Eleventh Circuit Affirms Approval of (Almost) All of Equifax Data Breach Settlement

In In re: Equifax, Inc. Customer Data Sec. Breach Litig. (Huang v. Equifax, Inc.), 2021 WL 2250845 (11th Cir. June 3, 2021), the Eleventh Circuit upheld the district court’s approval of a class settlement arising out of the Equifax data breach – except for the incentive awards to the class representatives, as to which the court reversed the district court in light of Johnson v. NPAS Sols., LLC, 975 F.3d 1244 (11th Cir. 2020).

The settlement in question arose from “scores of class actions” filed in the wake of a 2017 data breach affecting Equifax and its affiliates. The cases were consolidated in the Northern District of Georgia, and the consolidated complaint filed on behalf of consumers included claims under the Fair Credit Reporting Act and various state consumer protection and data breach statutes as well as claims for negligence and negligence per se. The settlement followed 18 months of negotiations between the parties and with various state and federal regulators, as well as mediation before a retired federal district court judge.  It binds approximately 147 million class members and provides for reimbursement for documented out-of-pocket losses; compensation for up to 20 hours spent dealing with identity theft and/or taking preventative measures; free credit monitoring and identity prevention services for 10 years (with an option for alternative cash consideration); and seven years of identity restoration services. The settlement includes no potential reversion to Equifax, and requires that Equifax spend at least $1 billion on data security over five years.

The settlement drew objections from 388 class members, six of whom appealed following the district court’s approval of the settlement. The Eleventh Circuit, in a lengthy opinion written by Judge Beverly Martin and joined by Judge Grant and Judge Brasher, affirmed the district court’s approval of the settlement except with respect to the incentive awards to the class representatives.

First, citing its recent decision in Muransky v. Godiva Chocolatier, Inc., 979 F.3d 917 (11th Cir. 2020), the court rejected the argument that class members who did not actually have their identities stolen lacked the injury-in-fact required to establish Article III standing. The court similarly rejected the novel argument that the settlement of a class action ends the Article III “controversy” so as to strip the court of jurisdiction.

Second, the court found no abuse of discretion in the district court’s requiring each objector to provide the objector’s name, address, signature, grounds for objection, previous objections in class actions, and potential deposition dates. The requirements “were not particularly burdensome,” the court decided, and the district court had imposed them for the stated purpose of “avoiding a ‘chaotic process.’” The court suggested that the sheer size of the class nudged these measures, similar to some that have been criticized by other courts, into the realm of the court’s discretion.

Third, the court found no reversible error in the district court’s adoption of an order “ghostwritten” by plaintiff’s counsel. “Ghostwriting” by litigants is generally disfavored, but the critical question is “whether the process by which the judge arrived at [the order] was fundamentally unfair.” Here, where the district court announced its ruling in court and then asked the plaintiffs’ counsel to submit an order in accordance with that ruling, which order the district court would “consider signing,” the process was not fundamentally unfair.

Fourth, the court upheld the district court’s decision to approve the settlement, finding that the district court properly applied the factors set forth in Bennett v. Behring Corp., 737 F.2d 982 (11th Cir. 1984) to determine that the settlement was fair, reasonable, and adequate.

Fifth, the court rejected an objector’s claim that the settlement class did not satisfy Rule 23’s adequacy requirement. The objector argued that there was a fundamental intraclass conflict because some class members had claims for state statutory damages and others didn’t. The court found this difference less than fundamental, especially in light of the objector’s failure to show that the statutory damages were actually valuable: “In fact,” the court noted, “[the objector] doesn’t cite a single case in which a plaintiff recovered statutory damages under either [relevant state] statute in a data breach case.”

Sixth, the court affirmed the $77.5 million attorneys’ fee award. The district court determined that the requested fee was just over 20% of the $380.5 million settlement fund, applying the percentage method described in Camden I Condo. Assoc., Inc. v. Dunkle, 946 F.2d 768 (11th Cir. 1991). The district court also used the lodestar method as a “cross-check.” On appeal, the Eleventh Circuit rejected an objector’s argument that Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010) required that the district court use the lodestar rather than the percentage method. Perdue involved a fee-shifting statute. Camden I, the court held, still applies in common-fund cases; “The Supreme Court has never categorically prohibited the percentage method in common fund cases.” The court also rejected another objector’s argument that the district court should have considered “economies of scale” as part of its evaluation of the settlement, given the size of the settlement fund (a “megafund,” as the objector called it) —“We decline to add an additional factor requiring the District Court to expressly consider the economics of scale in a megafund case.”

Seventh, the court reversed the district court’s approval of incentive awards to the class representatives, finding the awards prohibited by Johnson v. NPAS Sols., LLC, 975 F.3d 1244 (11th Cir. 2020). Notably, NPAS Sols. involved claims under a federal statute, whereas the remaining claims in Huang at the time of settlement were all state-law claims. Still, the Huang panel determined that “NPAS Solutions binds us here.” Accordingly the court vacated the incentive awards but left the rest of the settlement intact.

Finally, the court affirmed the district court’s imposition of a $2,000 appeal bond on each objector, finding that the district court’s imposition of a bond requirement based on its determination that there was a “substantial risk” of nonpayment was permissible under Fed. R. App. P. 7.

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