The economics of some class action lawsuits just don’t make sense!

If you live in California and you have had an eye exam at LensCrafters and also purchased eye glasses or contacts on the same day, you might be eligible to participate in a “Class Action” lawsuit that alleges wrong doing by LensCrafters.

Last week I received a post card sized letter entitled “Claim Form” notifying me that I qualified as a Class Member under one of the two Settlement Classes. In the interest of understanding the allegations which are the basis for the litigation, I diligently read over the fine print included with the Claim Form.

You should never sign a document without first understanding what it is that you are signing. If you receive a Claim Form, I encourage you to read over the terms before you blindly accept any offer.

The terms of the settlement as described in the Claim compelled me to write the following letter in response to the absurdity of the offer.

April 29, 2008

Clerk of the Court
Superior Court of California
County of San Francisco
Civic Center Courthouse
400 McAllister Street
San Francisco, CA 94102

RE: Snow et al. v. LensCrafters, et al., Case No. CGC-02-405544 (San Francisco Superior Court)

Dear Judge Kramer:

I am a member of the Settlement Class and in receipt of a Claim Form [claim#:LCS-10271317-0-01 0083147] for the above entitled class action (the “Action”).

In my capacity as a Certified Public Accountant and a business advisor, I must object to the proposed settlement as described in the “FULL NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION. Snow et al. v. LensCrafters et al., CGC-02-405544 (San Francisco Superior Court).”

If I was consulting on behalf of the Defendants in this litigation, I would be turning cartwheels followed by the Snoopy Dance if the cash and “Vouchers” that are proposed in the Settlement are approved by the court as a fair offer.

The offer describes two levels of Class Members who are eligible to benefit from the Action if the Member completes and returns a Claim Form. Class 1 [one] Members are entitled to a cash payment of $30 or a $75 Voucher [defined later]. Class 2 [two] Members are entitled to a $40 Voucher. If less than 50% of Class 1 Members return the Claim Forms then Class 1 Members will receive an enhancement of an additional $25 Voucher.

The Vouchers as described in the offer are restricted to any product or service offered by either EYEXAM or LensCrafters and will expire within one year. Based on this restriction, the use of the Vouchers by the Class Members will likely stimulate sales and increase “cross sell” opportunities for the Defendants similar to the way that customer rebates or coupons create competitive pricing perception and other competitive advantages since these Vouchers will bring customers into the Defendants establishments by providing instant rebates at the time services are rendered or product is purchased.

Studies have shown that retailers that offer coupons [or rebates] often see sales increase even though a relatively small amount of coupons that are issued are actually redeemed. A 2003 NCH Marketing report which is cited in The Coupon Report A study of Coupon Discount Methods March 2004 by researchers at Cornell University found that of the 248 billion coupons issued by U.S. businesses in 2002 only approximately 3.8 billion were actually redeemed [approximately 1.25%]. The reasons for this low redemption rate varied from the age of the respondents to the household income of the respondents.

Based on the facts as presented, it is clear that the proposed settlement agreement provides a win win for the Defendants since it is highly unlikely that all of the Vouchers will be redeemed by the affected Class Members. Marketing research also shows that the Class Members who redeem the Vouchers are likely to spend amounts in excess of the settlement received on the Defendants products and services.

The proposed settlement will pay attorneys’ fees up to $4,000,000, and court costs up to $225,000 to Class Counsel; and will pay $5,000 to each of the two Class Representatives. Defendants will pay for the costs of notice and settlement administration. Again a win win for the attorneys who will be receiving a significant amount and the two Class Representatives since they are being paid in cash and not in Vouchers.

Vouchers are an unfair settlement offer since they restrict the Class Members right to use the settlement proceeds to redeem services from a company that the Class Member feels deserves his or her patronage. It prevents the ability to comparison shop. My personal vision insurance coverage allows for eye glasses every two years. The Voucher creates a use it or lose it scenario which may conflict with vision coverage since the Vouchers may expire before Class Members are eligible under their Health Plan to seek eye care.

But with all of that said class action lawsuits such as this one are riddled with moral dilemma. As a Class Member, I find myself struggling with how I should approach my right to this claim.

Although the Defendants deny that they have committed any violation of law or engaged in any of the wrongful acts alleged in the complaint filed in the Action, my twenty five years of experience in business [twelve of which have been in public accounting] helps me to recognize some important facts about business and its management. In my expert opinion, business managers who violate laws or who conduct business in an inappropriate manner are usually found to have some common traits. They tend to be grossly incompetent and or management lacks integrity. It could also be argued that companies that violate laws either did not seek out competent advice or just plain ignored the advice that was given. This underlying principal questions the competency of the continuing services that may be provided by the Defendants.

In my mind and I suspect in the mind of many “non lawyers” I look at this litigation and I ponder about my moral obligation to consider whether I deserve to benefit from this Action. I suppose I can choose to believe that the Defendant is guilty of the allegations or at least some sort of wrong doing which justifies my right to receive a settlement – that is I have a right to receive something from the Defendant beyond my right as a “Class Member” which is based on the mere operation of law [i.e. the company is completely innocent and only makes the settlement offer as a means to get rid of a meritless lawsuit – in which case I do not wish to participate].

I suppose it could be argued that some businesses need the deterrent of litigation to help them keep the public’s interest ahead of their profit goals, but I can’t help to think that there must be a better solution.

I recognize that my argument is logic based and not necessarily applicable in terms of the operation of the law. But in my opinion it warrants consideration.

By allowing any part of the settlement to be paid in the form of a Voucher, the court is forcing the Class Members to conduct business with a potentially incompetent company or at the very least a company that lacks integrity because if the assumption is wrong, I must then assume that the litigation is meritless and the Class Members shouldn’t be getting anything at all. The Voucher concept is if anything a moral “lose lose” for the Class Members.

The dollar amount offered to the Class 1 Members is arguably an insignificant amount relative to the individual Member. The Settlement offer appears to unduly favor the Defendant and the attorneys, but lacks fairness in terms of the customers who were allegedly harmed by the actions of the Defendants.

In the interest of fairness and in the public’s interest, I propose that the settlement offer state that the Defendants will make a charitable contribution on behalf of the Class Members in an amount comparable to the cash and Vouchers that are being offered in the Proposed Settlement unless the Class Member at his or her option elects to receive the cash or Voucher applicable to their Settlement Class. The Defendant should not benefit from Class Members who do not respond to the Claim, but should allocate the funds that would have been necessary to pay non responding Class Members or honor Vouchers to charity. This Settlement Proposal provides benefit to the public, removes the moral dilemma of the Class Members, and provides an appropriate deterrent for other companies who might violate the law.

I urge the Court to reject the proposed settlement in its current form and opt for a settlement that better serves the public’s interest. Otherwise the court should simply dismiss the lawsuit in its entirety. Any other conclusion simply defies logic and seems to enrich everyone except the Class Members.

Thank you for your consideration in this matter.

Very truly yours,

Stacie Clifford Kitts, CPA

CC: Matthew D. David
Walkup, Melodia, Kelly & Schoenberger
650 California Street, 26th Floor
San Francisco, CA 94108

Lori A. Schechter
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105