Posted October 13, 2009 10:38 am by with 10 comments

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If there’s one solid truth about class action lawsuits, it’s this: only the attorneys win.

That truth has held out over and over again, especially when it comes to any kind of class action against a search engine. Adding to the list, Yahoo has settled a 2006 lawsuit that claimed it allowed advertisers’ ads to be displayed on a whole host of undesirable web sites:

…Yahoo! breached its contract with its customers by allowing Yahoo! ads to be displayed in spyware, domain name parking sites (also known as bulk registration sites), pop-ups, pop-unders, and typosquatting sites. Plaintiffs brought claims for breach of contract, unjust enrichment, misrepresentation, civil conspiracy, and unfair business practices.

You can argue that without this lawsuit, Yahoo would not have changed its ways–it has agreed to offer a new ad option that restricts ads to Yahoo sites and "premium" distribution partners–but, does anyone really feel like a winner here?

Yahoo simply settled because this was a PITA and it didn’t need this hanging over its head as it moves forward with assimilation by the Borg Microsoft.

What do advertisers get here? Well, you get the promise of better ad targeting on Yahoo Sponsored Search and…well, that’s about it. Unless you are already out of business, then you get $20. That’s not a misprint–you get twenty dollars.

So, who’s the real winner here? The attorneys. Buried at the bottom of the announcement, we find this:

Class Counsel will apply for attorneys’ fees of $4,170,000, plus reimbursement of expenses of approximately $100,000, and for service awards to the three Class Representatives of $10,000 each. Yahoo! has agreed to pay those fees, expenses and service awards, in the total amount of $4.3 million,

You get $20 (at best) the attorneys walk away with $4.3 million!

Don’t get me wrong, there are some great attorneys out there–heck I used to work as a paralegal back in England–but this is craziness. Something needs to be done to prevent attorneys from cashing out on such a large scale. It’s not like these class actions suits end up going to trial. They nearly always get settled–usually with the attorneys being the only real winners.

It’s a sad fact that these class action lawsuits will continue because both sides know that it’s cheaper to settle, than fight this all the way. Even sadder, the spoils tend to go to the one who passed the bar exam. 🙁

  • Andy are you sure this is not Spam, If you check the email link at the bottom of this email
    the link is fishy. Google was also giving us a warning from the natural listings of the site.
    Don’t you find it fishy that they are also looking for Out of Business “Business’s”

    Is this an elaborate email harvesting scheme. Please confirm. Looks Spammy to me.
    Could someone verify if this is actually legit.

  • Aaron

    It’s a bit more complicated than “class actions are bad”. What do you do, for example, when 1,000,000 people suffer a $20 harm (or 10,000,000 people suffer a $2 harm)? There’s no efficient way to litigate those claims other than as a class action. If you eliminate class actions, you effectively immunize highly profitable “mistakes” by corporations that serve large numbers of customers. I use small numbers in my examples, but sometimes the numbers are big: If a claim is less than $5,000, it’s generally not cost-effective to litigate the claim with the help of a lawyer. If the defendant has endless money to tie up cases in litigation, a $50,000 case may be marginal for bringing in a lawyer.

    That’s not to say that the compensation system for class action litigation isn’t in need of reform. Unfortunately the effort under G.W. went to the other side – making it more difficult and costly to bring and prosecute class actions as opposed to making the system more cost-effective and making potential rewards proportionate to the class lawyer’s investment of time, effort and money. Why? In my opinion because the defendants presently benefit from their ability to collude with the class lawyers, agreeing to high fee awards in exchange for settlement terms that minimize their compensation of class members or result in an award (e.g., coupons good toward future purchases) that class members are unlikely to use – and that, if used, will often return a profit for the defendant. The defendants wanted it harder to get class actions in the door, but didn’t want to eliminate their best tool for resolving them at minimal cost and maximum benefit to their clients.

    In my opinion, coupons issued to class members should always be subject to being sold and aggregated. If an auto manufacturer gives out coupons for $1,000 toward a new car purchase (nice profit for them), no more feigned surprise when “only a small fraction of the number of people we expected to use the coupon actually used it” – instead let them sell the coupons for whatever the market will bear (let’s say, putting $500 cash into their pockets) and let the aggregator use multiple $1,000 coupons toward a single car purchase. But, oh my goodness, then those coupons will actually be used….

  • Internet publishers should always be required to provide information to online advertisers as to placement; however, since this is unlikely to be provided in the bulk of the cases, it is up to web and mobile advertisers to negotiate ad placement in their online advertising contracts. Too many advertisers get into Pay Per Click (PPC) deals with little understanding of where their ads will appear. While I agree that this settlement is an embarrassment to most lawyers, it may serve to push internet publishers for more disclosure. — by Online advertising lawyer —

  • How about 90% of the entire claim (fees and all) goes to the claimants, not the attorneys?

    Frankly, the claimants don’t usually care about the $20. They want a problem fixed. Often times they aren’t even aware of a problem. The attorneys have a motivation for starting these because they know they will probably win and make lots of $. Take out such a large incentive and in most cases, only cases with true merit would stand.

    Whether 90% is the right number or not, I don’t know. But it is simply ridiculous.
    .-= ChrisCD´s last blog ..Best IRA Certificate of Deposit Rates – October 2009 =-.

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