Boston, MA 09/22/2014 (wallstreetpr) – A federal appeals court has declared the class-action settlement between RadioShack Corporation (NYSE:RSH) and its customers as void, stating that the actual benefits of the consensus were too low in comparison to the proposed legal fees. The settlement was intended as a resolution to customers who opposed RadioShack’s printing the credit and debit card expiry dates on receipts. The customers claimed Radio Shack had violated the federal Fair and Accurate Credit Transactions Act as this practice put them at an increased risk of identity theft in case the receipt was lost.
The settlement proposed a $1 million fee, which translated into each of the roughly 83,000 class members receiving a $10 voucher redeemable at RadioShack Corporation (NYSE:RSH) stores.
Judge Richard Posner, writing for a three-judge bench, observed that RadioShack Corporation (NYSE:RSH)’s weak financial condition and its recent announcement that it may file for bankruptcy may have driven such a settlement. He also noted that all the vouchers may not be redeemed by the customers, further reducing the settlement value and these terms could have transferred some of the steep litigation fees to the customers.
Paul Markoff, a lawyer representing the class members acknowledged that the settlement had indeed been impacted by RadioShack’s instable financial condition. He further added, “We built protections into this settlement in the event RadioShack Corporation (NYSE:RSH) were to file for bankruptcy, and believed the alternative to this settlement was that the class would get nothing. Now that the settlement has been thrown out, that may be the most likely scenario.”
On the other hand, Ted Frank who represents a couple in the case was hailed the court’s decision, stating that the beneficiaries in any class-action settlement must be the class members and the thrust must be on the actual recovery rather than a hypothetical inflated figure.
The case has now been returned to the federal district court in Chicago for further proceedings.