Tax Sale Certificate Antitrust Class Action Litigation Settlement is Affirmed, and Decision Permitting Appeal Bond to Include Administrative Expenses is Upheld

In re New Jersey Tax Sales Certificates Antitrust Litigation, 750 Fed. Appx. 73 (3d Cir. Sept. 6, 2018).  [Disclosure:  I am among the plaintiffs’ leadership team in this matter].  In this hotly-contested class action case, which began in 2012, plaintiffs alleged that the numerous defendants participated in a scheme to rig municipal auctions of tax sale certificates.  Plaintiffs ultimately reached settlements with all defendants totaling $9.59 million, plus certain discounts on redemption of the tax sale certificates.  The District Court granted final approval of the settlements, and one objector appealed.  The District Court ordered her to post an appeal bond of $10,000, which covered (among other things) administrative expenses incurred during the pendency of the appeal.  The objector appealed that ruling too.

The Third Circuit, in a not precedential opinion by Judge McKee, affirmed on both appeals.  Applying the abuse of discretion standard to the settlement approval, Judge McKee found no error.  He applied the factors of Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975), and concluded that they supported approval of the settlement.

The objector overstated plaintiffs’ likelihood of success.  She cited guilty pleas in federal criminal proceedings, but Judge McKee noted that “only fifteen of the fifty defendants entered guilty pleas, and several defendants were acquitted of criminal charges pertaining to the alleged scheme.”  Moreover, the guilty pleas did not “define the scope of any bid-rigging” and and thus did not, by themselves, show wrongdoing of the breadth that plaintiffs alleged.

Judge McKee found that the objector underestimated the risks that plaintiffs faced in litigating the case further.  And her “calculation of the best possible recovery,” a figure of which she argued the settlements fell impermissibly far short, was “necessarily overbroad … [and] more than unrealistic.”  Similarly without basis was her complaint that plaintiffs relied, in contending that the settlements were fair, reasonable, and adequate given the risks of the case, on informal discovery that was “undetailed” to the court.  Judge McKee observed that “Class Counsel provided the District Court with copious information regarding the amount of informal discovery obtained.”  Plaintiffs thus had shown a sufficient basis in the discovery taken to reach the settlements that they did.

Finally, Judge McKee rejected the objector’s argument that the settlement improperly gave disparate treatment to certain class members because those who still had outstanding tax liens could get not only a share of the settlement fund but discounts on redemption, should they choose to redeem.  “”[W]e have held that allocation settlements may indeed differ among class members based on the extent of their damage.”  It was reasonable to treat somewhat differently those who still have tax liens outstanding from those who do not.  There was no abuse of discretion by the District Court in this regard.  Accordingly, the panel affirmed the settlement approval.

Applying the abuse of discretion standard to the appeal bond issue, Judge McKee upheld the District Court on that issue too.  The objector provided “no binding authority” for her claim that administrative expenses cannot be included in an appeal bond, and the Third Circuit had previously permitted their inclusion, in In re Nutella, 589 Fed. Appx. 53 (3d Cir. 2014).  Since the $10,000 bond was far less than what plaintiffs had sought in order to cover administrative expenses, and “the amount of the bond did not foreclose [the objector’s] ability to appeal the class settlement decision while still providing some security to Plaintiffs of the original class action,” the District Court did not abuse its discretion in ordering the bond.