The past year saw a substantial range of complex litigation settlements benefitting consumers and workers. The California Supreme Court’s long-awaited Brinker decision, a mixed bag for employees, confirmed that employers still face substantial class-wide liability for violations of meal and rest laws, making settlement a prudent option. On the consumer front, numerous settlements put cash directly into the pockets of those victimized by deceptive practices. The year was also notable as several prosecutions by federal and state government entities led to meaningful results for plaintiffs. The following is an overview of 2012’s most notable impact litigation settlements.

Consumers Benefit from Substantial Settlements

The popular “Madden” video game was the subject of the settlement in Pecover v. Electronic Arts Inc., No. 08-2820 (N.D. Cal.). The settlement provides for aggregate payments of more than $27 million to plaintiffs who had alleged that video game leader Electronic Arts violated antitrust and consumer-protection statutes. The preliminarily approved settlement will pay class members as much as $70 each in compensation for Electronic Arts’ having exploited its monopoly-pricing advantage.

After a first attempt at settlement was rejected by a federal judge, the parties in Fraley v. Facebook, No. 11-01726 (N.D. Cal.) came back with a second settlement that addressed the first attempt’s most glaring deficiency — no payments to class members — in resolving the plaintiffs’ allegations that Facebook has effectively conscripted its members, without pay or consent, to endorse Facebook’s “Sponsored Stories.” On December 4, 2012, Judge Richard Seeborg granted preliminary approval to a settlement that provides broader injunctive relief than the first settlement proposal and payments of up to $10 per class member. The Fraley final approval hearing is scheduled for June of 2013.

Another web-based business, LivingSocial, agreed to settle a class action alleging that the company violated consumer-protection laws that mandate a minimum five-year redemption period for gift certificates in In re LivingSocial Mktg. & Sales Practices Litig., No. 11-0472 (D.D.C.).

In In re Bayer Corp. Combination Aspirin Prods. Mktg. & Sales Practices Litig., No. 09-02023 (E.D.N.Y.), the well-known aspirin maker and global pharmaceutical concern settled a class action for $15 million that alleged Bayer’s marketing had been misleading, specifically that particular products were sold without FDA approval and without proof that the medications were safe and effective as advertised.

In Hohenberg v. Ferrero U.S.A., No. 11-0205 (S.D. Cal.), the parties reached a $3 million settlement by which the class members are entitled to receive $4 per jar of Nutella purchased, up to a maximum of five jars, to resolve allegations that Nutella was deceptively advertised as a healthy food. In addition to providing monetary relief to consumers, Nutella will also be required to remove misleading health claims from its packaging, website, and advertising.

Brinker Affirms Continued Vitality of Wage and Hour Class Actions

Oil refinery workers and ConocoPhillips Co. settled meal break claims for $15 million in United Steelworkers v. ConocoPhillips Co., No. 08-2068 (C.D. Cal.), underscoring that despite being a mixed result, the California Supreme Court’s Brinker decision affirmed the relevance of meal break class actions.

Clarifying Reliance Doctrine

In a settlement more notable for having expounded on the “fraud on the market” doctrine than its terms, in In re Am. Int’l Grp., Inc. Secs. Litig., No. 10-4401 (2d Cir.), the Second Circuit Court of Appeals held that securities fraud plaintiffs need not prove that fraud-on-the-market applies to satisfy the predominance requirement for certification of a settlement class. The decision is expected to be an impetus to settling securities class actions.

Government Prosecutions Yield Substantial Settlements

In re Am. Int’l Grp. also yielded perhaps the year’s largest settlement, with Bank of America agreeing to pay $2.3 billion to resolve claims related to its 2008 acquisition of Merrill Lynch. The settlement’s principal beneficiaries will be the pension funds that suffered substantial losses in their Bank of America investments following the ill-fated Merrill Lynch acquisition.

A $22.5 million settlement was reached between Google and the Federal Trade Commission in U.S. v. Google Inc., 12-04177 (N.D. Cal.), to resolve charges that Google tracked users of Safari (the Apple web browser) without their knowledge or permission. The settlement received final approval from federal district judge Susan Illston in November. The Google Safari settlement will be the largest penalty the FTC has ever obtained for a consent violation.

The federal Consumer Financial Protection Bureau (CFPB) — the continued existence of which might have been in jeopardy had the presidential election turned out differently — mandated its first major enforcement action this past July, negotiating a $210 million settlement with Capital One Bank to resolve charges of deceptive marketing. Of the settlement fund, fully $150 million is dedicated to paying restitution to customers who bought “add-on” credit card services that were deceptively marketed.

In In re Electronic Books Antitrust Litigation, No. 11-02293 (S.D.N.Y.), another enforcement action brought chiefly by government entities, the U.S. Justice Department and various state attorneys general negotiated settlements with publishers alleged to have colluded and charged above-market prices for e-books. By the preliminarily approved settlement’s terms, consumers will receive refunds in their online accounts on iTunes, Amazon and Barnes & Noble, while those who bought their e-books through Google or Sony will receive checks.

Finally, a relatively rare public/private partnership between the Orange County District Attorney and a private plaintiff’s firm has yielded a $1.3 billion settlement in In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, and Products Liab. Litig., No. 10-02151 (C.D. Cal.).  This settlement is one of the largest of 2012, and possibly the largest automobile defect settlement in U.S. history.

While many predicted that 2012 would be the year in which interpretations of the U.S. Supreme Court’s ruling in Dukes v. Wal-Mart (131 S. Ct. 2541 (2011)) would effectively spell the end of class actions, this year has instead produced numerous pro-class judicial decisions, despite the more rigorous standards imposed by Dukes.

At the year’s outset, the Seventh Circuit affirmed class certification of wage and hour claims in a decision that provided considerable guidance as to the Dukes commonality requirement. In Ross v. Charter One, No. 10-3848 (7th Cir. Jan. 27, 2012), the Seventh Circuit found that Dukes did not require reversal of class certification, because the plaintiffs had shown sufficient evidence of classwide employment policies relating to unpaid overtime. Also in January, in Winfield v. Citibank, No. 10-7304 (S.D.N.Y. Jan. 27, 2012), the court granted conditional certification. In so ruling, New York’s Southern District rejected the application of Dukes v. Wal-Mart to motions for conditional certification under the FLSA. Similarly, in Myles v. Prosperity Mortgage Co., No. 11-01234 (D. Md. May 31, 2012), conditional FLSA certification was granted in an action alleging misclassification, with the express holding that Dukes is inapplicable at the certification stage of an FLSA action.

In addition to finding the post-Dukes defeat of class certification more difficult than expected, defendants also found themselves frequently rebuffed when attempting to decertify a previously certified class in light of Dukes. For instance, in Driver v. AppleIllinois, No. 06-6149 (N.D. Ill. Mar. 2, 2012), although the defendant argued that Dukes required the decertification of a wage and hour class, the court distinguished Dukes because class treatment in Dukes would have required the assessment of numerous subjective employment decisions, whereas class treatment in Driver was found to solely entail “strictly objective” issues of law and fact. Likewise, in Lyons v. Citizens Fin. Grp., No. 11-11187 (D. Mass. Nov. 9, 2012), the trial court responded to the First Circuit’s request that its certification ruling be revisited in light of Dukes by affirming its earlier certification of a class alleging misclassification and non-payment of overtime. And in California’s Northern District, in Ellis v. Costco, No. 04-3341 (N.D. Cal. Sept. 25, 2012), the court certified a class and meticulously distinguished the Title VII claims in that case from the far larger class that had been proposed in Dukes. This broader, plaintiff-friendly trend continued, as California’s Southern District narrowly interpreted Dukes by granting certification in Johns v. Bayer Corp., 09-1935 (S.D. Cal. Feb. 3, 2012).

Even the putatively conservative Seventh Circuit, in the person of Judge Richard Posner, participated in this trend. Early in 2012, in McReynolds v. Merrill Lynch, 672 F.3d 482 (7th Cir. 2012), Posner cautioned trial court judges to apply the same analytical rigor required by Dukes in denying class certification motions as they do to granting them. Later, in Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir. Nov. 13, 2012), Posner set out to “clarify the concept of ‘predominance’ in class action litigation” in light of Dukes, and in so doing established analysis that, while more rigorous than in the pre-Dukes era, is hardly insurmountable for plaintiffs. And within the influential Second Circuit, in Chen-Oster v. Goldman Sachs, No. 10-6950 (S.D.N.Y. Jul. 17, 2012), the court rebuffed the defendant’s motion to strike class allegations, largely rejecting the defendant’s Dukes-based analysis.

Finally, in the ultimate testament to the post-Dukes vitality of class actions, Dukes itself was re-filed, with a streamlined class definition, in late 2011. Throughout 2012, Wal-Mart pursued a motion to dismiss, which was denied by Judge Charles Breyer in September. Dukes v. Wal-Mart, No. 01-2252, Dkt. No. 812 (N.D. Cal. Sept., 21, 2012) (Order Denying Motion to Dismiss). Thus, Dukes v. Wal-Mart, filed more than a decade ago, remains pending in California’s Northern District, having survived its own landmark U.S. Supreme Court ruling.

The parties have announced a settlement in the Toyota sudden acceleration multi-district litigation pending in a Santa Ana federal court. Under the terms of the settlement, which must now receive judicial approval, Toyota will install a brake-override system in some 3.25 million vehicles in addition to paying cash compensation, which will be measured by the diminution in the value of the cars that were the subject of the lawsuit. As many as 16 million current and former Toyota owners are eligible to participate in the settlement. The proposed settlement agreement is available here.

The agreement reached in the sudden acceleration litigation is estimated to be worth $1.3 billion. While exceeded in size by the $2 billion payout in In re American International Group (No. 10–4401, 2d Cir.), the Toyota settlement is still one of the year’s largest, and may be the largest automobile-related settlement of all time.

This settlement is also notable due to the involvement of a relatively rare public/private partnership. One of the cases within the multi-district litigation was brought by the Orange County District Attorney, which contracted with the Robinson Calcagnie Robinson firm to augment the limited public resources devoted to the case. While some were critical of the arrangement, both the substantial result for consumers and the relatively swift resolution of the litigation should weigh in favor of California’s District Attorneys and City Attorneys exercising their authority to contract with private firms.

A Ninth Circuit en banc panel recently heard oral argument in the much-watched Kilgore v. KeyBank Nat’l Assn., No. 09-16703 (audio recording available here), which concerns whether two California Court of Appeal decisions remain good law in light of the U.S. Supreme Court’s holding in AT&T Mobility v. Concepcion. The two California cases are Broughton v. Cigna Healthplans, 21 Cal. 4th 1066, 988 P.2d 67 (1999) (public injunctive relief claims not arbitrable as a matter of California public policy; California’s Consumer Legal Remedies Act (CLRA) injunctive actions), and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003) (same; UCL injunctive actions).

Specifically at issue in Kilgore is whether public injunctive relief claims under the CLRA and UCL are not arbitrable as a matter of California public policy, as established in Broughton and Cruz. A three-judge Ninth Circuit panel had previously ruled that Concepcion overruled Broughton and Cruz. Additionally, Kilgore was issued just days after the California Supreme Court granted a petition for review in Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012). In Iskanian, the California Supreme Court will decide whether Concepcion overruled the unconscionability jurisprudence of Gentry v. Superior Court, 42 Cal. 4th 443 (2007). Since both appeals concern the extent of FAA preemption, with an underlying issue of California substantive law, the Kilgore appeal will likely be stayed until there is a disposition of Iskanian (the discussion of which provided a moment of levity during the oral argument as the attorney for KeyBank indicated that he was not familiar with Iskanian). Similarly, some members of the Kilgore panel queried whether a disposition of Kilgore ought to be deferred until the U.S. Supreme Court issues a decision in American Express Co. v. Italian Colors Restaurant, as to which a certiorari petition was just granted, or whether, instead of awaiting the Iskanian ruling, the procedure whereby a question is “certified” to the California Supreme Court ought to be used, thereby obtaining a definitive interpretation as to issues of state substantive law.

The Kilgore appeal has attracted considerable amicus interest, and the oral argument got underway with Chief Judge Kozinski questioning the Chamber of Commerce’s amicus counsel, asking if Concepcion is distinguishable on the most apparent ground: that the public injunctions in Broughton and Cruz are remedies, not claims. Responding to that and other similar inquires, the amicus counsel gave emphasis to the fact that seeking a public injunction under the UCL requires class certification, and was ready with an adept citation to Supreme Court precedent in which punitive damages were preempted by the Federal Arbitration Act (FAA).

Considerable time was devoted to discussing the FAA’s “savings clause,” which Concepcion held did not prevent FAA preemption. But does Concepcion bar any state-created legislation that might limit arbitration, even in circumstances where, as in Broughton and Cruz, public health and safety are implicated? Assuming a judicial posture, amicus counsel reiterated that the FAA had preemptive effect in the case at hand, sidestepping the broader hypothetical.

Judge M. Margaret McKeown pressed as to whether there is an intersection between unconscionability and public policy, and invoked the U.S. Supreme Court’s recent Marmet Health Care Ctr., Inc. v. Brown decision (132 S. Ct. 1201 (2012)), which seemingly puts state-created unconscionability doctrine outside the ambit of FAA preemption, before the proceedings focused on Cruz and Broughton. When questioned whether overruling Broughton and Cruz would be applicable only in federal courts or in California state courts as well, the voluble Chamber of Commerce amicus counsel opted for the more aggressive interpretation, whereby the disposition would be applicable in state and federal courts alike. While the degree to which the amicus parties worked cooperatively with counsel for KeyBank is unknown, but it is often an indication of confidence that an appellate panel is a favorable one when counsel opts for a broader interpretation when a narrower, more risk-averse interpretation is available.

Judge Harry Pregerson, widely viewed as among the most “plaintiff friendly” in the Ninth Circuit, questioned counsel only sparingly, and as to relatively technical issues of standing under the UCL. However, Judge William Fletcher worked off Judge Pregerson’s reference to UCL standing to elicit from KeyBank’s counsel the concession that there would be no injunctive relief available in a private action (i.e., other than in an action brought by the California Attorney General) even if there were a general fraud. Later in the oral argument, and at a moment of abrupt candor, Judge Pregerson asked the plaintiff’s counsel (who Pregerson let it be known is a personal acquaintance): “What is the bottom line of your lawsuit?” Counsel responded in essence that the preservation of the right to bring private actions that seek public injunctions to combat broad wrongs is the “bottom line” in Kilgore.

In addition to the judges referenced above, the 12-member Kilgore en banc panel consisted of Judges Paul Jeffrey Watford, Mary Murguia, Consuelo Callahan, Richard C. Tallman, Milan D. Smith Jr., Morgan Christen, and Andrew Hurwitz.