10-3806-cv(L) In re Sony Corp. SXRD (Ouellette)

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 23rd day of September, two thousand eleven.

PRESENT: GUIDO CALABRESI, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges. - - - - - - - - - - - - - - - - - - - - - - - - - -x

In re SONY CORP. SXRD

MICHAEL OUELLETTE, on behalf of himself and all others similarly situated, et al., 10-3806-cv(L) Plaintiffs-Appellants, 10-3814-cv(con) 10-3824-cv(con) - v - 10-3829-cv(con) 10-3871-cv(con) SABRINA CARDENAS, 10-3873-cv(con) Plaintiff-Appellee, 10-3874-cv(con) 10-3888-cv(con) - and -

SONY CORPORATION et al., Defendants-Appellees. - - - - - - - - - - - - - - - - - - - - - - - - - - x

FOR PLAINTIFFS-APPELLANTS: ARTHUR R. MILLER (Sanford P. Dumain, Milberg LLP, Robert I. Lax, Lax LLP, Joseph J.M. Lange, Jeffrey A. Koncius, Lange & Koncius, LLP, on the brief), New York, New York.

FOR PLAINTIFF-APPELLEE: WILLIAM B. FEDERMAN, Federman & Sherwood, Oklahoma City, Oklahoma. FOR DEFENDANTS-APPELLEES: JOHN S. PURCELL (Richard I. Werder, Jr., on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York.

FOR APPELLANTS: GREGORY P. JOSEPH (Mara Leventhal, Maura Eileen O'Connor, on the brief), Gregory P. Joseph Law Offices LLC, New York, New York.

Appeals from a final judgment and related orders of the

United States District Court for the Southern District of New

York (Patterson, J.).

These are appeals in seven consumer class actions that

were consolidated below. Plaintiffs-appellants are named

plaintiffs in five of the cases; they appeal the district court's

opinion and order of August 24, 2010 approving the settlement of

the consolidated cases. Appellants are lawyers (and their law

firms) who were publicly reprimanded by the district court in a

decision filed July 22, 2010; they appeal the sanctions order.

We assume the parties' familiarity with the underlying facts, the

procedural history of the case, and the issues on appeal. UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the judgment of the district court is AFFIRMED,

except that its order imposing Rule 11 sanctions against

appellants is VACATED.

1. Approval of the Settlement

Rule 23(e) of the Federal Rules of Civil Procedure

provides that the settlement of a class action must be approved

by the district court. Fed. R. Civ. P. 23(e). A district court

-2- may approve a settlement of a class action only if it determines

that the settlement is "fair, adequate, and reasonable, and not a

product of collusion." Joel A. v. Giuliani,

(2d Cir. 2000). This analysis requires the court to consider

both "the settlement's terms and the negotiating process leading

to settlement." Wal-Mart Stores, Inc. v. Visa U.S.A. Inc.,

(2d Cir. 2005) (citation omitted). "A 'presumption

of fairness, adequacy, and reasonableness may attach to a class

settlement reached in arm's-length negotiations between

experienced, capable counsel after meaningful discovery.'"

(quoting Manual for Complex Litigation (Third) § 30.42 (1995)).

In making this determination, courts consider what are

commonly referred to as the Grinnell factors: (1) the complexity,

expense, and likely duration of the litigation; (2) the reaction

of the class; (3) the stage of the proceedings and discovery

completed; (4) the risks of establishing liability; (5) the risks

of proving damages; (6) the risks of maintaining a class action

through trial; (7) the ability of defendants to withstand greater

judgment; (8) the range of reasonableness of the settlement fund

in light of the best possible recovery; and (9) the range of

reasonableness of the settlement fund in light of the attendant

risks of litigation. City of Detroit v. Grinnell Corp.,

(2d Cir. 1974), abrogated on other grounds, Goldberger

v. Integrated Res., Inc.,

(2d Cir. 2000); see also Wal-Mart,

(applying Grinnell factors).

-3- Public policy favors settlement. Wal-Mart,

; accord Williams v. First Nat'l Bank,

(1910) ("Compromises of disputed claims are favored by the courts

. . . ."); TBK Partners, Ltd. v. W. Union Corp.,

(2d Cir. 1982) (noting "the paramount policy of encouraging

settlements"). Consequently, when evaluating a settlement

agreement, the court is not to substitute its judgment for that

of the parties, nor is it to turn consideration of the adequacy

of the settlement "into a trial or a rehearsal of the trial."

Grinnell,

. We review a district court's determination that a

settlement is "fair, reasonable, and adequate" for abuse of

discretion. McReynolds v. Richards-Cantave,

(2d Cir. 2009). The district court's factual findings relating

to the settlement are reviewed for clear error, while its rulings

of law are reviewed de novo.

Here, we conclude that the district court did not abuse

its discretion in approving the settlement of the consolidated

class actions relating to the second generation SXRD rear

projection televisions (the "Settlement"). The district court

carefully and thoroughly considered both the terms of the

Settlement and the negotiation process that led to it. Indeed,

in connection with the approval of the Settlement, the district

court required extensive briefing, conducted hearings over five

days, and subjected the parties and their attorneys to a

searching inquiry. The terms of the Settlement were similar to

-4- -- if not better than -- the terms of the court-approved

settlement of the class actions relating to the first generation

SXRD televisions, where the class was represented by some of the

same counsel now representing the parties claiming the Settlement

is inadequate.

As the district court found, plaintiffs' counsel here

took extensive confirmatory discovery, and the Settlement was

reached only after extensive negotiations and with the assistance

of a mediator (a retired judge who assisted in resolving the

issue of attorneys' fees). The district court specifically

considered the issue of collusion and found none, and plaintiffs-

appellants' counsel conceded at oral argument that, indeed, the

record contains no evidence of collusion. Moreover, in a class

of over 352,000 members, only eighty-three opted out and only

twenty objected.

We have considered appellants' other arguments with

respect to the approval of the Settlement and have found them to

be without merit. We are satisfied, based on our review of the record, that the district court's findings were well-supported by

the record, that it gave due consideration to the Grinnell

factors, and that it did not abuse its discretion in approving

the Settlement. 2. The Sanctions Order

We vacate the district court's sanctions order. We

understand why the district court felt the need to impose

sanctions; we agree, for example, that (1) the Meserole

-5- plaintiffs' counsel did not have evidentiary support for certain

of the assertions in the second amended complaint, (2) they took

a statement attributable to a former Sony employee out of

context, thereby making it misleading in terms of time, and (3)

they filed motion papers supporting the confidential source

allegations even after defendants had served the Rule 11 motion.

We agree with the district court that we expect counsel to do

better.

Nonetheless, we conclude that the district court's

order imposing sanctions against the Meserole plaintiffs' counsel

should be vacated. Counsel did eventually withdraw the offending

allegations (albeit after the safe-harbor period had expired),

the district court found that counsel did not act in bad faith,

and the district court's order to show cause did not give

specific notice of the second basis for the imposition of

sanctions (the delay in striking the contested allegations). CONCLUSION

Accordingly, the judgment of the district court is

AFFIRMED, except that its order imposing Rule 11 sanctions

against appellants is VACATED.

FOR THE COURT:

CATHERINE O'HAGAN WOLFE, CLERK

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