[00:00:09] Speaker 01: I think we're all set now. [00:00:11] Speaker 02: May it please the court, I'm Stephen Kent-Rose and I represent Sanity Corp as well as David Gold, both of whom are objectors and class members. [00:00:22] Speaker 02: This case, if you look and compare and contrast excerpts of record 96 with 101 and you'll see two envelopes there. [00:00:32] Speaker 02: The first envelope is the envelope that was mailed by the class administrator [00:00:38] Speaker 02: from Minnesota to Xanadu's mail forwarding company in Los Angeles. [00:00:46] Speaker 02: The stamp on that envelope indicates that the mail drop stamped that the mailbox was closed and they sent it back. [00:00:57] Speaker 02: From that point forward, conflicted class council engaged in a campaign to discredit Xanadu's claim. [00:01:07] Speaker 02: However, if you can compare and contrast at excerpts of record 101, the envelope that was sent [00:01:16] Speaker 02: with a check over $600,000 was put in the mail from Minnesota, and it had no city, no state, no zip code. [00:01:23] Speaker 02: The only thing, what it said was Xanadu Corp, it said the name Carla Sawicka twice. [00:01:28] Speaker 01: Council, we know the record, and you don't have very much time, so we appreciate that it was misaddressed, and that it was returned, and that you have strong objection, but your briefing seems to argue that you were singled out and treated, your client, was singled out and treated differently. [00:01:42] Speaker 02: They were. [00:01:43] Speaker 02: And I would like to reserve, I forgot to say this at the beginning, I would like to reserve at least four minutes of my time for rebuttal. [00:01:48] Speaker 01: No problem. [00:01:49] Speaker 01: Just keep an eye on the clock, and it is ticking down. [00:01:51] Speaker 01: So if you could tell me, what is the basis for the strongest evidence I should see that your client was treated differently or unfairly? [00:01:59] Speaker 01: Because I think that's the gist of your argument. [00:02:01] Speaker 02: It's only a small piece of the argument. [00:02:03] Speaker 02: We have a very strong argument that the notice in this case was entirely inappropriate, that rule 23H1 requires reasonable notice [00:02:11] Speaker 02: class members. [00:02:12] Speaker 01: In this case... But you have to first be a class member, so let's back up to the envelope. [00:02:16] Speaker 02: David Gold is clearly a class member, and I would like to make sure that that argument gets out. [00:02:20] Speaker 01: Okay, and Mr. Gold... All right, so if you want to start there, we can start there. [00:02:23] Speaker 02: David Gold is clearly a class member, and he objects. [00:02:26] Speaker 02: They can claim he got the notice, and he knew. [00:02:29] Speaker 02: However, if the notice had been done properly, if there had been email sent rather than nothing or simply putting it on the website, then he might have had a lot of company for his objections. [00:02:40] Speaker 04: How is he hurt as a class member by the cheer orders you're challenging? [00:02:46] Speaker 02: He's hurt because he didn't have much company in his objection, and he's hurt because of the integrity of the process that he's participating in. [00:03:00] Speaker 02: is subject to question because there's no notice given of the new claim for attorney fees. [00:03:05] Speaker 02: There's no notice that the checks were sent out. [00:03:07] Speaker 02: There's no notice to anybody that the checks were sent back. [00:03:10] Speaker 03: But how was Gould damaged by that? [00:03:13] Speaker 03: He doesn't claim any more money should be coming his way. [00:03:16] Speaker 03: How was he damaged? [00:03:19] Speaker 03: What concrete, discrete interest gives him standing? [00:03:25] Speaker 02: He would have had more company, and he would have had more company in challenging class council's fees. [00:03:32] Speaker 02: They might have been less. [00:03:33] Speaker 02: And further... He's not challenging the fees. [00:03:35] Speaker 02: He's challenging the notice, right? [00:03:38] Speaker 02: He's also challenging... He's challenging everything. [00:03:40] Speaker 01: He's also challenging... If you think he's challenging fees, you're going to need to give us a record site for that. [00:03:44] Speaker 01: I don't think Mr. Gould challenged fees. [00:03:46] Speaker 01: That's my understanding. [00:03:47] Speaker 02: I think he objected to everything. [00:03:48] Speaker 01: I... Three weeks ago... If you want to give us... You're on notice. [00:03:51] Speaker 01: If you want to give us record site for that, that would be helpful, but... [00:03:54] Speaker 02: Okay, three weeks ago I had never heard of this case. [00:03:57] Speaker 02: I was hired two weeks ago, so I didn't live this case like I usually do in my cases. [00:04:01] Speaker 02: Wait a minute. [00:04:01] Speaker 02: So I don't have the details of where everything is in the record. [00:04:05] Speaker 02: What I do know is that there were numerous arguments made by both Xanadu and, and I will get to why Xanadu still has standing after I make the underlying argument, which is the [00:04:16] Speaker 02: district court entirely ignored California's unclaimed property law. [00:04:20] Speaker 01: Okay, hold on, hold on. [00:04:21] Speaker 01: Before you get to his cheating, because you're jumping from argument to argument, I don't think we've let you answer Judge Baia's question. [00:04:29] Speaker 01: Why is Mr. Gould, who received his check and he cashed his check, I think that is uncontested, so why does he have standing? [00:04:36] Speaker 02: He has standing because he's a claimant, and he has concerns with the integrity of the process. [00:04:40] Speaker 02: Also, he might have gotten more money had he had more company in opposing conflicted class counsels. [00:04:46] Speaker 03: But counsel, he doesn't claim that he should get any more money. [00:04:51] Speaker 03: So your theories, two weeks old, don't seem to have any basis. [00:04:58] Speaker 02: If there were a secondary distribution and there were more money, then he might have gotten more money. [00:05:04] Speaker 02: That's a concrete injury. [00:05:05] Speaker 03: But he doesn't claim that. [00:05:07] Speaker 03: He doesn't claim he's entitled to more money. [00:05:09] Speaker 02: He hasn't gotten to that point because the secondary distribution hasn't yet occurred. [00:05:16] Speaker 03: But he's not claiming that he would get more money from a secondary distribution. [00:05:20] Speaker 03: Is he? [00:05:21] Speaker 02: We don't know. [00:05:22] Speaker 02: It hasn't happened. [00:05:23] Speaker 03: Can you point to me anything in the record which shows that? [00:05:26] Speaker 02: It hasn't happened. [00:05:27] Speaker 02: That record has not been compiled. [00:05:30] Speaker 02: I need to get to my other argument, which is that the district court entirely ignored California's unclaimed property law. [00:05:35] Speaker 02: That would also result in more money for many people in the class. [00:05:41] Speaker 02: Under both Erie v. Tompkins, as well as by the clear terms of all the settlement agreements in this case, substantive California law should have been applied, and California's substantive law [00:05:51] Speaker 02: is that when there's a check issued, that check belongs to somebody, and if it's not claimed, if it's not cashed, then you need to follow the California Unclaimed Property Law, which doesn't simply eschete to the state, eventually it does if nobody claims it, but first it's put in a fund where the individuals whose names are on those checks can claim them. [00:06:08] Speaker 02: Had that happened... [00:06:09] Speaker 01: Again, we read the brief, so can you tell me where was there authority that bound the district court to proceed that way, as opposed to redistributing unclaimed funds among the people who had received checks? [00:06:22] Speaker 02: Erie v. Tompkins, as well as the terms of the settlement agreements, each settlement agreement clearly says that the settlement agreement will be construed and applied the class [00:06:32] Speaker 02: fund administered in accordance with California's substantive law. [00:06:36] Speaker 02: California's substantive law, without regard to its conflict of interest laws, California's substantive law includes its unclaimed property laws, which are around 1,500 of the Code of Civil Procedure. [00:06:46] Speaker 01: I appreciate your response. [00:06:48] Speaker 01: I'm noting that you wanted to save four minutes. [00:06:49] Speaker 01: You're down to three and a half. [00:06:50] Speaker 01: Would you like to save your time? [00:06:51] Speaker 02: Yes, I'll save the remainder of my time. [00:06:53] Speaker 02: Oh, except I need to make, very quickly, I need to make the point about Xanadu. [00:06:59] Speaker 02: needed to have a decision by a judge. [00:07:01] Speaker 02: In this case, Judge Breyer didn't make a decision. [00:07:04] Speaker 02: He simply adopted what Conflicted Class Council's administrator told him, which is that they did their whole campaign to discredit Xanadu so that they would have another $600,000 of this $5 million. [00:07:19] Speaker 02: That's 12 percent of the fund that was available. [00:07:22] Speaker 02: Class counsel is clearly conflicted in violation of the rules of professional conduct. [00:07:26] Speaker 02: Arguably, it's malpractice for them to do that, and had Judge Breyer [00:07:32] Speaker 02: not simply deferred to class counsel and the administrator, then Judge Breyer might have made a decision. [00:07:37] Speaker 04: Further, the class counsel— You're suggesting Judge Breyer did not actually make this decision? [00:07:43] Speaker 04: It's clear from his—it is clear to me from his— Looks to me like he reviewed the materials presented to him and he disagreed with your client's side. [00:07:52] Speaker 04: That's not a failure of a decision. [00:07:54] Speaker 02: I think it's clear, if you read the language of his order he wrote on reconsideration, it's clear that he simply deferred to Rust, which is class council's administrator. [00:08:06] Speaker 02: He didn't decide. [00:08:07] Speaker 02: He deferred to them. [00:08:08] Speaker 01: He did not further the- Council, we're going to hear from opposing council now. [00:08:12] Speaker 01: You've asked to reserve four minutes. [00:08:13] Speaker 01: We save the rest of my time. [00:08:14] Speaker 01: We will do that. [00:08:22] Speaker 00: May it please the court, Janine Kenney for plaintiffs. [00:08:26] Speaker 00: Addressing the issue of standing, neither Mr. Gould nor Zanadu have standing to bring this appeal as the court. [00:08:33] Speaker 01: If that's right, we have said, of course, that the district court stand in a unique position when they're reviewing this kind of a claim for present and non-present class members. [00:08:43] Speaker 01: So what should we do about that? [00:08:46] Speaker 00: Well, I think the law is very clear that [00:08:49] Speaker 00: though the court sits in the special position as a fiduciary for the class, only aggrieved class members have standing to bring, to object. [00:08:58] Speaker 01: Okay, so the problem we have here is there's a, to be, to play devil's advocate, there's a question about notice, that the notice was inadequate. [00:09:07] Speaker 01: There's an objection that this most recent notice was put on one website in English, but not on the other two websites in foreign languages. [00:09:15] Speaker 01: Again to play devil's advocate those folks who aren't present and aren't objecting May not be objecting because they didn't receive notice in a foreign language. [00:09:25] Speaker 01: And so what should we should we be concerned about that? [00:09:27] Speaker 00: That's what that's one of opposing counsel's arguments No, the no your honor that the notice was sufficient here and that the court [00:09:34] Speaker 00: The appellants have identified no abuse of discretion and the court's finding that notice was sufficient. [00:09:40] Speaker 00: The court stands in the shoes of the absent class members to approve the sufficiency of the notice and the court found it was sufficient. [00:09:47] Speaker 00: The notice was, the motion itself was posted on the website providing ample opportunity for anyone to object. [00:09:55] Speaker 01: Was there any place in the record where I can see an answer to the question? [00:09:59] Speaker 01: I think I've read everything that was filed, and I don't see an answer to why it was only posted on the one website where the earlier notices were posted on the others. [00:10:07] Speaker 00: The initial settlements in this case involved claimants for flights that originated other than in the US. [00:10:20] Speaker 00: Subsequent settlements didn't. [00:10:21] Speaker 00: So the initial notices were provided in multiple languages. [00:10:24] Speaker 00: The long form notices. [00:10:26] Speaker 00: Could you get closer to the microphone, please? [00:10:27] Speaker 00: The long form notices and the publication notices were provided in a foreign language. [00:10:34] Speaker 00: The foreign language websites [00:10:37] Speaker 00: direct people to the court document page. [00:10:40] Speaker 00: The court documents have never been translated and nor is there any authority that they must be translated in a settlement where the settlement period spans eight years of ongoing activity and hundreds of documents including [00:10:54] Speaker 00: settlement agreements, declarations, and so forth. [00:10:57] Speaker 00: And so objectors, appellants did not object that the prior notices of the prior fee petitions, the prior notice of settlements, were inadequate due to failure to translate the motions into multiple languages. [00:11:11] Speaker 01: And the period for objecting to those prior notices, the one, two, is it three phases? [00:11:16] Speaker 01: The period for objecting to the prior notices has long passed. [00:11:19] Speaker 01: Long passed. [00:11:20] Speaker 00: Yes, your honor. [00:11:22] Speaker 01: All right, so when I look back at, I'm looking at the document that was filed at 3ER45, well it starts at 442, and it's the plaintiff's notice of motion and motion for authorization to distribute net settlement funds. [00:11:35] Speaker 01: And it goes through quite an account of explaining how, for each round, there were X number of claims, many, many thousands of claims and responses, and then follow up on those. [00:11:46] Speaker 01: And some of those were by mail with, I think, stamps put on them. [00:11:49] Speaker 01: And some of them were by email. [00:11:50] Speaker 01: And there's a 1-800 number and so forth. [00:11:55] Speaker 01: It looks like the administrator followed up on each of those. [00:11:59] Speaker 01: Opposing counsel argues that his client was treated unfairly this go-around and was singled out for special treatment. [00:12:06] Speaker 01: It was treated differently than these other folks where there was follow-up for these earlier questions. [00:12:15] Speaker 01: So it seems to me in these earlier phases, some claims were denied in each of these after there were questions about the merits of the [00:12:24] Speaker 01: class membership. [00:12:25] Speaker 01: Is that fair? [00:12:27] Speaker 00: Certainly, there were claims during the claims administration process that were rejected for inadequate documentation. [00:12:32] Speaker 01: In the audit process, there were 2,360 claims that were rejected. [00:12:37] Speaker 01: And in the phase two, there were 553 out of 19,000 some claims that were considered invalid. [00:12:48] Speaker 01: Can you just walk through what were those processes like? [00:12:51] Speaker 01: What were those folks required to submit? [00:12:54] Speaker 00: The claims administrator accepted a wide range of documentation under the circumstances. [00:13:02] Speaker 00: During the audit process, the audit notices indicated the types of documentation that would be acceptable. [00:13:08] Speaker 00: In some cases, the claims administrator did accept affidavit as sufficient proof if it was sworn to under a penalty of perjury. [00:13:17] Speaker 00: And that's what Xanadu did. [00:13:19] Speaker 00: And Xanadu's argument is primarily that because [00:13:22] Speaker 00: its claim was accepted on the basis of that affidavit, neither the claims administrator nor the court or class counsel have any right to question the truth of that affidavit in the face of credible indicia of fraud. [00:13:38] Speaker 01: Okay, so it's concerning that an envelope came back with a check of that size in it. [00:13:43] Speaker 01: It's a $600,000 check and it was misaddressed. [00:13:48] Speaker 01: But what I can't tell is [00:13:50] Speaker 01: And I appreciate that it was re-mailed and so on and so forth. [00:13:54] Speaker 01: What I can't tell is whether there are any other indications of that kind of error happening anywhere else in the process. [00:13:59] Speaker 00: Do we know that? [00:14:02] Speaker 00: The district court found that there was absolutely no support for the notion, one, that Xanadu's check was miss mailed in the first place because it wasn't returned for insufficient address. [00:14:11] Speaker 00: It was returned as undeliverable, no forwarding address, and so forth. [00:14:15] Speaker 00: So it does not appear to the extent that there was any difference in the mailing address itself, that that had any impact whatsoever on why it was delivered. [00:14:23] Speaker 01: But his initial claim was over the audit amount, right? [00:14:26] Speaker 00: Yes. [00:14:27] Speaker 01: And, and so the check was sent out, I think on the basis of just an affidavit without this backup documentation, right? [00:14:33] Speaker 01: That's correct. [00:14:34] Speaker 01: Okay. [00:14:34] Speaker 01: Then there was this mistake that was recognized. [00:14:38] Speaker 01: Uh, the check was returned and there was follow-up from Xanadu about where's our, where's our check. [00:14:42] Speaker 01: Of course I'm paraphrasing. [00:14:43] Speaker 01: And then at that point, uh, the claims administrator discovered what? [00:14:47] Speaker 01: Please. [00:14:48] Speaker 00: Well, this was initially brought to class counsel's attention by an email from Xanadu's lawyer from Nicaragua. [00:14:57] Speaker 00: And so the suggestion that our involvement in the claims process and resolving this dispute is improper is a little hard to swallow. [00:15:07] Speaker 00: But there are a number of irregularities when we started looking into it and when Russ, the claims administrator, started looking into it. [00:15:14] Speaker 00: One, we had conflicting information about addresses. [00:15:18] Speaker 00: Rust had confirmation from Xanadu that the address where the final determination letter was mailed was correct, though it was returned. [00:15:27] Speaker 00: We later were told on July 30th that that address, that they had moved their offices, though we discovered these were not offices or physical locations, they were rental mailboxes, and that a different West Hollywood address was correct. [00:15:42] Speaker 00: And then later we got a declaration from Mr. Sutton, the director [00:15:46] Speaker 00: reportedly a director at Xanadu, that in fact, and this is at record, page 108, that in fact the original address where the first final determination letter was returned undelivered was always accurate. [00:16:00] Speaker 00: So we had conflicting information about what the address is, what the correct address was. [00:16:05] Speaker 00: We had conflicting information that these were physical offices as the July 30th email implied they were. [00:16:13] Speaker 00: It's very unusual. [00:16:15] Speaker 00: In addition, of course, Xanadu was on notice that the final determination letter hadn't been delivered, that it was returned undeliverable, and confirmed that that address was correct. [00:16:25] Speaker 00: And so they were on notice that there was an issue with their address. [00:16:28] Speaker 00: But I think a really critical point is Xanadu is not being treated inequitably. [00:16:33] Speaker 00: Every claimant whose cash was uncashed or returned by July 26 has not gotten a payment. [00:16:40] Speaker 00: They have not been reissued. [00:16:42] Speaker 00: and that is true for uh... claimants where they requested reissuance and there was additional indicia of fraud and this is all over the record uh... in the appellate record there were sixteen claimants that requested reissuance there were and this is outlined in the record i see my time is up so i'll be brief but rust requested an interview with them an additional supporting documentation [00:17:09] Speaker 00: do you know it's due diligence on fraud protection and this is that record at uh... three sixteen that's volume three volume two at seventy five uh... volume two at eighty those claims were not paid they were [00:17:23] Speaker 00: The checks were issued, they were initially approved. [00:17:25] Speaker 00: When they requested re-issuance, there were all sorts of indicia of fraud. [00:17:29] Speaker 00: And we didn't pay those claims. [00:17:31] Speaker 00: And that is appropriate, and that is our job as class counsel, to ensure that fraudulent claims are not paid. [00:17:37] Speaker 00: And Xanadu hasn't done anything to suggest it actually bought tickets that qualify under the settlement. [00:17:43] Speaker 01: You only have about 30 seconds left, but I'd like to ask a question about fees, appreciating your argument that the objectors don't have standing. [00:17:52] Speaker 01: I also noticed that Xanadu objected to the request for essentially a contingency fee, that the $1 million would have been another 18%, I think. [00:18:00] Speaker 01: And in their objection, I think what they argued is that class counsel should only receive its hourly rate, essentially. [00:18:07] Speaker 01: And I think that's what Judge Breyer has done here. [00:18:10] Speaker 01: Am I understanding the record correctly? [00:18:12] Speaker 00: Yes, I don't recall that specific objection to the fees themselves. [00:18:18] Speaker 00: But yes, Judge Breyer awarded on a load start only basis for actual hours worked. [00:18:24] Speaker 01: About 350 that had already been spent incurred at another 150 about. [00:18:30] Speaker 01: set aside for work yet to be done. [00:18:32] Speaker 01: Is that a fair summary? [00:18:34] Speaker 00: That's correct, Your Honor. [00:18:34] Speaker 01: All right. [00:18:35] Speaker 01: I don't have any other questions, but I think Judge Haslund. [00:18:37] Speaker 04: If I could just, with the indulgence of my colleagues, we're dealing here with variations on problems that arise in lots and lots of class administration, kind of with the tail end. [00:18:48] Speaker 04: There's always going to be a few folks you can't find, and I guess it was unusually hard here. [00:18:53] Speaker 04: Why is it not reasonable to expect, in essence, another round of emails to try to reach those class members who have not yet responded cash checks and so on? [00:19:07] Speaker 00: Well, one issue is fairness to the rest of the class. [00:19:12] Speaker 00: If you can't reach these people in the first instance. [00:19:17] Speaker 04: Well, you tried a second time with the address service, right? [00:19:21] Speaker 00: Yes, we did a batch trace, and that resulted in several thousand checks going out, and several were returned. [00:19:28] Speaker 00: One of the issues with the uncast checks, and I think you'll see this in the notice of post-distribution accounting, is that many of these checks are very small. [00:19:39] Speaker 00: The median was $43. [00:19:40] Speaker 00: The lowest check was $1.12, and what happens in a lot of cases is those low value checks just don't get cashed. [00:19:48] Speaker 00: It's a reality of this type of settlement situation. [00:19:51] Speaker 04: And the vast majority of the settlement funds in this case were claimed and distributed, correct? [00:19:57] Speaker 04: More than $100 million. [00:19:58] Speaker 00: Right, it's only about 5% of the total that is uncashed or returned. [00:20:03] Speaker 04: Thank you. [00:20:04] Speaker 00: Thank you. [00:20:04] Speaker 01: Judge Bay, did I cut you off? [00:20:06] Speaker 01: No? [00:20:06] Speaker 01: Okay. [00:20:07] Speaker 01: Counsel, you have some time left. [00:20:15] Speaker 02: point out there might have been only five percent of the money that wasn't given out. [00:20:18] Speaker 02: It was twenty five percent of the checks that weren't delivered and that weren't cashed. [00:20:23] Speaker 02: Going back to whether due process was followed with respect to Xanadu on [00:20:29] Speaker 02: Excerpts of Record 12, Line 15, Paragraph 5, Judge Breyer writes, in summary, Rust determined that Corp Zanadu is not a settlement class member. [00:20:39] Speaker 02: Counsel, will you please speak into the microphone? [00:20:42] Speaker 02: Rust determined that Corp Zanadu is not a settlement class member. [00:20:46] Speaker 02: And then he goes on to say, as Corp. [00:20:48] Speaker 02: Xanadu is not a settlement class member, the court need not consider its objections. [00:20:52] Speaker 02: So Judge Breyer is deferring to Rust. [00:20:55] Speaker 02: Rust is the class, the administrator for this conflicted council who's coming in asking for more money. [00:21:00] Speaker 02: They're asking for probably 20% of this $5 million. [00:21:05] Speaker 02: They want a million dollars. [00:21:06] Speaker 02: And they know that this $600,000 claim is about 12% of that. [00:21:12] Speaker 02: So that's a conflict. [00:21:15] Speaker 02: But this court should remand this case to Judge Breyer and instruct him to conduct a full and fair hearing as to whether or not Xanadu is a class member, whether or not Xanadu has legitimate claims to this money. [00:21:30] Speaker 02: It's $600,000. [00:21:31] Speaker 02: He shouldn't just allow it to be determined by this class administrator who's in the pay of a clearly conflicted class council. [00:21:40] Speaker 02: It's $600,000. [00:21:40] Speaker 02: This isn't a small claims decision. [00:21:45] Speaker 02: With that, I welcome the court's questions. [00:21:48] Speaker 02: And then, well, the notice should be email. [00:21:51] Speaker 02: They shouldn't use the Pony Express or the snail mail. [00:21:54] Speaker 02: There needs to be email. [00:21:54] Speaker 02: It's cheap. [00:21:56] Speaker 02: And they cannot simply ignore California's unclaimed property laws, because it's incorporated in the settlement and is part of the law at Erie v. Tompkins. [00:22:07] Speaker 02: Notice, going back to Malane versus Hanover, when I was in law school, you do the best you can to give notice. [00:22:12] Speaker 02: That means, in this case, you send out emails. [00:22:15] Speaker 02: It wasn't done. [00:22:16] Speaker 02: Thank you. [00:22:17] Speaker 01: Thank you. [00:22:17] Speaker 01: Thank you both for your argument. [00:22:19] Speaker 01: We'll take that case under advisement and go to the next case on the calendar.