In recent years, a lawsuit has been making its way through the court system alleging a price-fixing conspiracy among major manufacturers of optical disk drives like CD, DVD, and Blu-ray players. After years of litigation, a $124 million settlement was reached between the defendants and purchasers of these devices. But is this settlement legitimate? Let’s take a closer look at the details.
What is the optical disk drive lawsuit about?
This class action lawsuit accused optical disk drive manufacturers of conspiring to artificially raise and fix the prices of ODDs and products containing ODDs from January 1, 2004 through January 1, 2010. The defendants include major hardware companies like Sony, NEC, Panasonic, Hitachi-LG, Toshiba, and more.
The lawsuit claims these companies colluded through meetings, phone calls, emails, and other communications to coordinate pricing and output for optical disk drives. This allegedly resulted in overcharging consumers and businesses who purchased products containing ODDs during the specified period. Plaintiffs argue this violated state and federal antitrust laws.
Who is eligible for payouts in the settlement?
The settlement covers businesses and individuals who purchased new ODDs or products containing ODDs from the defendants or their subsidiaries for their own use and not for resale. This includes purchasers in the District of Columbia and thirty-one states, including Arizona, California, Florida, Hawaii, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin, and Wyoming.
What does the settlement provide?
Under the terms of the settlement, the defendants have agreed to pay out $124 million to resolve the claims against them. The money will be used to reimburse eligible businesses and consumers who submit valid claims. The minimum payout is $10, while the maximum payout caps at $450 for individuals and $5,000 for businesses. Any remaining funds may be distributed pro rata to claimants.
In addition to the monetary relief, the settling defendants have agreed to injunctive relief prohibiting them from engaging in the type of anticompetitive conduct alleged in the lawsuit. They also agreed to compliance measures and reporting requirements to prevent price-fixing.
Analyzing the Legitimacy of the Settlement
Now let’s dive into an analysis of whether this settlement passes the smell test in terms of legitimacy. There are several factors to consider when assessing if a class action settlement is fair and reasonable.
Settlement Amount
With a settlement fund of $124 million, this is a sizeable amount of money that could provide real value to class members who submit claims. The minimum and maximum claims also allow both small individual consumers and larger business purchasers to receive payments tailored to their class and purchase volume. Given the number of defendants and purchasers involved, the overall fund seems appropriate.
Length of Litigation
This case was lengthy and complex, initially filed back in 2007 and going through over a decade of motions, appeals, and negotiations before reaching this settlement in 2018. The many years of litigation reflect the challenges in proving the allegations and determining damages. The fact that plaintiffs’ counsel invested the time and resources over the years lends legitimacy to their belief in the strength of their claims.
Settlement Negotiations
Settlements are always a compromise. According to court documents, the $124 million amount was reached through extensive arms-length negotiations between plaintiffs’ counsel and defendants. The court appointed a retired judge as a special master to facilitate the mediation process indicating the negotiations had judicial oversight. There’s no evidence the settlement was collusive or the product of fraud or bad faith.
Reaction of Class Members
The class notification process gave members the chance to opt-out or object to the settlement terms. Out of millions of class members, only a handful objected or requested exclusion meaning the overwhelming majority consider it a fair and reasonable resolution. Lack of significant opposition from the class provides support for the legitimacy of the settlement.
Release of Claims
In exchange for the settlement benefits, class members agree to release defendants from claims related to the alleged conspiracy. This is standard in class action settlements and provides defendants the certainty they bargained for in the compromise. Allowing class members to retain their rights to sue separately would provide little incentive to settle. The release is mutual covering claims by defendants related to the litigation as well.
Settlement Plan Administration
The settlement agreement establishes a clear process for notice to the class and submission of claims. It also sets forth an objective methodology for allocating payments to claimants based on the type and amount of ODD purchases they made. Oversight of the claims and distribution process by an independent settlement administrator provides accountability. This helps legitimize the settlement and gives class members confidence in a fair claims process.
Attorneys’ Fees
The settlement allows plaintiffs’ counsel to request up to 30% of the settlement fund in attorneys’ fees and costs. Payment must be approved by the court and the amount is consistent with other class action settlements. Compensation for the many years of litigation provides motivation for attorneys to vigorously pursue complex antitrust cases in the future on behalf of wronged class members.
Conclusion
Given the arm’s length negotiations between experienced counsel, judicial supervision of the process, favorable class member reaction, and oversight of the administration of settlement benefits, this $124 million ODD settlement contains indicia of fairness and reasonableness. While no settlement is perfect, this resolution provides substantial compensation to class members without the risks and delays of proceeding through trial. On the whole, the settlement agreement appears to be a legitimate conclusion to years of antitrust litigation benefitting purchasers of optical disk drives.
| Year | Major Settlement Events |
|---|---|
| 2007 | Lawsuit originally filed |
| 2011 | Plaintiffs file consolidated class action complaint |
| 2012 | First settlement negotiations fail |
| 2014 | Litigation continues on through appeals |
| 2016 | Parties engage in renewed settlement talks |
| 2018 | $124 million agreement reached |
