[00:00:00] Speaker 00:
morning please be seated welcome to the night circuit we are pleased to be with you today and I'm happy to be sitting with my colleague Judge Sanchez and we both of us welcome Judge Ezra who's joining us from the district court who's currently assigned in Texas thank you for being here thank you so much for the honor all right we have two matters for argument this morning

[00:00:26] Speaker 00:
On the first one, I just want to clarify.

[00:00:28] Speaker 00:
It looks like both sides in the Feldman versus Facebook case are splitting time.

[00:00:32] Speaker 00:
Is that correct?

[00:00:33] Speaker 00:
All right.

[00:00:34] Speaker 00:
And then the clock will just set you for the time that you've agreed to.

[00:00:37] Speaker 00:
So we'll start with Feldman versus Facebook.

[00:00:40] Speaker 00:
And I think that Mr. Jan, you've got seven minutes.

[00:00:49] Speaker 05:
Point of your honors, my name is Kendrick Jan.

[00:00:51] Speaker 05:
I represent the appellants in this matter, Feldman and Mahaney.

[00:00:56] Speaker 05:
It's been exactly a year since we were here last.

[00:00:59] Speaker 05:
We appreciate the opportunity and the privilege of being here.

[00:01:02] Speaker 05:
May it please the court?

[00:01:04] Speaker 05:
The party's briefs in this matter describe the proposed settlement in terms of gross recovery, in terms of percentage of recovery, in terms of per capita recovery among class members.

[00:01:19] Speaker 05:
and percentage of aggregated statutory damages and individual statutory damages.

[00:01:25] Speaker 05:
That's not the point.

[00:01:27] Speaker 05:
The point here is whether or not the district court analyzed this settlement consistent with its duties under Hamlin and under E2.

[00:01:39] Speaker 05:
It did not.

[00:01:43] Speaker 05:
To survive appellate review, the district court must show it has explored comprehensively all factors and must give a reasoned response to all non-fibrillous objections.

[00:01:57] Speaker 05:
Among other concerns, the court must examine the Hanlon-Churchill factors, including strength of the plaintiff's case, risks and costs of further litigation.

[00:02:05] Speaker 02:
Well, counsel, we're very aware of the Hanlon factors.

[00:02:08] Speaker 02:
Why don't you jump to the—what did the District Court do wrong?

[00:02:11] Speaker 05:
The court did not itself analyze the Hanlon factors.

[00:02:16] Speaker 05:
If you look

[00:02:17] Speaker 05:
at the Court's preliminary order and the Court's final order, you will find that what it did was adopt the analysis of the parties.

[00:02:28] Speaker 05:
Mind this.

[00:02:31] Speaker 05:
Class counsel is a fiduciary until there's a settlement.

[00:02:37] Speaker 05:
And it becomes, at that point, its interests are not

[00:02:41] Speaker 05:
equated with the interests of the class.

[00:02:43] Speaker 05:
At that point, the court becomes a fiduciary for the class.

[00:02:49] Speaker 05:
The fiduciary cannot adopt the analysis done by class counsel.

[00:02:55] Speaker 05:
It is the court's obligation to do its own independent analysis.

[00:03:02] Speaker 05:
The court has to show in its order that it has comprehensively explored 23E2 and the Hanlon Factors.

[00:03:10] Speaker 05:
Simply saying it has done so is insufficient.

[00:03:13] Speaker 05:
The rule is, and this is a quote, a district court must set forth sufficiently detailed consideration of the most relevant factors to allow for a meaningful review on appeal.

[00:03:24] Speaker 05:
It simply did not.

[00:03:30] Speaker 02:
So your view is that because it agreed with one side's arguments, it substituted that party's analysis for its own?

[00:03:41] Speaker 02:
I'm struggling to understand your argument.

[00:03:43] Speaker 05:
Forgive me.

[00:03:44] Speaker 05:
I want to be clear.

[00:03:46] Speaker 05:
I'll go right to a significant point.

[00:03:49] Speaker 05:
The analysis that class counsel provided the court, the analysis the court relied most heavily on included

[00:04:00] Speaker 05:
zero best day in court number.

[00:04:06] Speaker 05:
It did not analyze the breach of contract issue in terms of dollars and cents.

[00:04:12] Speaker 05:
And as to statutory damages, and I'm going to quote what

[00:04:15] Speaker 05:
what class counsel said.

[00:04:17] Speaker 05:
If per person damages are awarded, the maximum recovery would be astronomical.

[00:04:21] Speaker 05:
That figure cannot be used to estimate what plaintiff, if successful, could actually collect.

[00:04:27] Speaker 05:
However, given the strong possibility of a large due process damages reduction on this record, it makes sense to factor it into the maximum possible recovery.

[00:04:36] Speaker 05:
In addition, a further discount is appropriate to reflect the risk the VPA claim faces on the merits.

[00:04:42] Speaker 02:
Well, our Wakefield case allows the district court to consider due process considerations, does it not?

[00:04:48] Speaker 05:
Absolutely, and I appreciate that you said that.

[00:04:50] Speaker 05:
Wakefield does absolutely allow the court to do that.

[00:04:54] Speaker 05:
What must the district court do pursuant to Wakefield?

[00:04:58] Speaker 05:
Wakefield tells us the district court itself must

[00:05:03] Speaker 05:
consider the magnitude of the aggregated award in relation to the statute's goals of compensation, deterrence, punishment, and the prescribed conduct.

[00:05:15] Speaker 05:
It has four factors.

[00:05:17] Speaker 05:
And it's conjunctive.

[00:05:19] Speaker 05:
The court itself must do that analysis.

[00:05:23] Speaker 05:
Four factors.

[00:05:25] Speaker 05:
The court itself didn't consider one.

[00:05:27] Speaker 05:
Class counsel didn't describe any such an else.

[00:05:30] Speaker 05:
Well, there was this gross aggressiveness.

[00:05:33] Speaker 02:
I don't read Wakefield to direct the district courts to calculate a statutory maximum damage.

[00:05:40] Speaker 02:
In context, the case is talking about if you are going to think of statutory damages, in some extreme circumstances, there may be due process considerations to take in mind.

[00:05:51] Speaker 05:
Your Honor, I agree with you.

[00:05:53] Speaker 05:
But if you're going to do that,

[00:05:55] Speaker 05:
And it adopts class counsel's analysis regarding due process.

[00:05:59] Speaker 02:
I mean, our Lane case tells us that sometimes trying to scale up to statutory maximums can be contingent and, you know, a little speculative.

[00:06:11] Speaker 02:
You know, if you just say, okay, here's the size of the class.

[00:06:15] Speaker 02:
We're going to assign a statutory award for each person.

[00:06:18] Speaker 02:
We're going to scale it up.

[00:06:20] Speaker 02:
And now we're in the billions of dollars.

[00:06:23] Speaker 02:
Not only might there be due process issues with that, but it's also very contingent on many factors.

[00:06:28] Speaker 02:
And so courts don't have to do this.

[00:06:31] Speaker 05:
I agree with you.

[00:06:31] Speaker 05:
This is what happened in Lane.

[00:06:33] Speaker 05:
It's quite interesting.

[00:06:34] Speaker 05:
In its final approval, forgive me, in its order of preliminary approving the settlement, the district court notified the parties that final approval will require a sufficient showing that terms of the settlement are reasonable, specifically in light of the claims under the VPPA and the apparent availability of statutory penalties there under.

[00:06:53] Speaker 05:
We're not concerned with statutory penalties.

[00:06:55] Speaker 05:
We just want to know what the VPPA says.

[00:06:58] Speaker 05:
And if the court, if the court is going to adopt

[00:07:03] Speaker 05:
a position that the matter is compromised by statutory, or forgive me, by Wakefield, if it should be adjusted consistent with Wakefield for due process, it must do, and I invite your attention to Wakefield, this is what the court says, it must look at those four factors, must.

[00:07:23] Speaker 05:
It didn't.

[00:07:25] Speaker 05:
Neither did class counsel, okay?

[00:07:27] Speaker 05:
So adopting their work and their word is entirely insufficient.

[00:07:33] Speaker 05:
OK, forgive me.

[00:07:33] Speaker 05:
I'm going to try and jump to one other point.

[00:07:37] Speaker 05:
Regarding non-frivolous objections, if there's some confusion about what we objected to, I'm getting very tight.

[00:07:42] Speaker 05:
Forgive me.

[00:07:44] Speaker 05:
I want to clarify in this way.

[00:07:46] Speaker 05:
Our objection said, please consider this case in this way.

[00:07:52] Speaker 05:
What the court did was violate Hamlin.

[00:07:57] Speaker 05:
It violated Wakefield.

[00:07:59] Speaker 05:
It did not give this court a showing

[00:08:03] Speaker 05:
of particulars as to why it came up with this position.

[00:08:06] Speaker 05:
If there's this amalgam of factors and this gross approximation, it still needs to tell this court why it did those things.

[00:08:15] Speaker 05:
So you can comprehend, in reality, not why class counsel, who favors the settlement, but why the district court itself looks at the settlement and says, this is fair, reasonable, and adequate.

[00:08:26] Speaker 00:
All right, counsel, your time is up.

[00:08:28] Speaker 00:
Thank you, Your Honor.

[00:08:28] Speaker 00:
Do you have any questions?

[00:08:30] Speaker 00:
OK, thank you.

[00:08:31] Speaker 05:
Appreciate it.

[00:08:41] Speaker 06:
Good morning, Your Honor.

[00:08:42] Speaker 06:
May it please the Court, Derek Lozier, for the class plaintiffs from the firm of Keller-Rorbach.

[00:08:47] Speaker 06:
The settling parties, as noted, have agreed to split their time with five minutes each.

[00:08:51] Speaker 06:
I'll try to be brief.

[00:08:52] Speaker 06:
There's not much time.

[00:08:53] Speaker 06:
It's, I think, important for the Court to know and to recognize that this is the largest privacy class action settlement to date and the most Facebook has ever paid to resolve a class action.

[00:09:04] Speaker 06:
I think it's also important to note that

[00:09:07] Speaker 06:
These gentlemen were not involved in the case.

[00:09:09] Speaker 06:
They weren't there and they don't have the knowledge of what Judge Chabria actually did in this case.

[00:09:13] Speaker 06:
This case was a battle.

[00:09:15] Speaker 06:
It was heavily fought.

[00:09:16] Speaker 06:
There were dozens of hearings.

[00:09:17] Speaker 06:
Judge Chabria knew the case well.

[00:09:19] Speaker 06:
He knew the parties well.

[00:09:20] Speaker 06:
He knew the claims and defenses well.

[00:09:22] Speaker 06:
And as this court has said many times, the district court judge is in the best position to evaluate the strengths and weaknesses of this case.

[00:09:29] Speaker 06:
That is precisely what Judge Chabria did.

[00:09:32] Speaker 06:
He noted

[00:09:33] Speaker 06:
in detail in his final approval order, the 23E factors.

[00:09:37] Speaker 06:
He went through each one.

[00:09:38] Speaker 06:
He noted the materials that we presented in which we provided 17 pages of assessment of the strengths and weaknesses of the case.

[00:09:46] Speaker 06:
And he also noted that he conducted his own review and determined that the settlement claims, the value was fairly accounted for the risks and challenges that the plaintiffs face, particularly with regard to the VPPA.

[00:10:00] Speaker 06:
Something that the objectors have said repeatedly, I didn't hear them say it today, their objection frankly is a bit of a moving ball, but in their papers they say repeatedly that this settlement is a 99.7% discount of the potential recovery in this case.

[00:10:13] Speaker 06:
That is not remotely true.

[00:10:15] Speaker 06:
As this court made clear, there was no possibility that $625 billion of statutory damages would be awarded because it would violate due process.

[00:10:25] Speaker 06:
These counsel are making the same argument they made to you a year ago,

[00:10:29] Speaker 06:
It's as incorrect today as it was one year ago.

[00:10:33] Speaker 02:
Counsel, can you address counsel's point that Wakefield, that if the court is to undertake, I'm not sure I quite followed, but if the court is to undertake a statutory award analysis, that it has to start with a statutory maximum and work from there.

[00:10:47] Speaker 02:
Those four factors that he was pointing out.

[00:10:50] Speaker 06:
This court has made very clear in Lane and in Rodriguez that it is not necessary to calculate a maximum.

[00:10:56] Speaker 06:
that those would be contingent and speculative calculations.

[00:11:00] Speaker 06:
And that would surely be the case here.

[00:11:02] Speaker 06:
As we noted in our papers to the court, the range of damages is highly disputed and unclear, and that in order to conduct, even to conduct and calculate the total amount of statutory damages would be contingent and speculative and require resolution of factual issues, which this court has said very clearly is not necessary.

[00:11:22] Speaker 06:
If you add to that the concept under Wakefield

[00:11:25] Speaker 06:
somehow the district court is also supposed to, when evaluating the settlement, determine what the maximum statutory damage award, the due process, would allow.

[00:11:33] Speaker 06:
That's even more speculative and contingent than the underlying damage number itself, and it's clearly not what this court has indicated.

[00:11:41] Speaker 06:
Council has said repeatedly in their papers that district courts need guidance on how to apply Wakefield.

[00:11:46] Speaker 06:
This court provided very clear guidance in an appeal in which these objectors indicated the same issue was presented.

[00:11:53] Speaker 06:
And the district court did exactly what it's supposed to do with Wakefield.

[00:11:56] Speaker 06:
It noted that it was very unlikely, theoretically possible, that a large VPPA statutory damage award could be awarded, but that there would be due process problems and therefore the claim can be discounted.

[00:12:10] Speaker 06:
The fact of the matter is there is no showing of any abuse of discretion.

[00:12:14] Speaker 06:
The court did the exact sort of qualitative analysis that this court has said many times is necessary to evaluate a settlement.

[00:12:21] Speaker 06:
This court lived this case, breathed this case, and if anyone who has ever been in front of Judge Chabria knows that there's no free or easy pass on a class action settlement.

[00:12:32] Speaker 06:
He put us through our paces.

[00:12:33] Speaker 06:
We provided the court with everything it needed to fully and fairly evaluate the claims.

[00:12:37] Speaker 06:
This is an outstanding result for the class.

[00:12:40] Speaker 01:
Let me ask you a quick question, if I may.

[00:12:43] Speaker 01:
I was a little bit surprised by the size of the attorney's fee award here.

[00:12:48] Speaker 01:
Now, I used to be a practicing lawyer.

[00:12:50] Speaker 01:
I believe lawyers ought to get fair compensation in difficult cases.

[00:12:59] Speaker 01:
The settlement here is $725 million.

[00:13:03] Speaker 01:
The attorney's fee award would be 25 percent of that.

[00:13:07] Speaker 01:
That looks to me like about $181 million in attorney's fees.

[00:13:13] Speaker 01:
Is that correct?

[00:13:14] Speaker 01:
Am I wrong?

[00:13:15] Speaker 06:
That is correct.

[00:13:16] Speaker 06:
And the district court was specifically raised and expressed skepticism about the benchmark in a case this size.

[00:13:22] Speaker 06:
He then evaluated the work that was done and determined that it was a reasonable fee in light of the results.

[00:13:28] Speaker 06:
But he also did what this court has instructed many times.

[00:13:31] Speaker 06:
He performed a load star cross check.

[00:13:33] Speaker 06:
Uh, this case was a massive undertaking.

[00:13:36] Speaker 06:
We had 140,000 hours built to this case and a $90 million load star.

[00:13:41] Speaker 06:
And when this court has said there's no special rule for large class actions, instead you look to see whether there was any windfall to the plaintiff's counsel.

[00:13:49] Speaker 06:
And the lodestar cross check shows that there's no windfall because the multiplier is less than two, which as the court noted is below the norm in class action cases.

[00:14:00] Speaker 00:
All right, thank you.

[00:14:01] Speaker 00:
I think we understand the class's position and we appreciate your argument.

[00:14:04] Speaker 06:
Thank you.

[00:14:04] Speaker 06:
We ask that you affirm the district court orders.

[00:14:11] Speaker 03:
Good morning, Your Honors.

[00:14:12] Speaker 03:
Chris Chorbaugh on behalf of Defendant Facebook.

[00:14:15] Speaker 03:
I would just like to make two quick points.

[00:14:17] Speaker 03:
With respect to Judge Sanchez's question relating to Wakefield, I'd be remiss if I didn't note that Wakefield occurred not in the settlement context.

[00:14:24] Speaker 03:
And here, the statutory damages issue, including defenses to statutory damages, first, that they're not mandatory, that they're discretionary,

[00:14:32] Speaker 03:
whether they would be awarded at all.

[00:14:34] Speaker 03:
And second, as to the extrapolation that objectors are arguing would raise constitutional problems, those issues were vetted and those issues were considered by the district court.

[00:14:44] Speaker 03:
That's what this court's precedents say a district court is required to do.

[00:14:48] Speaker 03:
And the court in Rodriguez expressly rejected the notion that the court's required to calculate a theoretical maximum and then come up with what it believes would be an appropriate discount based on it.

[00:15:00] Speaker 03:
Handling factor one,

[00:15:01] Speaker 03:
dictates that the court is to evaluate the strength and weaknesses of the case, the potential recovery.

[00:15:08] Speaker 03:
and what the settlement provides.

[00:15:10] Speaker 03:
That is exactly what Judge Trabria did here.

[00:15:12] Speaker 03:
So Wakefield was an issue, but it wasn't required to sort of do this mathematical calculation.

[00:15:18] Speaker 03:
We would urge the court to not change that precedent because it would hamstring district courts, and it would be very difficult for any court in any case to come up with what it would view as the ideal percentage of recovery.

[00:15:29] Speaker 03:
And it would turn what is a discretionary process into a mathematical exercise.

[00:15:35] Speaker 03:
The only other point I would make is, again, this court's precedents explicitly direct the district court's what to consider.

[00:15:42] Speaker 03:
Judge Chabria did that.

[00:15:43] Speaker 03:
It's at one ER five through seven, walked through each of the Hamlin factors, evaluated it.

[00:15:48] Speaker 03:
He conducted a very lengthy final approval hearing.

[00:15:52] Speaker 03:
He considered all of the objections, weighed them, and approved this settlement as fair, reasonable, and adequate.

[00:15:57] Speaker 03:
The only other point I would ask is that this court, if it were to address the attorney's fees,

[00:16:02] Speaker 03:
As we've argued in our brief, the settlement rises or falls independently of the attorney's fee award.

[00:16:08] Speaker 03:
The settlement is not contingent on the amount of attorney's fees.

[00:16:11] Speaker 03:
So we would ask the court, if it were to address the attorney's fees, to affirm independently the class settlement.

[00:16:17] Speaker 03:
And that actually matters because we would allow the case to move forward.

[00:16:20] Speaker 03:
We would avoid further appellate proceedings.

[00:16:23] Speaker 03:
This case has been delayed considerably by these objections.

[00:16:26] Speaker 03:
And unless there are questions, I would submit on the papers.

[00:16:31] Speaker 03:
Thank you.

[00:16:34] Speaker 00:
All right, we've got three minutes for rebuttal.

[00:16:37] Speaker 04:
Thank you, Your Honors.

[00:16:38] Speaker 04:
John Pence on behalf of the appellants.

[00:16:40] Speaker 04:
Your question was what did the court do wrong here?

[00:16:43] Speaker 04:
What the court did wrong was it used Wakefield as a complete defense to the statutory claims as if it's a get out of jail free card.

[00:16:51] Speaker 04:
But class counsel actually argued in their brief that you need to look at what would happen at trial when you're considering these statutory claims and what would happen at trial as illustrated by a couple or at least one of their cases that they cite.

[00:17:03] Speaker 04:
In Golan v. Free Eats,

[00:17:06] Speaker 04:
which I believe was a TCPA robo-call case, the statutory recovery there at trial was reduced to 2%.

[00:17:16] Speaker 04:
Well, translating that to this case would result in a $5 billion settlement value or verdict.

[00:17:23] Speaker 04:
In Fraley, where there were $750 statutory penalties, the case settled for $15 as a class member, which, again, applied here would be $3.6 billion.

[00:17:35] Speaker 04:
The court was required not simply to say, oh, well, we have statutory claims.

[00:17:40] Speaker 04:
They total in the hundreds of billions.

[00:17:41] Speaker 04:
But Wakefield.

[00:17:44] Speaker 04:
But Wakefield.

[00:17:44] Speaker 04:
So this is only a statutory damages case.

[00:17:48] Speaker 04:
That's what's different between this case and the Facebook case last year.

[00:17:51] Speaker 04:
In that case, class counsel had determined that the unjust enrichment was $90 million and that

[00:17:59] Speaker 04:
because they projected that their maximum recovery was 10 times that, that that settlement was a 10 percent settlement.

[00:18:05] Speaker 04:
So we did have mathematical precision there, despite Class Council or Mr. Chorba's assertion that you don't need that.

[00:18:14] Speaker 04:
And I would also argue that the past cases that say you don't have to consider the merits when approving a settlement, that's a bit of an overstatement.

[00:18:23] Speaker 04:
because when you're handicapping the claims themselves and determining their strengths and weaknesses, that is a forecast.

[00:18:30] Speaker 04:
You're looking ahead to the merits at trial, and you have to do the same thing with regard to the statutory damages.

[00:18:37] Speaker 04:
The court should have asked itself, well, what would I do

[00:18:40] Speaker 04:
if, for example, plaintiffs were to recover $250 billion in this case.

[00:18:46] Speaker 04:
And the facts there, the facts that you need to apply to that question are not facts that are going to emerge from discovery, that most of them are already known.

[00:18:55] Speaker 04:
I mean, what could Facebook bear?

[00:18:57] Speaker 04:
What's their net worth and annual income?

[00:19:00] Speaker 04:
What have they paid before?

[00:19:03] Speaker 04:
They paid a $5 billion fine to the FTC for privacy violations.

[00:19:09] Speaker 04:
And what is necessary to deter them, because that's one of the factors under the Wakefield test.

[00:19:14] Speaker 04:
This is really, in my view, more of a deterrence case than it is a compensation case.

[00:19:21] Speaker 04:
I mean, $3 per class member is not going to make a difference to anybody.

[00:19:24] Speaker 04:
And class counsel said in their brief, there are no actual damages here.

[00:19:29] Speaker 04:
This is strictly a statutory case.

[00:19:32] Speaker 04:
I see that my time has run out.

[00:19:33] Speaker 04:
Thank you, Your Honors.

[00:19:35] Speaker 00:
Thank you very much.

[00:19:38] Speaker 00:
Thank all council for your argument in this case.

[00:19:40] Speaker 00:
The matter of Feldman versus Facebook is now submitted.