your Honor.

[00:20:10] Speaker 04:
So it's mistaken to say that Mr. Gurdod showed up after everything was over.

[00:20:15] Speaker 04:
He was added after the mediation, but prior to the actual settlement being finalized.

[00:20:20] Speaker 02:
And as he attested... There was a binding term sheet before he showed up.

[00:20:23] Speaker 04:
There was a binding term sheet on the material terms, but not the settlement.

[00:20:26] Speaker 04:
And Mr. Gurdod, independently in his declaration, he reviewed, he evaluated, and he approved the settlement.

[00:20:33] Speaker 04:
He wasn't being required to.

[00:20:34] Speaker 04:
He wasn't being forced to.

[00:20:35] Speaker 04:
He said, I, as a direct purchaser, think that the settlement is fair, reasonable, and adequate.

[00:20:40] Speaker 04:
And class and objectors council had a year's worth

[00:20:43] Speaker 04:
of confirmatory discovery in which they could have deposed Mr. Gurdod.

[00:20:46] Speaker 04:
They could have asked him why he did that.

[00:20:48] Speaker 04:
They never did.

[00:20:49] Speaker 04:
So the only evidence in the record is his declaration.

[00:20:52] Speaker 04:
And the district court found that Mr. Gurdod's declaration satisfied the district court that he was an adequate class representative.

[00:21:00] Speaker 04:
And that finding of fact is reviewed for clear error.

[00:21:03] Speaker 04:
And it's sort of, I guess, a mixed question of law, but the same standard.

[00:21:06] Speaker 04:
So when you have the actual declaration under penalty of perjury on one hand,

[00:21:10] Speaker 04:
and attorney speculation on the other, the district court went with the actual evidence.

[00:21:15] Speaker 04:
And the actual evidence says Mr. Gurdod reviewed the settlement and he found it was adequate.

[00:21:19] Speaker 04:
And by the way, we also cite cases in our brief, the Yaffe case and the Nunez case, where class members were added after the settlement was reached or after the term sheet was reached, and they were found to be adequate.

[00:21:31] Speaker 04:
Miss Marie also was never found to be inadequate.

[00:21:33] Speaker 04:
In fact, the district court found that she was on the same legal footing as all other class members,

[00:21:38] Speaker 04:
because the motion to compel arbitration had been denied.

[00:21:41] Speaker 04:
So although she was stayed, she nonetheless had exactly the same claim.

[00:21:46] Speaker 04:
And in the actual preliminary approval order, the district court found both plaintiffs to be adequate class representatives.

[00:21:52] Speaker 02:
Was that appeal sort of stayed and backburner during the negotiations?

[00:21:57] Speaker 04:
That appeal is still active, as Judge Wardlaw noted.

[00:22:01] Speaker 04:
We provide regular status.

[00:22:04] Speaker 04:
But excuse me, Judge Thomas.

[00:22:07] Speaker 04:
We provide regular status updates to the court every couple of months just informing them that the settlement is going on.

[00:22:12] Speaker 04:
And obviously, if the settlement is vacated, then that appeal will be pushed forward.

[00:22:16] Speaker 04:
But what I would also note is that if that appeal is being pushed forward, we now have a direct purchaser plaintiff who Lufanza knew was going to be added if the settlement never happened and that the Marie case wasn't just going to be stayed indefinitely.

[00:22:28] Speaker 04:
There was going to be a direct purchaser plaintiff in our case

[00:22:31] Speaker 04:
And that case was going to be proceeding.

[00:22:34] Speaker 04:
I briefly want to address the claims process and the structure again.

[00:22:39] Speaker 04:
I've noticed that Objectors Council has jettisoned all their arguments about this being a not reasonable recovery.

[00:22:47] Speaker 04:
I didn't hear anything from Mr. Sims up here.

[00:22:49] Speaker 04:
And claims processes, and I see my time is almost up.

[00:22:52] Speaker 04:
May I finish this point, Your Honor?

[00:22:53] Speaker 04:
Yeah.

[00:22:54] Speaker 04:
OK.

[00:22:54] Speaker 04:
Claims processes are perfectly common, especially where they're not burdensome.

[00:22:58] Speaker 04:
I know this because objectors counsel has done it in their Eden Cemetery case that we cite in the briefing, where also all class members' identities were known, but they had a claims process.

[00:23:07] Speaker 04:
And the reason, if you look at the Montoya case that we cite in our briefing, is that it maximizes the opportunity present for class members.

[00:23:15] Speaker 04:
In other words,

[00:23:15] Speaker 04:
We could have negotiated for direct payments, but it would have meant Lufanza paying out less.

[00:23:20] Speaker 04:
So maybe it would have been you get $1 or a $10 voucher, or you get a quarter of a percent interest.

[00:23:25] Speaker 04:
Instead of, for the people that actually care enough to submit an easy claim form, you're getting 1% interest and then $10 and a $45 voucher.

[00:23:34] Speaker 04:
So that's not an unreasonable process.

[00:23:36] Speaker 04:
The district court found that it was very easy to go through.

[00:23:39] Speaker 04:
And we know that it was easy to go through because we had a significantly above average claims rate on the entire class.

[00:23:46] Speaker 02:
All right, thank you, counsel.

[00:23:47] Speaker 02:
We'll hear now from Ms.

[00:23:49] Speaker 02:
Gulliver.

[00:24:08] Speaker 00:
May it please the court, Colleen Gulliver on behalf of Deutsche Lufthansa.

[00:24:12] Speaker 00:
At the outset, I just want to correct a couple things that the objectors council said.

[00:24:17] Speaker 00:
First, they continue to state, despite no evidence in the record, that the release that occurred, the release that was negotiated was intending to release open ticket claims.

[00:24:28] Speaker 00:
That was never the intent.

[00:24:30] Speaker 00:
We've repeatedly stated that in the two courts, and there's been no evidence to the contrary.

[00:24:36] Speaker 00:
In addition, objectors council also stated

[00:24:40] Speaker 00:
that the record showed that the only people that were getting paid were people that sued Lufthansa for their refunds.

[00:24:49] Speaker 00:
But then they later admitted that Lufthansa was paying anyone who requested a refund.

[00:24:54] Speaker 00:
So what the record shows is that for a very short period of time, 2.6% of the class period, that Lufthansa had to shut off refunds for less than a month.

[00:25:05] Speaker 00:
After that point,

[00:25:06] Speaker 00:
The record showed that 66% of the class received a refund within 30 days.

[00:25:12] Speaker 00:
So what ended up being shown through Castaneris' discovery was that

[00:25:18] Speaker 00:
This case, which is only about interest for the majority of the class, was just not worth a lot.

[00:25:25] Speaker 00:
The estimates for Lufthansa puts it at $160,000.

[00:25:29] Speaker 00:
Marie's counsel says, at a minimum, it's $340,000, I believe.

[00:25:35] Speaker 00:
So this is a case where there isn't a ton at issue, even if you look at it.

[00:25:39] Speaker 02:
And how much are the attorney's fees here?

[00:25:42] Speaker 00:
Well, they haven't been awarded yet.

[00:25:45] Speaker 00:
Marie's counsel is allowed to request up to $875,000, which they did.

[00:25:51] Speaker 02:
I also want to remind the court that we are set at... Given the point you just made about how little was at stake and then the size of the fees, why isn't that a huge red flag?

[00:26:02] Speaker 00:
Because what has been shown through the discovery wasn't known at the time of the settlement.

[00:26:08] Speaker 00:
Part of what came out as part of that discovery was we had to hire an expert and really value those claims.

[00:26:15] Speaker 00:
We also had to dig through and do a sample of all the refunds because it required a manual review.

[00:26:21] Speaker 00:
What was shown that was actually the class was one third of the size less than we believed it to be.

[00:26:29] Speaker 00:
So at the time that the parties entered into settlement, we believed the case was worth more than it has turned out to be.

[00:26:37] Speaker 00:
And that's knowledge in a bell that just cannot be unwrung.

[00:26:40] Speaker 00:
That doesn't change the fact that the class here, one of the other things objectors council stated was that the class's value is only $500,000.

[00:26:48] Speaker 00:
That's incorrect.

[00:26:50] Speaker 00:
There's a minimum floor of $500,000.

[00:26:53] Speaker 00:
You're also allowed to include notice costs, which are almost $200,000, whatever is awarded in attorney's fees, as well as the district court acknowledged that there was some value and a significant value to those who had not been refunded.

[00:27:09] Speaker 00:
to the opportunity to get a refund.

[00:27:12] Speaker 00:
And 1,000 of those open ticket customers did request a refund through that easy claims process.

[00:27:19] Speaker 00:
So there is a value to that as well.

[00:27:21] Speaker 00:
Even if you assume that the objectors valuation of the settlement is accurate, which we don't agree, you're still not talking about the kinds of multiples that the Ninth Circuit has overturned a settlement for.

[00:27:34] Speaker 00:
The cases that Objectors Council cites, you're talking times seven, times 30.

[00:27:41] Speaker 00:
That's not the situation here.

[00:27:42] Speaker 00:
At most, if you accept their evaluation, you're talking less than a two multiple, which is a significant difference.

[00:27:51] Speaker 00:
This case has, and this settlement has been reviewed multiple times, and the standard of review here is extremely limited.

[00:27:59] Speaker 02:
But, you know, here's the,

[00:28:02] Speaker 02:
the things I'd like you to address sort of in the aggregate.

[00:28:06] Speaker 02:
I mean, you have class representatives, one of whom was saddled with a unique issue, the arbitration issue, and then you have someone who is added in after the term sheet is already done with the first person who's saddled with the

[00:28:23] Speaker 02:
with the conflict, and then you have the structure that's going to create this very large imbalance between the attorney's fees and the monetary recovery, everything going back to Lufthansa, and then you add on that the

[00:28:41] Speaker 02:
what is frankly the disturbing behavior that occurred in front of Judge Fitzgerald, where it frankly looked like misrepresentation to the court so that this could be conducted in the absence of the court and the plaintiffs in the other case knowing.

[00:28:57] Speaker 02:
Putting that all together, why is it an abuse of discretion to just rubber stamp this the way it was done?

[00:29:05] Speaker 00:
Well, Your Honor, we don't believe it was rubber stamped.

[00:29:07] Speaker 00:
It was originally denied.

[00:29:09] Speaker 02:
We've also enhanced the settlement, but in the final order doesn't address the concerns he identified in the first order.

[00:29:16] Speaker 00:
Well, a couple of things, your honor.

[00:29:18] Speaker 00:
First, Judge Fitzgerald.

[00:29:21] Speaker 00:
We spoke to Judge Fitzgerald twice on the issue.

[00:29:24] Speaker 00:
We explained that it was not what it appeared to be.

[00:29:27] Speaker 00:
There had been no misrepresentation of the court.

[00:29:29] Speaker 00:
And Judge Fitzgerald recognized that.

[00:29:31] Speaker 00:
He took our proffer and he said that he hoped that we could move past it and that this wouldn't be brought up again.

[00:29:39] Speaker 00:
It continues to be.

[00:29:40] Speaker 00:
Repeatedly, there was never any intent.

[00:29:43] Speaker 00:
This settlement was on the books, and there's in the record that this mediation, which was happening before a former federal judge, was already scheduled long before this state decision came down.

[00:29:55] Speaker 00:
It was set up because they were representing the entirety of the class and could provide finality.

[00:30:02] Speaker 00:
There was never an intent to misrepresent anything to the court.

[00:30:05] Speaker 00:
And the Ninth Circuit has said that you are permitted to negotiate with not every class plaintiff.

[00:30:12] Speaker 00:
We chose to negotiate with a firm that is well-versed in consumer class actions that had been representing other airline plaintiffs, so they had knowledge and understanding of these settlements and what was really at risk here.

[00:30:27] Speaker 00:
And Judge Fitzgerald, or excuse me, Judge Wilson acknowledged that there was significant

[00:30:33] Speaker 00:
litigation hazards both at class certification and on the merits here for what is

[00:30:39] Speaker 00:
at most interest.

[00:30:40] Speaker 00:
And so while we understand that the point that Judge Wilson and Judge Fitzgerald was looking at was whether this was a reverse auction, whether we had picked to counsel intentionally to get a good deal.

[00:30:53] Speaker 00:
And what is shown is that the class, if that were to be the case, the class would have objected.

[00:30:59] Speaker 00:
They wouldn't have liked this deal and they would have opposed it, but they've recognized that it is a good deal.

[00:31:04] Speaker 00:
It provides them

[00:31:04] Speaker 00:
substantial compensation for claims that were small and had a significant risk of never giving them any money at all.

[00:31:17] Speaker 00:
So that's it.

[00:31:19] Speaker 00:
I'm done.

[00:31:20] Speaker 00:
Thank you.

[00:31:21] Speaker 02:
Okay.

[00:31:21] Speaker 02:
All right.

[00:31:22] Speaker 02:
Thank you, counsel.

[00:31:23] Speaker 02:
You used your time, but I'll give you one minute and rebuttal.

[00:31:30] Speaker 05:
Very quickly, also on the adequacy, one other point to note.

[00:31:34] Speaker 05:
Mr. Gerdad also is seeking a $2,000 incentive award.

[00:31:39] Speaker 05:
So when he was presented with a settlement that was already done, do you think he could evaluate it adequately?

[00:31:44] Speaker 05:
If he would have said no, they would have found somebody else.

[00:31:47] Speaker 05:
They wouldn't have added somebody else.

[00:31:48] Speaker 05:
He wanted his $2,000 incentive award.

[00:31:50] Speaker 05:
That's number one.

[00:31:51] Speaker 03:
So what's our standard of review on adequacy of class representatives?

[00:31:56] Speaker 05:
Well, Your Honor, we believe that as a matter of law, you have to have an adequate class representative at the time the settlement was reached.

[00:32:02] Speaker 03:
So I think that you... They cite two cases, district court cases, Grant, where a new class representative was approved following the conclusion of settlement negotiations.

[00:32:15] Speaker 03:
Sure, and they actually... So we don't have any nice surrogate case on it, but at least you have two other district courts who've reached the same conclusion.

[00:32:21] Speaker 05:
Yeah, those district courts, we believe, actually support our position.

[00:32:25] Speaker 05:
In the first case, which is the Jaffe case, when the plaintiff was added, the settlement was not, to use the court's words there, was not a fait accompli.

[00:32:33] Speaker 05:
Here, the settlement was a fait accompli.

[00:32:35] Speaker 05:
There was a binding term sheet.

[00:32:37] Speaker 05:
that contained all the material terms.

[00:32:39] Speaker 05:
So Jaffe actually supports the position that you have to have a class representative at the time that the settlement is reached.

[00:32:46] Speaker 05:
With respect to the Nunez case, it's a rather complicated factual pattern.

[00:32:50] Speaker 05:
But what actually happened was when they settled, there was an adequate class representative.

[00:32:55] Speaker 05:
Preliminary approval was granted.

[00:32:57] Speaker 05:
After preliminary approval, the named plaintiff at the time of the settlement, who had supported the settlement, changed his mind.

[00:33:05] Speaker 05:
He said, you know what?

[00:33:06] Speaker 05:
Now I object.

[00:33:08] Speaker 05:
And the district court went through an analysis at final approval.

[00:33:12] Speaker 05:
And what it found was that the fact that the name plaintiff who was adequate at the time the settlement was reached now was objecting was not a problem, but was actually consistent with what a class representative is supposed to do, which is to provide the unbiased judgment that this court talked about in Radcliffe.

[00:33:29] Speaker 03:
And so he's saying, I don't think there's a per se rule that we have on this.

[00:33:34] Speaker 03:
And it seems to be a factual inquiry.

[00:33:36] Speaker 03:
Do you disagree?

[00:33:38] Speaker 05:
So, well, I disagree that it would not be as a matter of law.

[00:33:42] Speaker 05:
But I do appreciate where you're coming from.

[00:33:43] Speaker 05:
And I do agree with you that there's not a case.

[00:33:46] Speaker 05:
This court doesn't have a case.

[00:33:49] Speaker 05:
But then also, I would also say he didn't do any inquiry of this.

[00:33:52] Speaker 05:
Judge Wilson didn't.

[00:33:53] Speaker 05:
He just said, your dad was added.

[00:33:55] Speaker 03:
He has a declaration.

[00:33:56] Speaker 03:
He accepted the affidavit.

[00:33:58] Speaker 05:
And so if I still have just to... No, we've allowed you to go over.

[00:34:03] Speaker 02:
Thank you.

[00:34:04] Speaker 05:
My apologies for reading up your time.

[00:34:05] Speaker 02:
That's okay.

[00:34:06] Speaker 02:
I appreciate it.

[00:34:06] Speaker 05:
Thank you for your time.

[00:34:07] Speaker 02:
Okay.

[00:34:08] Speaker 02:
All right.

[00:34:08] Speaker 02:
Thank you, counsel.

[00:34:09] Speaker 02:
The case just argued is submitted.

[00:34:12] Speaker 02:
And with that, we are concluded our session for today.