Opinion ID: 1747844
Heading Depth: 1
Heading Rank: 1

Heading: Fairness of the Settlement

Text: Ballard and Cain first assert that the trial court abused its discretion when it approved the class settlement because the settlement was not fair, reasonable, and adequate. They urge this court, in measuring the fairness of the settlement, to adopt the Eighth Circuit Court of Appeal's standards set out in Grunin v. Int'l House of Pancakes, 513 F.2d 114 (8th Cir.1975). In Grunin , the Eighth Circuit adopted four factors to assist in assessing whether a class settlement is fair and adequate. Those four factors are listed below, with the first factor being the primary measure of fairness and the remaining three being secondary to the first: (1) the strength of the case for the plaintiffs on the merits, balanced against the amount offered in the settlement; (2) the defendant's overall financial condition and ability to pay; (3) the complexity, length, and expense of further litigation; and (4) the amount of opposition to the settlement. Grunin, 513 F.2d at 124 (citing West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079, 1085 (2d Cir.1971); City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974); Young v. Katz, 447 F.2d 431 (5th Cir. 1971)). The Eighth Circuit further stated in Grunin that the fairness of a class settlement is a discretionary matter that rests with the trial court, and an appellate court should not reverse a trial court's approval of a class settlement absent an abuse of its discretion. Grunin, 513 F.2d at 123 (citing Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30 (3d Cir.1971)). The Grunin Court quoted the Ace Heating case for the following proposition: Such a determination is committed to the sound discretion of the trial judge. Great weight is accorded his views because he is exposed to the litigants, and their strategies, positions and proofs. He is aware of the expense and possible legal bars to success. Simply stated, he is on the firing line and can evaluate the action accordingly. Grunin, 513 F.2d at 123 (quoting Ace Heating, 453 F.2d at 34). The Eighth Circuit continued that the trial court is accorded deference, but that deference is accompanied by a duty to act as a fiduciary who must serve as guardian of the rights of absent class members. Grunin, 513 F.2d at 123 (citing Greenfield v. Villager Indus., Inc., 483 F.2d 824 (3d Cir.1973); Norman v. McKee, 431 F.2d 769 (9th Cir. 1970); Percodani v. Riker-Maxson Corp., 50 F.R.D. 473 (S.D.N.Y.1970), aff'd sub nom. Farber v. Riker-Maxson Corp., 442 F.2d 457 (2d Cir.1971)). It concluded that no court should accept a settlement that is unfair or inadequate, and the burden is on the proponents of the settlement to show that the proposed settlement meets standards of fairness and adequacy. Grunin, 513 F.2d at 123 (citing City of Detroit v. Grinnell Corp., supra ; United Founders Life Ins. Co. v. Consumers Nat'l Life Ins. Co., 447 F.2d 647 (7th Cir.1971); Young v. Katz, supra ). We adopt the Grunin factors and will proceed to analyze this issue using those factors. a. The strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement. Ballard and Cain first argue that the plaintiff class's chance of success on the merits is great. They also point out the many differences between a possible litigation-generated recovery versus the settlement agreement, including differences in financial benefit to class members and differences to the future of the appellees' check-cashing businesses. They conclude that the likelihood of success on the merits versus the offered settlement weighs heavily in favor of this court's finding that the trial court abused its discretion. (i) Strength on the merits. We observe, as an initial matter, that this court has never directly spoken to the issue of whether the deferred-presentment transactions, such as we have in the instant case, are usurious and violate the Arkansas Constitution. However, many of this court's cases point to the strong constitutional policy against usury established by Article 19, section 13, of the Arkansas Constitution, both before and after the adoption of Amendment 60 in 1982. Article 19, section 13, of the Arkansas Constitution states in relevant part: (a) General Loans: (i) The maximum lawful rate of interest on any contract entered into after the effective date hereof shall not exceed five percent (5%) per annum above the Federal Reserve Discount Rate at the time of the contract.