This Week At The Ninth: The Igra “Two-Step” And Class Action Collusion – Litigation, Mediation & Arbitration

This Week: The Ninth Ward explains the “two-tier provision” of India’s Gambling Regulatory Act regarding the impact of a new casino on tribal lands and clarifies when a post-certification class action settlement settlement is unfair and collusive.

KALISPEL TRIBE OF THE INDIANS VUS DEPARTMENT OF THE INTERIOR

The court finds that even if the new casino were to have an adverse effect on another nearby tribe, as long as those effects are offset by benefits, the Secretary of the Interior can approve an Indian tribe’s application for a no-reservation casino under the Indian Gaming Regulation Act for the entire surrounding community. It also notes that the secretary’s decision to grant the Spokane tribe’s motion in this case did not violate the Administrative Procedure Act.

Panel: Judges Berzon, Christians and Bade, with Judge Christians writing the report

Key highlighting: “Evidence that additional gambling can be detrimental to some members of the surrounding community, including a Native American tribe, does not dictate the outcome of the minister’s two-step decision.”

Background: In 2001, the Spokane tribe applied for Interior Department approval under the Indian Gaming Regulation Act (IGRA) to allow them to open a casino in Airway Heights, WA. The nearby Kalispel Indian tribe rejected the proposed casino because it would be located just two miles from their Northern Quest Resort and Casino. Competition with the new Spokane casino, Kalispel argued, would reduce the Northern Quest tribe’s revenue, which would seriously affect their ability to pay their debts and provide for their members. In 2015, the Home Secretary gave permission to the Spokane tribe. As requested by the IGRA, the Secretariat’s provision stated that the new casino 1) “is in the best interests of the [Spokane] Tribe “and 2)” would not harm the surrounding community. “

The Kalispel Tribe sued the Home Secretary in federal court in 2017, claiming that the decision to grant permission to the Spokane tribe – and in particular the secretary’s “two-step decision” that the proposed casino was “not harmful to the surrounding community.” would”. “- Violated the IGRA and the Administrative Procedure Act. The Spokane Tribe intervened and both sides moved for a summary judgment. The District Court dismissed Kalispel’s claims and issued a summary judgment in favor of the Secretary and Spokane.

Result: The Ninth District upheld the District Court’s decision and confirmed the Secretary’s approval of the new Spokane Tribe Casino.

Kalispel argued that “any detriment to a nearby Indian tribe” prevented the secretary from determining that a new casino “would not harm the surrounding community.” The court disagreed and was of the opinion that benefits for certain segments of the community could offset the damage suffered by other community members. The court pointed to the Bureau of Indian Affairs regulations defining “surrounding community” to include more than just nearby Indian tribes, arguing that “a full harmonization of interests in the surrounding community” “was the purpose of the Congress for the adoption of IGRA “would undermine. Although the damage to an entity can be so severe that it does net damage to the community, “[a] shows that additional gaming can be detrimental to some members of the surrounding community. . . does not dictate the outcome of the secretary’s two-step decision. “

The court also denied Kalispel’s allegation that the secretary failed to adequately consider the threat to the tribe and “made implausible statements inconsistent with the records.” Rather, the secretary’s formal decision repeatedly referred to possible loss of revenue for the Kalispel tribe – he had just found that this was being outweighed by benefits for the rest of the community. And although Kalispel had submitted two private reports proving his predicted economic damage, the minister sided with the Interior Ministry’s own studies of the situation, which predicted that the Kalispel tribe’s revenue would pick up again after the new casino opened would. In particular, given the respect for forward-looking judgments within an agency’s specialty, the Court found that while Kalispel’s alleged violations were “real and identifiable disadvantages”, the APA’s two-step decision was not arbitrary and capricious.

BRISENO V. HENDERSON

The court extends its precedent in In re Bluetooth Headset Products Liability Litigation to include settlement agreements for post-certification class action lawsuits, noting that such agreements are subject to increased scrutiny for unfairness and collusion.

The panel: Judges Owens, Lee and Ezra (WD Tex.), With Judge Lee writing the statement

Key highlighting: “While courts shouldn’t casually question party-mediated settlements, they shouldn’t give them the go-ahead just because the parties assert that their dubious deal is ‘okay, okay, okay’. We’re revoking the approval of the Class comparison by the district court because the agreement causes a bunch of red flags to blow in the wind, begging for further review. “

background: Plaintiffs in this case filed a class action lawsuit against ConAgra alleging that Wesson Oil’s branding as “100% Natural” was misleading (because it contained ingredients derived from genetically modified organisms) and that plaintiffs were therefore in favor of the product paid too much misleading label. The district court issued the class certification under Rule 23 (b) (3). Shortly afterwards, the parties agreed on a settlement agreement. The agreement included a “Clear Sailing” provision, under which ConAgra agreed not to contest the $ 6.75 million in legal fees for classroom plaintiffs, and a “kicker” clause that stipulated that any reduction in attorney fees on ConAgra instead of increasing the award for the class. And although the parties claimed the settlement was worth $ 100 million, ConAgra actually only paid $ 8 million, of which seven-eighths went to the class council. A member of class law professor M. Todd Henderson appealed the settlement, but the district court accepted the agreement nonetheless. Henderson appealed.

Result: The ninth circle reversed. The court found that its standard for assessing the fairness of settlement agreements for pre-certification classes set in the 2020 In re Bluetooth Headset Products Liability Litigation also applies to settlement agreements after certification. The court found that Rule 23 (e) (2), which requires courts to ensure that bulk settlements are “fair, reasonable and reasonable”, makes no distinction between pre- and post-certification settlements. And although the incentive for the collective attorney to work with the defendant “peaks before class certification,” even after certification, the collective attorney “still has the incentive to conspire with the defendant” while the defendant has every reason to to participate “because it” only cares about the total payout, not the division of funds between class and class council. “Given these incentives and the broad formulation of Rule 23 (e) (2), the court ruled that the enhanced examination of the Bluetooth test also applies to comparisons after certification.

Using Bluetooth, the court found that this settlement agreement “had all three warning signs of potential collusion that we warned about in Bluetooth”: attorney receiving a disproportionate amount of settlement; a clear sailing regulation; and a foosball clause. Although the court made it clear that these “red flags” are not per se unfair and can only be “elements of a good deal”, the district courts need to scrutinize them “where they appear” to ensure that the parties have not colluded costs of the members. “Accordingly, it referred the case back to the regional court for further hearing.

The court also found that the injunction contained in the settlement agreement was “practically worthless” and that the district court had made a reversible error “by even attaching” some value “to the remedy”. The order in question prohibited ConAgra from marketing Wesson Oil as “100% Natural”. But not only had ConAgra discontinued the practice long before the settlement agreement was signed, ConAgra no longer even owned Wesson Oil. “ConAgra,” the court commented, “has essentially agreed not to do anything it is not empowered to do.” The promise was illusory and therefore the injunction was “practically worthless”.

Finally, the Henderson Court disagreed that the District Court had unjustifiably placed the burden of proof on the injustice of the settlement on him. The court reiterated that “Rule 23 (e) (2) presumes a class action settlement is invalid” and that applying the presumption to the contrary is a reversible error, but found that the district court did not make that mistake here had (despite some unfortunate formulations). suggest something else).

Due to the general nature of this update, the information provided herein may not be applicable in all situations and should not be performed based on specific situations without specific legal advice.

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