Draft Statement of Reasons for Objection

The draft is currently still in progress and will be updated periodically (along with version numbers).

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— VERSION 4 – FINAL (content only / not formatting) —

To the United States District Court for the Central District of California:

INTRODUCTION

We the Undersigned hereby object to the proposed BAR/BRI class action settlement. This letter will outline the reasons why the aforementioned settlement is unfair and inadequate and should be rejected by the Court. This settlement is the worst of both worlds: it is both an inadequate monetary award AND a coupon settlement with all the characteristic abuse that has been noted by the media, commentators and courts around this nation. If approved, this settlement will allow BAR/BRI to shed significant anti-trust liability at a discount price, while giving Kaplan a de facto promotional campaign for its testing service.  Because class members are confronted with abuse and unfairness at every stage of the settlement, the Court should force the parties to go back to the drawing board to come up with something actually resembling a fair and equitable settlement.

U.S. Federal Rule of Civil Procedure 23(e) has established that a class-action settlement should only be approved if it is “fair, reasonable and adequate.”See also, Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003). Additionally, “Settlements that take place prior to formal class certification require a higher standard of fairness.” In re Mego Financial Corp. Securities Litigation, 213 F.3d 454, 458 (9th Cir. 2000); D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001).  Regardless of the standard, this settlement is anything but what is required by Rule 23.  This letter will outline seven of the most glaring deficiencies that should persuade the Court to wholly reject this settlement.

First and foremost, the proposed settlement provides scant monetary relief to class members, while giving Defendants a broad and all encompassing release.  Class members are forced to accept 18% of the recovery awarded to class members of Rodriguez v. West Publishing Corp., 563 F.3d 948 (9th Cir. 2009), a nearly identical action against this suit’s very defendants.  This disproportionate recovery is further compounded by class counsel’s outrageous request that 25% of the settlement fund be paid to them as “reasonable” attorney fees.  In effect, counsel asks for an unearned windfall that severely cuts into an already meager class award.

Second, the other award, the proposed Kaplan coupon, has almost no value to class members. By definition, the class is wholly comprised of law school graduates and practicing attorneys who are almost assuredly disinterested in pursuing another degree in the foreseeable future.  As a result, the Kaplan “Test Prep Discount Certificate” will not benefit members of this class but will rather serve as a free promotional campaign for Kaplan. In failing to recognize this fact, class counsel has inadequately represented the needs and interests of the class.

Third, the class representatives, who have incurred the same injury as the class, will enjoy over 100 times the estimated monetary award of any class member.  Their definite windfall is grossly disproportionate to class members who are forced to estimate just how paltry their final share of the settlement will be.  The obfuscation of this stark inequality entices class representatives to support a settlement that is neither fair nor adequate for the class.

Fourth, class counsel has failed to undertake an appropriate method of providing sufficient notice of the proposed settlement and the class’s responsibility to affirmatively opt-in to receive any award. Class counsel relied on out-of-date contact information even though far more accurate records, such as bar registries, were available.  Additionally, if a class member were able to learn about the settlement’s existence by word of mouth, any subsequent internet search without the specific case name or years (aside from 2006 and 2011, specifically) would likely fail to reveal the settlement website and posed a substantial risk of causing confusion of this settlement with the Rodriguez or Park v. Thomson Corp., 633 F.Supp.2d 8, 11 (S.D.N.Y.2009) settlements. If class members were to read information on one of these other cases, they may be left with the impression that they had missed out on deadlines or that what they had heard was simply incorrect and look no further.

Fifth, the scope of the release is completely misrepresented by the notice and information disclosed to the class.  A class member would reasonably conclude that the only claims that are released are anti-trust claims premised on the collusion agreement and efforts to maintain a monopoly.  In all actuality it is a concealed global release over nearly every common law and consumer protection action that any class member would ever assert against BAR/BRI.   After reviewing these other, alternative legal theories, it is apparent that any “weakness” in the class’s action is artificial and created by class counsel’s choice to obtain national certification of a class over pleading substantially stronger legal theories that would actually vindicate the class’s interests.

Sixth, the settlement mechanics put in place unreasonable barriers to obtaining recovery.   From the outset, it is an affirmative opt in settlement which is already suffering from notice issues.   Additionally, multiple times, the settlement requires a class member to provide information that is already in the possession of BAR/BRI. In the alternative, when BAR/BRI actually uses its records it selects obviously out-of-date and ignores exact information foisting that burden of production upon the class.

Seventh, since the settlement lacks any injunctive provisions whatsoever, BAR/BRI and Kaplan will be allowed to continue a dangerous monopoly of their respective markets.  It is a right bought at increasingly discounted prices from its aggrieved former students who pay ever-increasing tuition fees to BAR/BRI.   The allegations against the Defendants are not spurious conjecture.  Class members are all too familiar with the fact that since BAR/BRI’s purchase of West Bar Review in 1997, no meaningful competitor has successfully entered the field of bar exam preparation on a national basis.

As a result of these various abuses and deficiencies the court should reject the proposed settlement and force parties to find a fair, adequate and reasonable solution that warrants court approval.

ARGUMENT

I.  Compared to the Previous Class the Monetary Award is Unfair and Unreasonable

The Court has a unique ability to judge this settlement’s fairness.  Just recently, BAR/BRI and Kaplan settled the Rodriguez v. West Publishing Corp. class action.  It is a practically identical case, based on the same operative facts, brought against the same Defendants.  The only apparent difference between our class and the Rodriguez class were the years in which each class took the BAR/BRI course— Rodriguezinvolved students from 1997 to 2005; this class is comprised of students from 2006 to 2011.  One could fairly say this case is entirely derivative of Rodriguez and it was born out of the dissatisfaction with the settlement agreed upon the last time around—that it failed to restore competition to the market through a break up of BAR/BRI.

In that case, $49 million was set aside to pay the claims of the class.  $19 million of that fund is being held in reserved as the costs and attorney fees issue are still being worked out.  Even so, $30 million of that fund was already disbursed.  Assuming the worst case scenario where the class receives none of the disputed $19 million, dividing up $30 million fund works out to $3.33 million for each year of students to collect against—this ultimately led to an average award of $277 for each class member.

The present class members are set to be treated far worse.

In this case, only $5.285 million is set aside for the settlement fund. However, before the calculation of the individual class award, the attorneys demand 25% of the fund for fees (and an unknown amount for expenses), leaving only $3.963 million to pay class members.  This means that roughly $792,000 is allocated for each year of class members, which pales in comparison to the more than $3.33 million that was set-aside in Rodriguez. The settlement, adjusted for the number of years covered, will provide only 13% of what Rodriguez gave its class members.  The Rodriguezclass members were given an average individual award of $277.  With no other data available, the class can reasonably assume the same response rate for purposes of calculating the probable individual award in this case—which would render an average individual award of $32.56, which would be 13% of the Rodriguezaward.

A $32.56 recovery versus a $277 award for a practically identical class is repugnant to any conception of what is “fair, reasonable and adequate.”

Additionally, any decrease in the individual award is inherently flawed, logically speaking.  Both actions are premised upon a theory of a continuing anti-trust violation.  Thus, the present class must have necessarily incurred more damage than the Rodriguezclass because each subsequent year of BAR/BRI test takers would inherit the illicit cost increase of all previous years.  There is no reason to place a discount on this settlement when the damages of the class are greater than the previous iteration.

II. The Inequality between the Class Representatives’ and Class Members’ Awards Precludes Approval of the Settlement

The grossest inequity is between the class representatives, and the interests of the class that they purport to protect. The Court has a duty to guard against settlements that may benefit the class representatives or their attorneys at the expense of absent class members.” Holmes v. Continental Can Co., 706 F.2d 1144, 1147-48 (11th Cir. 1983); Clement v. American Honda Finance Corp., 176 F.R.D. 15, 25 (D. Conn. 1997).  The class representatives will receive $4,000—this is definite and concrete under the terms of the settlement and they receive this windfall even though they did “not suffer any different injuries, do not have different legal claims, and are no more ‘aggrieved’ than [the] class members.” True v. American Honda Motor Co., (C.D. Cal. Feb. 26, 2010).  Thus, the Court must ensure that the “class representatives’ interests [continue to] align with all putative class members ‘interests’ by the terms of the settlement.” Id.

The average class member will receive less than 1% of the Representatives’ award.  This is quite frankly unbelievable.  The class cannot offset the cost of a single BAR/BRI book, but the Representatives will get a full refund plus a windfall of $1,000. When the representatives stand to receive such over 100 times the benefit of any class member a “conflict between the representative plaintiffs and those class members,” invariably results because their monetary incentive to support the settlement is so much greater than any individual of the class itself. Clement v. Am. Honda Fin. Corp., 176 F.R.D. 15, 22 (D.Conn.1997) cited with approval by True v. American Honda Motor Co., 749 F.Supp.2d 1052, 1065 (C.D. Cal. 2010).

With such a gross disparity inherent to the current settlement structure, the Representatives are compensated in such an extreme fashion that makes it difficult to consider their outcome representative of the class when such a meager settlement is foisted on the rest of the class for the same all-encompassing release.  It would be one thing to present such a lackluster financial award if this settlement involved some sort of break up of BAR/BRI to restore market competition (a stated purpose of this case outlined in the complaint) painstakingly chiseled out by class counsel, but instead it is merely a fire sale of class members’ rights and a mere shadow of Rodriguez.

III.  The Coupon is an Inadequate Award for this Particular Class

The Kaplan “Test Prep Discount Certificate” coupon is relatively worthless to every class member.  It can be reasonably viewed as a calculated attempt to provide something of potential value that will ultimately go unused.  The allowance for transference and sale can be viewed as a positive gesture on the part of Kaplan, however the transaction costs will likely render the actual dollar value a lot less than the maximum credit of $200 towards a course.  Just as companies harness rebates to allow for the advertisement of lower product costs, the dark calculus involved is making the wager that a significant portion of consumers will fail to properly and/or timely file the appropriate paperwork to receive the rebate monies and that when combined with the present value of money allow for the company to either break even or come out ahead when all is said and done.

Of course, Kaplan knows full well of this practice, since just this month it ended a promotion for a $200 rebate on many of its classes.  While this kind of shell game is typical in the retail arena, it is dubious and disingenuous in the context of a class action settlement.  Even assuming that a class member was interested in a course that cost $1,999.00 or more (in order to take full advantage of the $200 discount), the courses offered that one could even remotely conceive of as making any sense would be entrance exam prep courses for MBA programs (GMAT), other master’s programs (GRE), or—perhaps conceivably— medical school (MCAT).  For outlier class members with children of an older age, some value could be found in SAT/ACT prep courses and the like, but this is moving rather far afield to find value or sense in the issuance of these coupons in the first place as an acceptable component of the proposed settlement.  If the view is that upwards of $200 of value is a reasonable amount to provide to class members, let it come in the form of a cash award that members, if they so wish, could then similarly apply to Kaplan’s various service offerings.

IV.  The Notice of Settlement Was Horribly Deficient

Many of the Undersigned did not receive notice of the settlement and were only informed about it through word of mouth.  The process undertaken by class counsel has lead to several of the Undersigned discovering the settlement in early May or just prior to the deadline at the close of the month.  This is because the notice provided to the class was ineffective.

BAR/BRI should have known that using the last known contact information of its students would likely result in many errors.   Many students take their bar preparation classes near their law school for various reasons, such as remaining time on a lease or avoiding the added stress of moving to the stress of sitting for the bar exam.  However, upon passage, many of those students will move to start their practice elsewhere.  The address of where the class members studied for the bar is almost universally different that where class members will be upon entering their practice or other employment.

This is where the class’s uniqueness becomes so important.  Nearly every class member is a practicing lawyer for the bar, unless BAR/BRI wishes to argue that its classes are ineffective.  BAR/BRI knows which bar that attorney is seeking to pass based on what course that class member had enrolled.  Once admitted, an attorney MUST be registered in that state with a current address and to always keep that information on file up-to-date.  To put it bluntly, the members of this class are almost universally on the grid and easily discoverable.   A simple nationwide survey of bar associations, which most— if not all— maintain a searchable Internet database, would provide BAR/BRI with a nearly flawless class member contact list to provide notice of the settlement.  There is no good reason why such an endeavor was not undertaken, unless there was not a genuine desire to reach out to all class members in the first place.

Even if a class member was not directly contacted yet lucky enough to have been informed about the settlement by word of mouth, finding the required documents to fill out was nearly impossible without being provided detailed information by those who had received notice.  A Google search for “BarBri Settlement,”  “BarBri Class Action” “BarBri Class Settlement” yields NO link to the Stetson settlement website.  Instead, the class members seeking the forms will find references to the Rodriguez notices or to another case, Park v. Thompson Corp. The class members would see that they were not part of that class and the deadline had already expired, assuming that they were no longer to interact with the settlement.  This was a unique risk that should have been dealt with from the start of notice.  Differentiating Rodriguez and Park from Stetson is critical for the notice to be effective.  And since West Publishing has retained the same attorneys in this action as it had in Rodriguez, this was an issue that was predictable and had attorneys uniquely able to remedy this needless and dangerous risk of confusion for the class.

V.  The Notice Fails to Inform the Class that Defendants will Receive an All-Encompassing Global Release of Claims

The release language in the notice fundamentally misrepresents what claims class members are actually surrendering under the settlement’s release provision– the language of the release is reproduced, but its true meaning is not.  Upon approval of the settlement, class members:

release the [Defendants] from any and all manner of claims…  ever had, now has, or hereafter can, shall, or may have, whether directly, representatively, derivatively, or in any other capacity, concerning or relating to any conduct alleged in the complaint in the Action, and including without limitation all claims that have been asserted or could have been asserted in any litigation against the Released Parties or any of them for any conduct alleged in the complaint in the  Action (the “Released Claims”) Notice, pg. 5-6.

Nearly identical language was implicated as a global release less than two weeks ago in the widely reported DirectBuy class settlement rejection. Wilson v. DirectBuy, Inc., No. 3:09-CV-590 (JCH) (D. Conn. May 16, 2011)

The notice claims that Plaintiffs alleged:

that BAR/BRI violated federal antitrust laws by agreeing with Kaplan to limit competition in the market for  full service bar review courses; that BAR/BRI unlawfully acquired and maintained a monopoly…[and] conspired to monopolize that market, all through a variety of means. Notice pg.3

From the notice, a class member would reasonably surmise that only claims of inflated BAR/BRI tuition due to anti-competitive actions are released. However, this is not the case.

The class releases all claims “to any conduct alleged in the complaint.”  Of course, the complaint is not attached to the notice, nor is it accessible on the settlement website as indicated in said notice (“pleadings in the Action…are available at www.gilardi.com/barbrisettlement.”) Notice pg. 8.  Class members are not directed to where they are able to obtain access to the complaint, and it is silent as to whether or not class members should even consider reviewing the document, even though analysis of the complaint and its allegations control what legal rights the class members will ultimately give up.  If actually examined, the member would learn that the complaint alleges a litany of additional conduct:

In addition, BAR/BRI imposes an effectively non-refundable book charge, repeat fees, add-on (second state preparation) fees, plus other penalties and charges that have increased substantially over the last several years and now average hundreds of additional dollars of extra cost per student per year. Complaint ¶ 75

Bar/Bri has also reduced the quality of the course services…[which makes the Class] more likely to fail the bar… Complaint ¶  77

¶ 77 alleges one of the most central concerns of any student who pays upwards of 3000 for an instructional course – the quality and how it will aid them in the test it purports to prepare them for.  These allegations embrace at minimum common law contract claims.  These are of course released by this settlement.

The allegations of ¶ 75 are classic unfair practices under nearly all state consumer protection statutes.  Indeed claims brought under such statutes are markedly stronger without the need to prove any “intent” or any of the conspiratorial elements required of a Sherman Claim,[1] and many provide for minimum statutory recoveries in far excess of the $32.56 likely recovered by class members.[2]

But the most shocking feature of this release is that several members of the class, who have already paid the course’s tuition fees for classes that may be as far as three years in the future.  Those class members are forced to give up their rights to contest a failure of BAR/BRI to perform as it has promised in the future.  A contractual clause which would purport to create a waiver of any and all actions for breach of the contract in which it appears would be repugnant to any conception of fairness, but that is what this camouflaged global release functions as.

“A defendant would normally be expected to pay a premium for this type of global peace.” Clement v. American Honda Finance Corp., 176 F.R.D. 15, 29 (D. Conn. 1997); Buchet v. ITT Consumer Financial Corp., 845 F.Supp. 684. 697 (D. Minn. 1994), but under this settlement, BAR/BRI’s expectation is such a release at a fire sale price.

But the price that the class will pay is all too expensive.  Their causes of action against BAR/BRI that are affected by this release are not legally weak.  State level merchandising claims are powerful tools to protect the class’s interests as just outlined.  While federal anti-trust violations may have provided class counsel with an expedient vehicle to create a national class, such a consideration cannot trump the requirement that the class’s interests be adequately protected with sound legal theories.   The class’s best causes of action to address their injuries should not be sacrificed so that counsel can enjoy the exorbitant fees associated with a hasty national class settlement.

VI. The Mechanics for this Settlement are Fundamentally Flawed

From the outset, this an affirmative opt-in settlement, where the burden falls on the class to fulfill the requirements decided by class counsel.  For such a case, the settlement should not put in place needless barriers, but this is exactly what is done.

For class members to receive an award, they must know exactly how much they spent for their BAR/BRI class.  Class members have paid for BAR/BRI classes as far back as nine years ago, since BAR/BRI actively solicits law students to sign up as early as 1L year.  In this time, class members have lost receipts, and, in several cases, this information is far past the seven-year retention that most financial institutions observe.  For class members whose banks did have such records available, their request required a banking fee.

Of course, the settlement has provided a customer service number to obtain the information.  However, it has been found by class members to be woefully inadequate.  Many were unable to make satisfactory use of the customer service line because they faced untenable waiting times and as a result had to repeatedly call back with varied results.  A class member should not have to repeatedly call a number in the hopes of being able to opt-in before a rapidly approaching deadline, and class counsel should not provide such an option for class members unless it is committed to providing adequate resources to make it a reasonable and useful one.

Fortunately, many class members were able to discover a work-around. If members go to the BAR/BRI website and are able to remember their login information from years back, they can then access their account. On the website they can access an invoice with the precise amount they spent on the course. However, this should not have been necessary, as the defendants have had this information all along.

This hurdle was placed as a method to needlessly defeat a class member’s recovery while subjecting that member to the full strength of its release.  In effect, BAR/BRI asks the class to go on a scavenger hunt through old receipts and understaffed customer service lines, instead of simply opening its filing cabinets itself.

Additionally the Undersigned have provided their best estimation of the award based on all the available information; however, class and defense counsel may argue that our numbers are pure speculation, and to the extent this may be true, it is only because the settlement that they have devised forces us to make estimated theory of recovery.  Both the deadline to opt-in to collect the monetary award AND file an objection is the same, Memorial Day.  Thus, they require the class to accept an unknown award.

This is a disability only borne by the class.  As outlined earlier, the class representatives know exactly what their windfall will be down to the dollar.  Additionally, class counsel knows what its fees are likely going to be.  Only the class must guess what each member will receive.  The settlement is designed to provide a fundamental asymmetry of information between those who are interested in settling and those who are interested in receiving a fair award in exchange for a full release of their claims against defendants.  By simply extending the deadline to object past the deadline to affirmatively opt-in; this discriminatory flaw could be fully remedied.

This is all needless gamesmanship.  The class is entitled to a reasonable settlement procedure that both informs them of the actual settlement award AND allows reasonable access to obtain that expectancy.  This settlement does neither.

VII.  The Proposed Settlement Offers BAR/BRI and Kaplan De Facto Monopoly Control

Besides the inadequacy of the coupons and the monetary, the settlement also lacks injunctive provisions to protect future students from the Defendants’ abuse.  Multiple class action settlements suggest that BAR/BRI and Kaplan simply treat these settlements as a nominal cost of doing (illicit) business.  Corrective or preventative action to alter such unfair practices eviscerates the ability for the settlement to provide meaningful relief.  Certainly as outlined earlier, this settlement provides global release for with no assurance of future compliance with the law.

Conclusion

Ultimately, this settlement reeks of abuse arrived at by a desire for expediency over meaningful protection of class members.  Every other party to this suit knows full well their interest — Defendants know that they will have global peace; class counsel knows it will enjoy substantial fees; and, class representatives know that they will receive a definite monetary windfall.  Only the class is deprived of knowing just how meager a recovery they will receive in exchange for a release that is purchased at fire sale prices. The Senate Judiciary committee’s notes in passing CAFA sums up the evaluation of this settlement under Rule 23:

Abusive class action settlements in which plaintiffs receive promotional coupons or other nominal damages while class counsel receives large fees are all too commonplace… [T]hese cases [have] become clientless litigation in which the plaintiff attorneys and the defendants have powerful financial incentives to settle the litigation as early and as cheaply as possible, with the least publicity. These financial incentives create inequitable outcomes. For class counsel, the rewards are fees disproportionate to the effort they actually invested in the case.

… For society, however, there are substantial costs: lost opportunities for deterrence (if class counsel settled too quickly and too cheaply), wasted resources (if defendants settled simply to get rid of the lawsuit at an attractive price, rather than because the case was meritorious), and—over the long run— increasing amounts of frivolous litigation as the attraction of such lawsuits becomes apparent to an ever-increasing number of plaintiff lawyers. S. REP. No. 109-14, at 32 (2005), as reprinted in 2005 U.S.C.C.A.N.

The Court should reject the settlement.


[1] Cal. Bus. & Prof. Code § 17200, Mo. Rev. Stat.  §407.020; Conn. Gen.Stat. § 42-110q; Fla. Stat. § 501.211; Ga.Code. § 10-1-399; La.Rev.Stat. § 51:1409; and N.J. Stat. § 56:8-19.

[2] See e.g. Ala.Code § 8-19-10 ($100 statutory minimum); Alaska Stat. § 45.50.531 ($200 statutory minimum); Colo.Rev.Stat. § 6-1-113 ($250 statutory minimum); Haw.Rev.Stat. § 480-13 ($1000 statutory minimum); Idaho Code § 48-608 ($1000 minimum); Mass. Gen. Laws ch. 93A § 9 ($25 statutory minimum); Mich. Comp. Laws § 445.911 ($250 statutory minimum); Mont.Code § 30-14-133 ($200 statutory minimum); N.H.Rev.Stat. § 358-A:10 ($1000 statutory minimum); N.M. Stat. § 57-12-10 ($100 statutory minimum); N.Y. Gen. Bus. Law. §§ 349(h) ($50 statutory minimum); Ohio Rev.Code § 1345.09 ($200 statutory minimum); Or.Rev.Stat. § 646.638 ($200 statutory minimum); Pa. Stat. tit. 73 § 201-9.2 ($100 statutory minimum); R.I. Gen. Law § 6-13.1-5.2 ($200 statutory minimum); Utah Code § 13-5-14 ($2000 statutory minimum); Va.Code § 59.1-204 ($500 statutory minimum); and W. Va.Code § 46A-6-106 ($200 statutory minimum).

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RE: STETSON v. WEST PUBLISHING CORP