Wawa
PHILADELPHIA - Despite the best efforts of a professional objector and a group of state attorneys general, class action lawyers will get their $3.2 million in a settlement with Wawa over a 2019 data breach.
The class action settlement provided up to $9 million - much of it in Wawa gift cards - but the U.S. Court of Appeals for the Third Circuit on June 25 ruled the fees awarded to firms like Berger Montague in Philadelphia federal court were reasonable.
It did so over the complaints of 16 state attorneys general who submitted an amicus brief that said "two-thirds of the $9 million settlement is phantom relief that class members will never see."
And the $25 million Wawa spent on updated privacy measures shouldn't matter, they said, as it pre-dated the settlement, reached first in 2020.
"Here, the district court relied on phantom recovery to approve a fee award, giving counsel $3.2 million in cash while leaving the class with $2.9 million in gift cards and about $80,000 in cash," the AGs wrote.
"That reality should be a significant factor in vacating the fee award."
The convenience-store chain suffered a data breach on Dec. 10, 2019, and plaintiff lawyers quickly pounced with 15 separate lawsuits that were consolidated. Class members were separated into financial institutions, employees and consumers.
A consumer settlement was reached after a 12-hour negotiation session in September 2020. Ted Frank, founder of the Center for Class Action Fairness, objected to its terms, leading to revisions and a trip to Third Circuit and back.
In the case's first trip to the Third Circuit, judges held courts should weigh "either amounts paid or amounts made available." There had been a cap on how much certain consumers could receive.
Consumers who spent some time monitoring their credit statements could get a $5 Wawa gift card, capped at $6 million total. Customers with a fraudulent charge could get a $15 card, up to $2 million total. And those with out-of-pocket losses could get up to $500 in cash, up to $1 million total.
Those caps add up to $9 million but the AGs noted only $2.9 million was paid out - almost all of it in $5 gift cards. Only $79,830 was paid in cash for class members with out-of-pocket losses.
"The remaining funds will never leave Defendant's hands, making any consumer relief purely 'imaginary,'" the AGs wrote.
Still, the Third Circuit affirmed a fee award that exceeded the class' recovery. Wawa had agreed to the $3.2 million, drawing allegations from Frank of a "side agreement" to swiftly settle the case while lining the lawyers' pockets.
The late judge Gene Pratter found no "clear-sailing provision" existed, and that based on the declarations of defense lawyers, there were no formal agreements to not challenge the fees request.
"Regardless of whether a clear-sailing agreement appeared in the settlement agreement, Judge Pratter thoroughly examined the parties' negotiation process and any potential negative implications that process may have had on the class," Judge D. Brooks Smith wrote for the Third Circuit.
"As part of this analysis, she found no collusion between defense and class counsel during the settlement negotiations or litigation proceedings. We afford great deference to her decision to credit... testimony that the negotiation was hard-fought and free of collusion."
Citing a "flexible approach" to scrutinizing class action fee awards, the Third Circuit found this one justified. The settlement had been amended to remove a one-year expiration date on the gift cards, and Wawa customers go there often, giving them plenty of chances to use the cards, the court said.
Pratter and the Third Circuit also touted new security measures as of value to the class, though Frank argued Wawa would've made these changes anyway and they weren't a result of the settlement.
The AGs wrote "relying on illusory injunctive relief was an abuse of discretion." The states participating in that brief were Iowa, Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Louisiana, Montana, Ohio, South Carolina, Tennessee, Utah, Virginia and West Virginia. Brenna Bird of Iowa led the brief.
Quoting Abraham Lincoln, Judge Smith wrote: "The matter of fees is important, far beyond the mere question of bread and butter involved."
Attorneys said they worked 5,942 hours and at an average of $653 per hour, that lodestar amount came to almost $3.9 million, meaning, the Third Circuit said, the attorneys actually get less than what they worked for.
