court the supreme court announced the concern with the money of the serial presentation of settlement certification in fairness of a settlement agreement and the purpose behind this concern was the protection of the rights of the non named class members this court and hanlon atan and in multi has then proceeded to apply those concerns what is required now is that the structure of the settlement agreement and the allocation plan the structure itself provide the proof of assurances that the requirements of twenty three a four and twenty three a s supreme court and this court has said look at the structure of the documents to make that decision here the athletes say well there's two parts of the structure of these documents a settlement agreement and the plan of distribution that you should look at one is the value of the settlement at one hundred seventy five million dollar manufacturers suggested retail price and the other is the fact that each member is treated equally and that each member gets the benefit of the prospective junction and has a one in five chance to get an eighteen to twenty four dollars manufactured retail price product stressed chance what's the problem with the value bit of the settlement wel said we look to see what is the evidence concerning the value of the penalty the defendant and the settlement because sometimes no matter what the value to the class is if there's a little penalty to the defendant that must be overcome then indicates possible conflicts of interest degree of lack of vigor on the part of plenty of counsel here the manufacturer suggested retail price is used to value the settlement however these are the manufacturers of the product and therefore the penalty while the proponents of the settlement didn't see fit to give the court any information on what the cost to produce those products were at least one of the objectors did put forth some information from which we can determine that this entire product preparation cost somewhere under fourteen million dollars and then there's the twenty four million dollars worth of the tourney series we also have the problem that while the value that the settlement maybe one hundred seventy five million dollars dollars in manufacture suggested retail price we have a cypre provision and under the projected take rates we're going to have ballots one hundred eight million dollars minimum of the product won't be claimed and will provide a tax savings when this is all looked at the penalty to the defendants is slightly over twenty four million dollars that's sli more than the attorney's fees alone now is to the problem that all members are treated the same well not all members have the same interest do the damages or their product or store affinity some want one product some bought some more than one product manufactured product some go to one of more stores so the structure of training them all the same doesn't assure that the treatment of the members with the greatest damages and with multi transactions amount was determined first one hundred five yes it's pretty clear question you're arguing these points but were any were if if any of these points were not part of the settlement process i'd like to know or if these points were part of the settlement process they were discussed before two to seven percent projected take right would then have enough product so that each person who truly attempted to claim one would be able to pay and then the question of a different status of different claimants you know somebody i've got one product i bought five product was that part of it that's true yes as a matter of fact the judge actually went through and her first fairness here and discuss the idea well if it's only two to three percent and so on this many could possibly get it but if it's seven then only so many others could get it and if we use the one product per manufacturer the nets the possibility of nine products per claim that and then if you have a seven percent take right now yes that so if we find a list if we find that these these particular points that you're raising were presented the special masters were discussed it was all into the process and now we have a disagreement about what happened in that process we look at that whole process under abuse of discretion when a district judge appointed a group of us or it's a view to discretion but you don't look at the discussions you look at the results you love her well i'm just saying they were just if nothing was ever brought up then i don't know where we go from there but we were talking about things that were already discussed during the settlement process that were presented to the judges the fair settling these issues were presented by those eyes at the fairness here thank you so what you have also here i or consumers of different numbers of the defendants however what happened is there was a failure to use the den of categories of different clients one of the factors that the supreme court has a den of fat as being in dishes that there may be impermissible conflicts of interest there for making the settlement and profit that's a mouthful tell me specifically what happened in this case ok because the entire discussion in the fairness hearings and for the special master talked in terms of that there weren't stack people that had bought from one or more of the manufacturers products or at one or more of the stores it's easily to easy to quantify the fact that there are  point specifically there's a single group of pointless council and no one was nominated to look out for those who had purchased the more than one or more than two or more than three or up to nine make sure i understand what you what this was particular argument is trying to do you're saying that such there should have been separate representation for single purchasers compared to multiple purchasers ye in making the discretion standard you would look at this issue for instance but focusing on just on this argument of whether or not you need separate counsel i guess that would be kind of a conclusion to looking at this issue where the supreme court  es and found the settlement improper was where each individual member of the class potentially had huge amounts of stink ill of a sickly people who were ill already from a special supposed or well people who might in the all but were not yet showing symptoms and there were a lot of dollars involving life and death issues with respect to medical care for these people and dividing up those two classes here i don't see the stakes as any where near as high we're talking about do you get one do you get nine cosmetic products two valued retail many thank you suggested retail price i don't know what is going to be  and are you trying to import into this cosmetic situation yeah analysis from this past as consumers yes yeah that's what i mean that's what i was afraid of in the sense that i'm not sure that i see that conflict as to visionary severe as a away in using the class action vehicle to clear the court of potentially the individual we can't go so far away that we forget that what we're distributing is justice and that the rules enabling act is saying you need to have a very close to match between what the outcome is in a class action and that's not a rule of specific application related just the high stakes part almost no matter how we structure a settlement we're not going to get a some people signing off on some of this goes forward who never did anything another sign a piece of paper and say sure i mean that this is basically a steep price settlement maybe doesn't have that name but that's what is going to be well once the amendment came into pla exactly what came with this i think it was going to be a secret settlement anyway in fact well it's a matter of fact with the estimate estimates of the experts it looks as though in the first case and that was the just works its breath concern was that there weren't going to be enough products for those who actually show up i'm more interested actually in your argument i think i'll call it a structural argument just as you call this sort of separate class aster members the conflict among members of the class a structural argument i used to call this one a structural argument to it's one you've already cut on and that is the inherent conflict that always exists in these in these cases between the class members and their twenty's representing them that is to say how much is going on in fees here which looks like it's going to be roughly twenty four million how much it costs them put the product in the stores terms of some tax deduction they might get for the products that are in fact delivered in those during the week long period in terms of what other and you did mention this but it's in the papers to whatever the benefit they might get  customer comes into the store to get the three product and the other things that they might do you're saying that the actual net saw harm or pain suffering by the defendant is not much more than twenty four million dollars which means that virtually all of the payout by the defendant you net it all out goes to lawyers that's that's the argument i find more as it were difficult for supporting a settlement yes or in fact that's exactly what i believe is a mathematical calculation that can be or so after the time in which to opt out or to object and came after the first fairness hearing when the court would not approve the plan of allocation because it would not have a sufficient number of products so that each person should go product let's use the same product unit cost but what will do is will cut it down so that in fact none of the plan of the class members can get more than one that is the supreme court's view of w close in hand counsel lose its vigor depressed for all that the defendants would pay by the way the defendants and so they would pay for no more and rather of threatening to sue which is what the supreme court works he said with leverage the first appeal is the one that was addressed by counsel but there is an appeal on that was taken from the court's order directing that a bond be paid and you know i think that's pretty clear and the briefs i think we understand that more or less from watching writing in front of us and the actual structure of the subtle my may be more productive way to spend our time here but you don't want to hear anything with regard to the appointment of the master speak for myself no no between the class members go to the the question of the amount of damages as opposed to the type of damages when you talk about or teaser and came as your honor pointed out the differences which required s you my problem is not that although my fellow judges may stick on that point to the instead of going to problem it has to do with how much money goes to the lawyers york's sun article on january thirteenth two thousand and four who describes the attitude of the defendant toward this settlement as well they are delighted those quote i'm sure made sure they were you it's not page two five four nine of the excerpts of record ok you're on to the point with regard to the attorney's fees is first of all that there were no discussions in the record is absolutely clear that there were no discussions about attorney's fees prior to the startlement reaching resolution with regard to the benefit to be given to the class in fact there is no objection as i understand it that distributing the product to my knowledge there is no objection that says that that total settlement in all its components is inadequate i believe the law and i believe mr chairman was going to address this but i believe the law is clear that in valuing the settlement and you're talking about a product you do it with regard to the value to the recipient not well depends on what you're trying to do if you're trying to figure out their innocent or settlement which is one of the record with respect to that well the maybe you can find something in the record because there is master in connection with the ongoing litigation which is why he became the master in connection with the settlement but the litigation went through many depositions millions of pages of documents produce attempts are resolving it through jams mediation that was unsuccessful and eventually with motions for summary judgment pending we were able to reach an agreement with regard to  distribute the product we do not know the precise amount of the cost of the product but we know that the product has been specially manufactured and packaged for this purpose in order that the  to be given to the client's yeah and that value is based on the retail value of the product i see and what we don't know is how much it costs the manufacturers to produce and class the class will be getting you there's no issue about that of one hundred seventy five million dollars product that's all you know there's a there's a major issue about that too because we don't know what how many people will actually show up to pick up  what could be as much as one hundred seventy five million dollars manufacturing suggested retail price that is the moment that for a one week distribution is your what happens if at the end of the week only i'm just making up the number twenty percent one hundred seventy five million dollars worth of retail price has been handed out that's it the rest of it just goes to an unnamed charity well it goes to charities that would be related to  part of the settlement if it turns out that your take rate is that low of extending the period well there were considerations of all of these things around or there were considerations through the entire approval process whether or not it should be one product limited to one product or not that was extensive consideration by both the special master twice and the judge twice with regard to what the take r understand the product the final plan was approved by the special master and his first recommendation of approval up to the district judge there was going to be something like four hundred thousand dollars in change spent on notice to the class the income pick up your stuff is that right there is a plan to notify the class when the product is available correct consists of two components well i'm asking about the plan not as a now exists i'm asking about the plan as it was originally approved by the special master and as it came up to judge armstrong at that time was an anticipated the something over four hundred thousand dollars would have been spent on the notice i can't tell you what the dollar amount was your honor of the original plan also as in the record with the original the original plan was for the re advertisement in the fifty largest markets that the product was available right and in addition to that anyone who had signed up and registered for the two to receive it would get either a postcard or an internet message telling them that the product was available and how many people or those there are at the last count i believe it was six hundred seventy one thousand i believe is the number and in the record who  allocated for advertising and how was that advertising going to look like your honor i believe that that advertising when it was going to occur would be would have been drafted at the time it was to be an advertising that was comparable to the original notice telling people that now the product was available and the original notice as i understand it shows up in the back pages of various magazines is that right i don't believe in newspapers it's in the magazines  advertising and these large markets is very likely to reach very many people and what i'm after is as it was originally approved by the master it didn't seem to me that the bristly to the people who were supposed to come in and get their free gifts was going to be very the special master signs off on something it seems to me has pretty slender nowness not likely to produce huge crowds at these things counters so i come back to the question well what happens if at the end of the week we've only had a twenty percent there's anything that would preclude that person who comes in the next day from and saying they want a product or product of being given that product your honor my name is frederick yarm and i represent the estee lauder companies and i'm speaking for the defendant please let me turn directly well let me first turn directly to judge for headaches point yes i do believe that it goes beyond your typical and normal judging for abuse of discretion for you to count up the number of advertisements or with all respect decide whether they're on the back page or the middle pages my biggest problem here is if we have a product this is not a the point is i'd like to little discretion on your part to tell me that because i want to figure out how i go through this abuse of discretion review on this big record because we could go on for ever doing this and we could actually very frankly redo the settlement for if you want the point is run abuse of discretion let me throw you a life preserver if i can and really i do want to respond to judge fletcher because judge fletcher has correctly and quite obviously trying to make sure that you can and in reviewing this feel comfortable that this was fair that it does make sense that it is practical and feasible and obviously that's your job so what's been left out of this entire discussion so far is one very very critical fact and that was the presence of the state's attorneys general this was a very complicated difficult and in many respects unusual case and settlement we had thirty eight million class members it was a very long class period that the we're dealing with with with almost ten years one of the features of this was aside from the fact well let me start from the beginning we did the settlement we published the notice the original notice your honor was published as you know  lots of magazines and it was as i recall it was basically all over the magazines and some was on the rear page and some of it was in the middle it was very very prominent in fact it was done by a very very high reputable and well known company that ministries these things and we had something like a ninety one percent reach which is enormous you don't mean reach twenty percent ninety one percent reading rate you know and physical obligation and yes in the ninety one percent you know not only a question of you're too good at this you're absolutely right that's what reach me yeah you know but it's the best you can do it then that's how they chose the best you can do it but i have to say that i wish you had said it that way instead of making me say well your honor i said reach and that's the way they judge these things and i certainly didn't mean to you can't get precise so if you look at the record they had to decide how many people are going to pick this up we're going to go but you're giving away free cosmetics there's anybody believe that not everybody would know about it let me tell you it was that discussed the fact that you're giving cosmetics you do flips so let me come back to the state attorney state attorney general i think because because for your honour's for your honour's comfort here what we had was we had only seventy one objectives which is really kind of amazing in a class the size and i think is something of a testament to the to the to the to the value of the settlement and we only had i think sixty two opt outs in a class of this size but on the other hand we did have the eleven states attorneys general who were concerned about this because they get concerned about consumer class action and what i'd like to know those and i think this is going to turn out to be a point in your favor when i read the attorney general's was about to say that if you if you read the state's attorney general's original position you will know that they certainly were in no way in our pocket or anything like that they were deeply skeptical of the settlement they deeply skeptical of how people deal in this kind of a situation with their constituents the millions of people who live in there state and they put us through a wringer like i don't think any other class settlement has ever been put through so for example you were talking about the value in the cost it is correct there is no exact number for what the defendant's cost of producing these products are but it is one hundred seventy five million dollars worth of products and what the state a g s did for example is we've said we were selling or normal legitimate products which is what we're going to do in a giveaway and we're valuing them at the same price we typically sell them to consumers who you know you're getting values and we never put in the record for a lot of different reasons why what our absolute cost is that's confidential also as a matter of a lawyer on a respectfully i think the standard is you judge the benefits of the class you don't judge the cost of the plaintiff so no one of a rush that's made a difference here and if you're out of fairness hearing well all right but but that's where the record rather remains and i don't want to mislead you so we need to put in our exact number that i think the court can take to dish on notice that if these are our normal everyday stale products which are being sold at our normal everyday price we have a very very substantial cost of producing those products out of tha hundred seventy five million of retail value so this was hardly without penalty to us this is a major cost to us to produce those products plus the cost of notice which was several million dollars plus the cost of that ministration plus the cost of administering th entire settlement so there was a very large number to us and i ask you to weigh that as as i know you're on a should against the weakness of the case because this is also an extraordinarily weak case and i think one of the other major features of this settlement that you should take notice of is that there are going to a lot of little questions raised by by wilkinson by the appellant here but the one thing no objector not one of the seventy one not one of the state's attorneys general no one ever questioned the adequacy of the settlement the hundred and seventy five million dollars cap which we insisted upon the taney as being fair reasonable and adequate for the settlement of this case because judges i aspect first by the by by the counsel and all of the objectors and most importantly by the state's attorneys general i mean just as an example i think you got distracted and i want to come back to you yeah b doing they were concerned that maybe we would just be giving away trinkets maybe when we say when we said we were giving real products we wouldn't be giving real products maybe we'd be giving away junk maybe we'd be the giving away stuff that expired stuff you would be giving away anywhere remember that part of yeah and in fact what we did was we went through before judge renfrew we went through extensive hearings and lots of papers filed paper after paper describing specifically which products exactly what we were doing what the retail price was how it was what it was going to be inside it what the size was and then the state's attorneys general not sure this is clearly in the record i mean it would probably come out if you read the transcripts closely they went out and they went to the to the stores and checked us and they came back and we had i don't remember twenty five different products that are part of the same because different manufacturers are doing different things in the that will wait a second the number seventeen your saying that it was this and it cost that you were wrong it turns out they happened to be wrong they misread a price on something or they misread a quantity then the stuff i remember specifically we were giving the way perfume and we had it value to twenty five dollars for a certain amount of perf human he came back complaining well wait a second i saw that for twenty five dollars for the ten ounces and you're only giving away two ounces this is phony well the mistake was they were looking at the cologne toilet water and we were giving away perfume so they mistook what we were doing they fly specked this thing the way a state's attorneys general can can fly speck this kind of an arrangement but the good news from our perspective is yes your honor we are used to this we frequently do giveaways we know how to do it right we know when we value a product we know we have to do it fairly and honestly and one of the things i think the state attorney general finally became became happy with number one was that we were giving real value to consumers they were each going to get a significant and valuable product not some trinket not a twenty five cent check that would be thrown away and that no one would do and that after months of discussions about how else we could do it they became persuaded that this was the single best way to give as much value  possible to as many people as possible and that no other way and we explore that's what judge on strong sent this back if you recall at the end of the first hearing she liked everything about the settlement except she wasn't convinced that this was the best way just as you're sitting here today and and it goes to your point judge pernetti at what point do you say ok isn't enough is enough we've got to rely on the district judge will look with the district judge did he or she sat there is skeptical as you are and she said to us well i'm not yet convinced go back and work on it some more so we did and we finally came back with those modifications the modifications were for force one to go to a customer and we prove to the state attorneys you know coming back what's her name around when they really started looking at participation rates carefully and we really started examining what we'd expect would happen here they were persuaded you know there is enough for everybody here this is fair and there's no better way to do this so that turned him around and i think they also to be honest in  in all modesty i think they became turned around because they realized that this was a very professional and good faith effort to do the right thing in the settlement we had been working for months and i'll take some pride in this i've never worked so hard on a settlement in my life to put this deal together coordinating among eight manufacturers plus the plaintiff plus the injectors plus the a g s plus judgment through plus just on strong it was the hardest thing we've ever put together to satisfy everyone but we did and we never i've never seen one that people looked at so carefully and were so skeptical of as you are and properly because it's a big deal and needs to be done right so i think that's the bottom line here answer yes they got persuaded this was fair reasonable anik when the best we could do now obviously one of the questions has been and this who was behind the only put at the last step before comes up to us this was judge armstrong who i'm trying to figure out ok how many people are go show up to claim this distribution and she's worried that they'll be too many people sort of some people get you know several product that will be enough left or go back to one per i continue to have the question and it is a flashback i admit this is guesswork as to how many people are going to show up you know you're out what if it turns out the you end up with a lot of extra product at the end of the week none want our plan is distributed oh yes but i think i think i think judge flexor knows that but he was saying but why don't you just run it on longer also i'm asking what it was the answer i got a moment ago in the does nothing to prevent from going later in the  instinct is that's never going to happen because you listicle just don't you know i i'm not going to speculate your honor i certainly reserve i think we all need to reserve the right to stay with the settlement and i certainly certainly do what will happen and i the things that was the final modification that we haven't mentioned yet was that he was the monitoring committee what we all agreed to do is when we actually do the settlement and just to make sure and this was frankly the state attorneys general who are the strongest  proponent of this they've created a committee of the ag the objectors and the plaintiffs who are going to monitor how exactly how we implement this what the mechanics are going to be in terms of how we implement this one our own on this thing  the special master monitoring that committee and of course judge armstrong has retained jurisdiction through the consummation of the deal so it's another assurance of fairness if you want another reason why i don't think you need to flyspeck every detail you need for the question injunction yes because that could affect even way more people of than we're talking about after and third is the weakness and the reason why it was weak  five million appropriate your honour's this was a very very weak case we went through a great deal of discovery depositions we produced millions of documents they copied six hundred thousand we litigated this very hard two of the two of the defendants had to get this thing settled was very very difficult and we felt this case was it was worth very very little the fans were holding out like crazy for huge amounts of money and we finally finally settled on one seventy five one of the thing in product one of the things that came out and it's in the record is they did a little geisha an analysis the plaintiffs little a geisha analysis and their own litigation analysis established to them that they had something like a seven percent chance of winning so i think in answer your question  own in their own litigation risk analysis that's why the case is week one hundred seventy five million dollars or product is going to be given to somebody it's going to give and yes it will go at least to the class members and if there's left it'll go cypre hopefully to places where it'll be here by the former deputy attorney general of the state of california for antitrust matters who evaluated our injunctive relief and his opinion was that it was very significant this is not one of those cases where you had an injunction that said you got to do what you gotta do what you always had to do anyway he valued this is very significant and i think no one has question there's not a there's not a no one controverted that declaration not a single objector or the a g s for that matter have said you know have come in and said no no no there's injunctive relief here this is a significant injunction and it has significant has a significant effect it has a far reaching effect in the sense that it deals with with with vertical relationships which could be in a state of flux so this is not a small matter and there's no question and no one has ever contested i mean not even appellant the value of this injunction and that injunction goes to everyone no matter what the last thing is the effect very highly professional firm to do this explosion and can sell i you know i'm sure you've seen the name around i mean these are very very good people and we basically paid them several million dollars and say get it done the last thing in the world you want to do when you heard it's happening to me is go through this whole settlement and stand up before a court and they look at you and say boy that was a chintzy notice what's the matter with you why didn't you do better we said do the best notice we can do here they designed the notice program for us we were in eleven i think i wrote up a list one thing to say didn't know what happened but something like eleven national publications major major publications all over the action suit you get a whole business in an industry building around exactly you do these things exactly as i read the record you used the business industry standard the best we could do i mean did the best we could all make an estimate anyway so they use the best science you've got i g us for here we can get into christ i guess but you're just saying that that without cost there's a defect in the record that's what you're saying at a minimum it's abused her discretion for the court to approve it with that money evidence of what it cost why is that of use the discretion is an  that the review needed to look at the the penalty whether it was little or no penalty to the settling defendant if that is the directive of the factor and there's no evidence one way or the other on the factor and they rule in favor of the settlement and yes that's a good lot of words you're saying that the relationship the cost of the fair market value is is got a relationship to the penalty is that what you're trying to tell me yes or the only penalty the way you all use that phrase and use money also the only way you use that phrase  mostly was what it cost to the defendant if you notice when plaintiff's counsel is examined on this issue he said that he had cited cases where it was not the value it was not the cost of the defendant the value to the class that was the relevant factor every one of those cases is talking about justifying the attorney's fees not one of them is addressing whether or not it's a fair settlement so yes and mostly all said look to the penalty to the defendant and in the terminating the fairness of the settlement if you don't know what it costs to the fan and if there's nothing in the record then the trial court acted without any evidence and that under traditional abuse of discretion standard abused discretion similarly it isn't important what it costs as opposed to the retail value of the product because the supreme court has said that what now courts need to be doing is looking for the issue both to structure to show that there wasn't either thank heartedness i hate these traces but this is what the courts say that's nice solution that's black letter law but when you let's get down to a case was the product versus the retail value when you determine fairness of the of the settlement amount will most kind of that in general are mostly has made a composition of law and a case where the application was what was the defendant out of pocket close as i can get but it makes sense that if you have a very low out of pocket cost even if it has what seems to be a high value that you have the potential for being suing for twenty five dollars or two hundred twenty five dollars that's a very dangerous class action is that it's provides a mechanism for some small valor claims to be adjudicated on a non present in the courtroom procedure but that rules the neighboring act which we all and the supreme court has come back to is we don't do a different brand of justice just because it's a class action you have to do justice in the traditional w you would know more a judgment is what you get when you go to court in an individual case it's either take nothing judgment or grant something for i don't do it with all due respect this is a good jury argument but we're talking about reviewing years and years of work on abuse of discretion and let me talk about the structure of what we do but we're talking about this case ok if i may want one response i believe it was the supreme court when it reversed