Appeals Court Rejects RadioShack FACTA Class Action Settlement

Last week, the 7th U.S. Circuit Court of Appeals rejected a settlement that would have resolved a class action lawsuit alleging RadioShack violated federal law by printing credit card expiration dates on receipts.

The RadioShack class action settlement would have provided about $830,000 worth of coupons to Class Members. However, the appellate court found that the benefits to Class Members were disproportionate to the amount the attorneys were set to gain from the deal.

The RadioShack class action lawsuit was initially filed in 2011 by a customer who alleges he made a purchase at a RadioShack store and received a receipt with his credit card expiration date printed on it. The Fair and Accurate Transactions Act (FACTA) prohibits businesses from printing more than the last five digits of a payment card number or the card’s expiration date on a receipt provided to the cardholder during a point-of-sale transaction.

Under the terms of the RadioShack class action settlement, Class Members who submitted valid and timely Claim Forms would be eligible to receive $10 vouchers, redeemable for purchases at RadioShack stores. Several appeals were filed in opposition to the FACTA class action settlement.

Writing for the appellate panel, Judge Richard Posner wrote that there were 16 million eligible Class Members for the RadioShack class action settlement. However, only 5 million people reportedly received notice about the class action settlement, and only 83,000 Class Members filed claims.

Judge Posner expressed concern that the attorneys were set to gain $1 million from the RadioShack class action settlement, which is more than the entire value of coupons to be distributed to Class Members. However, the class action settlement received final approval by the district court judge presiding over the litigation.

“A trial judge’s instinct, in our adversarial system of legal justice, is to approve a settlement, trusting the parties to have negotiated to a just result as an alternative to bearing the risks and costs of litigation,” Judge Posner wrote. “But the law quite rightly requires more than a judicial rubber stamp when the lawsuit that the parties have agreed to settle is a class action. The reason is the built-in conflict of interest in class action suits. … Unfortunately the magistrate judge in approving the settlement in RadioShack failed to analyze the issues properly.”

According to Judge Posner, the district judge considered the attorneys’ fees in proportion to the aggregate value of the class action settlement rather than the amount the Class Members were slated to receive. Under that comparison, the attorneys’ fees were reduced to a “respectable-seeming 25 percent.” However, Judge Posner suggests the district judge erred by considering the $2.2 million in administrative costs in the calculation, as this amount is not part of the value received by Class Members.

Judge Posner also took issue with RadioShack’s offer of coupons as compensation, as the vouchers have virtually no value to the company until they are redeemed for merchandise. He acknowledged that the deal may have been driven by RadioShack’s tenuous financial situation and possible bankruptcy.

The appellate court sent the RadioShack settlement back to the district court for reconsideration. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

The RadioShack FACTA Class Action Lawsuit is Redman v. RadioShack Corp., Case No 1:11-cv-06741, in the U.S. District Court for the Northern District of Illinois, Eastern Division.