J.C.C.P. No. 4335
DECLARATION OF KIMBERLY A. KRALOWEC IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF REVISED CLASS ACTION SETTLEMENT
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I, Kimberly A. Kralowec, declare:
1. I am an attorney licensed to practice law in the State of California. I am the principal of The Kralowec Law Group, co-counsel for Plaintiffs in this case. I have personal knowledge of the facts stated herein and, if called as a witness, I could and would testify competently thereto. I submit this declaration in support of Plaintiffs’ Motion for Preliminary Approval of Revised Class Action Settlement.
2. I have litigated antitrust and unfair competition law cases, including class actions, for more than 16 years. I have both prosecuted and defended UCL class actions during the course of my 20-year career as a litigator. In addition to actively litigating UCL matters, I have written extensively on the subject. Since 2003, I have been the author of The UCL Practitioner (http://www.uclpractitioner.com), a legal web log on the UCL and class action practice in California and the Ninth Circuit. I have also written numerous published articles on the UCL and class action practice.
3. I first began working on this case in 2004. I was initially asked to assist in opposing a demurrer in which Visa and MasterCard challenged plaintiffs’ ability to recover restitution or injunctive relief under the UCL in this case (which argument Judge Kramer
rejected in 2004, allowing the UCL claim to proceed). I was also asked to evaluate the impact of Proposition 64, which passed in November 2004 and which amended the UCL’s standing
provisions. I handled the briefing in opposition to defendants’ motion for judgment on the pleadings based on Proposition 64, which Judge Kramer denied in 2007. I also handled the appellate briefing in connection with defendants’ writ petition challenging that ruling, which the Court of Appeal summarily denied in 2007. Since that time I have remained continuously and actively involved in the litigation of this matter, including the decision to settle.
4. I strongly support the revised settlement agreement reached in this case. Based on my experience in litigating antitrust and UCL class actions, I believe that the $31 million all-cash settlement negotiated by plaintiffs’ lead counsel is an extraordinary result for the class, in light of the very substantial risks of this litigation.
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5. In my opinion, the settlement amount is reasonable even with the inclusion of the claims asserted by objector Attridge, which I believe are weaker than the credit-debit tying claims asserted in this case and present even more risks. In connection with evaluating the original settlement, I carefully reviewed the complaints, the docket and the orders entered in the Attridge case, including transcripts of key proceedings. Those documents reveal that the scope of the Attridge action was significantly limited in 2006. First, the defendants’ demurrer to the antitrust claims was sustained without leave to amend, leaving the UCL “unfair” prong claim as the only remaining cause of action in the Attridge case. See Order Sustaining and Overruling Demurrers to Plaintiff’s Third Amended Complaint, filed May 23, 2006, at 2:3-5; Transcript of Proceedings, April 19, 2006, at 12:10-15. (A similar order was separately entered in this case.) Second, the scope of the relief was limited to recovery of finance charges paid by putative class members who are revolving cardholders and paid such interest. Order Sustaining and Overruling Demurrers to Plaintiff’s Third Amended Complaint, filed May 23, 2006, at 2:7; Transcript of Proceedings, April 19, 2006, at 16:9-13, 17:12-16, 19:20-20:1.
6. This creates significant problems for the Attridge case.
7. The most significant problem is that it will be extremely difficult to establish entitlement to restitution from the defendants who have been named in the action: Visa and MasterCard. As the Court is well aware, the UCL does not permit recovery of damages; restitution is the only form of monetary relief that is recoverable under the UCL. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003). Under California law, three types of restitutionary recovery are available under the UCL: “money taken” restitution, “vested interest” restitution, and restitutionary disgorgement.1 To be recoverable from a particular defendant, that defendant must have taken money from the plaintiff (directly or through intermediaries), or the
1
The three types of UCL restitution are discussed in detail in my article, “Three Evolving Facets of UCL Restitution,” CAOC Forum (Nov. 2007). I have closely followed the decisions handed down by the California Supreme Court and the California Court of Appeal since 2007, and the types of available UCL restitution have not further evolved since then.
J.C.C.P. No. 4335
DECLARATION OF KIMBERLY A. KRALOWEC IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF REVISED CLASS ACTION SETTLEMENT
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defendant must be in possession of money in which the plaintiff has a vested interest created by law (such as a Labor Code provision requiring payment of earned wages), contract, or equity. See, e.g., Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116 (2000); Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163 (2000); Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (2012); Shersher v. Superior Court, 154 Cal.App.4th 1491 (2007); Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663 (2006). As has been explained in briefs filed by Visa and MasterCard in this case, finance charges paid by revolving credit cardholders are paid to the banks who issued the cards, not to Visa or MasterCard. To be recoverable from Visa or MasterCard, therefore, Attridge would have to show that some portion of the finance charges he paid to his bank were later paid or transferred to Visa or MasterCard. Attridge’s counsel has never provided a satisfactory explanation of how this problem could be overcome, either from a factual or a legal standpoint.
8. I have carefully reviewed the Declaration of Dr. Andrew Safir dated October 5, 2009. This is the same declaration submitted by counsel for Atttridge years ago in connection with their objection to the original settlement agreement. As has been explained in numerous prior briefs filed in this action, Dr. Safir does not acknowledge that the Attridge case is limited to a restitutionary remedy. His declaration discusses damages. Accordingly, his opinions do not reflect an accurate assessment of the potential value of the Attridge case. Our own expert, Dr. Bamberger, has considered the limitation and evaluated the Attridge case in light of the correct legal principles.
9. Since 2009, we have filed brief after brief pointing out Dr. Safir’s failure to consider whether the harms that he identifies could actually be recovered from Visa or
MasterCard in a case in which the legal remedies have been limited to restitution, and in which damages are not recoverable. The fact that Attridge’s counsel chose to simply re-submit the same 2009 declaration of Dr. Safir, rather than discussing these issues with Dr. Safir and obtaining his opinions in light of them, calls into question their adequacy to represent the putative Attridge class. It is also troubling that Attridge’s counsel did not ask Dr. Safir to take
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into account this Court’s 2006 rulings when they asked him to form his opinions in the first place.
10. If the Court had appointed me lead counsel for Plaintiffs, I would have settled this case for the amounts that Visa and MasterCard agreed to pay here.
11. I have known Craig Corbitt for many years, and we have worked together on numerous class actions and other cases. He and his firm, Zelle Hofmann, are among the very best lawyers in the profession, and have a well-deserved nationwide reputation for zealous and successful advocacy.
12. In addition to working together on class action cases, Mr. Corbitt and I have also worked closely together as members of the Executive Committee of the Antitrust and Unfair Competition Law Section of the State Bar of California. Mr. Corbitt and I have served together on the Executive Committee of the Section since 2008. In 2011-2012, Mr. Corbitt served as the Chair while I served as the Secretary.
13. In all the cases we have had together, Mr. Corbitt has always acted in the best interest of our clients. I have never seen Mr. Corbitt or his firm accept a “cheap” settlement or sell out a plaintiff class, in this or any other case, in exchange for receiving substantial attorneys’ fees or benefiting some other person. His and his firm’s work on the LCDs antitrust case in particular was extraordinary. Based on my many years of working with Mr. Corbitt, I can attest to his integrity, and do not believe that he would ever engage in such conduct.
14. It makes no sense for Attridge’s counsel to attempt to assert that Mr. Corbitt’s firm has a disqualifying conflict of interest when numerous other firms represent the plaintiffs and the putative class along with Mr. Corbitt. My firm has no conflict of the kind identified by Attridge’s counsel and could ably represent the class along with Cooper & Kirkham, Saveri & Saveri, my own former partners at Schubert Jonckheer & Kolbe, and the numerous other highly respected firms who are serving as our co-counsel in this case. The failure of Attridge’s counsel to perceive this obvious problem with their challenges to Mr. Corbitt’s firm calls into question their own adequacy to represent a putative class.
