Lone Objector Holds Up $96M Tobacco Funds, Deal Discriminates Against Small Users, Man Claims

Deal Discriminates Against Small Users, Man Claims

By Pat Broderick
Daily Journal Staff Writer

Some $96 million in settlement funds from a smokeless tobacco class action in California is being held up by a lone objector. In his complaint, initially filed Jan. 25, in San Francisco Superior Court, Sean Hull argued the settlement “unfairly discriminates” against those who bought fewer than 30 cans of U.S. Smokeless Tobacco in California.

Cy Pres Fund
It all started eight years ago with the class action, Smokeless Tobacco Cases I-IV. A certified class of California smokeless tobacco buyers alleged that U.S. Smokeless Tobacco and related entities, engaged in sales practices that made it possible for the company to monopolize the market for moist smokeless tobacco products in violation of the antitrust and consumer protection laws of the state of California.

According to the plaintiffs, they paid more for U.S. Smokeless Tobacco moist snuff tobacco products than they otherwise would have. The products include Copenhagen, Skoal, Rooster, Red Seal, Bandits, Pouches and Husky.The class period extends from Jan. 1, 1990, to Oct. 17, 2007.

At issue is the cy pres fund, established for small purchasers. Any awards from this group are to be distributed to charitable organizations, rather than the buyers themselves.

$32 Million Legal Fees

Hull contends that procedural safeguards to protect these class members were not followed, and that the settlement “is unfair, inadequate and unreasonable.” “This is an arbitrarily low number to cut off all individual relief altogether,” Hull said in his complaint. In their response, plaintiffs contend that the 30-can minimum was designed to avoid over-compensating “minimal users.”

By requiring cash payments to all class members, they said, “the claim form would have been far more detailed and complicated, which would have deterred claims.” Hull also contends that the attorneys fees sought, amounting to $32 million, are “excessive.”

On March 12, San Francisco Superior Court Judge Richard Kramer rejected the claims, and approved a plan for distribution of the funds and attorneys fees. Hull then appealed to the 1st District Court of Appeal, which is expected to set a hearing date to consider his objection.

“The result was that no payments have been made from the settlement, and won’t be until the appeal is resolved,” said Dan Mogin , who runs the Mogin Law Firm in San Diego and was a co-liaison counsel, along with the San Francisco office of Saveri & Saveri, in the suit, first filed in 2002.

Mogin dismisses the suit as “frivolous.” The plaintiffs are seeking attorneys fees, expenses and unspecified damages, contending that Hull’s arguments are “without merit,” taken “solely for purposes of delay and harassment.”

While U.S. Smokeless Tobacco had denied any wrongdoing in the class action, the parties reached a settlement with the aid of a mediator, Lawrence Kay, a retired justice of the 1st District, working from the offices of ADR Associates in San Francisco. Under the terms of the settlement, claimants may be eligible for amounts ranging from $195 to $585. According  to Mogin, 42,000 individuals have submitted claims for cash payments.

“We are unaware of any consumer class-action settlement in California state court history that has provided class members with the opportunity to recover a higher cash payment through a simple claims process,” Mogin said.
Plaintiffs’ attorneys invested about 35,000 hours in the case, he said, and almost $1 million in out-of-pocket expenses. But, nobody is getting paid until the case is settled, Mogin said.

Hull’s legal counsel, Timothy R. Hanigan and Arthur Carvalho Jr. in the Woodland Hills office of Lang, Hanigan & Carvalho, were not available for comment. Meanwhile, Mogin is overseeing efforts to distribute $40 million in cy pres awards to California legal societies, organizations and charities. Among the groups are the Legal Aid Society of San Diego, the San Diego Volunteer Lawyer Program, University of San Diego Legal Clinics, Bay Area Legal Aid, Bet Tzedek, Legal Aid Foundation of Los Angeles, Volunteer Legal Services Program of San Francisco, California Indian Legal Services and California Rural Legal Assistance Inc.

“This shows that you can combine cy pres with cash claims,” Mogin said. “It is unusual. It tends to be one or the other.”

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© 2009 Daily Journal Corporation. All rights reserved.
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© 2009 The Daily Journal Corporation. All rights reserved.

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