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 The 7th U.S. Circuit Court of Appeals in Chicago said there was no
showing that the proposed $1 million fee was reasonable for a
settlement calling for roughly 83,000 class members to each receive
a $10 voucher redeemable at RadioShack stores.
Writing for a three-judge panel, Circuit Judge Richard Posner noted
that RadioShack's "fragile" state, including the electronics
retailer's recent announcement that it may file for bankruptcy,
might have hastened the perceived need to settle.
But he also said the vouchers might not all be redeemed, reducing
the settlement's value, and that revised terms could have shifted
some of the "exorbitant" legal fees to customers.
"The law quite rightly requires more than a judicial rubber stamp"
to class-action accords, Posner wrote, just 11 days after oral
arguments. He returned the case to the federal district court in
Chicago for further proceedings.
The accord was intended to resolve claims that RadioShack violated
the federal Fair and Accurate Credit Transactions Act by printing
card expiration dates on customers' receipts, which if lost could
increase the potential for identity theft.
Paul Markoff, a lawyer for the customers, said in a phone interview
that the settlement had been driven "primarily" by RadioShack's
financial position.
"We built protections into this settlement in the event RadioShack
were to file for bankruptcy, and believed the alternative to this
settlement was that the class would get nothing," he said. "Now that
the settlement has been thrown out, that may be the most likely
scenario."
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RadioShack and its lawyers did not respond to requests for comment.
Shares of the Fort Worth, Texas-based company closed down 5.3 cents
at 90.7 cents on Friday.
Ted Frank, a critic of what he considers excessive legal fees and
who represented a couple opposing the RadioShack settlement, in a
phone interview welcomed the decision.
"It is important in the class-action settlement process that class
members be the foremost beneficiaries," he said. "One must look at
the actual recovery, rather than a hypothetical adding up of numbers
that don't benefit the class."
Frank said he is pursuing six cases in federal appeals courts
raising similar issues.
The case is Redman et al v. RadioShack Corp et al, 7th U.S. Circuit
Court of Appeals, Nos. 14-1470, 14-1471, 14-1658.
(Reporting by Jonathan Stempel in New York; Editing by Grant McCool)
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