discussing in detail the complexity of estimating damages in cases where the 9 harm arises from deceptive advertising
How later courts described this case
- discussing in detail the complexity of estimating damages in cases where the 9 harm arises from deceptive advertising
- noting “class members are suing due to an 4 online-DVD rental agreement” but could purchase “many products beyond DVDs” with 5 the gift card
- “Of the 62,000 products, only about 5,800 of them are 3 under $ 18” voucher limit
- noting that Defendants’ “e-credits” were “coupons” in part because 1 they “expire six months after issuance”
Written by the judges who cited it.
The opinion
1
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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 MONICA RAEL and ALYSSA Case No.: 3:16-cv-00370-GPC-LL
HEDRICK, on behalf of themselves and
12
all others similarly situated, ORDER
13
Plaintiffs,
(1) CERTIFYING PROVISIONAL
14
v. SETTLEMENT CLASS;
15
THE CHILDREN’S PLACE, INC., a
(2) GRANTING PRELIMINARY
16 DELAWARE corporation, and DOES 1-
APPROVAL OF CLASS ACTION
50, inclusive,
17 SETTLEMENT;
Defendant.
18
(3) PROVIDING FOR NOTICE TO
19 THE SETTLEMENT CLASS;
20
(4) APPOINTING NAMED
21 PLAINTIFFS, CLASS COUNSEL,
AND CLAIMS ADMINISTRATOR;
22
AND
23
(5) SETTING FINAL APPROVAL
24
HEARING AND CRITICAL DATES.
25
ECF NO. 60.
26
27
Before the Court is the Plaintiffs’ amended, unopposed motion for preliminary
28
1 approval of settlement and provisional class certification. (ECF No. 60.) For the reasons
2 detailed below, the Court GRANTS Plaintiffs’ motion.
3 To assist the reader, the Court sets out the structure of the opinion to follow. In
4 Section I, the Court summarizes the factual and procedural background to this motion,
5 including the material terms of the Settlement Agreement (“SA”). (See ECF No. 60-2,
6 Ex. 1, SA.) Section II addresses the motion for provisional class certification under
7 Federal Rules of Civil Procedure (“Rules”) 23(a) and 23(b)(2). Section III addresses the
8 motion for preliminary approval of the Settlement Agreement. The Court analyzes four
9 discrete questions: (a) whether what has been agreed upon is a coupon settlement; (b)
10 whether the Settlement is fair, reasonable, and adequate; (c) whether the Settlement
11 shows signs of collusion between Defendant and Class Counsel; and (d) whether the
12 Notice Plan is adequate. Finally, in the Conclusion at Section IV, the Court summarizes
13 its holdings, findings, and orders to the Parties.
14 The Court advises Class Members reading this opinion that any summary of the
15 Settlement Agreement is not a substitute for the Agreement itself and directs the reader to
16 review the Settlement Agreement.
17 I. Background
18 a. Procedural Background
19 On February 11, 2016, Plaintiff Monica Rael brought suit on behalf of herself and
20 all others similarly situated against Defendant the Children’s Place, Inc. (“TCP” or
21 “Defendant”) and fifty unnamed Does (collectively, “Defendants”). (ECF No. 1.)
22 Plaintiff Rael amended the complaint three times and added a second Named Plaintiff,
23 Ms. Alyssa Hendrick (collectively, “Plaintiffs” or “Named Plaintiffs”). (ECF Nos. 9, 19,
24 29, 37-2.) On November 22, 2017, Plaintiffs filed the Third Amended Complaint
25 (“TAC”) alleging three causes of actions for violations of (1) California’s Unfair
26 Competition Law (“UCL”), CAL. BUS. & PROF. CODE § 17200 et seq.; (2) California’s
27 False Advertising Law (“FAL”), CAL. BUS. & PROF. CODE § 17500 et seq.; and (3)
28 California’s Consumer Legal Remedies Act (“CLRA”), CAL. CIV. CODE § 1750 et seq.
1 (ECF No. 37-2, Ex. B, TAC at ¶¶ 51–78.) In short, Plaintiffs’ three causes of action stem
2 from the accusation that Defendant routinely advertises discounted prices from false
3 original prices to deceive customers as to the real value of their goods and unlawfully
4 drive sales. (Id. at ¶¶ 1–9.)
5 On November 22, 2017, Plaintiffs also filed the initial unopposed motion for
6 preliminary approval of settlement and provisional class certification. (ECF No. 36.) The
7 Court heard that motion on February 8, 2018. (ECF No. 42; see also Transcript for
8 February 8, 2018 Hearing (“2018 Tr.”)). On April 2, 2018, the Court stayed proceedings
9 pending the Ninth Circuit’s decision on the petitions for rehearing en banc in In re
10 Hyundai & Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018). (ECF No. 48.)
11 The Court denied Plaintiffs’ initial settlement motion on June 8, 2018 as moot. (ECF No.
12 49.) The Parties filed status updates during the pendency of the stay. (ECF Nos. 50, 53.)
13 On June 17, 2019, the Court lifted the stay. (ECF No. 57.) Then, on October 31,
14 2019, Plaintiffs filed an amended motion for preliminary approval of settlement and
15 provisional class certification. (ECF No. 60). Plaintiffs included the declarations of Mr.
16 Todd Carpenter as Class Counsel, (ECF No. 60-2, 2019 Declaration of Todd Carpenter
17 (“2019 Carpenter Decl.”)), and Ms. Carla Peak of the firm Kurtzman Carson Consultants
18 LLC (“KCC” or “Claims Administrator”). (ECF No. 60-3, Declaration of Carla Peak
19 “Peak Decl.”)).1 On November 22, 2019, TCP filed a notice of non-opposition. (ECF No.
20 61.)
21 On December 6, 2019, the Court held a second hearing on Plaintiffs’ unopposed
22 motion. (ECF No. 63; see also Transcript for December 6, 2019 Hearing (“2019 Tr.”)).
23 The Court then ordered the Parties supplement the record with factual support for their
24 assertions at the hearing. (ECF No. 65.) On January 3, 2020, the Parties filed three
25
26
27 1 To be more precise, Plaintiffs first filed the amended motion on October 25, 2019, which the Court
then rejected for a minor procedural error. (ECF Nos. 58, 59.) Plaintiffs quickly corrected that error and
28
1 documents complying with the Court’s order: (a) another declaration by Class Counsel
2 Todd Carpenter dated January 3, 2020, (ECF No. 66, Declaration of Todd Carpenter
3 (“2020 Carpenter Decl.”)); (b) Plaintiffs’ supplemental briefing, (ECF No. 67); and (c)
4 the declaration of Vipul Jain, a TCP employee. (ECF No. 68 at 2, Declaration of Vipul
5 Jain (“Jain Decl.”)).
6 b. Factual Background
7 This Section summarizes the material facts of the Settlement Agreement, including
8 (i) the proposed Class, (ii) the releases and warranties provided to Defendant, (iii) the
9 Voucher Fund created by Defendant to compensate the Class, (iv) the awards to Class
10 Counsel and the Named Plaintiffs entailed in the Settlement, and (v) the Notice Plan.
11 i. The Proposed Class
12 Plaintiffs seek provisional certification of a nationwide class including “[a]ll
13 individuals in the United States who, from February 11, 2012 through the date the Court
14 enters the preliminary approval order, purchased any product bearing a discount at one of
15 The Children’s Place retail or outlet stores” (the “Class”). (ECF No. 37-2, TAC at § 43;
16 ECF No. 60-2, Ex. 1, SA at § 1.8.) “Defendant, Defendant’s counsel, Defendant’s
17 officers, directors, and employees, and the judge presiding over the action” are to be
18 excluded. (Id. at § 1.8.)
19 Plaintiffs further divide the Class into three Tiers. (Id. at § 2.1.) “Tier 1 Authorized
20 Claimants” include individuals whose qualifying purchases total less than $50, or any
21 individuals who do not submit proof of their purchases. (Id. at § 2.1(a)). “Tier 2
22 Authorized Claimants” include individuals whose qualifying purchases total $50.01 to
23 $150. (Id. at § 2.1(b)). “Tier 3 Authorized Claimants” include individuals whose
24 qualifying purchases total more than $150. (Id. at § 2.1(c)). Tier 2 and Tier 3 Claimants
25 are required to submit proof of their purchases. (Id. at §§ 2.1(a)–(b)). Tier 1 Claimants
26 get one voucher, Tier 2 Claimants get two vouchers, and Tier 3 Claimants get three
27 vouchers. (Id. at § 2.2).
28 ii. The Releases & Warranties
1 Under the Settlement Agreement, the Class agrees to release TCP from any and all
2 claims they have against it. (ECF No. 60-2, Ex. 1, SA at § 2.11.) This includes all “Class
3 Released Claims,” i.e. all claims “arising out of or relating to any of the acts, omissions
4 or other conduct that have or could have been alleged or otherwise referred to in the
5 Complaint.” (Id. at § 1.10.)
6 Class Members also agree to waive all “Unknown Claims.” (Id. at §§ 1.31, 2.11.)
7 Under this provision, Class Members waive the protection of California Civil Code §
8 1542 and thereby relinquish claims which they do “not know or suspect to exist . . . at the
9 time of executing the release and that, if known . . . would have materially affected . . .
10 settlement.”2 (Cal. Civ. Code § 1542; Id. at § 1.31.) Per the representation of Class
11 Counsel, the release of Unknown Claims only extends to “issues that were alleged in the
12 complaint related to [TCP’s] advertising.” (2019 Tr. at 14.)
13 The Named Plaintiffs likewise release Defendant from future liability. (Id. at §
14 2.12.) Defendant, moreover, admits no wrongdoing and affirmatively denies “each of the
15 claims and contentions alleged by Plaintiffs in the Action.” (Id. at § 2.13.)
16 iii. The Voucher Fund
17 To compensate the Class for settling this action, the Settlement Agreement
18 provides for a “Voucher Fund” which will contain 800,000 vouchers to be awarded to
19 qualifying Class Members. (ECF No. 60-2, Ex. 1, SA at §§ 1.33, 2.1–2.4) Vouchers may
20 be used at a TCP store, outlet, or online, and come in one of two forms: “(i) $6 off a
21 purchase (no minimum purchase) or (ii) 25% off a purchase (of the first $100).” (Id. at §
22 1.32.) Vouchers are “transferable,” valid for 6 months, and “may be used on items that
23 are on sale or otherwise discounted.” (Id.) Vouchers cannot be “combined with any other
24 coupon or promotional offer,” redeemed for cash, or replaced if lost, stolen, or damaged.
25
26
2 As with the known claims, the release language encompassing “Unknown Claims” is “limited to a
27 universe of claims ‘arising out of or relating to any of the acts, omissions or other conduct that have or
could have been alleged or otherwise referred to in the Complaint . . .’” (ECF No. 60-1 at 25 (quoting
28
1 (Id.) The $6 vouchers are “stackable” while the 25% vouchers are not. (Id.)
2 To obtain a voucher, Class Members must comply with the Claims Procedure
3 detailed in the Settlement Agreement. (ECF No. 60-2, Ex. 1, SA at §§ 3.6–3.10.) The
4 Procedure permits Class Members to file a claim with the Claims Administrator, object to
5 the Settlement Agreement, or request to be excluded from the Class. (Id.) Class Members
6 must perform these actions on or before the response deadline, which would initially be
7 set at 120 calendar days after the entry of this Order. (Id. at §§ 1.28, 3.6.) Class Members
8 may also request to appear at the Fairness Hearing. (Id. at § 3.9(c)). In addition to
9 collecting biographical information, the Claim Form asks Claimants to select their Tier,
10 note their purchases and any available proof, choose which voucher to obtain, and
11 provide an e-mail address for electronic delivery. (ECF No. 60-2, Ex. E, Claim Form).
12 As noted, the number of vouchers each Claimant receives will be equal to the Tier
13 number. (ECF No. 60-2, Ex. 1, SA at § 2.2.) If there are timely claims to more than
14 800,000 vouchers in the first round of distribution, the Fund will only distribute dollar-
15 based vouchers, and the value of those vouchers will be calculated on a pro rata basis.
16 (Id. at § 2.4) In subsequent rounds of distribution, Claimants receive vouchers according
17 to the selections made in their Claim Forms. (Id. at § 2.3(a)–(b)). Again, if there are
18 fewer vouchers left in the Voucher Fund than are timely claimed in any subsequent round
19 of distribution, the Fund will then disburse only dollar-value vouchers at a pro-rated
20 value. (Id. at § 2.3(c)).
21 iv. Awards to Counsel and Named Plaintiffs
22 The Settlement Agreement also permits the Named Plaintiffs and Class Counsel to
23 recover fees independent of the Voucher Fund. Each Named Plaintiff may recover an
24 “Individual Settlement Award” of $2,500 or less, subject to the Court’s approval. (ECF
25 No. 60-2, Ex. 1, SA at § 2.6.). Class Counsel may seek up to $1,080,000 in costs and fees
26 (total), subject to the Court’s approval. (Id. at § 2.7.) If the Court awards less than that
27 maximum amount in fees and costs to Class Counsel, the difference between the actual
28 award and $1,080,000 will go to the Voucher Fund or, if certain criteria are met, become
1 a cy pres distribution to the National Consumer Law Center. (Id. at § 2.8.)
2 v. The Notice Plan
3 The Settlement Agreement provides for a tri-part notice structure, hereafter
4 referred to as the Notice Plan. (ECF No. 60-1 at 9–12.) First, the Claims Administrator
5 will post the Full Notice – a document explaining the Settlement Agreement, the Class,
6 this Order, and other information critical to the Class Members – to an internet website
7 specifically created for this settlement (the “Settlement Website”). (Id. at 9; ECF No. 60-
8 2, Ex. 1, SA at § 3.3(a); ECF No. 60-2, Ex. B, Full Notice)). The Settlement Website will
9 also contain the Claim Form, TAC, Settlement Agreement, a notice of attorneys’ fees and
10 costs, and this Order. (ECF No. 60-2, Ex. 1, SA at § 3.3(a)). Claimants may file claims
11 electronically through the Settlement Website. (Id.)
12 Second, the Claims Administrator will “use reasonable efforts to identify those
13 TCP customers who may be Class Members for whom it has a valid email address” and
14 provide e-mail notice to those addresses. (Id. at § 3.3(b)). These e-mails will come, in
15 part, from Defendant’s e-mail records of its “rewards club members.” (See 2018 Tr. at 2.)
16 The e-mails – which would go to addresses “in the range of 12.5 million” – will contain
17 the address of the Settlement Website, and the e-mail and mailing addresses of the
18 Claims Administrator. (ECF No. 60-3, Peak Decl. at ¶ 4.)
19 Third, the Claims Administrator “will start implementing an online notice program
20 through the Google Display Network.” (ECF No. 60-2, Ex. 1, SA at § 3.3(c); see also
21 ECF No. 60-2, Ex. D, Online Media Notice.) In sum, these notices will be short online
22 advertisements, posted to the Google Display Network,3 that target individuals 18 years
23 of age or older and contain a link to the Settlement Website. (ECF No. 60-3, Peak Decl.
24 at ¶¶ 5–8.)
25 The Parties claim that their tri-part Notice Plan will reach approximately 70% of
26
27
3 See Google, Inc., Display Network Overview, https://www.google.ca/ads/displaynetwork/index.html
28
1 the class on average 2.5 times each. (ECF No. 60-3, Peak Decl. at ¶ 8.) TCP agrees to
2 bear the “administration costs, notice costs . . . and any other related costs (including, but
3 not limited to, distribution),” consistent with § 3.3 of the Settlement Agreement, and up
4 $1,000,000. (Id. at § 2.10.) The Parties, through the Claims Administrator, will execute
5 the Notice Plan within sixty days (60) of the entry of this order. (Id. at § 3.3.)
6 II. Certifying Provisional Settlement Class
7 This Section examines Plaintiffs’ request for provisional certification of the Class.
8 Pursuant to Rules 23(a) and 23(b)(3), the Court GRANTS this request and provisionally
9 certifies the Class.
10 a. Rule 23(a) Requirements
11 Class certification is governed by Rule 23. Wal-Mart Stores, Inc. v. Dukes, 564
12 U.S. 338, 345 (2011). Under Rule 23(a), the party seeking certification must demonstrate
13 that “(1) the class is so numerous that joinder of all members is impracticable; (2) there
14 are questions of law or fact common to the class; (3) the claims or defenses of the
15 representative parties are typical of the claims or defenses of the class; and (4) the
16 representative parties will fairly and adequately protect the interests of the class.” Fed. R.
17 Civ. P. 23. For the foregoing reasons, the Court finds Rule 23(a) is satisfied.
18 i. Numerosity
19 The numerosity “requirement is met if the class is so large that joinder of all
20 members is impracticable.” Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1029
21 (9th Cir. 2012) (citing Fed. R. Civ. P. 23(a)). Impracticability “does not mean
22 impossibility, but only the difficulty or inconvenience of joining all members of the
23 class.” Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913–14 (9th Cir. 1964)
24 (quotations omitted). “Where the exact size of the proposed class is unknown, but general
25 knowledge and common sense indicate it is large, the numerosity requirement is
26 satisfied.” In re HiEnergy Techs., Inc. Sec. Litig., No. 8:04-CV-01226-DOC, 2006 WL
27 2780058, at *3 (C.D. Cal. Sept. 26, 2006). “Although there is no exact number, some
28 courts have held that numerosity may be presumed when the class comprises forty or
1 more members.” Krzesniak v. Cendant Corp., No. C-05–05156-MEJ, 2007 WL 1795703,
2 at *7 (N.D. Cal. June 20, 2007).
3 Here, numerosity is satisfied. Though an estimate of the total number of potential
4 Class Members eludes the parties, it is reasonable to assume that number may be in the
5 millions. (See ECF No. 60-3, Peak Decl. at ¶ 4 (noting the Claims Administrator expect
6 to receive e-mail addresses “in the range of 12.5 million” for potentially affected
7 consumers)). Defendant, moreover, has not disputed numerosity since pre-mediation
8 discovery took place. (ECF No. 60-2, 2019 Carpenter Decl. at ¶ 3.)
9 ii. Commonality
10 “To establish commonality, the existence of shared legal issues with divergent
11 factual predicates is sufficient, as is a common core of salient facts coupled with
12 disparate legal remedies.” Parra v. Bashas’, Inc., 536 F.3d 975, 978 (9th Cir. 2008)
13 (quotations and citations omitted). In other words, not all questions of fact and law need
14 to be common to satisfy commonality. See Hanlon v. Chrysler Corp., 150 F.3d 1011,
15 1019 (9th Cir. 1998); see also Staton v. Boeing Co., 327 F.3d 938, 953 (9th Cir. 2003)
16 (finding commonality for a class of more than 15,000 Boeing workers facing company-
17 wide discriminatory practices).
18 Here, commonality is satisfied. The Class Members’ claims stem from the same
19 factual circumstances, namely, the purchasing of TCP merchandise bearing some
20 discount at a TCP store, outlet, or webpage after February 11, 2012. Likewise, each Class
21 Member’s claims involve common questions of law, including: “(1) whether defendant’s
22 price-comparison advertising scheme regarding its private and exclusive branded apparel
23 and accessories was false or misleading within the meaning of the UCL, FAL or CLRA;
24 (2) whether defendant made false statements in its advertisements; [and] (3) whether
25 defendant’s advertisements were likely to deceive a reasonable consumer.” See Spann v.
26 J.C. Penney Corp. (“Spann I”), 307 F.R.D. 508, 518 (C.D. Cal. 2015), modified, 314
27 F.R.D. 312 (C.D. Cal. 2016). Thus, like the class action in Spann I, here the class meets
28 the requirement of Rule 23(a)(2). Spann I, 307 F.R.D. at 518.
1 iii. Typicality
2 Rule 23(a)(3) requires that the “claims or defenses of the representative parties are
3 typical of the claims or defenses of the class.” Fed. R. Civ. P. 23 “The test of typicality is
4 whether other members have the same or similar injury, whether the action is based on
5 conduct which is not unique to the named plaintiffs, and whether other class members
6 have been injured by the same course of conduct.” Achziger v. IDS Prop. Cas. Ins. Co.,
7 772 F. App’x 416, 417 (9th Cir. 2019) (quoting Hanon v. Dataproducts Corp., 976 F.2d
8 497, 508 (9th Cir. 1992)).
9 Here, typicality is satisfied. Plaintiffs have claims, and suffered injuries, typical of
10 the Class. As with the other Members, Plaintiffs raise claims under UCL, FAL, and
11 CLRA pertaining to TCP’s pricing scheme. Also, like other Class Members, Plaintiffs’
12 primary injury is the loss of income from purchases made at TCP stores as a result of
13 TCP’s false discounts. Plaintiff Monica Rael, for example, purchased jeans for
14 “approximately $7.47” with the understanding that she was receiving a “50%” discount,
15 only to find that the jeans were not sold at the “original” price in the 90 days preceding
16 her purchase, and that those jeans “were of lesser value than what she paid.” (ECF No.
17 37-2, TAC at §§ 13–14.) Similarly, Plaintiff Alyssa Hendrick was “enticed to purchase
18 jeans” for $9.99 under the presumption that she had received a 40% discount, only to find
19 that the jeans were “never offered for sale as the [TCP outlet] at the full regular price of
20 approximately $16.50.” (Id. at §§ 15–16.) Plaintiffs’ purchases, moreover, are likely
21 comparably priced to those of many potential Class Members as “[h]undreds of items are
22 available [at TCP locations and online] for sale at less than $6.00.” (ECF No. 60-2, 2019
23 Carpenter Decl. at ¶ 12.)
24 iv. Adequacy of Representation
25 The adequacy requirement “serves to uncover conflicts of interest between named
26 parties and the class they seek to represent.” Amchem Prod., Inc. v. Windsor, 521 U.S.
27 591, 625 (1997) (citation omitted). Thus, to determine adequacy, the Court must “resolve
28 two questions: ‘(1) do the named plaintiffs and their counsel have any conflicts of interest
1 with other class members and (2) will the named plaintiffs and their counsel prosecute the
2 action vigorously on behalf of the class?’”. In re Hyundai & Kia Fuel Econ. Litig., 926
3 F.3d 539, 566 (9th Cir. 2019) (en banc) (quoting Hanlon, 150 F.3d at 1020). Adequacy of
4 representation is designed to deny certification in instances of “actual fraud,
5 overreaching, or collusion.” In re Bluetooth Headset Products Liability Litigation, 654
6 F.3d 935, 948 (9th Cir. 2011).
7 Here, Plaintiffs have no conflicts of interest with other Class Members that would
8 render them inadequate representatives. Plaintiffs’ claims are typical of the other
9 potential members’ claims, so Plaintiffs are unlikely to act against the interests of the
10 Class. Plaintiffs, moreover, have “stayed abreast of the proceedings” and are willing to
11 “sit for depositions and participate in discovery” as necessary. (ECF No. 60-2, 2019
12 Carpenter Decl. at ¶ 16.) Plaintiffs and the Class Members also “share the common goal
13 of protecting consumer’s rights to have properly [priced] products.” Cf. Hofmann v.
14 Dutch LLC, 317 F.R.D. 566, 573–74 (S.D. Cal. 2016).
15 Likewise, Class Counsel is adequate. Class Counsel – the law firm of Carlson
16 Sweet Kilpela & Carpenter, LLP – is a firm with “experienced consumer class action
17 attorneys” that have “litigated other cases involving UCL, FLA, and CLRA claims.”
18 (ECF No. 60-2, 2019 Carpenter Decl. at ¶ 17.) Class Counsel have advised Plaintiffs
19 through the settlement process, and have made diligent strides to advance their clients’
20 interests by, for example, conducting “informal pre-mediation discovery,” “attending two
21 full day mediation sessions with the Honorable Edward A Infante (Ret.) of JAMS, Inc.,”
22 obtaining the “Expert Report of Christian Tregillis CPA, ABV, CFF, CLP,” and “heavily
23 negotiat[ing]” this Settlement Agreement. (Id. at §§ 4, 5, 11.) These facts show that
24 Plaintiffs and Class Counsel will “fairly and adequately protect the interests of the class.”
25 Fed. R. Civ. P. 23(a)(4).
26 b. Rule 23(b)(3) Requirements
27 “In addition to meeting the numerosity, commonality, typicality, and adequacy
28 prerequisites, the class action must fall within one of the three types specified in Rule
1 23(b).” In re Hyundai, 926 F.3d at 556. Here, Plaintiffs seek certification under Rule
2 23(b)(3). (ECF No. 37-2, TAC at §§ 41–50.)
3 Plaintiffs contend that the “questions of law or fact common to Class Members
4 predominate over any questions affecting only individual members,” and a class action
5 would be the “superior . . . method[] for fairly and efficiently adjudicating the
6 controversy.” (ECF No. 60-1 at 28 (quoting Fed. R. Civ. P. 23(b)(3)). For the foregoing
7 reasons, the Court agrees with Plaintiffs’ arguments and finds Rule 23(b)(3) is satisfied.
8 i. Predominance
9 “The Rule 23(b)(3) predominance inquiry asks the court to make a global
10 determination of whether common questions prevail over individualized ones.” Torres v.
11 Mercer Canyons Inc., 835 F.3d 1125, 1134 (9th Cir. 2016). In other words, the Court
12 asks whether issues “subject to generalized proof . . . predominate over those issues that
13 are subject only to individualized proof.” Dilts v. Penske Logistics, LLC, 267 F.R.D. 625,
14 634 (S.D. Cal. 2010) (internal quotations and alterations omitted). A finding of
15 predominance ensures “proposed classes are sufficiently cohesive to warrant adjudication
16 by representation.” Hanlon, 150 F.3d at 1022 (internal quotations omitted).
17 Here, common questions predominate over individual questions. As discussed with
18 respect to commonality, multiple facts and common questions of law bind the class
19 together. See supra Section II.a.ii. Most importantly, regardless of the volume, price,
20 timing, or location for any Claimant’s qualifying purchase, all claims will require the
21 Court to analyze whether Defendant’s pricing scheme and pattern of discounting prices
22 was lawful under California law. Therefore, the Class is sufficiently cohesive to merit a
23 joint adjudication, and thus the Class meets the predominance requirement.
24 ii. Superiority
25 The superiority requirement focuses on the determination of “whether the
26 objectives of the particular class action procedure will be achieved in the particular case.”
27 Hanlon, 150 F.3d at 1023 (citation omitted). The class action method is superior if
28 “classwide litigation of common issues will reduce litigation costs and promote greater
1 efficiency.” Valentino v. Carter–Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996).
2 Likewise, the class-action method is superior where individual litigants are unlikely to
3 pursue meritorious claims merely because their respective awards would be too small
4 individually to merit the costs of such litigation. See Barani v. Wells Fargo Bank, N.A.,
5 No. 12-CV-2999-GPC, 2014 WL 1389329, at *4 (S.D. Cal. Apr. 9, 2014).
6 Here, the superiority requirement is satisfied. As discussed with respect to
7 numerosity, it is possible that the number of Claimants will range in the hundreds of
8 thousands. See supra Section II.a.i. Consequently, judicial economy favors class-based
9 adjudication. Cf. In re Activision Sec. Litig., 621 F. Supp. 415, 435 (N.D. Cal. 1985)
10 (finding joint litigation economic where only 150 claims existed). The Class Members,
11 moreover, only suffered damages approximately equal to 10% of the sale price of their
12 respective purchases. (ECF No. 60-2, Ex. 2, Expert Report of Christian Tregillis
13 (“Tregillis Report”) at ¶ 58; ECF No. 66 at 4, 2020 Carpenter Decl. at ¶ 8.) Thus, given
14 the low prices of TCP’s inventory, (ECF No. 60-2, 2019 Carpenter Decl. at ¶ 12), “it is
15 unlikely that individual actions will be filed.” Barani, 2014 WL 1389329, at *4. And,
16 those damages are “relatively modest compared to the burden and expense that would be
17 entailed by individual litigation.” (ECF No. 37-2, TAC at ¶ 48.)
18 III. Granting Preliminary Approval of Class Action Settlement
19 Section III of this Order addresses Plaintiffs’ unopposed motion for preliminary
20 approval of the Settlement Agreement. (ECF No. 60-1.) As a threshold matter, the Court
21 holds that the Settlement Agreement does not call for a distribution of coupons within the
22 meaning of the Class Action Fairness Act of 2005 (“CAFA”), 28 USC 1711 et seq. See
23 generally In re Online DVD-Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015). The
24 Court next finds that the Settlement Agreement is “fair, reasonable, and adequate.” Fed.
25 R. Civ. Pro. 23(e)(2). The Court also applies heightened scrutiny to the Settlement
26 Agreement because it was reached before the Class was approved and finds there is no
27 indication of collusion between Class Counsel and Defendant. See generally Roes, 1-2 v.
28 SFBSC Mgmt., LLC, 944 F.3d 1035 (9th Cir. 2019). Lastly, the Court finds that the
1 Settlement Agreement provides for the “best notice that is practicable under the
2 circumstances.” Fed. R. Civ. Pro. 23(c)(2).
3 a. Whether the Settlement is a Coupon Settlement
4 Congress passed CAFA “primarily to curb perceived abuses of the class action
5 device.” In re HP Inkjet Printer Litig., 716 F.3d 1173, 1177 (9th Cir. 2013) (quoting
6 Tanoh v. Dow Chem. Co., 561 F.3d 945, 952 (9th Cir. 2009)). “One such perceived abuse
7 is the coupon settlement, where defendants pay aggrieved class members in coupons or
8 vouchers but pay class counsel in cash.” Id. (citation omitted). Coupon settlements
9 present the risk that Class Counsel may “negotiate settlements under which class
10 members receive nothing but essentially valueless coupons, while the class counsel
11 receive substantial attorney’s fees.” Id. (quoting S. Rep. 109–14, at 29–30 (2005)). As a
12 result, the unidentified Class Members may be “shortchanged.” See Redman v.
13 RadioShack Corp., 768 F.3d 622, 636-37 (7th Cir. 2014).
14 To mitigate the risk of unfair coupon settlements, CAFA provides for increased
15 judicial scrutiny. 28 U.S.C. § 1712(e). CAFA also awards attorney’s fees “on the value to
16 class members of the coupons that are redeemed,” 28 U.S.C. § 1712(a),” instead of “the
17 amount of time class counsel reasonably expended working on the action” per the
18 “lodestar” method. See In re HP Inkjet, 716 F.3d at 1183. Thus, delineating settlements
19 that award cash or cash-equivalent certificates from those awarding coupons affects the
20 calculation of attorneys’ fees and bears upon the fairness of the settlement. Seegert v.
21 Lamps Plus, Inc., 377 F. Supp. 3d 1127, 1130 (S.D. Cal. 2018) (quoting In re HP Inkjet,
22 716 F.3d at 1182–86).
23 Congress did not define the term “coupon” when promulgating CAFA. In re
24 Online DVD, 779 F.3d at 950. However, the Ninth Circuit has since fashioned a three-
25 part test to identify coupons: “(1) whether Class Members have to ‘hand over more of
26 their own money before they can take advantage of’ a credit, (2) whether the credit is
27 valid only ‘for select products or services,’ and (3) how much flexibility the credit
28 provides, including whether it expires or is freely transferrable.” In re Easysaver Rewards
1 Litig., 906 F.3d 747, 755 (9th Cir. 2018) (citing In re Online DVD, 779 F.3d at 951).
2 Applying these factors in In re Online DVD, the Ninth Circuit found that a $12 gift card
3 to Walmart was not a coupon because the “class member need not spend any of his or her
4 own money” to make another Walmart purchase. In re Online DVD, 779 F.3d at 951.
5 Such gift cards, moreover, were transferable, did not expire, and could be used to
6 purchase “one of many different types of products” sold for $12 or less. Id. at 951–52. In
7 addition, consumers could opt to receive $12 in cash instead of a $12 gift card. Id. at 941.
8 The Court finds that the $6 vouchers offered in this Settlement, as with the $12 gift cards
9 offered in In re Online DVD, are not coupons for the following reasons.4
10 First, Plaintiffs do not need to “hand over more of their own money before they
11 can take advantage of” the vouchers. In re Easysaver, 906 F.3d at 757 (quotations
12 omitted). Plaintiffs present compelling evidence that the purchasing power of a $6
13 voucher at TCP is significant. Of the 1,024 items available for purchase online in October
14 2019, 435 were listed for sale under $6.00 (i.e., 42%). (ECF No. 66 at 2–3, 2020
15 Carpenter Decl. at ¶ 4.) The median price point of those items was only $4.20. (Id. at ¶
16 5.) Also, about 760 items were listed for sale under $10.00 (i.e., about 75%). (Id. at ¶ 4.)
17 These figures, moreover, likely represent above-average prices for TPC’s retail inventory
18 as winter seasonal items tend to be “slightly more expensive.” (Id.).
19 Defendant likewise asserts that, as of December 18, 2019, TCP had “several
20 hundred thousand items, totaling more than 20 million units, available in its stores and
21 online for less than $6. These items include tops, bottoms, sleepwear, shoes, bags,
22 jewelry, and other accessories in baby, toddle, girls and boys.” (ECF No. 68 at 2, Jain
23 Decl. at ¶ 3.) Thus, the instant facts differ from those present in coupon settlements. See,
24 e.g., In re Easysaver., 906 F.3d at 757 (“Defendants only claim to sell ‘15–25 products’
25
26
4 It is beyond dispute that the 25% vouchers are coupons within the meaning of In re Online DVD.
27 However, “having a coupon option does not necessarily transform a class action settlement into a
coupon settlement under CAFA.” Foos v. Ann, Inc., No. 11-CV-2794-L, 2013 WL 5352969, at *3 (S.D.
28
1 for under $20. And that meager list does not even account for shipping charges.”);
2 Seegert, 377 F. Supp. 3d at 1132 (“Of the 62,000 products, only about 5,800 of them are
3 under $ 18” voucher limit); Linneman v. Vita-Mix Corp., 394 F. Supp. 3d 771, 780 (S.D.
4 Ohio 2019) (“It is undisputed that Class Members will have to spend money . . . as Vita-
5 Mix containers and blenders . . . exceed the $70 Gift Card” with prices starting at
6 “$144.95”).
7 It is unlikely, moreover, that the Voucher Fund will distribute vouchers of a value
8 substantially less than $6 in the first round of distribution. (ECF No. 60-2, Ex. 1, SA at §§
9 2.3–2.4 (describing the procedure by which vouchers would be disbursed “on a pro rata
10 basis” in the event that the Voucher Fund is “exhausted by the first round of
11 distribution”)). The Parties estimate that the “approximately 1% of the Class will submit
12 a claim.” (ECF No. 66 at 3, 2020 Carpenter Decl. at ¶ 6.) This estimate “is based on the
13 historical claims rate for four similar consumer cases that offered a voucher of similar
14 value as part of the settlement.” (See id.; ECF No. 66-1, Table of Comparable Cases
15 (including four cases with filing rates ranging from 0.23% to 2.07%)). And, as Plaintiffs
16 note, consumer class actions tend to result in claims rates in the low single digits. See,
17 e.g., Bayat v. Bank of the W., No. C-13-2376-EMC, 2015 WL 1744342, at *1 (N.D. Cal.
18 Apr. 15, 2015) (approving settlement with a “claims rate for the monetary relief portion
19 of the settlement of roughly 1.9%”); Spillman v. RPM Pizza, LLC, No. CIV-A-10-349-
20 BAJ, 2013 WL 2286076, at *2 (M.D. La. May 23, 2013) (noting that “less than one
21 percent of the total class” filed claims); Touhey v. United States, No. ED-CV-08-01418-
22 VAP, 2011 WL 3179036, at *7 (C.D. Cal. July 25, 2011) (noting that “approximately
23 2%” of Class Members filed claims); Perez v. Asurion Corp., 501 F. Supp. 2d 1360,
24 1377–78 (S.D. Fla. 2007) (noting that about 1.1%, i.e. 118,663 of about 10.3 million
25 Class Members, filed claims). Considering the Parties’ claims and authorities, the Court
26 finds it likely that Class Members who file claims and elect the dollar-based vouchers
27 will receive vouchers of approximately $6 in value.
28 Second, the vouchers are applicable to a wide variety of products. In re Online
1 DVD, 779 F.3d at 951. Like the consumer in In re Online DVD, a Class Member need not
2 apply their voucher to the same item, or the same category of items, that would give rise
3 to their claim against Defendant. Id. at 952 (noting “class members are suing due to an
4 online-DVD rental agreement” but could purchase “many products beyond DVDs” with
5 the gift card). Moreover, in contrast to the minimal “inventory” available at the flower
6 and chocolate store defendant in In re Easysaver, TCP operates 961 stores in the United
7 States, Canada, and Puerto Rico” and an “online store at www.childrendsplace.com.”
8 Compare In re Easysaver, 906 F.3d at 757 with (ECF No. 68 at 2, Jain Decl. at ¶¶ 2–3)
9 and (ECF No. 60-2, Ex. 2, Tregillis Report at 3 n.4.) TCP is thus a sufficiently large
10 retailer – even if not a “giant” one like Walmart – to avoid restricting a consumer to a
11 “meager list” of goods for purchase. In re Easysaver, 906 F.3d at 757. And, while
12 vouchers cannot be used in conjunction “with any other coupon or promotional offer,”
13 they are applicable to “items that are on sale or otherwise discounted.” (ECF No. 60-2,
14 Ex. 1, SA at § 1.32.)
15 Third, the vouchers are subject to some concerning limitations in use – but not so
16 concerning that the vouchers should be treated as coupons within the meaning of CAFA.
17 On the one hand, the vouchers are “transferrable,” “stackable with each other,” (ECF No.
18 60-2, Ex. 1, SA at § 1.32), and have no “blackout periods.” In re Easysaver, 906 F.3d at
19 757. On the other hand, they expire in “6 months.” (ECF No. 60-2, Ex. 1, SA at § 1.32).
20 Plaintiffs’ argument that a six-month window is appropriate “where Class Members are
21 purchasing products for growing children” does not fully assuage the Court’s concerns,
22 (ECF No. 67 at 6), as “redemption periods usually are longer” than six months. Redman,
23 768 F.3d at 630 (J. Posner). At a minimum, courts have differed as to whether six months
24 is appropriate. Compare Chaikin v. Lululemon USA Inc., No. 3:12-CV-02481-GPC, 2014
25 WL 1245461, at *3 (S.D. Cal. Mar. 17, 2014) (approving a class action settlement
26 offering vouchers that expire within six months), and Foos v. Ann, Inc., No. 11-CV-
27 2794-L, 2013 WL 5352969, at *3 (S.D. Cal. Sept. 24, 2013) (same), with In re HP Inkjet,
28 716 F.3d at 1176 (noting that Defendants’ “e-credits” were “coupons” in part because
1 they “expire six months after issuance”), and Davis v. Cole Haan, Inc., No. C-11-01826-
2 JSW, 2013 WL 5718452, at *3 (N.D. Cal. Oct. 21, 2013) (finding a class action
3 settlement was a coupon settlement, in part, because of “significant limitations” including
4 that “the vouchers expire after six months”). The vouchers are also not “redeemable for
5 cash.” (ECF No. 60-2, Ex. 1, SA at 1.32); see In re Easysaver, 906 F.3d at 757–58
6 (relying in part the lack of redeemability to find the credits were coupons); Seegert, 377
7 F. Supp. 3d at 1132 (same).
8 On the balance, the Court finds that the $6 vouchers are not coupons. The vouchers
9 here are intended to provide real value to the consumer and are not the kinds of “rebates
10 and coupons aim[ed] to facilitate a sale to a purchaser who would not otherwise purchase
11 a product at a higher price.” See True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052,
12 1075 (C.D. Cal. 2010). The vouchers, moreover, satisfy the first two In re Online DVD
13 factors and do not present such overwhelming concerns as to the third factor that the
14 Court’s analysis should shift. Thus, because a Class Member may use the vouchers
15 without spending more of their own money and the vouchers do not apply only to a
16 limited set of products or services, the Court finds that the vouchers’ limitations on how
17 flexibly a Class Member can spend them do not render the vouchers coupons within the
18 meaning of CAFA. In re Online DVD, 779 F.3d at 951.
19 b. Whether the Settlement Agreement is Fair, Adequate, and Reasonable
20 Rule 23(e) requires that the Court approve any settlement of class claims. Fed. R.
21 Civ. P. 23(e)(2). The Court’s oversight function operates on a “strong judicial policy that
22 favors settlements, particularly where complex class action litigation is concerned.” Class
23 Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992) (citations omitted). Thus,
24 in approving a class action settlement, the Court advances the “overriding public interest
25 in settling and quieting litigation,” particularly where resource-intensive class actions are
26 concerned. Van Bronkhorst v. Safeco Corp., 529 F.2d 943, 950 (9th Cir. 1976).
27 To fulfill its duty, the Court must evaluate “whether a proposed settlement is
28 fundamentally fair, adequate, and reasonable.” Staton, 327 F.3d at 952 (internal quotation
1 marks and citations omitted). Courts should consider some or all of the following factors
2 in determining if a settlement is fair: “the strength of the plaintiffs’ case; the risk,
3 expense, complexity, and likely duration of further litigation; the risk of maintaining class
4 action status throughout the trial; the amount offered in settlement; the extent of
5 discovery completed and the stage of the proceedings; the experience and views of
6 counsel; the presence of a governmental participant; and the reaction of the class
7 members to the proposed settlement.” Hanlon, 150 F.3d at 1027; Staton, 327 F.3d at 959.
8 Upon evaluating the foregoing factors, the Court finds that the Settlement
9 Agreement is fair, adequate, and reasonable. Fed. R. Civ. P. 23(e)(2).
10 i. The Strength of Plaintiffs’ Case; The Risk, Expense, Complexity and
11 Likely Duration of Further Litigation; and The Risk of Maintaining
12 Class Action Status Throughout the Trial
13 Settlement is favored where a case is “complex and likely to be expensive and
14 lengthy to try.” Low v. Trump Univ., LLC, 246 F. Supp. 3d 1295, 1300 (S.D. Cal. 2017),
15 aff’d, 881 F.3d 1111 (9th Cir. 2018) (quoting Rodriguez v. W. Publ’g Corp., 563 F.3d
16 948, 966 (9th Cir. 2009)). Here, the balance of strengths and risks favors settlement.
17 On the one hand, Plaintiffs’ claims appear strong. Counsel conducted a “years-long
18 investigation into The Children’s Place’s sale discounting practices” across multiple
19 jurisdictions which they contend shows “pervasive” violations of California law. (ECF
20 No. 60-1 at 12.) Plaintiff also obtained an expert whose report corroborates these
21 accusations and helps calculate damages. (ECF No. 60-2, Ex. 2, Tregillis Report.)
22 On the other hand, the Parties recognize the challenges in continuing to litigate this
23 matter, including, that “the expense, delay, risks and uncertainties associated with
24 continued prosecution. . . could take several more years to litigate.” (ECF No. 60-2, 2019
25 Carpenter Decl. at ¶ 18.) Similarly, Class Counsel acknowledges that the “state of the law
26 regarding the appropriate method for calculating damages or restitution in these types of
27 false pricing cases is in flux.” (ECF No. 60-1 at 20; ECF No. 67, 2020 Carpenter Decl. at
28 3.) Hence, it may be possible that years from now the class would succeed on the merits
1 only to “recover nothing” in damages. Spann v. J.C. Penney Corp., 314 F.R.D. 312, 326
2 (C.D. Cal. 2016) (“Spann II”); see also Chowning v. Kohl’s Dep’t Stores, Inc., No. CV-
3 15-08673-RGK-, 2016 WL 1072129, at *1 (C.D. Cal. Mar. 15, 2016), aff’d, 735 F. App’x
4 924 (9th Cir. 2018), amended on denial of reh’g, 733 F. App’x 404 (9th Cir. 2018), and
5 aff’d, 733 F. App’x 404 (9th Cir. 2018) (granting defendants summary judgment in a suit
6 based on allegations of deceptive pricing because the plaintiffs “failed to demonstrate a
7 viable measure of restitution”); In re Tobacco Cases II, 240 Cal. App. 4th 779, 795
8 (2015) (discussing in detail the complexity of estimating damages in cases where the
9 harm arises from deceptive advertising).
10 ii. The Amount of Settlement
11 A settlement is not judged against only the amount that might have been recovered
12 had the plaintiff prevailed at trial; nor must the settlement provide full recovery of the
13 damages sought to be fair and reasonable. Linney v. Cellular Alaska P’ship, 151 F.3d
14 1234, 1242 (9th Cir. 1998). “Naturally, the agreement reached normally embodies a
15 compromise; in exchange for the saving of cost and elimination of risk, the parties each
16 give up something they might have won had they proceeded with litigation.” Officers for
17 Justice v. Civil Serv. Comm’n of City & Cty. of San Francisco, 688 F.2d 615, 624 (9th
18 Cir. 1982) (quoting United States v. Armour & Co., 402 U.S. 673, 681 (1971)). “It is
19 well-settled law that a cash settlement amounting to only a fraction of the potential
20 recovery will not per se render the settlement inadequate or unfair.” Id. at 628.
21 Here, Plaintiffs claim that the settlement provides real value to the class, and the
22 Court agrees for three reasons. (ECF No. 60-1 at 14–15.) First, the Court finds that the $6
23 vouchers provide Class Members with adequate purchasing power given the low prices
24 common to much of Defendants’ inventory. See supra Section III.a. Second, the Court
25 finds that the number of vouchers is sufficient for Claimants to receive vouchers valued
26 at or about $6 in the first round of distribution. Id. Third, the Court finds that the total
27 amount in the Voucher Fund – approximately $5.4 million dollars assuming everyone
28 opts for $6 vouchers – is adequate. At the February 8, 2016 hearing, Plaintiffs’ counsel
1 estimated that full relief, i.e. “mak[ing] a voucher available for every single class
2 member,” would require Defendant to create a Voucher Fund of $40 million dollars. (See
3 2018 Tr. at 5.) Assuming that the total potential relief in this action ranges up to that
4 amount, Defendant’s proposed award of $5.4 million dollars would give the Class a
5 certain recovery of 13% of the potential award at trial. This number aligns with other
6 large class actions entailing small-dollar claims. See In re Omnivision Techs., Inc., 559 F.
7 Supp. 2d 1036, 1042 (N.D. Cal. 2008) (approving a total amount estimated to be 6% of
8 the maximum possible recovery). This amount represents, moreover, a fair compromise
9 given the surrounding questions regarding the calculation of damages at trial, (ECF No.
10 60-2, 2019 Carpenter Decl. at ¶ 18; ECF No. 60-1 at 20), and the limited damages that
11 stem from each sale. (ECF No. 60-2, Ex. 2, Tregillis Report at ¶ 58 (finding that damages
12 would be equal to a “10% discount” on the price of each qualifying purchase)).
13 Thus, because the Voucher Fund contains sufficient vouchers with real purchasing
14 power, and the total award represents an informed, negotiated compromise, the Court
15 finds that the Settlement Amount is fair and reasonable.
16 iii. The Extent of Investigation and Discovery and the Stage of Litigation
17 The Settlement Agreement is the result of an arms-length negotiation predicated on
18 sufficient investigation, discovery and negotiations. First, the parties only exchanged pre-
19 mediation discovery. (ECF No. 60-2, 2019 Carpenter Decl. at ¶ 3.) They did not engage
20 in more “substantial discovery,” which could reduce Plaintiffs’ ability to evaluate the
21 appropriateness of the Settlement. Cf. Knutson v. Schwan’s Home Serv., Inc., No. 3:12-
22 CV-00964-GPC, 2014 WL 3519064, at *3 (S.D. Cal. July 14, 2014).
23 The Settlement, however, is informed by Plaintiffs’ thorough investigation. Class
24 Counsel engaged in the multi-district, “years-long” investigation undertaken to assess
25 Plaintiffs’ claims and the class claims. (ECF No. 37-2, TAC at ¶ 22–40; ECF No. 60-1 at
26 12.) During this investigation, counsel photographed and compared “price tags and retail
27 discount signage in the Defendant’s retail and outlet stores throughout California as well
28 as select stores in” eight other states. (ECF No. 66, 2020 Carpenter Decl. at ¶ 2.)
1 Plaintiffs reinitiated the investigation over the 2019 holiday season to corroborate their
2 findings. (Id. at ¶ 3.)
3 In addition, the Parties met over two full-day mediation sessions conducted by the
4 Honorable Edward A. Infante of JAMS, Inc. on December 8, 2016 and April 19, 2017,
5 and subsequently negotiated, drafted, and executed the instant Agreement. (ECF No. 60-1
6 at 13–14; ECF No. 60-2, Ex. 2, Tregillis Report). Collectively, these efforts are enough to
7 satisfy this factor.
8 iv. Adequacy and Experience of Class Counsel
9 As discussed with respect to adequacy for class certification, see supra Section
10 II.a.iv, Class Counsel are adequate advisors to the Class. There is no evidence of
11 animosity or conflicting interests (aside from the clear sailing clause discussed below),
12 and Class Counsel is sufficiently experienced to advocate on behalf of the Class. (ECF
13 No. 60-2, 2019 Carpenter Decl. at ¶¶ 1, 13, 17, 18.)
14 c. Applying Heightened Scrutiny for Signs of Collusion
15 The “[C]ourt’s role in the class action settlement process is to protect the rights of
16 those not involved in negotiating the settlement, generally the unnamed class members.”
17 In re Syncor ERISA Litig., 516 F.3d 1095, 1101 (9th Cir. 2008) (quotations omitted); see
18 also Officers for Justice, 688 F.2d at 624 (collecting cases). Where a settlement is agreed
19 upon prior to certification, there is a “greater potential for a breach of fiduciary duty
20 owed the class during settlement.” In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d
21 935, 946 (9th Cir. 2011). Consequently, the Court applies greater scrutiny and considers
22 whether the Settlement Agreement is “the product of collusion among the negotiating
23 parties.” In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000), as
24 amended (June 19, 2000) (citation omitted).
25 “This more exacting review is warranted to ensure that class representatives and
26 their counsel do not secure a disproportionate benefit at the expense of the unnamed
27 plaintiffs who class counsel had a duty to represent.” Roes, 1-2 v. SFBSC Mgmt., LLC,
28 944 F.3d 1035, 1049 (9th Cir. 2019) (quotations omitted). Most commonly, these unjust
1 benefits take the form of (1) a “disproportionate distribution of the settlement” to Class
2 Counsel; (2) “a ‘clear sailing’ arrangement (i.e., an arrangement where defendant will not
3 object to a certain fee request by class counsel)”; or (3) “a reverter that returns unclaimed
4 fees to the defendant.” Allen v. Bedolla, 787 F.3d 1218, 1224 (9th Cir. 2015).
5 Here, the Settlement Agreement “bears none of the typical signs of collusion
6 between class counsel and defendants.” In re Hyundai, 926 F.3d at 569. For example, if
7 the Court does not award full fees and costs to Class Counsel, the Settlement Agreement
8 requires that the amount by which the fees were reduced be made available to the Class
9 as additional vouchers. (ECF No. 60-2, Ex. 1, SA at § 2.8.) The absence of a clause
10 reverting funds to the Defendant mitigates the fear that the Settlement Agreement is the
11 product of collusion between Defendants and Class Counsel. Cf. In re Bluetooth, 654
12 F.3d at 947 (citing Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781, 785 (7th Cir. 2004)
13 (Posner, J.)) (noting that the reversion of unpaid fees to the defendant may signal
14 collusion).
15 Likewise, the Agreement does not award Class Counsel disproportionate fees. As
16 noted, Defendant is likely to pay at least $5.4 million towards the vouchers. Hence,
17 because Class Counsel agrees not to seek more than $1,080,000 to cover fees and costs,
18 (ECF No. 60-2, Ex. 1, SA at § 2.7), Counsel’s maximum fees do not exceed 20% of the
19 value of the Voucher Fund. Cf. Hanlon, 150 F.3d at 1029 (quoting Six (6) Mexican
20 Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)) (noting that the
21 Ninth Circuit “has established 25% of the common fund as a benchmark award for
22 attorney fees.”) The Court, moreover, finds that the $5.4 million estimated value of the
23 Voucher Fund accurately reflects the vouchers’ value to the Class Members because they
24 are not coupons, as discussed earlier. See supra Section III.B. Unlike the vouchers in
25 Roes, for example, these vouchers are useable by Class Members, provide enough
26 purchasing power that Class Members need not spend additional funds to use them, and
27 are not exchangeable for only 10% of their value in cash. Cf. Roes, 944 F.3d at 1052. In
28 addition, even if the vouchers are limited by a 6-month expiration window, they are both
1 transferrable and stackable, and can be used in conjunction with existing sales at any TCP
2 store or online. See In re HP Inkjet, 716 F.3d at 1179 (noting that “a coupon settlement is
3 likely to provide less value to Class Members if . . . the coupons are non-transferable,
4 expire soon after their issuance, and cannot be aggregated”).
5 In addition, the Court recognizes that the Agreement contains a potentially
6 problematic “clear sailing” clause as to Class Counsel’s fees. (ECF No. 60-2, Ex. 1, SA at
7 § 2.7) (“TCP agrees not to object to Class Counsel’s request . . .”) Such clauses create the
8 risk that “the plaintiff may agree to less for the class in exchange for a higher fee.” See
9 Jonathan R. Macey & Geoffrey P. Miller, Judicial Review of Class Action Settlements, 1
10 J. LEGAL ANALYSIS 167, 200 (2009). This risk, however, is mitigated by the Settlement
11 Agreement’s terms. First, “Plaintiffs must petition the Court for approval of any award to
12 Class Counsel of attorney’s fees and costs.” (ECF No. 60-2, Ex. 1, SA at § 2.7.)
13 Consequently, when the Parties bring forward motions for final approval of the
14 Settlement Agreement, and then report on the vouchers’ distribution, the Court will be in
15 a position to scrutinize whether the final amount to be awarded should, in fact, reach
16 $1,080,000. And, the Court may then reduce the petitioned amount as is reasonable and
17 assign that the value by which the award is reduced to the Class Members. (Id. at § 2.8.)
18 Also, there is no indication that the awards to the Named Plaintiffs here are the
19 result of collusion or special treatment contrary to the Class’s interest. Awards to Named
20 Plaintiffs are “fairly typical” in class action settlements. Rodriguez v. W. Publ’g Corp.,
21 563 F.3d 948, 958 (9th Cir. 2009). They properly compensate Named Plaintiffs for the
22 additional duties required of them to bring forward the litigation and execute a settlement.
23 Id. at 958–59. Here, the awards are reasonable. Cf. In re M.L. Stern Overtime Litig., No.
24 07-CV-0118-BTM, 2009 WL 995864, at *1 (S.D. Cal. Apr. 13, 2009) (granting
25 preliminary approval of an agreement allotting $15,000 in fees for each Named Plaintiff
26 from a fund of $945,960). Afterall, the Named Plaintiffs have served in their role since
27 2016 and have made themselves available to confer with Class Counsel and for
28 discovery, as needed. (ECF No. 60-2, 2019 Carpenter Decl. at ¶ 16.)
1 Consequently, for the foregoing reasons, the Court finds that the Settlement
2 Agreement’s clear sailing clause, awards to Class Counsel and Named Plaintiffs, and
3 language on reversion show the absence of collusion.
4 d. Approving the Form, Manner, and Content of the Proposed Notices
5 Plaintiffs request that the Court approve the proposed Notice Plan and Claims
6 Procedure. (ECF No. 60-1 at 9–12, 15, 21–22, 31–32.) Rule 23(c)(2) requires the “best
7 notice practicable under the circumstances” and permits notice to be served by “United
8 States mail, electronic means, or other appropriate means.” The Notice Plan must clearly
9 and concisely state in plain, easily understood language:
10
(i) the nature of the action; (ii) the definition of the class certified; (iii) the
11 class claims, issues, or defenses; (iv) that a class member may enter an
appearance through an attorney if the member so desires; (v) that the court
12
will exclude from the class any member who requests exclusion; (vi) the
13 time and manner for requesting exclusion; and (vii) the binding effect of a
class judgment on members under Rule 23(c)(3).
14
15 Rinky Dink Inc v. Elec. Merch. Sys. Inc., No. C13-1347-JCC, 2015 WL 11234156, at *7
16 (W.D. Wash. Dec. 11, 2015) (quotations omitted). The Ninth Circuit has found that a
17 Notice Plan is satisfactory if it “alert[s] those with adverse viewpoints to investigate and
18 to come forward and be heard.” In re Online DVD, 779 F.3d at 946.
19 Here, Plaintiffs hired a “leading notice and settlement administration firm,”
20 Kurtzman Carson Consultants LLC, to design and implement the Notice Plan. (ECF No.
21 60-3, Peak Decl. at ¶ 2.) Plaintiffs intend to disseminate notice through a tri-part plan:
22 direct e-mail notice to approximately 12 million potential members, a website containing
23 the relevant information to understand and file a claim, and a series of online
24 advertisements targeting individuals 18 years of age or older through Google’s Display
25 Network. (Id. at ¶¶ 5–8.) Based on their experience, and the filings rates in other class
26 actions offering similar vouchers, Plaintiffs and the Claims Administrator expect that the
27 Notice Plan will reach approximately 70% of the class on average 2.5 times each. (ECF
28 No. 60-1 at 10; ECF No. 60-3, Peak Decl. at ¶ 8.)
1 The Court finds that the Notice Plan satisfies the requirements of Rule 23. Courts
2 assessing voucher-based settlements in class actions that deliver notice “primarily
3 through email” have found similar notice programs to comply with Rule 23. See, e.g.,
4 Keirsey v. eBay, Inc., No. 12-CV-01200-JST, 2014 WL 644697, at *1 (N.D. Cal. Feb. 14,
5 2014) (finding that a program delivering notice supported by a “class website” was the
6 “best notice practicable under the circumstances”); In re Equifax Inc. Customer Data Sec.
7 Breach Litig., No. 1:17-MD-2800-TWT, 2020 WL 256132, at *4 (N.D. Ga. Jan. 13,
8 2020) (approving a comparable notice plan – i.e., one that includes a settlement website,
9 online advertising, e-mails, and contact information for the Claims Administrator – which
10 adds only a “full-page ad in USA Today”).
11 The proposed notices and Settlement Website, moreover, will collectively contain
12 all of the information necessary to adequately inform interested Class Members how to
13 engage with the Settlement, including (1) information on the meaning and nature of the
14 Class; (2) the basic terms and provisions of the proposed settlement; (3) the costs and
15 fees to be paid out of the Settlement Fund; (4) the procedures and deadlines for
16 submitting Claim Forms, objections, and/or requests for exclusion; and (5) the date, time
17 and place of the fairness hearing. (See ECF No. 60-2, Ex. B, Full Notice; ECF No. 60-2,
18 Ex. C, E-Mail Notice; ECF No. 60-2, Ex. D, Online Media Notice; Ex. E, Claim Form.)
19 With respect to the E-Mail Notice, the Parties recognize the need to ensure adequate
20 service. (See 2019 Tr. at 12.) Also, though not contained in the Settlement Agreement per
21 the Court’s review, Class Counsel represented to the Court that the Parties are “prepared
22 to provide” a phone number with which Class Members may contact the Claims
23 Administrator with questions in English and Spanish. (Id. at 13.) As such, the Court
24 concludes that this Notice Plan provides the best possible notice under the circumstances.
25 IV. Conclusion & Orders
26 For the foregoing reasons, the Court GRANTS Plaintiffs’ motion for preliminary
27 approval of the Settlement Agreement and provisional certification of the Class. To
28 facilitate the implementation of that motion, the Court ORDERS the following:
1 1. The Court hereby orders the following approvals and certifications:
2 a. Approval of the Settlement Agreement. The Settlement Agreement,
3 including the Full Notice, E-Mail Notice, Online Media Notice, and Claim
4 Form, are preliminarily approved. (See ECF No. 60-2, Exs. B–E.)
5 b. Approval of the Class Notice Plan. The Notice Plan is approved. The Parties
6 and the Claims Administrator will notify Class Members of the Settlement in
7 the manner specified under Section 3.3 of the Settlement Agreement.
8 i. Additional Order: The Court further ORDERS the Parties to comply
9 with Cal. Civ. Code § 1781(d) by giving notice of this Settlement by
10 publication in a newspaper of general circulation in the county in
11 which the alleged transactions occurred as provided by law.
12 c. Provisional Certification of the Class. The Class is provisionally certified as
13 a class of all individuals in the United States who, within the Class Period,
14 made a Qualifying Purchase. The Court utilizes these terms as defined in
15 Section 1 (“Definitions”) of the Settlement Agreement. (See ECF No. 60-2,
16 Ex. 1, SA at §§ 1.8, 1.9, 1.26.)
17 d. Approval of CAFA Notice. The Court finds that TCP has attempted to
18 comply with 28 U.S.C. § 1715(b), per the affidavit of Ms. Jeanne M.
19 Chernila, Project Manager at KCC Class Action Services, LLC, by sending
20 sixty (60) “CAFA Notice Packets” to the requisite parties, on December 1,
21 2017. (See ECF No. 61-1.)
22 i. Additional Order: To fully comply with CAFA, the Court ORDERS
23 the Parties send new CAFA Notice Packets which include notice as to
24 the date, time, and location for the Final Fairness Hearing, and a copy
25 of this Order.
26 2. The Court hereby makes the following appointments:
27 a. Conditional Appointment of Class Representatives. Plaintiffs Monica Rael
28 and Alyssa Hedrick are conditionally certified as the Class Representatives
1 to implement the Parties’ settlement in accordance with the Settlement
2 Agreement.
3 b. Conditional Appointment of Class Counsel. The law firm of Carlson Lynch
4 Sweet Kilpela & Carpenter, LLP is conditionally appointed as Class
5 Counsel.
6 c. Conditional Appointment of Claims Administrator. The firm of Kurtzman
7 Carson Consultants LLC is conditionally appointed as Claims
8 Administrator.
9 3. The Court hereby instructs Class Members to review the Settlement
10 Agreement. The Settlement Agreement permits Class Members to (a) file
11 claims for vouchers, (b) object to the Settlement Agreement, and (c) request to
12 be excluded from the Class and Settlement up to 120 days after the entry of
13 this Order. Class Members may also appear at the Fairness Hearing.
14 a. Claims. Class Members may file a Claim, as explained in Section 3.6 of the
15 Settlement Agreement.
16 b. Objections. Class Members may object to the Settlement Agreement, as
17 explained in Section 3.9 of the Settlement Agreement.
18 c. Exclusions. Class Members may request to be excluded from the class, as
19 explained in Section 3.10 of the Settlement Agreement.
20 d. Appearance at Fairness Hearing. Class Members may appear at the Fairness
21 Hearing upon request as explained in Section 3.9(c) of the Settlement
22 Agreement.
23 4. The Court orders that, if the Settlement Agreement terminates for any reason,
24 the following will occur:
25 a. Class Certification will be automatically vacated;
26 b. Plaintiffs will stop functioning as Class representatives;
27 c. Class Counsel will stop functioning as Class Counsel; and
28 d. This Action will revert to its previous status in all respects as it existed
1 immediately before the Parties executed the Settlement Agreement, except
2 for Plaintiffs’ filing of the Third Amended Complaint. This Order will not
3 waive or otherwise impact the Parties’ rights or arguments.
4 5. Further Action in This Matter by the Parties.
5 a. Stay of Proceedings. All discovery and pretrial proceedings and deadlines
6 are stayed until further notice from the Court, except for such actions as are
7 necessary to implement the Settlement Agreement and this Order.
8 b. Procedures for Implementing the Settlement Agreement. Counsel and the
9 Parties are hereby authorized to agree to utilize all reasonable procedures in
10 connection with the administration of the Settlement which are not
11 materially inconsistent with either this Order or the terms of the Agreement.
12 c. Scheduling the Fairness Hearing. On July 31, 2020 at 1:30 p.m., this Court
13 will hold a Fairness Hearing to determine if the Settlement should be finally
14 approved in Courtroom 2d of the Edward J. Schwartz U.S. Courthouse.
15 d. Critical Dates. The Court ORDERS all parties adhere to the following dates:
16
Event Timing Date
17
Last day for Defendant, through the Claims 60 days after entry of 3/31/2020
18
Administrator, to: this Order
19 (1) Send E-Mail Notice,
(2) Start operating Settlement Website, and
20
(3) Begin to provide Online Media Notice.
21
Last day for Plaintiffs to file fee petition. 90 days after entry of 4/30/2020
22
this Order
23
Last day for Class Members to: 120 days after entry 5/30/2020
24 (1) File a claim, of this Order
25 (2) Request an exclusion, or
(3) Object to the Settlement.
26
27 Last day for Parties to file briefs in support One month before the 6/30/2020
of the Final Order and Judgment. Fairness Hearing
28
2
(to be held in Courtroom 2D of the Edward J. | after entry of this at 1:30
4 Schwartz U.S. Courthouse, 221 West Order p-m.
5 Broadway, San Diego, CA 92101)
6 This Court may order the Fairness Hearing to be postponed, adjourned, or
7 ||continued. If that occurs, the updated hearing date shall be posted on the Settlement
g || Website. If the Court determines additional notice is required, the Court may order it as
g ||needed upon conferring with the Parties.
10 IT IS SO ORDERED.
11 Dated: January 28, 2020
12 Hon. athe Coke
13 United States District Judge
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