An attorney for objectors to a settlement between a class of current and former California Pizza Kitchen employees and the restaurant chain over a data breach told a Ninth Circuit panel on Monday that the district court did not properly scrutinize the deal or allegations of collusion between the parties.

The objectors' attorney, Theodore Walter Maya of Ahdoot & Wolfson PC, told the panel that the deal is worth far less than the $3.7 million valuation assigned by California Pizza Kitchen and the settling plaintiffs.

Problems with the settlement include exorbitant attorney fees for the class counsel, and that U.S. District Judge David O. Carter's orders approving the deal did not address the collusion allegations raised by the objectors even though the judge said on the record that he was troubled by them, Maya argued.

Judge Carter "never explained in the final order and judgment or in any of the transcripts why we shouldn't be concerned by these signs of collusion," Maya said.

Maya appeared to find at least one judge receptive to some of his arguments, as U.S. Circuit Judge Daniel P. Collins said several times that Judge Carter's approval of the settlement looked like a "rubber stamp," and that despite raising concerns during the proceedings about collusion, he never explained away those concerns in the written record.

"It's a complete rubber stamp," Judge Collins told counsel for the class. "He just took out the general formula, slapped it in the order, and we have no idea what he did with all that stuff that he developed over two days, he just didn't tell us."

"He made a great record, and the ruling is a cipher," Judge Collins added.

California Pizza Kitchen, or CPK, notified those affected by the breach in November 2022, after determining a month earlier that Social Security numbers and other information may have been stolen, the company said in a disclosure to the Maine attorney general's office. The company first discovered "suspicious activity" on its network on Sept. 15, prompting an investigation into the scope of the incident, it told Maine authorities.

Four lawsuits connected to the attack, which affected about 100,000 of CPK's current and former employees, were consolidated and included allegations that CPK was negligent in allowing the breach to happen and broke an implied contract with current and former employees to adequately protect their personal data.

The plaintiffs and CPK asked the court in May 2022 to approve a deal that they said had "a conservative value" of more than $3.7 million if even 2% of the class were to seek reimbursement for "ordinary" expenses of up to $1,000, and up to $5,000 for "extraordinary expenses." The group of objectors argued to Judge Carter that it was a "rotten deal" that appeared to be reached through collusion and ignored the potential of the claims under California's Consumer Privacy Act, which they valued at $77 million.

Judge Carter ultimately approved the deal. On appeal, the objectors argued the settlement "at most" could come to $497,974.50, with $800,000 in attorney fees. Although Judge Carter expressed concerns over the attorney fees and the collusion allegations during in-person hearings, the preliminary and final orders did not address those concerns, according to the objectors.

On Monday, Judge Collins repeatedly raised the issue of the order not addressing the concerns the judge expressed orally. Judge Kenneth K. Lee did not go as far as Judge Collins, but did say it looked as if Judge Carter didn't address his previous concerns about the attorney fees, while Judge Richard Clifton focused his questions on the merits of the case.

When Judge Collins asked Maya if the judge's order had an "articulation" issue of not explaining the court's reasoning, Maya agreed, but added that there is also a real "fairness" problem with the settlement as a whole "beyond any just matter of articulating what scrutiny was applied and the outcome of that," and that the settlement approval should be reversed and sent back to the lower court because it's overall a bad deal.

David Lietz of Milberg Coleman Bryson Phillips Grossman PLLC, who represents the settlement class, when confronted with Judge Collins' "rubber stamp" assessment, told him he agreed that Judge Carter's order "doesn't articulate with specificity what exactly he relied upon," but said if the panel looked "holistically" at the transcripts and full record of the proceedings it is obvious the judge developed an "extensive record through the court hearings and talks about why it is that he rejects the allegations of collusion."

Judge Collins disagreed, and said Judge Carter expressed various concerns and "then in the order, nothing. I don't know what he did with it."

Jon Peter Kardassakis of Lewis Brisbois Bisgaard & Smith, LLP, who represents CPK, told the panel that it's clear from the record as a whole Judge Carter "did take quite seriously these allegations of collusion."

"But I don't know why," Judge Collins said. "He said he was troubled by it, and then the next day he wasn't, and I don't know why."

Kardassakis responded that it was because of the "lack of substance" in the collusion allegations. He also noted that Judge Carter brought the mediator in to give live testimony, something Kardassakis said he'd never experienced before, and that the judge said he was "satisfied" with the mediator's testimony.

The objectors are represented by Theodore Maya of Ahdoot & Wolfson PC.

The proposed class is represented by David K. Lietz of Milberg Coleman Bryson Phillips Grossman PLLC.

California Pizza Kitchen is represented by Jon Peter Kardassakis of Lewis Brisbois Bisgaard and Smith LLP.

The case is Aviva Kirsten et al. v. California Pizza Kitchen Inc., case number 23-55288, in the U.S. Court of Appeals for the Ninth Circuit.