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11th Circuit Asked to Toss Out Massive US Data Breach Settlement

A $380 million settlement over the 2017 Equifax data breach is hanging in the balance in the 11th Circuit, where a tort-reform attorney argued Tuesday that the deal unfairly lumped all plaintiffs into a single class.

(CN) — A $380 million settlement over the 2017 Equifax data breach is hanging in the balance in the 11th Circuit, where a tort-reform attorney argued Tuesday that the deal unfairly lumped all plaintiffs into a single class.

During the cantankerous appellate hearing, a three-judge panel weighed whether to preserve the historic settlement arising from a hack of credit agency Equifax's records. The breach allegedly exposed the personal information of some 147 million Americans.

The settlement — the largest data breach settlement ever in the U.S. — provides for credit monitoring for class members, up to $20,000 to cover individual out-of-pocket losses, as well as compensation to consumers for time spent addressing identity theft concerns arising from the breach.

Equifax may be obligated to pay an additional $125 million if the $380 million settlement sum does not cover all of the out-of-pocket claims, the company says.

After a year-and-half of negotiations among the parties, Chief Judge Thomas Thrash Jr. of the Northern District of Georgia gave final approval to the deal in January 2020. The process was marked by heavy tension between class counsel and objectors to the settlement. Thrash at one point characterized some opponents of the settlement as "serial objectors" purportedly manipulating the legal system to hold up class action cases for monetary gain.

On appeal Tuesday, attorney and tort reform activist Ted Frank asked for the settlement approval to be reversed on the grounds that people affected by the data breach were improperly forced into one litigation class despite their widely varying claims.

Thrash had declined to break up the class, finding that doing so could cause "needless duplication of effort, inefficiency, and jury confusion." He noted that potential claimants were permitted to opt out of the settlement.

Frank argues that plaintiffs in states with strong consumer protection laws, which could provide them with additional damages, were not given their rightful leverage at the negotiating table because they were lumped in with every other plaintiff. The class should have been broken up, with subgroups having their own counsel to advocate for them during settlement negotiations, he argues.

Frank is a founder of the Center for Class Action Fairness and the Hamilton Lincoln Law Institute.

"All class members were treated as if their claims had the same settlement value and were provided the same relief, effectively releasing the more valuable statutory-damages claims for no additional consideration," Frank wrote in his brief.

When the appellate panel pressed the issue Tuesday, opposing counsel insisted Frank was taking an overly broad stance on the requirements for breaking up a plaintiff class.

"This court has said that subclasses are only necessary if there is a fundamental conflict. There isn't here," said Kenneth Canfield, a lawyer for plaintiffs who want to keep the settlement in place.

Equifax's lawyer David Balser echoed the sentiment, telling the panel that creating sub-classes is only required when there "a substantial intraclass conflict." He wrote in his brief that the plaintiffs' claims had "comparably limited value in light of the litigation risk posed by Equifax’s defenses."

The appeal is being fielded by U.S. Circuit Judge Beverly Martin, a Bill Clinton appointee, alongside U.S Circuit Judges Andrew Brasher and Britt Grant, who are both Donald Trump appointees.

Among other questions, the panel is assessing whether the district court improperly delegated the writing of a key judicial opinion in the class action to plaintiffs' counsel. Frank says a proposed opinion was submitted to and then adopted by the district judge ex parte, without review by Frank and other objectors.

Frank says that the the district judge has refused to place the ex parte communications on the court record.

Balser countered by telling the 11th Circuit Tuesday that Frank and his fellow objectors "have not connected the ex parte nature of the order to any substantive unfairness."

The panel is also considering whether the class action is defective for purportedly including plaintiffs who failed to prove an "actual or imminent" loss from the Equifax data breach.

Objector Shiyang Huang in that vein claims the class action should be tossed for failure to allege concrete injury.

The matter of whether the risk of future identity theft from a data breach creates standing to sue has been an evolving matter of case law in federal courts, leading to circuit splits across the country.

The 11th Circuit, which has jurisdiction over Florida, Alabama and Georgia, recently ruled in Tsao v. Captiva MVP Rest. Partner that a plaintiff did not have standing to sue on the basis of increased risk of identity theft from a data breach that exposed the restaurant PDQ's customer information.

Frank has argued that the Equifax case is distinguishable, however, because it involves exposure of social security numbers.

The hearing Tuesday ended on a raucous note when Balser insinuated that some "serial objectors" to class action settlements are unscrupulous and engaged in a form of extortion by delaying reasonable class action settlements.

Eric Isaacson, one of the attorneys objecting to the settlement, became visibly incensed, believing Balser was talking about him.

"He was clearly referring to me!" Isaacson exclaimed. "It is an ad hominem attack, and it is outrageous."

By the end of the exchange, Frank had his head in his hands.

In his brief, Frank felt compelled as well to bite back against being called an extortionist — a label applied to him by the district judge, he says.

"The accusation of extortion is unsupported and utterly meritless: Frank has never settled an objection for quid pro quo payment," the brief states.

In addition to asking for the settlement approval to be reversed, Frank wants the district judge removed from the case.

Categories / Appeals, Technology

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