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7-Eleven Owners For Fair Franchising v. Southland Corp.12/29/2000
referred means of dispute resolution. This is especially true in complex class action litigation . . . ." (Officers for Justice, supra, 688 F.2d at p. 625) and that, according to the Dunk court, "a presumption of fairness exists where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small." (48 Cal.App.4th at p. 1801.)
a. Strength of Plaintiffs' Case.
Mr. Culp presented his assessment of the merits of plaintiffs' case in testimony at the approval hearings. Counsel thought two of the four RDA claims had a good chance at prevailing if the case went to trial-the equipment claim and the McLane transition allowance claim. These claims Culp estimated had a value of between $15 million and $20 million respectively. But he thought the plaintiff class would lose the SDC RDA claim for the reasons given above, as well as the advertising allowance claim, because the bulk of these were "cooperative" in nature and thus exempt from sharing under the terms of the RDA franchise provision. Culp also acknowledged the role played by the significant limitations issue pending in the Texas court and that failure there would wipe out a majority of the claims of the non-California class members. Moreover, because of an apparent breach of the attorney-client privilege, the trial court had before it a copy of Culp's confidential memorandum to the class representatives, authored well before the settlement negotiations had begun, detailing a candid assessment of the merits of the case. And that document was not only not an after-the-fact appraisal, but its conclusions dovetailed with those of the trial judge, who remarked, "I have looked at these contract provisions and I have serious reservations about whether there have been breaches sufficient even to bring these damages issues into account with the singular exception of the equipment allowances."
b. The Risk, Expense, Complexity, and Duration of Further Litigation and the Risk of Maintaining Class Action Status Through Trial.
Proponents suggest that trial of the RDA claim might well require an examination of every invoice Southland's vendors provided it over a decade in order to ascertain the magnitude of the claims at issue. Whether that is true or not, it seems clear enough that trial of the case would have required the preparation and testimony of opposing financial and accounting experts, as well as their depositions and the not insubstantial associated litigation costs. Trial itself would have been lengthy and complex. And, as detailed elsewhere in this opinion, the risks of maintaining class action status and pursuing judgment through trial would have been large.
c. The Amount Offered in Settlement.
Proponents point out that, given the problems with proof, the uncertain fate of the limitations issue in the Texas lawsuit, and an interest on the part of both sides in ending divisive litigation that threatened to harm ongoing business relationships, a settlement fund of $37 million was not unattractive. The litigation interfered with attempts to cooperate in a successful business, especially after recent business reversals suffered by Southland and its franchisees.
d. Stage at Which Settlement is Reached.
As noted, settlement came only after some four and a half years of litigation, including voluminous discovery and many motions filed and argued by both sides. The trial court was afforded the opportunity both to review many of the materials produced by discovery and to observe at clo
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