• March 17, 2011

Update (March 17, 2011): A second Minnesota Litigator post this week on class action procedure.  This one concerns the procedure for “opting out” of a class action and the possibility of “opting back in.”  Last week, Sr. U.S. District Court Judge David Doty (D. Minn.) put the kibosh on the proposed class action hokey-pokey discussed below.

The Court appears to have found the maneuver too clever by half.   Some putative class plaintiffs went for an “out of the class settlement” and then sought to be “part of the class settlement.”  The Judaeo-Christian deity prohibited one bite of the apple; U.S. courts are somewhat more liberal, but not much.

Original post (January 4, 2011): You put your left foot in, you put your left foot out, you put your left foot in, and you shake it all around…that’s what it’s all about….”

How is a Court to deal with a group of shareholder/class members who opt out of the class on the last possible day in the Court’s order allowing opt-out from the class action settlement, who then negotiate a side deal with defendants, and then seek to rejoin the class and share in the class action settlement?

Does it make a difference if the side-deal of the shareholder/class members resulted in a cash settlement not for themselves, but for their investment manager — not an actual class member under any definition?

Is there something subtly devious here or is the hokey-pokey harmless?  If a subset of shareholders hold out and exact something faintly resembling a “spiff,” that spiff comes out of the pockets of the defendants and not the plaintiffs’ class so why should the plaintiffs’ class care?  Certainly when the settlement was reached and agreed to by class counsel, they had no right to assume that the fence-sitters would opt out.  On the other hand, what incentives would a blanket rule allowing the hokey pokey insert into class action settlements?

Sr. U.S. District Court Judge David S. Doty will weigh in after the Jan. 28 hearing on a motion to revoke certain class member opt-outs  in In re: Moneygram Sec. Litig.

The parties’ briefs are here and here.

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