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Date: 12-07-2017

Case Style:

Saul M. Kaufman and J.G. Goodman v. American Express Travel Related Services Company, Inc.

Seventh Circuit Court of Appeals Courthouse - Chicago, Illinois

Case Number: 16-1691

Judge: Manion

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Northern District of Illinois (Cook County)

Plaintiff's Attorney: Robert M. Hatch for Kimberly Stegich and others, Plaintiffs.

Phil Bock, Phillip James Bullimore, Daniel Cobrinik for Intervenors

Brian Custy for Charles Robinson for Objector

Lori Ann Fanning for Intervenor Kambiz Kazemi

Richard D. Greenfield and Daniel Mark Harrisfor J.L. Goodman and Carla Santsche

Defendant's Attorney:

Description: aul Kaufman, as lead plaintiff in a
class action, sued American Express Travel Related Services
2 No. 16‐1691
Company, Inc. (“Amex”), alleging claims for breach of contract,
unjust enrichment, and statutory fraud related to
Amex’s general‐use, prepaid gift cards. Just over two years
after Kaufman filed the class action, Kaufman (on behalf of
the class) and Amex sought approval from the district court
of a settlement agreement that would resolve the action. Almost
seven years later, after multiple amended motions for
approval and three rounds of notice to the class, the district
court granted final approval of the settlement. J.G. Goodman
and Carla Santsche (“Intervenors”), who had intervened in
the class action, appeal the approval of the settlement. While
we recognize this settlement is not without issues, we conclude
the district court did not abuse its discretion in approving
I. Background
The protracted history of this case began on February 14,
2007, when Kaufman filed a class‐action lawsuit in the Superior
Court of Cook County, Illinois, against Amex. The claims
arose out of Amex’s sale of general‐use, prepaid gift cards. A
customer could buy a gift card by paying the amount to be
loaded on the card (e.g., $25, $50, or $100) and a purchase fee
of less than $5. The packaging in which the gift cards came
declared they were “good all over the place.”
Kaufman alleges, however, that these gift cards were not
worth their stated value (e.g., a $25 card was not actually
worth $25) and that they were not “good all over the place.”
This is because merchants were ill‐equipped to process “splittender”
transactions, which occurred when a gift‐card holder
attempted to use his gift card to purchase an item that cost
more than the value remaining on his card, necessitating the
use of two forms of tender. The inability to process those sorts
No. 16‐1691 3
of transactions led to rejected cards and languishing balances,
as gift‐card holders could not use the relatively small amounts
remaining on their cards.
Those balances did not have to languish for long, though,
because after twelve months Amex automatically began
charging a $2 “monthly service fee” against balances on the
cards. If a holder wanted to recover the balance of his card
from Amex, he could request a check, but only if he paid a $10
check‐issuance fee. Because of these service and check‐issuance
fees, which resulted in remaining funds on the cards going
to Amex, Kaufman alleged Amex had purposely designed
its gift‐card program to make it difficult for people to exhaust
the balances on their cards, thus lowering their value.
On March 27, 2007, Amex removed the class action to the
District Court for the Northern District of Illinois pursuant to
the Class Action Fairness Act. 28 U.S.C. § 1332(d)(2). Once in
federal court, Amex moved to compel arbitration, citing the
arbitration provision in the “American Express Gift Card
Cardholder Agreement” that was included with the gift
cards. For cards purchased from stores, this agreement was
only accessible after purchasing the gift card and opening its
The district court denied the motion, concluding the provision
was not part of the contract between Amex and Kaufman.
Amex appealed that decision to this court. Shortly thereafter,
Amex and Kaufman engaged in settlement negotiations
through this court’s Mediation Program. As a result of those
negotiations, the parties sought a limited remand of Amex’s
appeal for the purpose of presenting their settlement to the
district court for approval. On February 4, 2009, we granted
that request.
4 No. 16‐1691
After remand, the Intervenors sought entry into the action.
1 Intervenor Goodman was the lead plaintiff in a class action
in the Eastern District of New York that made similar
complaints against Amex arising from issues with split‐tender
transactions and Amex’s fee policies. In the briefs filed in
this appeal, the Intervenors explain that intervenor Santsche’s
interest in this case arises from her alleged purchase of a $100
gift card that had no value when she attempted to use it. On
July 15, 2009, the district court granted the motion to intervene.
Two days before the grant of that motion, Kaufman, joined
by a new co‐plaintiff, Kimberly Stegich, individually and on
behalf of all others similarly situated (“Plaintiffs”), filed an
amended class‐action complaint and a motion for preliminary
approval of a settlement of the action. But before the district
court addressed that motion, the Plaintiffs amended it. According
to the amended motion, the settlement called for a
$3,000,000 fund. From that fund, class members could receive,
in exchange for their release of all claims related to Amex’s
gift cards, the following payments: (1) up to $20 in reimbursement
for monthly fees actually paid due to refused split‐tender
transactions; (2) up to $8 for monthly fees paid; (3) up to
$5 in reimbursement of any check‐issuance fee paid; and (4)
up to $5 in reimbursement for monthly fees paid simply by
1 Four other parties also intervened in the action: Gordon Jarratt and
Amanda Rudd, who eventually became co‐plaintiffs and whose counsel
became additional class counsel, and Kambiz and Katayoun Kazemi, who
eventually reached a separate settlement of their California class action
against Amex and were excluded from the class in this case.
No. 16‐1691 5
attesting to the fact that the fees were paid.2 If any of the
$3,000,000 remained after paying claims, up to $200,000
would go to a charitable organization as cy pres. If more than
that remained, up to $650,000 would go to Amex as reimbursement
for the costs of notice and administration. If still
more remained, that too would go to the cy pres.
In addition to payments from the fund, class members
could also take part in two supplemental programs: (1) the
“Balance Refund Program,” which allowed class members
with less than $25 remaining on their gift cards to request a
refund of their balance without paying the check‐issuance fee;
and (2) the “Purchase Fee and Shipping/Handling Fee
Waiver” program, through which class members could purchase
a new $100 Amex gift card without paying the purchase
fee or shipping and handling fee (a savings of approximately
The district court entered its order on the Plaintiffs’ motion
on December 22, 2009. After concluding that the class was
certifiable pursuant to Federal Rule of Civil Procedure 23, the
court certified the class for settlement purposes, defining the
class as
All purchasers, recipients, holders and users
of any and all gift cards issued by American Express
from January 1, 2002 through the date of
preliminary approval of the settlement, including,
without limitation, gift cards sold at physical
retail locations, via the Internet, or through
mall cobranded programs. Notwithstanding the
2 To recover the other benefits, a class member had to provide proof, including
a gift‐card number.
6 No. 16‐1691
foregoing, ‘Be My Guest’ dining cards are not
included within the settlement.
Kaufman v. Am. Express Travel Related Servs. Co., 264 F.R.D. 438,
444 (N.D. Ill. 2009).
Despite certifying the class, the court denied preliminary
approval of the settlement. Of particular concern to the court
was the inadequacy of the proposed notice, both in form (the
Plaintiffs had proposed notice by publication, but the court
did not accept the proposition that Amex had no personalidentifying
data with which to provide individualized notice)
and substance (the notice failed “to satisfy the requirements
of Rule 23(c)(2)(B)”). Id. at 445–46.
The district court addressed the proposed settlement
again in an order on August 19, 2010. The court observed that
the parties had improved the proposed notice, but now it was
too complicated—the court ordered that it should include a
concise summary. Additionally, the court noted that, since the
initial denial of preliminary approval, Amex had revealed
that it did have some personal‐identifying information for
gift‐card holders, so the court declined to excuse individual
Over a year later, the Plaintiffs filed their Second
Amended Motion for Preliminary Approval. The settlement
now proposed a fund of $6,753,269.50. While this fund was
considerably larger than the $3,000,000 initially proposed, it
would be drawn against for the costs of notice and administration,
as well as approved attorneys’ fees and lead‐plaintiff
incentive awards. The benefits available to the class (the
four types of refunds and the supplemental programs) and
the release remained substantially the same. This version of
No. 16‐1691 7
the settlement maintained the cy pres but removed the
$650,000 reimbursement for Amex. It also called for notice by
publication and by direct mail to every class member for
which Amex had information.
On September 21, 2011, the district court granted preliminary
approval of the settlement, appointed the Plaintiffs’
counsel as lead class counsel and counsel for two intervening
parties as additional class counsel, and again certified the
class for purposes of the settlement.3
After providing notice and receiving responses from class
members, the Plaintiffs and Amex sought final approval of
the settlement on February 16, 2012. However, response to the
notice had been “abysmal.” Of the approximately 70,000,000
gift cards sold, only 3,456 benefits had been requested,
amounting to $41,510.35.4 As class counsel was requesting
$1,525,000 in fees, the fee‐to‐claims ratio was woefully imbalanced.
The district court decided that issues with notice
needed to be addressed, and so determined to hire a notice
expert. After the Intervenors objected to the appointment of
the court’s recommended expert due to her affiliation with
the firm serving as the settlement administrator, the district
court appointed Todd Hilsee, whom the Intervenors had recommended.
3 The class definition was amended to exclude “Westfield” branded gift
cards due to the Kazemi intervenors pursuing their own relief in California.
See supra, note 1.
4 This is the number given by the district court in its order denying final
approval. Later in the litigation, the district court was provided with information
suggesting that the actual claims rate was much lower even
than that—amounting to a paltry $11,377.
8 No. 16‐1691
The parties worked with Hilsee to create a supplemental
notice program, and after its implementation the Plaintiffs
once again moved for final approval of the settlement on May
28, 2014. The supplemental notice plan had provided notice
to approximately 70% of the class, and over 32,500 claims
were filed. While these numbers were not ideal, they represented
an astronomical improvement over the results of the
first round of notice. There were only five objections, and
eighty class members chose to opt out.
Despite this solid improvement in the response to the notice,
the district court again denied final approval. The court
did so for two reasons: (1) though no longer as blatant as the
first proposal, the settlement still provided for Amex to be reimbursed
for the costs of providing the first, unsuccessful notice;
and (2) the court felt bound by our decision in Redman v.
RadioShack Corp., 768 F.3d 622, 637–38 (7th Cir. 2014), which
was decided after the Plaintiffs filed their motion for final approval
but before the district court issued its order, to command
yet another round of notice concerning motions for attorneys’
After this third round of notice, the district court granted
final approval of the settlement on March 2, 2016. The greater
part of a decade had elapsed since Kaufman filed his complaint
in the Superior Court of Cook County, Illinois, and
nearly seven years had passed since the first motion for preliminary
approval of the settlement. The district court determined
that the settlement was fair, reasonable, and adequate,
but referred to final approval as the “least bad option.” Kaufman
v. Am. Express Travel Related Servs. Co., No. 07‐cv‐1707,
2016 WL 806546, at *1 (N.D. Ill. Mar. 2, 2016). Based on the
affidavit of an Amex employee, the court concluded the total
No. 16‐1691 9
value of the claims at issue was approximately $9.6 million. It
then calculated that, considering the total number of claims
received and the value of the supplemental programs (the
waived purchase, shipping and handling, and check‐issuance
fees), the total benefit to the class from the settlement was $1.8
million. The court determined that this was within the range
of a reasonable settlement given the class’s likelihood of not
recovering the full $9.6 million. In reaching that decision, the
district court considered Amex’s defenses, most notably its
still‐pending appeal of the denial of its motion to compel arbitration.
The district court also remarked that if the case continued,
it would be extremely costly and difficult, and that there was,
even considering the fact that notice was not perfect, a small
rate of opt‐outs and objectors. After addressing the objections
that had been filed, the court observed that this settlement
was seven years in the making and had involved the participation
of four mediators and a notice expert. In light of all of
those considerations, the court found that the parties had negotiated
the settlement in good faith, and it approved the settlement.
Having approved the settlement, the court turned to attorneys’
fees. The Plaintiffs’ counsel had requested $1,235,000 in
fees and another $40,000 in expenses, which they claimed
amounted to 30.7% of the settlement. Additional class counsel
requested $250,000 in fees. Counsel for the Intervenors requested
$1,500,000 in fees. The district court ultimately
awarded $1,000,000 in fees and $40,000 in expenses to the
Plaintiffs’ counsel, $250,000 in fees to additional class counsel,
and $700,000 in fees to counsel for the Intervenors.
10 No. 16‐1691
In the final tally, attorneys would be receiving $1,950,000
from the settlement, while class members would receive approximately
$1,800,000. The district court did not like this, but
found it acceptable as any reduction in fees would not go to
the benefit of the class. Any excess would go either to the cy
pres or to Amex.
The Intervenors appeal the approval of the settlement and
the awards of attorneys’ fees.
II. Analysis
A district court may approve a settlement of a class action
if it concludes that it “is fair, reasonable, and adequate.” Fed.
R. Civ. P. 23(e)(2); see also Isby v. Bayh, 75 F.3d 1191, 1196 (7th
Cir. 1996). We review a district court’s approval of a class‐action
settlement only for abuse of discretion. In re Southwest
Airlines Voucher Litig., 799 F.3d 701, 711 (7th Cir. 2015). That
said, we “require[] district judges to exercise the highest degree
of vigilance in scrutinizing proposed settlements of class
actions,” due to the risk that attorneys for the class will “place
their pecuniary self‐interest ahead of that of the class.” Reynolds
v. Beneficial Nat’l Bank, 288 F.3d 277, 279 (7th Cir. 2002).
Indeed, we have repeatedly stated that district courts should
act as the “fiduciary of the class,” subject “to the high duty of
care that the law requires of fiduciaries.” Id. at 279–80; accord
Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646,
652–53 (7th Cir. 2006).
On appeal, the Intervenors challenge four decisions of the
district court: (A) the district court erred by not requiring the
filing of briefs in support of the settlement prior to the deadline
to object to the settlement; (B) the district court erred in
determining that Amex’s arbitration appeal posed a risk to
No. 16‐1691 11
the class’s success; (C) the district court erred in approving
the settlement given the breadth of the release; and (D) the
district court erred in not awarding most, if not all, of the attorneys’
fees to the Intervenors’ counsel. We address each in
A. The Filing of Briefs
The Intervenors acknowledge that there is no express requirement
in the Federal Rules or in the case law requiring
the proponents of a class‐action settlement to file their briefs
in support of the settlement prior to the expiration of the time
to object to the settlement. However, they argue that this procedure
is compelled as a matter of due process and that it is a
natural extension of our decision in Redman and the Ninth
Circuit’s decision in In re Mercury Interactive Corp. Securities
Litigation, 618 F.3d 988 (9th Cir. 2010), upon which Redman relied.
We disagree.
In Mercury Interactive Corp., the Ninth Circuit held that a
district court must “set the deadline for objections to counsel’s
fee request on a date after the motion and documents supporting
it have been filed.” Id. at 993. The court so held based on
“[t]he plain text of [Rule 23(h)],” which provides that requests
for attorneys’ fees must be made by motion and that class
members “may object to the motion.” Id. (quoting Fed. R. Civ.
P. 23(h)). This language implied that class members must “be
allowed an opportunity to object to the fee ‘motion’ itself, not
merely to the preliminary notice that such a motion will be
filed.” Id. at 993–94. Without the details provided by a motion
(such as the amount of hours worked and the tasks completed),
a potential objector “could make only generalized arguments
about the size of the total fee.” See id. at 994.
12 No. 16‐1691
In Redman, we adopted the Ninth Circuit’s reasoning and
reversed the approval of a class‐action settlement in part because
the district court had provided for the filing of motions
seeking attorneys’ fees after the deadline for class members to
object to the settlement. See 768 F.3d at 637–38. We concluded
that the scheduling violated Rule 23(h) by handicapping those
who wished to object to the fee motions. Id.
The Intervenors urge us to extend Redman’s reach to apply
to the filing of briefs in support of settlement before the deadline
to object. But, as the Ninth Circuit made clear, the plain
text of Rule 23(h), which deals exclusively with attorneys’ fees
and costs, is what requires parties to file motions for attorneys’
fees before the deadline to object to the settlement.
There is no such requirement for the filing of briefs in support
of a settlement agreement. On the contrary, Rule 23(e), which
governs the approval of class‐action settlements, only requires
that notice of the proposed settlement be directed “in a
reasonable manner to all class members who would be bound
by the proposal,” and that “[a]ny class member may object to
the proposal if it requires court approval under this subdivision
(e).” Fed. R. Civ. P. 23(e)(1), (5). Rule 23(e) thus only requires
that class members be given an opportunity to object
to the proposed settlement—the Rule has no provision that
would require parties to file briefs in support of the settlement
prior to the deadline to file objections.
The differing procedures make sense. In the fee‐request
context, the general notice may give parties information concerning
the total amount of fees requested, but no details. To
require a party to object based on an aggregate number alone
would be fruitless, as there would be no specifics to dispute.
See In re Mercury Interactive Corp., 618 F.3d at 994 (requiring
No. 16‐1691 13
the filing of fee motions before the deadline for objections because
“[i]t ensures that the district court, acting as a fiduciary
for the class, is presented with adequate, and adequatelytested,
information to evaluate the reasonableness of a proposed
fee”). On the other hand, the notice of a proposed settlement
should provide class members with all the information
they need to make an informed decision to file a claim,
opt out, or object. See generally Phillips Petroleum Co. v. Shutts,
472 U.S. 797, 812 (1985) (“[A] fully descriptive notice … sent
first‐class mail to each class member, with an explanation of
the right to ‘opt out,’ satisfies due process.”). There is no need
for the briefs of the parties in favor of settlement to be filed
first. In addition, we have repeatedly told district courts to
consider the amount of opposition to a proposed settlement
in deciding whether to approve it. E.g., Synfuel Techs., Inc., 463
F.3d at 653; Isby, 75 F.3d at 1199. Briefs in support of a proposed
settlement thus routinely address the subject, which
they could not do if the deadline for objections had not already
passed. Accordingly, we conclude that our holding in
Redman does not compel the procedure the Intervenors propose,
and the district court did not err in declining to employ
that procedure.
B. The Arbitration Defense
Though we have elucidated several factors to guide a district
court’s analysis of whether a proposed settlement is fair,
reasonable, and adequate, we have repeatedly stated that
“[t]he ‘most important factor relevant to the fairness of a class
action settlement’ is … ‘the strength of plaintiff’s case on the
merits balanced against the amount offered in the settlement.’”
Synfuel Techs., Inc., 463 F.3d at 653 (quoting In re Gen.
Motors Corp. Engine Interchange Litig., 594 F.2d 1106, 1132 (7th
14 No. 16‐1691
Cir. 1979)); accord Isby, 75 F.3d at 1199. In analyzing this factor,
the district court should consider “the range of possible
outcomes and ascrib[e] a probability to each point on the
range.” Synfuel Techs., Inc., 463 F.3d at 653 (alteration in original)
(quoting Reynolds, 288 F.3d at 285). This requires acknowledgment
of potential defenses and the risk of failure for
the class. See Williams v. Rohm and Haas Pension Plan, 658 F.3d
629, 634 (7th Cir. 2011). However, we have instructed the district
courts “to refrain from resolving the merits of the controversy
or making a precise determination of the parties’ respective
legal rights.” Isby, 75 F.3d at 1196–97 (quoting
E.E.O.C. v. Hiram Walker & Sons, Inc., 768 F.2d 884, 889 (7th
Cir. 1985)). We have also taught that the Synfuel/Reynolds evaluation
of potential outcomes need not always be quantified,
particularly where there are other reliable indications that the
settlement reasonably reflects the relative merits of the case.
See Wong v. Accretive Health, Inc., 773 F.3d 859, 864 (7th Cir.
The Intervenors argue that the district court improperly
analyzed this factor by giving too much weight to Amex’s potential
arbitration defense. The district court concluded there
was a significant risk that this court would reverse the district
court’s decision and send the action to arbitration, where the
Plaintiffs would likely receive nothing. Because of that risk,
the district court concluded that the approximately $1.8 million
the class would receive from the settlement was a reasonable
recovery. To support that conclusion, the district court
cited two recent decisions of the Supreme Court and a recent
decision of this court enforcing arbitration provisions in contracts:
American Express Co. v. Italian Colors Restaurant, 133 S.
Ct. 2304, 2307, 2312 (2013), which required enforcement of an
arbitration provision despite the fact that “the plaintiff’s cost
No. 16‐1691 15
of individually arbitrating a federal statutory claim exceeds
the potential recovery,” AT&T Mobility LLC v. Concepcion, 563
U.S. 333, 336, 348 (2011), which held that a state rule “conditioning
the enforceability of certain arbitration agreements on
the availability of classwide arbitration procedures” was
preempted by the Federal Arbitration Act, and Gore v. Alltell
Communications, LLC, 666 F.3d 1027, 1030 (7th Cir. 2012),
which determined that the arbitration provision in one contract
between the parties compelled arbitration of a claim arising
under a different contract between the parties.
The Intervenors maintain that these cases are inapposite
to the consideration of the effect of Amex’s arbitration defense
in this case. They point out that the cited cases all deal with
the enforceability of arbitration provisions contained in contracts
between the parties, and that, they claim, is not the situation
here. Here, the district court denied Amex’s motion to
compel arbitration not because it concluded that the provision
was unconscionable or otherwise unenforceable, but because
it determined that the provision was not a part of the contract
between Amex and Kaufman.
It did so in reliance on our decisions in ProCD, Inc. v. Zeidenberg,
86 F.3d 1447 (7th Cir. 1996), and Hill v. Gateway 2000,
Inc., 105 F.3d 1147 (7th Cir. 1997). In those cases, we concluded
that contract terms contained on the inside of a product’s
packaging (and thus only discoverable after purchase) become
part of the contract between the purchaser and the seller
so long as the purchaser had “an opportunity to read the
terms and to reject them by returning the product.” Gateway
2000, Inc., 105 F.3d at 1148. The district court applied this rule
to the Cardholder Agreement and concluded that there was
16 No. 16‐1691
not a sufficient opportunity to reject the terms of the agreement
by returning the card, so the terms contained inside the
packaging were not terms of the contract between Kaufman
and Amex. Kaufman v. Am. Express Travel Related Servs. Co.,
No. 07‐C‐1707, 2008 WL 687224, at *8 (N.D. Ill. Mar. 7, 2008).
Having resolved the motion in that way, the district court did
not reach the question of enforceability. Id.; see also United
Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.
574, 583 (1960) (“[A] party cannot be required to submit to arbitration
any dispute which he has not agreed so to submit.”).
Because the district court did not address the contract‐formation
issue in its order approving the settlement, the Intervenors
believe the court abused its discretion.
The court’s reasoning in its order on final approval of the
settlement certainly puts the enforceability cart before the
contractual horse. Still, we do not believe that the district
court abused its discretion in concluding that the pending appeal
concerning the arbitration provision is a significant potential
bar to the class’s success in this action.
To begin with, our review of the district court’s decision
to deny arbitration would be de novo. Sgouros v. TransUnion
Corp., 817 F.3d 1029, 1033 (7th Cir. 2016) (noting de novo review
of contract‐formation and arbitration‐enforceability
questions). Thus, the inquiry into whether the terms included
in the gift‐card packaging became part of the contract between
the parties would be a question for this court to decide
without deference to the district court’s conclusions. That
adds to the uncertainty surrounding the outcome, and increases
the risk to the class. See Williams, 658 F.3d at 634–35
(“The prospect of appellate review affects the risk and costs
(in time and money) of the litigation.”).
No. 16‐1691 17
And if we were to conclude that the arbitration provision
was part of the contract between the parties, then there is little
doubt we would enforce it. The parties do not dispute that the
claims at issue in this case fall within the scope of the provision,
and the law clearly favors enforcement of arbitration
provisions in contracts, as the district court noted. See, e.g.,
AT&T Mobility LLC, 563 U.S. at 339. In light of those considerations,
the district court’s conclusion was not an abuse of discretion.
C. Overbreadth
The settlement class is defined to include, with only a few
exceptions, all those who held Amex gift cards from January
2002 through September 21, 2011. Per the terms of the settlement,
the members of the class are releasing “any and all
rights, duties, obligations, claims, actions, causes of action or
liabilities … that relate to any and all Gift Cards issued by
American Express (or any affiliate thereof) from January 1,
2002 through [September 21, 2011].”
The Intervenors believe this release is overbroad. They
contend it releases claims that are not receiving compensation
from the settlement. Specifically, the Intervenors highlight the
alleged claim of intervenor Santsche, who alleges she purchased
a $100 gift card by paying the purchase fee, but then
the gift card was literally unusable because it had no value.
The Intervenors maintain that Santsche’s case is one of many,
constituting “hundreds of millions of dollars of unjustified
‘up‐front’ fees.” As the settlement only proposes compensation
for the payment of the $2 per month maintenance fees
and the check‐issuance fees, the Intervenors say that class
members with claims like Santsche’s are giving up their
claims while receiving nothing in return.
18 No. 16‐1691
The district court acknowledged that the release would
cover the Intervenors’ alleged $0‐balance claims and that “the
breadth of the release is one of the problems with the settlement.”
Kaufman, 2016 WL 806546, at *9. “[B]ut,” the court concluded,
“on balance, the court does not believe the breadth of
the release justifies rejecting the settlement.” Id.
“A settlement offer is a compromise and may include a release
of claims not before the court.” Oswald v. McGarr, 620
F.2d 1190, 1198 (7th Cir. 1980). Nevertheless, because of the
unique situation posed by a class action—whereby attorneys
for the class may be incentivized to accept inadequate settlement
terms so long as they receive their fees—it is necessary
for a court to scrutinize what claims the class is giving up and
what the class is receiving in exchange. See Reynolds, 288 F.3d
at 283–84.
Here, the district court’s conclusion was not an abuse of
discretion because there was no admissible evidence that the
purported claims existed. The total size of the class in this case
is not known, but the district court referred to an estimated
range of 17.7 to 36.9 million people. Thanks to the district
court’s decision to appoint a notice expert, notice was provided
to this massive class in a reasonable and effective manner,
reaching approximately 70% of the members. Assuming
the veracity of the Intervenors’ allegations, it is probable that
at least some of the persons with $0‐balance claims received
notice. However, no party submitted any admissible evidence
of those claims—not even an affidavit or declaration from
Santsche herself. Granted, it is not an objector’s duty to show
that the settlement is inadequate. See Gautreaux v. Pierce, 690
F.2d 616, 630 (7th Cir. 1982). But the burden on the proponents
to support the settlement should not extend to an affirmative
No. 16‐1691 19
duty to rebut every allegation an objector makes. See id. at
631. In the absence of any admissible evidence that the purported
claims even exist, the district court’s conclusion that
the release of these claims was not a sufficient reason to deny
approval of the settlement was not an abuse of discretion.
D. Attorneys’ Fees
In reviewing the award of attorneys’ fees, “‘[w]e review
the district court’s methodology de novo to determine
whether it reflects procedure approved for calculating
awards,’ and we review the reasonableness of the award for
abuse of discretion.” Williams, 658 F.3d at 635–36 (quoting Sutton
v. Bernard, 504 F.3d 688, 691 (7th Cir. 2007)).
The district court awarded the Plaintiffs’ counsel
$1,000,000 in fees, additional class counsel $250,000 in fees,
and the Intervenors’ counsel $700,000 in fees. The Intervenors
do not challenge the methodology used to determine these fee
awards, instead focusing on the amounts of the awards themselves.
The Intervenors (or, perhaps more accurately, their
counsel) maintain the district court erred in failing to award
them most, if not all, of the attorneys’ fees in this case.5 They
5 In many ways, this argument is emblematic of what is wrong with class
actions. The Intervenors spend a vast majority of their 49‐page brief to this
court attacking the settlement as unfair, unreasonable, and inadequate.
They claim it releases hundreds of millions of dollars’ worth of claims
without receiving anything for those claims. Yet, when it comes time to
divvy up the money, their counsel is right there with open hands, claiming
not only that they helped make the settlement better than it could have
been, but that they are solely responsible for the settlement’s success. We
do not mention this chutzpah, as similar conduct has been called in the
past, see Mirfasihi v. Fleet Mortg. Corp., 551 F.3d 682, 687 (7th Cir. 2008), to
criticize counsel for the Intervenors—they are just looking out for their
20 No. 16‐1691
argue that while they were working to further the interests of
the class, the Plaintiffs’ counsel were colluding with Amex.
“The law generally does not allow good Samaritans to
claim a legally enforceable reward for their deeds.” Reynolds,
288 F.3d at 288. But, if a professional “render[s] valuable albeit
not bargained‐for services in circumstances in which high
transaction costs prevent negotiation and voluntary agreement,
the law does allow them to claim a reasonable professional
fee from the recipient of their services.” Id. In order to
claim that fee, the value provided by the professional must
“be worth more than the fee [he is] seeking.” Id.
Here, the district court acknowledged that the Intervenors
were important to getting Amex to divulge its information on
class members, that they suggested the notice expert the court
ultimately appointed, and that they anticipated the attorneys’‐
fee‐notice requirement we announced in Redman in
their objections. Indeed, the court went so far as to say that it
is “undeniable” that the settlement would never have been
approved without the Intervenors.
The Intervenors take these acknowledgments and run
with them, claiming responsibility for all the good in the case.
However, the Intervenors ignore that the district court also
observed that they filed “a number of repetitive and meritless
objections.” Additionally, the court considered it “disingenuous”
to attribute the increase in claims due to the second notice
program (crafted with the assistance of the notice expert
and using the information obtained from Amex) entirely to
them. Finally, it noted that it was unclear to what extent the
interests. We merely remark that it is unfortunate that this is the way the
game is played.
No. 16‐1691 21
Intervenors could claim responsibility for the supplemental
programs. Considering the full impact the Intervenors had on
the case, the district court awarded counsel for the Intervenors
$700,000 in fees, representing what the court calculated
to be approximately 34% of the value they added to the class.
We conclude there was no abuse of discretion in awarding
the attorneys’ fees. Having dealt with the parties and their
counsel for nearly seven years, the district court was easily in
the best position to determine which parties (and which attorneys)
had contributed to the settlement and in what proportions.
See Williams, 658 F.3d at 637 (seeing “no reason to disturb
the district court’s assessment of fees” where the judge
“became intimately familiar with [the] litigation over the past
eight years”); see also Mirfasihi v. Fleet Mortg. Corp., 551 F.3d
682, 687–88 (7th Cir. 2008) (affirming the district court’s 50%
reduction to the objectors’ fee based on their “irresponsible
litigation tactics”).
III. Conclusion
The decision we affirm today did not approve a perfect
settlement. The individual class members (those who bothered
to submit claims) will receive very little, while attorneys
will receive more than all of the class members combined. But
even the attorneys have not come out as well as they had
The district court, throughout this case, properly exercised
its responsibility to look out for the class by consistently denying
inadequate proposals and working with the parties to
overcome the challenges associated with notice to get this settlement
into an approvable posture. In the end, the court
found itself in an unenviable position: it could either approve
22 No. 16‐1691
the adequate—albeit flawed—settlement and allow the class
members to get their meager recoveries, or reject it and have
the parties further exhaust their resources (and the settlement
fund) on notice or discovery or have them turn to litigation
where the class ran the risk of recovering nothing. It chose the
former course, and that was not an abuse of discretion.

Outcome: We AFFIRM.

Plaintiff's Experts:

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