Opposition Brief — Brian Perryman, Petitioner v. Josue Romero, et al.
Supreme Court briefMay 31, 2019
Ask Donna
What actually matters in this document.
Text
No. 18-1074
================================================================
In The
Supreme Court of the United States
-----------------------------------------------------------------BRIAN PERRYMAN,
Petitioner,
v.
JOSUE ROMERO, et al.,
Respondents.
-----------------------------------------------------------------On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Ninth Circuit
-----------------------------------------------------------------RESPONDENT PROVIDE COMMERCE, LLC’S
RESPONSE IN OPPOSITION TO
PETITION FOR A WRIT OF CERTIORARI
-----------------------------------------------------------------MICHAEL G. RHODES
(rhodesmg@cooley.com)
Counsel of Record
MICHELLE C. DOOLIN
(mdoolin@cooley.com)
LEO P. NORTON
(lnorton@cooley.com)
COOLEY LLP
4401 Eastgate Mall
San Diego, CA 92121
(858) 550-6000
Counsel for Respondent
Provide Commerce, LLC
(formerly known as
Provide Commerce, Inc.)
May 31, 2019
================================================================
COCKLE LEGAL BRIEFS (800) 225-6964
WWW.COCKLELEGALBRIEFS.COM
i
QUESTION PRESENTED
Whether the district court abused its discretion in
approving the parties’ use of cy pres to distribute unclaimed settlement funds where the district court
found the cy pres recipients are tethered to the underlying claims and would advance class members’ interests.
ii
PARTIES TO THE PROCEEDINGS
Petitioner Brian Perryman was the appellant in
the court of appeals and the lone objector to the class
action settlement in the district court.
Respondents Josue Romero, Deanna Hunt, Kimberly Kenyon, Gina Bailey, Alissa Herbst, Grant Jenkins, Bradley Berentson, Jennifer Lawler, Daniel Cox,
Jonathan Walter, and Christopher Dickey were appellees in the court of appeals and the named plaintiffs in
the district court.
Respondent Provide Commerce, LLC (formerly
known as Provide Commerce, Inc.) (“Provide Commerce”) was an appellee in the court of appeals and a
defendant in the district court.
Respondent Regent Group, Inc. d/b/a Encore Marketing International (“Regent Group”) was an appellee
in the court of appeals and a defendant in the district
court.
RULE 29.6 CORPORATE
DISCLOSURE STATEMENT
Respondent Provide Commerce, LLC (formerly
known as Provide Commerce, Inc.) is a wholly-owned
subsidiary of FTD, Inc.
FTD, Inc. is owned by FTD Group, Inc., which in
turn is owned by FTD Companies, Inc., the ultimate
parent company of Provide Commerce, LLC.
iii
RULE 29.6 CORPORATE
DISCLOSURE STATEMENT—Continued
FTD Companies, Inc. has issued stock that is publicly traded. Qurate Retail, Inc., which also has issued
stock that is publicly traded, owns 36% of the stock issued by FTD Companies, Inc. There are no other publicly traded business entities that own more than 10%
of the stock issued by FTD Companies, Inc.
Other than FTD Companies, Inc., there are no
other parents, trusts, subsidiaries, or affiliates of Provide Commerce, Inc. that have issued shares or debt
securities to the public.
iv
TABLE OF CONTENTS
Page
QUESTION PRESENTED...................................
i
PARTIES TO THE PROCEEDINGS ...................
ii
RULE 29.6 CORPORATE DISCLOSURE STATEMENT ..................................................................
ii
TABLE OF AUTHORITIES .................................
vi
INTRODUCTION ................................................
1
STATEMENT .......................................................
2
REASONS FOR DENYING PETITION .............. 13
I.
The Petition Presents No Circuit Conflict ... 15
A. There is no circuit conflict in evaluating
proposed alternative remainder distribution methods ..................................... 16
B. There is no circuit conflict in evaluating
cy pres recipients for unclaimed funds .... 19
II.
The Petition Does Not Present an Important
Recurring Question Warranting Review ..... 23
III.
This Case Is the Wrong Vehicle to Address
Cy Pres Issues ............................................ 27
IV.
The Ninth Circuit’s Decision on the Cy Pres
Issue Is Correct on the Merits .................... 30
CONCLUSION..................................................... 37
v
TABLE OF CONTENTS—Continued
Page
APPENDIX
Appendix A: FAIRNESS HEARING TRANSCRIPT, District Court, Southern District of
California (January 28, 2013) .................................1a
Appendix: B: DECLARATION OF CLAIMS ADMINISTRATOR, District Court, Southern
District of California (January 17, 2013) .............64a
vi
TABLE OF AUTHORITIES
Page
CASES
In re Airline Ticket Comm’n Antitrust Litig,
307 F.3d 679 (8th Cir. 2002) ....................................20
In re Baby Prod. Antitrust Litig.,
708 F.3d 163 (3d Cir. 2013) ............................. passim
In re BankAmerica Corp. Sec. Litig.,
775 F.3d 1060 (8th Cir. 2015) ...................... 20, 21, 22
Baxter v. Intelius, Inc.,
No. SACV 09-1031 AG (MLGx),
2010 WL 3791487 (C.D. Cal. Sept. 16, 2010) ............5
Berry v. Webloyalty.com, Inc.,
No. 10-CV-1358-H (CAB), 2011 WL 1375665
(S.D. Cal. Apr. 11, 2011), vacated on other
grounds, 517 F. App’x 581 (9th Cir. 2013) ................5
Cyberspace, Comm’ns, Inc. v. Engler,
55 F. Supp. 2d 737 (E.D. Mich. 1999)......................31
In re EasySaver Rewards Litig.,
599 F. App’x 274 (9th Cir. 2015) ..............................12
Fager v. CenturyLink Comm’ns, LLC,
854 F.3d 1167 (10th Cir. 2016) .......................... 28, 35
Fraley v. Facebook, Inc.,
966 F. Supp. 2d 939 (N.D. Cal. 2013), aff ’d
sub nom. Fraley v. Batman, 638 F. App’x 594
(9th Cir. 2016), cert. denied sub nom. K.D. v.
Facebook, Inc., 137 S. Ct. 68 (2016) ........................16
Frank v. Gaos,
No. 17-961 ........................................................ passim
vii
TABLE OF AUTHORITIES—Continued
Page
Hanlon v. Chrysler Corp.,
150 F.3d 1011 (9th Cir. 1998) ..................................33
Hook v. Intelius, Inc.,
No. 10-CV-239 (MTT),
2011 WL 1196305 (M.D. Ga. Mar. 28, 2011).............5
Klier v. Elf Autochem N. Am., Inc.,
658 F.3d 468 (5th Cir. 2011) .............................. 19, 22
Lane v. Facebook,
696 F.3d 811 (9th Cir. 2012),
cert. denied sub nom. Marek v. Lane,
571 U.S. 1003 (2013).............................. 17, 21, 31, 33
In re Linerboard Antitrust Litig.,
MDL No. 1261, 2008 WL 4542669
(E.D. Pa. Oct. 3, 2008) .............................................32
In re Lupron Mktg. & Sales Practices Litig.,
677 F.3d 21 (1st Cir. 2012) .............................. passim
Masters v. Wilhelmina Model Agency, Inc.,
473 F.3d 423 (2d Cir. 2007) .....................................18
Nachshin v. AOL, LLC,
663 F.3d 1034 (9th Cir. 2011) .......................... passim
In re Online DVD Antitrust Litig.,
799 F.3d 934 (9th Cir. 2015) .............................. 12, 13
Pearson v. NBTY, Inc.,
772 F.3d 778 (7th Cir. 2014) .............................. 20, 21
Perkins v. Am. Nat. Ins. Co.,
No. 05-CV-100 (CDL),
2012 WL 2839788 (M.D. Ga. July 10, 2012) ...........31
viii
TABLE OF AUTHORITIES—Continued
Page
In re Pharm. Indus. Average
Wholesale Price Litig.,
588 F.3d 24 (1st Cir. 2009) .......................... 15, 18, 35
Reno v. Am. Civil Liberties Union,
521 U.S. 844 (1997) .................................................31
Rescue Army v. Mun. Court of City of Los
Angeles, 331 U.S. 549 (1947) ...................................25
Schulte v. Fifth Third Bank,
805 F. Supp. 2d 560 (N.D. Ill. 2011) .................. 29, 35
Six Mexican Workers v. Ariz. Citrus Growers,
904 F.2d 1301 (9th Cir. 1990) ..................................30
Tennille v. W. Union Co.,
809 F.3d 555 (10th Cir. 2015) ..................................19
United States v. Johnston,
268 U.S. 220 (1925) .................................................14
In re Universal Serv. Fund Telephone
Billing Pracs. Litig.,
No. 02-MD-1468-JWL,
2013 WL 2476587 (D. Kan. June 7, 2013) ..............34
In re Vistaprint Corp. Mktg. & Sales Prac. Litig.,
MDL No. 4:08-md-1994, 2009 WL 2884727
(S.D. Tex. Aug. 31, 2009), aff ’d sub nom.,
Bott v. Vistaprint USA, Inc.,
392 F. App’x 327 (5th Cir. 2010) ................................5
STATUTES
28 U.S.C. § 1712(e) ......................................................24
ix
TABLE OF AUTHORITIES—Continued
Page
OTHER AUTHORITIES
Fed. R. Civ. P. 23 .................................................. passim
4 Newberg on Class Actions § 12:32 (5th ed.
2014) ........................................................................15
Sup. Ct. R. 10 ..............................................................14
1
INTRODUCTION
In a misguided effort to obtain review, Petitioner
portrays this case as raising the same question presented as Frank v. Gaos, No. 17-961, and as an “ideal
vehicle for addressing the issue of cy pres.” Pet. 1, 10–
11. Petitioner’s portrayal misses the mark. Gaos was
an injunctive relief and cy pres-only settlement with
no direct financial award to the class. This case, however, provides direct monetary relief—cash refund for
money allegedly lost on fees paid—and a $20 credit to
each class member, and cy pres is used only as a mechanism to distribute unclaimed funds. What Petitioner
actually seeks is review of a case-specific question:
whether the district court abused its discretion under
Rule 23(e)(2) by approving a class action settlement
that uses cy pres as a mechanism to distribute unclaimed funds where the district court carefully evaluated silent class members’ interests and those sought
to be advanced by the underlying claims.
The Petition should be denied. Although Petitioner
contends there is a circuit conflict on the applicable legal standards, there is none. Each of the other circuits
that have addressed use of cy pres to distribute unclaimed settlement funds applies the same or substantially similar standards as the Ninth Circuit did here.
These include the circumstances for employing cy pres
to distribute unclaimed funds and the criteria for selecting recipients of such funds to protect the interests
of silent class members. The Petition also does not present an important, recurring question of law warranting this Court’s review. Instead, it takes issue with the
2
district court’s exercise of discretion in applying these
standards to the specific factual aspects of this particular settlement. Even if there was a need to take up
certain cy pres issues, such as cy pres-only settlements,
this case is not the right vehicle to do so because cy
pres was employed here in a narrow, universally approved circumstance—as a device to distribute unclaimed settlement funds. Further, both the district
court and Ninth Circuit below considered and rejected
Petitioner’s two proposed alternative distribution
methods for compelling reasons under established law
as applied to the unique circumstances here. Finally,
the Ninth Circuit’s decision affirming the district
court’s approval of the limited cy pres aspect of the settlement as “fair, reasonable, and adequate” under Rule
23(e)(2) was correct on the merits.
------------------------------------------------------------------
STATEMENT
The Contested Membership Programs
This case arises from plaintiffs’ online enrollment
in certain subscription-based membership programs,
each of which was offered and administered by Regent
Group. Pet. App. 4–5, 28–29. Plaintiffs claim that, after
they ordered items from certain of Provide Commerce’s
websites, they were presented with an offer to enroll in
one of the membership programs. Id. As part of the offer to enroll, plaintiffs allege they were presented with
the opportunity to claim a gift code for $15 off their
next order. Id.
3
Plaintiffs concede that they navigated away from
Provide Commerce’s websites to Regent Group’s membership programs’ enrollment webpages, entered their
email addresses and zip codes, and clicked the acceptance button. Id. at 4, 28. Plaintiffs allege that
when they did so, Provide Commerce transmitted their
payment and billing information to Regent Group,
which proceeded to enroll plaintiffs and class members
in one of the membership programs and charged their
credit or debit cards a $1.95 activation fee, followed by
a monthly fee of $14.95. Id. at 4–5, 28–29. Plaintiffs
contend they did not intend to enroll in the membership programs, but rather were seeking to claim the
$15-off gift code, which they believed was offered without any obligation, despite the clear disclosures to the
contrary contained on Regent Group’s enrollment
pages. Id.
Because they purportedly did not intend to enroll
in the membership programs, plaintiffs contend that
the charges that Regent Group posted to their credit or
debit cards for the membership programs’ fees were
unauthorized. Id. Plaintiffs also allege that they did
not receive the promised $15-off gift code. Id.
Plaintiffs’ Claims
Based on the conduct surrounding their enrollment in the membership programs, plaintiffs asserted
ten statutory and common law claims for relief against
Provide Commerce and Regent Group under various
legal theories, including invasion of privacy. Pet. App.
4
5, 29. Plaintiffs asserted these claims individually and
on behalf of a putative nationwide class. Id.
Discovery Conducted
In two and a half years of litigation, the parties
engaged in extensive discovery, completed pre-class
certification fact discovery, and had nearly completed
pre-class certification expert discovery when the parties settled. Id. at 5, 55–56, 77. Provide Commerce
produced more than 450,000 pages of documents, responded to twelve interrogatories, defended six corporate depositions, took six current and former plaintiffs’
depositions, and obtained over 29,000 pages of documents from plaintiffs. Id. at 55–56, 77. Provide Commerce and plaintiffs served opening expert reports. Id.
at 56.
Provide Commerce’s Positions Were Supported
By Several Federal Court Opinions that Called
into Question the Viability of Plaintiffs’ Claims
Provide Commerce has maintained that plaintiffs’
claims were without merit. Id. at 55, 70, 83–84. Provide
Commerce contended: (i) the terms of the offer and
plaintiffs’ enrollment in the membership programs
were adequately disclosed; and (ii) plaintiffs entered
into valid electronic contracts with Regent Group for
the membership programs that authorized Provide
Commerce to disclose billing and payment information
to Regent Group upon Regent Group’s request. Id.
5
Before the parties settled, several federal district
courts had recently dismissed complaints involving
substantially similar enrollment processes and disclosures for other subscription-based membership programs. See, e.g., Baxter v. Intelius, Inc., No. SACV 091031 AG (MLGx), 2010 WL 3791487, at *3–5 (C.D. Cal.
Sept. 16, 2010) (holding that similar enrollment
webpage was not deceptive as a matter of law); Hook v.
Intelius, Inc., No. 10-CV-239 (MTT), 2011 WL 1196305,
at *9–10 (M.D. Ga. Mar. 28, 2011) (same); Berry v. Webloyalty.com, Inc., No. 10-CV-1358-H (CAB), 2011 WL
1375665, at *4–6 (S.D. Cal. Apr. 11, 2011) (same), vacated on other grounds, 517 F. App’x 581 (9th Cir. 2013).
One such district court opinion had already been affirmed on appeal. In re Vistaprint Corp. Mktg. & Sales
Prac. Litig., MDL No. 4:08-md-1994, 2009 WL 2884727,
at *8 (S.D. Tex. Aug. 31, 2009) (granting defendants’
motion to dismiss and holding nearly identical enrollment webpage was not deceptive as a matter of law),
aff ’d sub nom., Bott v. Vistaprint USA, Inc., 392
F. App’x 327 (5th Cir. 2010).
As such, Provide Commerce’s motion to dismiss
pending at the time of settlement was well-supported,
and the district court noted in its order approving the
settlement that the viability of plaintiffs’ claims was
“substantially uncertain” in light of these decisions.
Pet. App. 55, 83.
6
Settlement Process
Throughout the litigation, the parties participated
in extensive settlement conferences and mediations in
an effort to resolve this case. Id. at 5, 56, 83–84. On
December 15, 2010, the parties appeared before Magistrate Judge William V. Gallo for an Early Neutral
Evaluation conference. Id. On May 18, 2011, the parties participated in a full-day private mediation session before Magistrate Judge Leo S. Papas (Ret.). Id.
On May 20, 2011, the parties again appeared before
Magistrate Judge Gallo and participated in a Mandatory Settlement Conference with defendants and their
respective insurance carriers. Id. Magistrate Judge
Gallo conducted follow-up telephone conferences with
certain defendants and insurers on July 18, 2011, August 5, 2011, and August 17, 2011. Id. Magistrate
Judge Gallo also conducted an in-person Mandatory
Settlement Conference with plaintiffs only on October
7, 2011. Id.
The parties continued to discuss a potential settlement over the next several months, and ultimately
agreed to attend a second private mediation with another mediator. Id. On April 9, 2012, the parties participated in a full-day private mediation session with
Judge Edward A. Infante (Ret.). Id. At the conclusion
of the mediation, the parties reached an agreement on
the high-level terms of a settlement, conditioned on the
parties negotiating and executing a final written
agreement. Id. In the weeks following the mediation,
the parties negotiated a formal written settlement
agreement. Id. at 80–116.
7
Settlement Terms
The parties structured the settlement to specifically address plaintiffs’ core allegations. First, because
plaintiffs contended that they and the class had been
damaged by Provide Commerce’s purported unauthorized or otherwise improper disclosure of their billing
and payment information to Regent Group, and Regent
Group’s alleged unauthorized charges to their credit or
debit card accounts for membership fees, Provide Commerce and Regent Group agreed to establish a $12.5
million non-reversionary cash fund to, among other
things, make cash payments to authorized claimants
up to the full amount of monthly membership fees paid
(less any prior full or partial payment for such fees).
Id. at 5–6, 30–35, 70–72, 80–115. Second, because
plaintiffs contended that they and the class were misled by the offering of a $15-off code as part of the enrollment process, and that they did not actually receive
the code upon enrollment, Provide Commerce agreed
to provide each class member with a $20 credit. Id.
Class members were not required to submit a claim
form to obtain the $20 credit, which is 30% larger than
the $15-off code class members originally sought. Id.
Notably, the settlement did not include injunctive
relief because defendants had voluntarily ended the
contested practices before the settlement. Resp. Provide Commerce’s App. 29-30.
8
The main terms of the settlement include:
•
Notice to class members by e-mail, followed by U.S. postal mail for undeliverable e-mails, and an Internet website.
•
Creation of a cash fund of $12.5 million,
to be used to pay the claims of class
members, cost of providing notice, claims
administration fees and costs, courtapproved attorneys’ fees and costs, and
court-approved plaintiffs’ enhancement
awards. Any remainder funds would be
paid on an equal basis to San Diego State
University, the University of California at
San Diego, and University of San Diego
School of Law, with the payments specified to be used for a chair, professorship,
fellowship, lectureship, seminar series, or
similar funding, gift, or donation program
regarding internet privacy or internet
data security.
•
To class members who timely submit
valid claim forms, a cash payment from
the cash fund for the amount of monthly
fees paid for membership program(s), less
any full or partial payment for such fees
previously received.
•
To all class members (whether or not they
submit claim forms), a $20 credit useable
at certain Provide Commerce websites.
•
Awards to the named plaintiffs ranging
from $5,000 to $15,000 (depending on the
9
extent of their involvement in the case),
subject to court approval.
•
Attorneys’ fees and costs of up to a maximum amount of $8.65 million in fees and
$200,000 in costs, subject to court approval.
Pet. App. 5–6, 30–35, 70–72, 80–115.
There were approximately 1.3 million class members that received notice, of which approximately 3,000
submitted claims for cash refunds. Id. at 6, 34. Each of
those claims will be paid in full, equaling about
$225,000. Id. After accounting for these claims, notice
and administration costs, and class counsel’s request
for fees and costs, there is a remainder of approximately $3 million. Id. at 6.
Objection to Settlement
Petitioner filed the lone objection to the settlement, challenging the amount of the attorneys’ fees requested, as well as the use of cy pres to distribute
unclaimed settlement funds and the choice of cy pres
recipients. Pet. App. 41–49.
As a claimant from the fund, Petitioner will receive a $121.55 cash payment. Resp. Provide Commerce’s App. 66. As a class member, he will also receive
the $20 credit. Pet. App. 95–96.
10
Fairness Hearing and Final Approval Order
The district court conducted a fairness hearing on
January 28, 2013. Pet. App. 6, 27–28; Resp. Provide
Commerce’s App. 1–51. After entertaining argument
for over 70 minutes, the district court took the matter
under submission. Pet. App. 6, 27–28. On February 4,
2013, the district court issued a final order approving
the settlement and plaintiffs’ requested attorneys’ fees
and enhancement awards and overruling Petitioner’s
objections. Id. at 27–60. In a thoughtful and wellreasoned 22-page order, the court considered the proposed settlement, weighed the merits of the objection,
and ultimately determined that the parties had entered into the settlement in good faith, after extensive
arm’s-length negotiations, and concluded that the settlement was fair, reasonable, adequate, and in the best
interests of class members. Id.
Addressing Petitioner’s issues with use of cy pres
to distribute unclaimed funds, the district court first
addressed the cy pres recipients that the parties selected. As to geographic scope, the district court found
that the proposed cy pres distribution was “directly
tied to the statutes underlying [p]laintiffs’ claims” because the funds would “directly contribute to the national academic dialogue involving internet privacy
and security,” and because the funds would benefit absent class members, all of whom are internet consumers: “Regardless of their physical location, programs
furthering the goals of internet security and privacy
will benefit users of the internet everywhere.” Id. at
46–47. The district court noted that the recipient
11
universities “serve a diverse student population of students from many states, issue widely-distributed publications, and engage in the overall national academic
discourse.” Id. at 46. In rejecting Petitioner’s contention, the district court found: “the geographic distribution in this instance satisfies (1) the objectives of the
underlying statute(s) and (2) the interests of the silent
class members.” Id. at 48. The district court also rejected Petitioner’s argument that the University of
San Diego School of Law was an unacceptable cy pres
beneficiary merely because a couple of the numerous
attorneys that had appeared in the case happened to
be alumni of that institution. Id. at 43–44. In doing so,
the court noted that, of the three institutions sharing
the cy pres award, University of San Diego Law School
was not entitled to a greater award than the others. Id.
The court further noted that, “simply by virtue of it being a law school, USD Law School may be in the best
position to develop and research the legal issues associated with internet privacy and security underlying
[p]laintiffs’ claims.” Id.
The district court next addressed Petitioner’s objection to use of cy pres at all as a mechanism to distribute unclaimed settlement funds and his proposed
alternative distribution methods. The district court
found that a further distribution to claimant class
members “would constitute an impermissible windfall”
and that the settlement agreement “already authorizes class members to recover the entirety of any unauthorized charges and further awards a $20 credit
worth $5 more than the original ‘thank you gift’ leading
12
to [p]laintiffs’ claims.” Id. at 48. The district court further found that “silent class members would not benefit from a further distribution to the claimant class
members,” and they “will receive greater benefit from
the remaining funds” if distributed by cy pres. Id. at
48–49. In overruling Petitioner’s cy pres objections, the
district court found that the cy pres here met the Ninth
Circuit standards because “[t]he nature of the distribution and the proposed recipients are sufficiently tied
to the objectives of the statutes . . . and to the interests
of silent class members.” Id. at 49.
Petitioner’s First Appeal
Petitioner appealed. Id. at 7. On March 19, 2015,
after all parties to the appeal completed briefing, but
before oral argument, the Ninth Circuit vacated the
judgment and remanded the case for further proceedings consistent with its newly issued opinion In re
Online DVD Antitrust Litig., 799 F.3d 934 (9th Cir.
2015). In re EasySaver Rewards Litig., 599 F. App’x 274
(9th Cir. 2015); id. at 7, 66–68.
Remand and Order Reinstating Prior Final Approval Order and Judgment
Upon remand, the district court ordered supplemental briefing from the parties and Petitioner regarding the import of In re Online DVD Antitrust Litig. Pet.
App. 69–70. By order filed August 9, 2016, the district
court again rejected Petitioner’s contentions regarding
attorneys’ fees and costs, and adopted and reinstated
13
the prior final approval order and final judgment. Id.
at 69–78. The district court did not readdress Petitioner’s objections regarding cy pres as it was not an
issue in In re Online DVD Antitrust Litig. Id.
Petitioner’s Second Appeal
Petitioner again appealed. On October 13, 2018,
the Ninth Circuit issued its opinion holding that Petitioner’s “challenge to the attorney’s fee award succeeds
because the district court failed to treat the $20 credits
as coupons under CAFA, but [ ] reject[ing] his cy pres
arguments.” Id. at 8–9. The Ninth Circuit further held
that given the settlement agreement’s structure and
the focus of Petitioner’s challenges to the settlement,
that it need not reverse the entire settlement approval
in vacating and remanding the attorneys’ fee award.
Id. at 25. As such, it reversed the fee award, but otherwise affirmed the district court’s settlement approval.
Id. at 25–26.
------------------------------------------------------------------
REASONS FOR DENYING PETITION
The Petition seeks review of a case-specific decision that applies settled law on the use of cy pres to
distribute unclaimed settlement funds based on the
unique facts of this particular case, a decision that is
correct on the merits.
There is no circuit conflict as to the standards
district courts apply in assessing the use of cy pres to
14
distribute unclaimed remaining settlement funds. Every
circuit to address the issue has held that district courts
may approve use of cy pres to distribute such remaining funds. Every circuit court likewise applies a substantially similar standard in evaluating cy pres
recipients: requiring a sufficient nexus between the objectives of the underlying statute(s) or claim(s) and the
interests of silent class members. Courts have recognized that use of cy pres under these circumstances
serves the policies favoring settlement and benefits the
class. They also recognize the need to scrutinize such
settlements to ensure that they are fair to silent class
members. Both the district court and the Ninth Circuit
followed these established standards in evaluating the
proposed settlement here.
Petitioner tries to manufacture a conflict by citing
four cases that involved the use of cy pres to distribute
unclaimed funds, but none of these cases applied a different legal standard; they merely reached different results based on different sets of facts. In the end, all the
Petition offers is nothing more than an argument that
the Ninth Circuit did not correctly apply the prevailing
standard in this particular case. The claimed misapplication of a properly stated rule of law does not, however, warrant review by this Court. Sup. Ct. R. 10;
United States v. Johnston, 268 U.S. 220, 227 (1925). The
Petition seeks a case-specific examination of whether
the district court and Ninth Circuit correctly applied
settled legal standards to the unique facts of this case.
Finally, the decision below was correct. The district court and Ninth Circuit applied settled standards
15
to the facts here, and reached a decision on the cy pres
issues that is consistent with decisions from other circuit and district courts. Given these considerations and
the questionable viability of plaintiffs’ underlying
claims, the district court acted within its discretion in
finding the settlement “fair, reasonable, and adequate,”
and use of cy pres to distribute unclaimed funds to be
appropriate under the circumstances here.
I.
The Petition Presents no Circuit Conflict.
Petitioner contends that other circuits “categorically reject” the Ninth Circuit’s standards for use of cy
pres to distribute unclaimed funds. Pet. 12. This is incorrect. The other circuits have not rejected the Ninth
Circuit’s standards. All of the circuits apply essentially
the same legal standards to determine whether use of
cy pres to distribute unclaimed funds is appropriate.
The Ninth Circuit adheres to these established standards, and has often taken a lead role in developing
them. The decision below follows this common approach, and as such, does not create a circuit conflict.
Use of cy pres is “likely the most prevalent method
for disposing of unclaimed funds” and “[c]ourts in every
circuit, and appellate courts in most, have approved
the use of cy pres for unclaimed class action awards.”
4 Newberg on Class Actions § 12:32 (5th ed. 2014)
(listing cases); see, e.g., In re Pharm. Indus. Average
Wholesale Price Litig., 588 F.3d 24, 34 (1st Cir. 2009)
(quoting Newberg on Class Actions) (“[C]ourts are not
in disagreement that cy pres distributions are proper
16
in connection with a class settlement.”); In re Baby
Prod. Antitrust Litig., 708 F.3d 163, 172 (3d Cir. 2013)
(“[A] district court does not abuse its discretion by approving a class action settlement agreement that includes a cy pres component directing the distribution
of excess settlement funds to a third party to be used
for a purpose related to the class injury.”); Fraley v. Facebook, Inc., 966 F. Supp. 2d 939, 946 (N.D. Cal. 2013)
(“[C]y pres is a well-accepted method for distributing
unclaimed settlement funds.”), aff ’d sub nom. Fraley v.
Batman, 638 F. App’x 594 (9th Cir. 2016), cert. denied
sub nom. K.D. v. Facebook, Inc., 137 S. Ct. 68 (2016).
A. There is no circuit conflict in evaluating
proposed alternative remainder distribution methods.
Despite the prevalence of employing cy pres to distribute unclaimed settlement funds, Petitioner contends that there is a circuit conflict with respect to the
standards for evaluating alternative distribution
methods. Pet. 11, 13–16. The Ninth Circuit held that
the district court did not abuse its discretion in rejecting Petitioner’s two proposed alternatives for distributing the remaining funds: (1) additional distribution
to the claimants; or (2) pro rata distribution to the nonclaimant class members. Pet. App. 21–22. As to an additional distribution to claimants, the Ninth Circuit
held, “the district court was under no obligation to
adopt a distribution approach that might overcompensate claimants, all of whom will already be fully reimbursed for the money they lost through the rewards
17
program.” As to a forced distribution to non-claimants,
each of whom received direct notice and chose not to
make a claim, the Ninth Circuit rejected this approach,
recognizing that “each non-claimant’s recovery would
be ‘de minimis,’ . . . particularly once the costs of distribution are deducted.” Id. at 22. (quoting Lane v. Facebook, 696 F.3d 811, 821 (9th Cir. 2012), cert. denied
sub nom. Marek v. Lane, 571 U.S. 1003 (2013)). Given
these facts, the panel determined that use of cy pres
as a remainder distribution method is appropriate
where, as here, “the administrative costs of distribution” are substantial compared to “the amount each
non-claimant might receive.” Id.
There is not a circuit conflict in evaluating these
two alternative distribution methods.
Other circuits recognize that claimant class members should not be overcompensated at the expense of
non-claimants. See, e.g., Baby Prod., 708 F.3d at 176
(“[W]here all class members submitting claims have already been fully compensated for their damages by
prior distributions . . . additional individual distributions would overcompensate claimant class members
at the expense of absent class members.”) (internal alterations and citation omitted)); In re Lupron Mktg. &
Sales Practices Litig., 677 F.3d 21, 35–36 (1st Cir. 2012)
(expressing concerns about overcompensating claimants at the expense of absent class members, and rejecting windfall payments to claimants that have
already been compensated for harm suffered).
18
Other circuit courts have likewise recognized that
cy pres distribution of unclaimed settlement funds is
permissible where direct distributions are infeasible or
not economically or otherwise viable under the circumstances:
•
First Circuit: In re Pharm. Indus. Average Wholesale Price Litig., 588 F.3d 24,
34 (1st Cir. 2009) (holding cy pres awards
are permissible where “[d]istribution of
all funds to the class can be infeasible, for
example, when class members cannot be
identified, when the class changes constantly, or when class members’ individual damages—although substantial in
the aggregate—are too small to justify
the expense of sending recovery to individuals”).
•
Second Circuit: Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423,
436 (2d Cir. 2007) recognizing that cy pres
distributions may be appropriate in “circumstances in which direct distribution
to individual class members is not economically feasible”) (citation omitted).
•
Third Circuit: Baby Prod., 708 F.3d at
169–73 (recognizing that cy pres awards
are appropriate where the “amounts involved are too small to make individual
distributions economically viable”—for
instance, where “the cost of distributing
individually to all class members exceeds
the amount to be distributed” and noting
general agreement among circuit courts
19
that “cy pres distributions are most appropriate where further individual distributions are economically infeasible”)
(emphasis added).
•
Fifth Circuit: Klier v. Elf Autochem N.
Am., Inc., 658 F.3d 468, 475 & n.15 (5th
Cir. 2011) (cy pres awards are appropriate
“when direct distributions to class members are not feasible”) (citation omitted).
•
Tenth Circuit: Tennille v. W. Union
Co., 809 F.3d 555, 560 n.2 (10th Cir. 2015)
(recognizing that the “cy pres doctrine allows a court to distribute unclaimed or
non-distributable portions of a class action settlement fund to the ‘next best’
class of beneficiaries”) (citing Nachshin v.
AOL, LLC, 663 F.3d 1034, 1036 (9th Cir.
2011)).
In short, there is not a circuit conflict in evaluating
Petitioner’s two proposed alternative distribution
methods, and Petitioner has not identified any such circuit split.
B. There is no circuit conflict in evaluating
cy pres recipients for unclaimed funds.
Petitioner also contends that there is a circuit conflict regarding the standards used to evaluate the
choice of cy pres remainder recipients. In the opinion
below, the Ninth Circuit articulated the standard as
follows: “recipients of cy pres funding should be selected
in light of ‘the objectives of the underlying statute(s)’
20
and the interests of silent class members.” Nachshin,
663 F.3d at 1039. Pet. App. 22. Each of the four cases
on which Petitioner relies in support of his position is
in accord with the Ninth Circuit’s standard. See Baby
Prod., 708 F.3d at 172 (“We join other courts of appeals
in holding that a district court does not abuse its discretion by approving a class action settlement agreement that includes a cy pres component directing the
distribution of excess settlement funds to a third party
to be used for a purpose related to the class injury.”);
In re BankAmerica Corp. Sec. Litig., 775 F.3d 1060,
1067 (8th Cir. 2015) (noting that a cy pres award
“should be distributed for a purpose as near as possible
to the legitimate objectives underlying the lawsuit,
the interests of class members, and the interests of
those similarly situated”) (quoting In re Airline Ticket
Comm’n Antitrust Litig, 307 F.3d 679, 682 (8th Cir.
2002)); Klier, 658 F.3d at 474 (same); Pearson v. NBTY,
Inc., 772 F.3d 778, 784 (7th Cir. 2014) (where class
claims were based on “orthopedic medicine,” “the choice
of an orthopedic institute as a recipient of money left
over after all approved class members’ claims are paid
is consistent cy pres”). There is no circuit conflict on the
standard used to evaluate cy pres remainder recipients.
Rather than establishing a circuit split, the four
cases on which Petitioner relies reflect careful and considered application of the same legal standard to different and often unique sets of facts.
In Pearson, the Seventh Circuit applied the wellestablished standard that a “cy pres award is supposed
21
to be limited to money that can’t feasibly be awarded
to the . . . class members.” Pearson, 772 F.3d at 784.
This is in accord with the standard applied in every
other circuit that has decided the issue. See, e.g., Lane,
696 F.3d at 819 (holding that cy pres awards are appropriate only where “the proof of individual damages
claims would be burdensome or the distribution of
damages costly”) (quoting Nachshin, 663 F.3d at 1038).
Pearson involved fixed damages arising from the purchase of a particular dietary supplement, whereas
here, damages were variable and had to be calculated
separately for each claimant. See Pearson, 772 F.3d at
779–80. Moreover, the Pearson court acknowledged
that “the choice of an orthopedic institute as a recipient of money left over [was] consistent with cy pres”—
in other words, the cy pres recipient had a sufficient
nexus to the class—but determined that a cy pres
award was not appropriate “in this case” because direct
distribution to class members was feasible. Id. at 784.
In BankAmerica, the Eighth Circuit expressly
noted it was in accord with the Ninth Circuit’s decision
in Nachshin in requiring cy pres remainder distributions to provide an “indirect class benefit” by going to
“uses consistent with the nature of the underlying action.” 775 F.3d at 1067 (citations and quotation marks
omitted). The Eighth Circuit rejected the cy pres award
in that case because the recipient, a Missouri legal aid
organization, was “totally unrelated” to the securities
fraud claims asserted on behalf of a nationwide class.
Id. Moreover, the court determined that a further
distribution was feasible under the facts of that case
22
because $2.4 million could be distributed at the low
cost of $27,000 and claimants had received settlement
payments compensating them for only a fraction of the
harm incurred. Id. at 1064.
In Baby Products, the Third Circuit vacated the
district court’s approval of the settlement because—
unlike here—the district court “was apparently unaware of the amount of the fund that would be distributed to cy pres beneficiaries rather than being
distributed directly to the class.” 708 F.3d at 170; see
also id. at 175 (“We vacate the District Court’s orders
approving the settlement and the fund allocation plan
because it did not have the factual basis necessary to
determine whether the settlement was fair to the entire class. Most importantly, it did not know the
amount of compensation that will be distributed directly to the class.”).
Finally, the Fifth Circuit’s decision in Klier is not
relevant here because it did not involve a district
court’s approval or enforcement of the parties’ agreed
use of cy pres to distribute unclaimed settlement funds.
See Klier, 658 F.3d at 476–78. Rather, the district court
sua sponte ordered a cy pres distribution of unclaimed
settlement funds, despite the settlement agreement’s
explicit direction that any leftover funds “shall be distributed pro rata to all Claimants in that subclass.” Id.
at 476. The decision expressly stated that it did not
“implicate the line of authority giving careful scrutiny
to class settlement agreements in which the parties
agree to a cy pres distribution.” Id. at 478 n.29.
23
In sum, Petitioner has failed to demonstrate a circuit conflict meriting review. As such, the Petition
should be denied.
II.
The Petition Does Not Present an Important
Recurring Question Warranting Review.
Relying on Gaos and Marek, Petitioner contends
“the Rule 23 questions presented in this case are important and recurring.” Pet. 16. In doing so, Petitioner
overlooks that Gaos and Marek were cy pres-only settlements with no direct financial award to the class,
whereas the settlement here provides direct monetary
relief—cash refund payments for money allegedly lost
on fees paid—and a $20 credit to each class member.
Further, cy pres is used here only as a mechanism to
distribute unclaimed funds. This fundamental mischaracterization of the settlement aside, Petitioner
advances six policy arguments in support of his contention. None establishes that this case presents an
important and recurring question warranting review.
First, Petitioner argues “cy pres is a poor fit for
class actions when courts permit settlements to be
gamed to divert material amounts of money away from
the class.” Id. at 18. But as set forth in Section I. above,
cy pres is a prevalent and well-established mechanism
for disposing of unclaimed settlement funds. Petitioner’s statements regarding a lack of “ ‘charitable objective[s]’ ” (id. at 18) for class actions also overlooks
that Congress has expressly authorized a distribution
to charities in class actions in the context of unclaimed
24
coupons in coupon settlements. 28 U.S.C. § 1712(e)
(stating in relevant part: “[t]he court, in its discretion,
may also require that a proposed settlement agreement provide for the distribution of a portion of the
value of unclaimed coupons to 1 or more charitable or
governmental organizations, as agreed to by the parties.”). Additionally, Petitioner fails to establish any actual widespread gaming of settlements resulting in the
diversion of material amounts of money from class
members at the time settlements were made. That certainly is not the case here, where the settlement established a cash fund to make payments to authorized
claimants up to the full amount of monthly membership fees paid and the settlement agreement contemplated the possibility of a pro-rated reduction if the
total number and dollar value of claims exhausted the
cash fund. The parties employed cy pres here only to
distribute any unclaimed remaining funds.
Second, employing cy pres to distribute unclaimed
funds does not necessarily create conflicts of interest
for class counsel, and there are existing protections in
place to guard against such a prospect. District courts
review class-action settlements to ensure that they
are fair, reasonable, and adequate. See Fed. R. Civ. P.
23(e)(2). Further, circuit courts have articulated standards used to evaluate the choice of cy pres remainder
recipients as established above in Section I.B. Also,
there is no conflict of interest here. The district court
found that there was “a rational connection between
the chosen recipients and the nature of the settlement”
and no impropriety in the selection process due merely
25
to the alumni status of a small number of the numerous attorneys that appeared in this case as there is “no
suggestion that counsel has any further relationship
with the school than simply graduating from there.”
Pet. App. 44. The Ninth Circuit likewise found that
“the alumni connections of three of the (many) involved
attorneys did not impermissibly taint the selection
process.” Id. at 24.
Third, the use of cy pres here does not create the
appearance of impropriety for district court judges because the parties, not the district court, selected the cy
pres remainder recipients in the settlement agreement, and gave notice to the class about the distribution of any remainder and the recipients. Id. at 94, 97–
99.
Fourth, Petitioner and amicus curiae’s First
Amendment argument does not apply here. Petitioner
concedes that “this case does not challenge the cy pres
on First Amendment grounds.” Pet. 25. Despite this
concession, Petitioner nevertheless proceeds to argue
“canons of constitutional avoidance militate for interpreting Rule 23 in a way to limit cy pres.” Id. Petitioner’s argument is backwards. Under the doctrine of
constitutional avoidance, courts observe a “policy of
avoiding constitutional decisions until the issues are
presented with clarity, precision and certainty.” Rescue
Army v. Mun. Court of City of Los Angeles, 331 U.S. 549,
576 (1947) (emphasis added). Additionally, the use of
cy pres here does not raise First Amendment issues
because class members were not required “to subsidize political organizations or charities . . . which
26
individual class members may not support or approve”
as Petitioner appears to contend. Pet. 24. Class members were not forced to pay anything, and could have
received a payment under the settlement fund had
they submitted a claim. The use of cy pres here was
only for unclaimed remainder funds, and the district
court found that non-claimant class members will benefit from the cy pres distribution. Further, class members received direct notice of the potential for cy pres
remainder distribution and the identity of the cy pres
recipients, and had an opportunity to opt out of the settlement.
Fifth, Petitioner’s contention that limiting class
counsel’s ability to get paid through the use of cy pres
results in tangible benefits to class members is misplaced. Petitioner again overlooks that each class
member here received direct notice and had the opportunity to make a claim for a cash payment for a refund
of membership fees paid. The parties employed cy pres
only to distribute any remaining funds. The district
court and Ninth Circuit found that the use of cy pres
here satisfied well-established standards. There was
no finding of cy pres abuse. To the extent the series of
district court opinions on which Petitioner relies found
that use of cy pres in those cases did not satisfy the
settled standards, such findings were specific to the
unique circumstances of those cases.
Sixth, because there is no circuit split as established in Section I. above, Petitioner’s argument regarding forum shopping in the Ninth Circuit has no
merit.
27
III. This Case Is the Wrong Vehicle to Address
Cy Pres Issues.
Petitioner fails to articulate any question actually
presented by this run-of-the-mill case that employed
use of cy pres to distribute remaining settlement funds.
Petitioner’s assertion that “[t]he question presented in
this case is similar to that presented in Gaos,” namely,
“[w]hether, or in what circumstances, a cy pres award
that provides no direct relief or benefit to class members [is] fair, reasonable, and adequate,” is simply not
true. Pet. i–ii. Gaos involved a cy pres-only settlement
with no direct relief to class members. The settlement
here provides substantial and direct relief to every
class member in the form of a $20 credit and the opportunity to claim an additional cash payment from
the settlement fund for a refund of fees paid for the
membership programs. Pet. App. 5. Indeed, Petitioner
himself will receive a $121.55 cash payment and a $20
credit. Resp. Provide Commerce’s App. 66; Pet. App.
95–96. Unlike both Gaos and Marek, the cy pres
awards in this case will only be made to distribute unclaimed cash settlement funds remaining after direct
notice to each class member—notice which Petitioner
did not challenge. The questions raised in Gaos and
Marek are simply not present here.
To the contrary, this case represents perhaps one
of the most prevalent and widely approved scenarios
for using the cy pres mechanism: distribution of unclaimed funds. As the Ninth Circuit aptly noted in its
opinion below:
28
The availability of cy pres as a mechanism to
distribute unclaimed funds rests on the premise that class action settlements will sometimes have just that—unclaimed funds. A
settlement is not fatally flawed solely because
class members did not deplete the entirety of
the settlement fund. If it were, cy pres would
not exist.
Pet. App. 21.
Petitioner’s two proposed alternative distribution
methods are not as appropriate as use of cy pres here.
An additional distribution to claimants would overcompensate them at the expense of non-claimant class
members, and would not provide any benefit to silent
class members. A distribution to silent class members
is also not appropriate because doing so would eliminate the requirement that to receive a refund, class
members had to affirm that they had neither intended
to enroll in the program nor used any program benefits. This was a hotly contested case. Provide Commerce contended: (i) the terms of the offer and
plaintiffs’ enrollment in the membership programs
were adequately disclosed; and (ii) plaintiffs entered
into valid electronic contracts with Regent Group for
the membership programs that authorized Provide
Commerce to disclose billing and payment information
to Regent Group upon Regent Group’s request. Id. at
55, 70, 83–84. As such, the claim form requirement under the settlement agreement cannot be disregarded in
favor of an automatic distribution to class members.
Fager v. CenturyLink Comm’ns, LLC, 854 F.3d 1167,
29
1176 (10th Cir. 2016) (“On appeal Ziegler asserts that
class members should not have to submit a claim form
to receive compensation, but he did not raise this argument below. In any event, it makes perfect sense to require class members to submit a claim form evidencing
their entitlement to compensation.”); Schulte v. Fifth
Third Bank, 805 F. Supp. 2d 560, 593 (N.D. Ill. 2011)
(“[T]he claims process is a negotiated facet of this settlement, which, as the Court explained above, is fair as
a whole. The Court may not make unilateral modifications or alterations to the proposed settlement, such as
the substitution of a claims process for a direct payout.”) (internal citation and quotation marks omitted). In any event, such a distribution is infeasible
in light of the amount remaining per class member
($3,000,000/1,300,000 class members = $2.30) and the
third-party claims administration and postage costs
that will significantly erode such a small distribution.
While the Petition raises a myriad of hypothetical
cy pres issues, almost none of petitioner’s generalized
policy concerns are actually present in this case as established in Section II. above. To the extent Petitioner
claims that settlements with a voucher or coupon component may “bamboozle” a district court into “crediting
the coupons as being worth their face value,” and lead
the court to “award exaggerated fees,” the Ninth Circuit already vacated and remanded the attorneys’ fee
award here for recalculation “in a manner that treats
the $20 credits as coupons under CAFA.” Id. at 20.
Although Petitioner strives mightily to re-cast this
case as a direct replacement for Gaos, he cannot do so.
30
The settlement here incorporates cy pres only as a
mechanism to distribute unclaimed funds. This case is
simply not the appropriate vehicle for review of cy pres
generally or cy pres-only settlements specifically.
IV. The Ninth Circuit’s Decision on the Cy Pres
Issue Is Correct on the Merits.
Certiorari is unwarranted because the Ninth Circuit’s decision was correct. The district court acted
within its discretion in approving the use of cy pres and
the particular recipients here.
Use of cy pres as a mechanism to distribute unclaimed funds is acceptable when it is “guided by (1)
the objectives of the underlying statute(s) and (2) the
interests of the silent class members.” Nachshin, 663
F.3d at 1039 (citing Six Mexican Workers v. Ariz. Citrus
Growers, 904 F.2d 1301, 1307 (9th Cir. 1990)). In compliance with these guidelines, the proposed cy pres distribution in this case represents a fair and reasonable
effort to address the class’s claims and to indirectly
benefit the silent class members. See Six Mexican
Workers, 904 F.2d at 1305 (finding cy pres allows for
“distribution of unclaimed funds to indirectly benefit
the entire class”).
Below, Petitioner raised a geographic challenge to
the cy pres recipients. Pet. App. 22–23. But this challenge ignores the fact that “[i]t is not the location of the
recipient which is key. . . .” In re Lupron Mktg. & Sales
Practices Litig., 677 F.3d at 36. One of the issues presented in Lupron was whether Dana Farber/Harvard
31
Cancer Center was an appropriate cy pres recipient
given it is located in “Boston while the injuries are to
a national class.” Id. In concluding it was an appropriate recipient, the First Circuit noted the cy pres fund
“will have benefits well beyond Boston.” Id.; see also
Perkins v. Am. Nat. Ins. Co., No. 05-CV-100 (CDL), 2012
WL 2839788, at *5 (M.D. Ga. July 10, 2012) (approving
cy pres recipient whose “home is within the jurisdiction
of this Court” since “it has the capability of awarding
grants . . . on a national scale”).
Here, as in Lupron, the proposed recipients will
have an effect far beyond the greater San Diego metropolitan area. The district court found that all three
recipients’ students and alumni have a nationwide
presence. Pet. App. 46–48. Further, “[t]he Internet has
no geographic boundaries.” Cyberspace, Comm’ns, Inc.
v. Engler, 55 F. Supp. 2d 737, 751 (E.D. Mich. 1999); accord Reno v. Am. Civil Liberties Union, 521 U.S. 844,
851 (1997) (“ ‘[C]yberspace’—[is] located in no particular geographical location but [is] available to anyone,
anywhere in the world, with access to the Internet.”).
The education provided regarding internet privacy or
data security will therefore have benefits nationwide
and beyond. See Lane, 696 F.3d at 821 (finding distribution of funds to cy pres recipients with a nexus to
the lawsuit “will benefit absent class members”);
Nachshin, 663 F.3d at 1041. Indeed, Nachshin suggested that, where all class members use the internet
and their claims arise from a purportedly unlawful online
advertising campaign, the parties could select “beneficiaries from any number of non-profit organizations
32
that work to protect internet users from fraud, predation, and other forms of online malfeasance.” Id. That
is because an internet presence focuses less on the
physical locus, given that users can be anywhere.
As such, San Diego-based universities can just as
easily advance the interest of online actions of the type
involved here as any other academic institution. The
parties here selected precisely such recipients. The district court did not abuse its discretion in rejecting Petitioner’s geographic challenge below.
The district court likewise did not abuse its discretion in finding that the alumni status of three of the
numerous attorneys in this case to one of the three cy
pres recipients did not impermissibly taint the selection process.
The mere fact that a couple of attorneys out of the
more than 20 that appeared in or worked on this case
are alumni of one of the three schools selected as cy
pres recipients is not improper. There is no assertion,
much less evidence, that counsel for the parties have a
“significant” connection or leadership role, ongoing or
past, with the University of San Diego School of Law.
Nor is there evidence counsel will somehow personally
or professionally benefit from the distribution. Cf. In re
Linerboard Antitrust Litig., MDL No. 1261, 2008 WL
4542669, at *5 (E.D. Pa. Oct. 3, 2008) (declining to
award funds to two of three cy pres recipients where
“an attorney formerly associated with this case currently serves in a lead role at” one of the recipients and
one of class counsel’s former partners founded the
33
other proposed recipient). Further, as the district court
found, it is not particularly surprising that there is a
tenuous alumni connection between a couple of the attorneys for the parties and one of the three proposed
cy pres beneficiaries. Pet. App. 43–44. Provide Commerce is headquartered in San Diego. This case was
filed in San Diego, and counsel and their law firms are
located in San Diego. Id. The district court found that
“[t]here is a rational connection between the chosen recipients and the nature of the settlement. Furthermore, simply by virtue of it being a law school, USD
Law School may be in the best position to develop and
research the legal issues associated with internet privacy and security underlying [p]laintiffs’ claims.” Id.
Petitioner did not cite to a single case below in
which a court declared a cy pres distribution unenforceable merely because counsel’s alma mater was a
cy pres recipient. Although Petitioner relied on Nachshin
below, his reliance is misplaced. In Nachshin, the court
expressed concern that an appearance of impropriety
may arise when “judges and outside entities deal[ ] in
the distribution and solicitation of settlement money.”
663 F.3d at 1039. That is not the case here as the parties selected the cy pres recipients as part of the arm’slength, hard fought settlement negotiations presided,
not the court. Lane, 696 F.3d at 821 (“[S]ettling parties
[need not] select a cy pres recipient that the court or
class members would find ideal.”); accord Hanlon v.
Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998).
Also, Petitioner did not present any evidence—because there is none—that counsel would receive any
34
benefit as a result of the cy pres distribution to USD
Law School.
The district court also did not abuse its discretion
in rejecting Petitioner’s two proposed alternative distribution methods. Petitioner’s proposal to distribute
funds to the claimants would result in “overcompensating claimant class members at the expense of absent class members.” Lupron, 677 F.3d at 35. Here,
there is no cy pres distribution until after cash payments to class members who timely completed a valid
claim form. The claim process allows class members to
claim a cash payment up to the full amount of monthly
membership fees charged and not previously recouped.
Courts have repeatedly held that redistribution to
class members is not applicable where class members
have been fully compensated for their losses. See In re
Universal Serv. Fund Telephone Billing Pracs. Litig.,
No. 02-MD-1468-JWL, 2013 WL 2476587, at *2 (D.
Kan. June 7, 2013) (noting that “each of the pertinent
cases rejects the distribution of unclaimed funds to
participating class members in favor of cy pres distribution when class members have already received full
compensation for their injuries”); Baby Prod., 708 F.3d
at 176 (“[W]here all class members submitting claims
have already been fully compensated for their damages by prior distributions . . . additional individual
distributions would overcompensate claimant class
members at the expense of absent class members.”) (internal alterations and citation omitted); In re Lupron
Mktg. & Sales Practices Litig., 677 F.3d at 32 (explaining that ALI “was motivated by a concern that few
35
settlements award 100 percent of a class member’s
losses, and thus it is unlikely in most cases that further
distributions to class members would result in more
than 100 percent recovery”) (citations and quotation
marks omitted).
Petitioner’s proposal to distribute the funds to
non-claimant class members is also not appropriate
under the circumstances of this case. A direct distribution would not account for class members that were
satisfied with their enrollment or those that chose not
to make a claim because of brand loyalty or based on
philosophical differences with the litigation. Such a
distribution would also violate the terms of the settlement agreement, which required a claim form containing affirmations that the claimant had neither
intended to enroll in the program nor used any program benefits. Fager, 854 F.3d at 1176 (“[I]t makes perfect sense to require class members to submit a claim
form evidencing their entitlement to compensation.”);
Schulte, 805 F. Supp. 2d at 593 (“The Court may not
make unilateral modifications or alterations to the proposed settlement, such as the substitution of a claims
process for a direct payout.”). Direct distribution is also
infeasible as $3 million divided by approximately 1.3
million class members equals $2.30 per absent class
member. Less postage and significant third party claims
administration costs for the distribution, non-claimant
class members would receive at best a miniscule
amount. Pharm. Indus. Average Wholesale Price Litig.,
588 F.3d at 34 (holding cy pres awards are permissible
where “[d]istribution of all funds to the class can be infeasible, for example, when class members cannot be
36
identified, when the class changes constantly, or when
class members’ individual damages—although substantial in the aggregate—are too small to justify the
expense of sending recovery to individuals”); Baby
Prod., 708 F.3d at 169–73 (recognizing that cy pres
awards are appropriate where the “amounts involved
are too small to make individual distributions economically viable”—for instance, where “the cost of distributing individually to all class members exceeds the
amount to be distributed” and noting general agreement among circuit courts that “cy pres distributions
are most appropriate where further individual distributions are economically infeasible”) (emphasis
added).
The district court’s approval of the parties’ use of
cy pres to distribute unclaimed funds in this case met
the standards for final settlement approval in the
Ninth Circuit, which, as established above in Section I.,
is in accord with other circuits, and consistent with
cases within and outside the Ninth Circuit. The district court’s decision was correct on the merits, and as
such, further review is unwarranted.
------------------------------------------------------------------
37
CONCLUSION
For the foregoing reasons, the Petition for a Writ
of Certiorari should be denied.
Respectfully submitted,
MICHAEL G. RHODES
(rhodesmg@cooley.com)
MICHELLE C. DOOLIN
(mdoolin@cooley.com)
LEO P. NORTON
(lnorton@cooley.com)
COOLEY LLP
4401 Eastgate Mall
San Diego, CA 92121
(858) 550-6000
Counsel for Respondent
Provide Commerce, LLC
(formerly known as
Provide Commerce, Inc.)
May 31, 2019
APPENDIX
1a
APPENDIX A
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE
ANTHONY J. BATTAGLIA, JUDGE PRESIDING
IN RE: EASYSAVER
) CASE NO. 09CV2094-AJB
REWARDS LITIGATION ) SAN DIEGO, CALIFORNIA
) JANUARY 28, 2013
THIS DOCUMENT
) 2:06 P.M.
RELATES TO ALL
)
ACTIONS.
)
REPORTER’S TRANSCRIPT OF PROCEEDINGS
*
*
*
APPEARANCES:
FOR THE PLAINTIFFS:
JAMES R. PATTERSON, ESQ.
PATTERSON LAW GROUP, APC
402 WEST BROADWAY, 29TH FLOOR
SAN DIEGO, CALIFORNIA 92101
JENNIE LEE ANDERSON, ESQ.
ANDRUS ANDERSON LLP
155 MONTGOMERY STREET
SUITE 900
SAN FRANCISCO, CALIFORNIA 94104
BRUCE W. STECKLER, ESQ.
THE STECKLER LAW FIRM
12700 PARK CENTRAL DRIVE, SUITE 1900
DALLAS, TEXAS 75251
2a
MAZIN A. SBAITI, ESQ.
BARON & BUDD PC
3102 OAK LAWN AVENUE
SUITE 1100
DALLAS, TEXAS 75219
ISAM C. KHOURY, ESQ.
COHELAN KHOURY & SINGER
605 C STREET
SUITE 200
SAN DIEGO, CALIFORNIA 92101
FOR THE DEFENDANTS:
MICHAEL G. RHODES, ESQ.
MICHELLE C. DOOLIN, ESQ.
LEO P. NORTON, ESQ.
COOLEY GODWARD KRONISH
4401 EASTGATE MALL
SAN DIEGO, CALIFORNIA 92121
MYRON M. CHERRY, ESQ.
JACIE C. ZOLNA, ESQ.
MYRON M. CHEERY [sic] & ASSOCIATES, LLC
30 NORTH LASALLE STREET, SUITE 2300
CHICAGO, ILLINOIS 60602
FOR THE OBJECTOR:
ADAM SCHULMAN, ESQ.
CENTER FOR CLASS ACTION FAIRNESS
1718 M. STREET NW NO. 236
WASHINGTON, DC 20036
ALSO PRESENT:
BLAKE BILSTAD, ESQ.
SENIOR VICE PRESIDENT AND GENERAL
COUNSEL OF PROVIDE-COMMERCE
3a
[3] SAN DIEGO, CALIFORNIA;
MONDAY, JANUARY 28, 2013; 1:51 P.M.
DEPUTY CLERK: ITEM NUMBER ONE
ON CALENDAR, 09CV2094, IN RE EASYSAVER REWARDS LITIGATION, ON FOR MOTION HEARING
AND FAIRNESS HEARING.
THE COURT: GOOD AFTERNOON TO
ALL. AND LET’S HAVE THE PLAINTIFFS MAKE
THEIR APPEARANCES FOR THE RECORD.
MR. PATTERSON: GOOD AFTERNOON,
YOUR HONOR. JIM PATTERSON ON BEHALF OF
THE PLAINTIFFS.
MS. ANDERSON: JENNIE LEE ANDERSON ON BEHALF OF THE PLAINTIFFS, YOUR
HONOR.
MR. STECKLER: BRUCE STECKLER ON
BEHALF OF THE PLAINTIFFS, YOUR HONOR.
MR. SBAITI: MAZIN SABAITI [sic] ON
BEHALF OF THE PLAINTIFFS, YOUR HONOR.
MR. KHOURY: ISAM KHOURY ON BEHALF OF THE PLAINTIFFS.
THE COURT:
FOR THE DEFENSE.
ALL RIGHT. AND THEN
MR. RHODES: GOOD AFTERNOON, YOUR
HONOR. MICHAEL RHODES OF COOLEY, ON BEHALF OF THE DEFENDANT. WITH ME IS MY
PARTNER, MICHELLE DOOLIN, LEO NORTON.
4a
AND THEN AT COUNSEL TABLE WITH US IS
BLAKE BILSTAD. HE IS THE SENIOR VICE PRESIDENT AND GENERAL COUNSEL OF PROVIDECOMMERCE.
THE COURT:
THEN – YES, SIR.
OKAY. THANK YOU. AND
MR. CHERRY: GOOD AFTERNOON, YOUR
HONOR. MYRON CHERRY AND JACIE ZOLNA ON
BEHALF OF THE REGENT GROUP AND EASYSAVER.
[4] THE COURT: OKAY. THANK YOU.
MR SCHULMAN: ADAM SCHULMAN
ON BEHALF OF BRIAN PERRYMAN.
THE COURT: THANKS, MR. SCHULMAN. AND I THINK THAT PROBABLY WRAPS IT
UP.
SO WE’VE GOT THE PENDING MOTION FOR
APPROVAL OF THE FINAL SETTLEMENT, THE ATTORNEY FEES, COSTS, AND INCENTIVE AWARDS,
THE OBJECTIONS, OBVIOUSLY, TO ALL OF THE
ABOVE TO DEAL WITH.
AND FROM THE PLAINTIFFS’ STANDPOINT,
YOU FOLKS HAVE ANY COMMENTS YOU WOULD
LIKE TO ADDRESS TO ANY OF THE CRITICAL
ISSUES, ANY OF THE RECENT PLEADINGS OR
ANYTHING ELSE?
MR. PATTERSON, YOU CAN GO AHEAD.
5a
MR. PATTERSON: JIM PATTERSON ON
BEHALF OF THE PLAINTIFFS. JUST REAL
BRIEFLY, YOUR HONOR. I WILL ADDRESS JUST A
COUPLE MAJOR POINTS AND THEN JUST BRING
YOU UP TO SPEED ON A COUPLE OF THE OTHER
POINTS. MS. ANDERSON WILL ADDRESS ANY OF
THE COURT’S CONCERNS THAT MIGHT HAVE
COME UP WITH RESPECT TO THE OBJECTION
FILED BY MR. PERRYMAN.
THE COURT:
OKAY.
MR. PATTERSON: SO JUST QUICKLY
TO BRING YOU UP TO SPEED. THE SETTLEMENT
HAS BEEN WIDELY ACCEPTED BY THE CLASS.
WE SENT DIRECT NOTICE TO 1.3 MILLION
CLASS MEMBERS. AS OF TODAY, THERE ARE 39
OPT-OUTS OUT OF 1.3 MILLION AND CHANGE.
THERE WAS ONE OBJECTION FILED, OF COURSE,
BY MR. PERRYMAN.
[5] IN ADDITION TO THAT, WE DID RECEIVE
ONE ADDITIONAL LETTER FROM A CLASS MEMBER THAT PURPORTED TO BE AN OBJECTION.
AND THAT HAS BEEN PRESENTED TO THE
COURT, ALONG WITH THE MOST RECENT FILINGS.
NOTHING ELSE HAS HAPPENED, SINCE PRELIMINARY APPROVAL, THAT SHOULD CHANGE
THE COURT’S POSITION. AND WE BELIEVE THAT
THE CLASS CERTAINLY SHOULD RECEIVE FINAL APPROVAL, AND WE SHOULD MOVE FORWARD WITH THE BENEFITS.
6a
JUST QUICKLY, I WANTED TO GO THROUGH
THE BENEFITS THAT ARE GOING TO BE PROVIDED.
THE COURT:
SURE.
MR. PATTERSON: WE ARE GOING TO
MAKE FULL CASH REFUNDS TO ANY OF THE
CLASS MEMBERS THAT SUBMITTED A CLAIM. IN
ORDER TO SUBMIT A CLAIM, ALL THEY HAD TO
DO WAS ATTEST THAT THEY DIDN’T INTEND TO
SIGN UP FOR THE PROGRAM, AND THEN PROVIDE UPDATED CONTACT INFORMATION, JUST
TO BE SURE WE WOULD KNOW WHERE TO SEND
THE MONEY. EVERYBODY WHO DID THAT WILL
RECEIVE A FULL REFUND OF ALL OF THE FEES
THAT THEY HAD PAID TO THE DEFENDANTS,
THAT WEREN’T PREVIOUSLY REFUNDED.
IN ADDITION TO THAT, ALL 1.3 MILLION
CLASS MEMBERS WILL BE DIRECTLY SENT A
$20 MERCHANDISE CREDIT THAT IS GOOD AT
THE PROVIDE-COMMERCE WEBSITES, INCLUDING PROFLOWERS AND THE OTHERS THAT
ARE MENTIONED IN THE SETTLEMENT AGREEMENT.
THERE WAS NO CLAIMS REQUIRED FOR
THAT. THAT IS A DIRECT BENEFIT THAT IS
BEING PROVIDED. THE CREDIT IS AS GOOD [6]
AS CASH WITH RESPECT TO THE ABILITY TO
USE IT ON THE WEBSITE. IT’S GOOD FOR –
FOR EXAMPLE, YOU CAN USE IT – IF THERE
IS A DISCOUNTED ITEM FOR SALE THAT IS
7a
DISCOUNTED ON THE WEBSITE, THEN YOU GET
TO APPLY THE $20 TO THAT DISCOUNTED
PRICE.
THE IMPORTANT THING TO US, WHEN WE
NEGOTIATED THAT $20 BENEFIT, WAS THAT THE
CLASS MEMBERS WOULD HAVE A REAL ABILITY
TO GO TO THESE WEBSITES AND OBTAIN SOMETHING FOR FREE WITHOUT SPENDING ANY ADDITIONAL MONEY THAT WOULD BE PAID TO
THE DEFENDANTS. AND SO WHAT WE DID
WHEN WE NEGOTIATED THIS, WE WERE VERY
CAREFUL TO REVIEW THE WEBSITES AND ENSURE THAT THERE WERE A NUMBER OF DIFFERENT PRODUCTS THAT WERE AVAILABLE
FOR $20 OR LESS. AND WE BELIEVE THAT THAT
DISTINGUISHES IT FROM A COUPON IN THE
SENSE THAT YOU DON’T HAVE TO SPEND YOUR
OWN MONEY. IT’S NOT A DISCOUNT IF YOU
DON’T WANT IT TO BE.
NOW, OBVIOUSLY, PEOPLE WOULD OBVIOUSLY HAVE THE OPTION OF BUYING A MORE
EXPENSIVE PRODUCT, IN WHICH CASE THEY
WOULD SAVE $20 OFF WHATEVER THE PURCHASE PRICE IS OF THE LARGER ITEM.
IN ADDITION TO THE MERCHANDISE CREDITS AND THE CASH BENEFITS TO THE CLASS
MEMBERS, IF EVERYTHING IS APPROVED AS
IT’S BEING PRESENTED TO THE COURT, THERE
WOULD BE AN ESTIMATED – I THINK IT’S A LITTLE MORE THAN $3 MILLION THAT WOULD BE
8a
PROVIDED TO THE THREE CY PRES RECIPIENTS
THAT WE HAVE PROPOSED. SO APPROXIMATELY
$1 MILLION EACH WOULD BE PROVIDED TO THE
THREE CY PRES.
[7] THIS WAS A NEGOTIATED POINT OF THE
SETTLEMENT. THE GENERAL IDEA WAS IN ORDER TO GET A DEAL, WE AGREED THAT THE CY
PRES BENEFICIARIES WOULD BE NEUTRAL IN
THE SENSE THAT THEY COULD BE – THE IDEA
WOULD BE THAT THERE WOULD BE INSTITUTIONS THAT WOULD USE THE MONEY IN A WAY
THAT WOULD BENEFIT THE CLASS AND CONSUMERS IN GENERAL, BUT IT WOULD BE MORE
OF AN OBJECTIVE GROUP. SO THAT IS HOW WE
CAME UP WITH THE THREE ACADEMIC INSTITUTIONS, UNIVERSITIES THAT WOULD RECEIVE
THE MONEY.
AND IF YOUR HONOR APPROVES THE DEAL
AND THOSE CY PRES BENEFICIARIES, THEY
WILL RECEIVE APPROXIMATELY A MILLION EACH,
THE MONEY IS EARMARKED TO BE USED TO
FUND A CHAIR ON PRIVACY AND CONSUMERPROTECTION-TYPE ISSUES. WE BELIEVE THAT
PROVIDES A GENERAL BENEFIT TO CONSUMERS ACROSS THE COUNTRY.
A COUPLE OF QUICK REASONS WHY: ONE,
YOU KNOW, THESE PARTICULAR UNIVERSITIES
TAKE STUDENTS FROM ALL OVER THE COUNTRY, OBVIOUSLY. AND THEN THE IDEA IS THAT
THEY WILL BE LEARNING ABOUT PRIVACY AND
9a
CONSUMER PROTECTION ISSUES: THAT THEY
WILL THEN CARRY THOSE ON INTO THE WORKPLACE TO THE EXTENT THEY ARE DEALING
IN ONLINE COMMERCE. CERTAINLY, THAT IS
THE BENEFIT THAT WOULD ULTIMATELY FLOW
FROM THEIR USING THESE SKILLS. IT WOULD
BENEFIT CONSUMERS IN GENERAL AND HAVE
SOME BENEFIT TO THE CLASS, AS WELL, WHICH
IS THE WAY WE SET IT UP.
THE COURT: WAS THERE ANY THOUGHT
GIVEN, INITIALLY, TO DIVERSIFYING GEOGRAPHICALLY THE SCHOOLS, OR WERE THESE SCHOOLS
PICKED FOR A PARTICULAR INTEREST IN PRIVACY OR A SET [8] MECHANISM WITH WHICH TO
USE THE FUNDS FOR THAT TYPE OF A CURRICULUM PROGRAM, WHATEVER?
MR. PATTERSON: THE SCHOOLS THAT
WOULD GET THE MONEY WOULD HAVE EITHER
ALREADY IN PLACE SOME SORT OF A PRIVACYTYPE CURRICULUM OR THE ABILITY TO ESTABLISH ONE. THERE WASN’T REALLY A RHYME
OR REASON AS TO WHY GEOGRAPHICALLY WE
CHOSE SAN DIEGO. I SUPPOSE MY BEST RESPONSE WOULD BE PROVIDE-COMMERCE IS
A SAN DIEGO COMPANY. THEY ARE ONE OF
THE PRIMARY DEFENDANTS, OBVIOUSLY. THE
TRANSACTIONS THAT THESE PEOPLE – OR THE
CLASS MEMBERS ENTERED INTO WERE COMPLETED IN SAN DIEGO. AND THAT KIND OF ADDRESSES THE GEOGRAPHIC CONNECTION TO
SAN DIEGO.
10a
BUT WE OBVIOUSLY DIDN’T WANT TO SPLIT
THE MONEY UP TOO THINLY, SUCH THAT YOU
COULDN’T REALLY MAKE A DIFFERENCE IN ESTABLISHING A PROGRAM THAT WOULD HAVE
ANY REAL IMPACT. IF YOU SENT A WHOLE
BUNCH OF SCHOOLS A SMALL AMOUNT OF
MONEY, THE REALITY IS THEY WOULDN’T BE
ABLE TO DO ANYTHING WITH IT.
THE COURT:
RIGHT.
MR. PATTERSON: IN ADDITION TO
THE CY PRES, WE FEEL LIKE WE HAVE DONE A
GREAT JOB OF DISCOURAGING WHAT WE CONSIDER TO BE THE ILL-GOTTEN GAINS FROM
SOME OF THESE PRACTICES. CERTAINLY, THE
DEFENSE WOULD – THEY MAY DISAGREE WITH
THE CHARACTERIZATION. BUT FROM OUR
STANDPOINT, THIS IS A BIG BENEFIT, FROM A
POLICY STANDPOINT, THE CLASS MEMBERS
AND TO SOCIETY, IN GENERAL, THAT THEY NOT
BE ALLOWED TO KEEP ALL OF THE BENEFITS
OF THIS PRACTICE.
[9] AND THEN LAST, WE CERTAINLY FEEL
THAT WE HAD A HAND IN STOPPING THE PRACTICE. OUR UNDERSTANDING IS THAT THE DEFENDANTS STOPPED OR PUT AN END TO THESE
PARTICULAR PROGRAMS SOON AFTER WE
FILED THE LAWSUITS. I DON’T KNOW FOR CERTAIN BUT I BELIEVE THAT THE TWO DEFENDANTS ARE NO LONGER DOING BUSINESS IN
11a
THESE TYPES OF PRACTICES. SO WE FEEL LIKE
THAT IS AN ADDITIONAL BENEFIT THAT HAS
BEEN PROVIDED BOTH TO THE CLASS AND TO
SOCIETY.
SO WE CERTAINLY FEEL THAT THE BENEFITS ARE IN LINE WITH WHAT SHOULD BE FINALLY APPROVED, AND THAT SHOULD GO TO
THE CLASS.
THE NEXT REQUEST ON OUR MOTION IS,
OBVIOUSLY, FOR ATTORNEYS’ FEES. WE FEEL
LIKE WE’VE DONE A GOOD JOB. WE HAVE LITIGATED THIS CASE TIRELESSLY FOR OVER
THREE AND HALF YEARS. WE HAVE BEEN
THROUGH NUMEROUS ENE CONFERENCES
WITH JUDGE GALLO. I’M SURE HE CAN ATTEST
TO THE LEVEL OF EFFORT THAT WAS PUT INTO
THIS BY BOTH SIDES, FRANKLY, BUT CERTAINLY
BY THE PLAINTIFFS.
THIS ISN’T A CASE THAT WE FILED AND
QUICKLY TRIED TO RESOLVE SO WE COULD
MOVE ON TO OTHER CASES. WE DID HAVE A MEDIATION EARLIER, AND THAT DIDN’T RESULT IN
A SETTLEMENT. THAT WAS WITH MAGISTRATE
PAPAS. WE CONTINUED TO LITIGATE THE CASE
AND, ULTIMATELY, IT WAS RESOLVED WITH
THE HELP OF JUDGE INFANTE, AND WITH HIS
BLESSING. HE HAS SUBMITTED A DECLARATION SUPPORTING THE DEAL.
12a
SO WE THINK THAT OUR FEES ARE JUSTIFIED, WHETHER OR [10] NOT THE COURT ULTIMATELY USES THE PERCENTAGE OF THE
BENEFITS OR THE LODESTAR ANALYSIS. WITH
RESPECT TO THE PERCENTAGE OF THE BENEFITS, THE CASH THAT WAS PROVIDED IN THE
DEAL WAS $12.5 MILLION. IN ADDITION TO THAT,
THERE IS 1.3 MILLION $20 MERCHANDISE CREDITS THAT ARE BEING DIRECTLY PROVIDED TO
THE CLASS MEMBERS. THE BENEFITS THAT
ARE AVAILABLE FROM THOSE MERCHANDISE
CREDITS ARE APPROXIMATELY $26 MILLION.
PLUS, THE CASH IS A TOTAL OF 38-AND-A-HALFMILLION DOLLARS. WE BELIEVE THAT THE
COURT SHOULD RECOGNIZE THE VALUE OF
THOSE MERCHANDISE CREDITS. ANY CLASS
MEMBER THAT CHOOSES TO UTILIZE THAT
CREDIT WILL GET A $20 BENEFIT. SO THE REAL
BENEFIT TO THE CLASS MEMBER IS $20 PER
CREDIT.
THE NINTH CIRCUIT STANDARD IS THAT
THE COURT SHOULD AWARD FEES. IF YOU ARE
GOING TO DO IT BASED ON A PERCENTAGE OF
THE BENEFITS, YOU SHOULD BASE IT ON THE
BENEFITS THAT ARE BEING MADE AVAILABLE.
AND WE THINK THAT IT’S CLEAR THAT THAT
SHOULD BE 38-AND-A-HALF-MILLION DOLLARS.
IF THE COURT WERE INCLINED TO APPLY A
DISCOUNT TO THE MERCHANDISE CREDITS, WE
THINK THE COURT SHOULD LOOK AT SIMILAR
CASES THAT WE HAVE SUBMITTED TO THE
13a
COURT; NAMELY, THE FERNANDEZ V. THE VICTORIA’S SECRET CASE, AND THE YOUNG V.
POLO CASE. AND IN EACH OF THOSE CASES, THE
COURT APPLIED A SLIGHT DISCOUNT TO THE
FACE VALUE OF THE BENEFITS.
I WOULD POINT OUT THAT I BELIEVE BOTH
OF THEM WERE CLAIMS – PURE CLAIMS CASES.
YOU ACTUALLY HAD TO MAKE A CLAIM [11] TO
GET THE MERCHANDISE CERTIFICATE. HERE,
YOU DON’T HAVE TO DO THAT. BUT IN THE VICTORIA’S SECRET CASE, WHICH WAS THE LATER
CASE, THE COURT DID APPLY A 15 PERCENT DISCOUNT TO THE FACE VALUE OF THOSE CARDS.
WHILE WE DON’T THINK THAT THAT IS NECESSARY IN THIS CASE, IF THIS COURT WERE TO
FOLLOW THAT PRECEDENT, WE WOULD STILL
BE FAR UNDER WHAT IS APPROPRIATE IN THE
NINTH CIRCUIT FOR AWARDING A PERCENTAGE
OF THE BENEFITS.
I WOULD TAKE IT ONE STEP FURTHER AND
SAY THAT AT THE ENTIRE OTHER END OF SPECTRUM, IF THE COURT WERE INCLINED TO APPLY A DISCOUNT OF EVEN 50 PERCENT OF THE
FACE VALUE, WHICH WE BELIEVE IS ENTIRELY
IMPROPER, GIVEN THE VALUE OF THESE
THINGS – BUT IF THE COURT DID DO THAT, OUR
REQUESTED FEES WOULD STILL ONLY AMOUNT
TO 33 PERCENT OF TOTAL. AND THAT’S LESS
THAN THE COURT AWARDED IN THE VICTORIA’S
SECRET CASE THAT I REFERENCED EARLIER.
AND IT’S WITHIN THE COURT’S DISCRETION.
14a
IT’S CERTAINLY ON THE HIGH SIDE OF WHAT
WOULD BE AWARDED, BUT DEFINITELY WITHIN
THE COURT’S DISCRETION.
AS TO THE LODESTAR, WE SUBMITTED OUR
LODESTAR. IT’S CURRENTLY AROUND $4.3 MILLION. THE REQUESTED MULTIPLIER, WHEN
THIS IS FINISHED, WILL BE LESS THAN TWO, IF
THE COURT WERE TO STICK TO THE LODESTAR
ANALYSIS OR USE IT AS THE CROSSCHECK.
WE WOULD POINT OUT THAT WITH RESPECT TO THE LODESTAR, THERE ARE STATUTES THAT WE HAVE ALLEGED THAT ALLOW
FOR FEE-SHIFTING: NAMELY, THE ELECTRONIC
FUNDS TRANSFER ACT CLAIM AND THE CLRA
CLAIM BOTH ALLOW FOR FEES TO BE SHIFTED
AND [12] AWARDED. SO UNDER EITHER OF
THOSE CLAIMS, THE COURT COULD AWARD
FEES DIRECTLY BASED ON LODESTAR, EVEN
THOUGH THAT IS NOT OUR PREFERENCE.
WE WOULD POINT OUT TO THE EXTENT THE
COURT IS CONSIDERING EITHER AN UPWARD
MULTIPLIER WITH RESPECT TO THE LODESTAR,
OR AWARDING A HIGHER PERCENTAGE OF THE
BENEFITS, THE COURT HAS THE ABILITY AND
THE DISCRETION TO LOOK AT CERTAIN FACTORS. AND ONE OF THOSE FACTORS IS RISK.
THIS WAS AN ENORMOUSLY RISKY CASE. WHEN
WE FILED THIS CASE, THERE WERE VERY FEW
REPORTED DECISIONS. ACTUALLY, THIS CASE
WAS ONE OF THE FIRST REPORTED DECISIONS
15a
DEALING WITH THE SIMILAR-TYPE PRACTICES
– ONLINE PRACTICES OF TRANSFERRING CUSTOMER BILLING INFORMATION. THEY CERTAINLY HAVE NOT ALL GONE THE PLAINTIFFS’
WAY. THIS IS ONE OF A HANDFUL THAT HAS.
ON THE FLIP SIDE, THERE IS A BUNCH OF
CASES THAT HAVE NOT. I’M SURE THE COURT IS
AWARE OF THOSE, BUT WE’RE HAPPY TO POINT
THEM OUT IF NEED BE. ONE CASE I WOULD
POINT OUT IS THE WEBLOYALTY CASE THAT
WAS DECIDED BY JUDGE HUFF. I AM THE COUNSEL OF RECORD IN THAT CASE. AND JUDGE
HUFF GRANTED A MOTION TO DISMISS A SIMILAR-TYPE PRACTICE. THAT CASE IS CURRENTLY
PENDING BEFORE THE NINTH CIRCUIT. ALLISON GODDARD, FROM MY OFFICE, ARGUED
THAT HEARING A COUPLE WEEKS AGO, AND WE
EXPECT A RULING ON THAT.
SO WHEN WE FILED THIS CASE, THERE WAS
AN ENORMOUS RISK. IT WASN’T A SLAM DUNK.
WE HAD A LOT OF HURDLES TO [13] OVERCOME
TO GET TO THE POINT WHERE WE COULD RESOLVE THE CASE. IT WAS THREE AND A HALF
YEARS. THERE IS SUBSTANTIAL DISCOVERY
THAT IS WELL DOCUMENTED.
WE BELIEVE THE RESULTS ARE EXCELLENT, AND I CHALLENGE ANYBODY TO COME
UP WITH A SETTLEMENT IN THIS AREA, CHALLENGING SIMILAR-TYPE PRACTICES AND MAKING THE SAME CLAIMS, THAT WAS BETTER
16a
THAN OURS. WE THINK IT’S THE BEST ONE YOU
WILL SEE OUT THERE.
AND THEN LAST BUT NOT LEAST, WE DO BELIEVE WE’VE STOPPED THE PRACTICE. AND
WHILE WE HAVEN’T PRESENTED THAT TO THE
COURT WITH AN ASSIGNED DOLLAR VALUE, WE
THINK IT’S A FACTOR THAT THE COURT CAN
AND SHOULD CONSIDER IF YOU ARE GOING TO
DEPART UPWARD OR DOWNWARD IN AWARDING
A LODESTAR PERCENTAGE OF BENEFITS.
WE THINK THE ENHANCEMENTS SHOULD
BE APPROVED. THEY WERE NEGOTIATED ARM’S
LENGTH WITH THE HELP OF JUDGE INFANTE.
OUR PLAINTIFFS WERE HEAVILY INVOLVED IN
THIS CASE. THE TWO INITIAL PLAINTIFFS APPEARED AT A NUMBER OF ENE CONFERENCES.
JUDGE GALLO RUNS A VERY TIGHT SHIP. HE REQUIRES THE NAMED PLAINTIFFS TO BE AT
THESE CONFERENCES. AND IN MOST CASES
THEY WERE, IN FACT, THERE.
THE COURT:
AND BAILEY?
THAT’S FOR ROMERO
MR. PATTERSON: THAT’S FOR ROMERO
AND BAILEY. THAT’S RIGHT. THEY WERE THE
FIRST ORIGINAL PLAINTIFFS. THEY WERE DEPOSED. THEY WERE GRUELING DEPOSITIONS,
TO SAY THE LEAST. [14] DEFENSE COUNSEL DID
AN EXCELLENT JOB AND DID THEIR JOB IN
KIND OF RAKING THEM OVER THE GOALS [sic]. AND
THEY STUCK WITH THE CASE FOR A NUMBER
17a
OF YEARS, AT THE RISK OF BEING LIABLE FOR A
JUDGMENT OR COSTS IN A LINE OF CASES THAT
WAS SOMEWHAT UNCERTAIN.
AND THEN THE OTHER PLAINTIFFS THAT
WE REQUESTED THE MIDDLE AWARD FOR ARE
BERENTSON, JENKINS, COX AND LAWLER. THEY
DID PARTICIPATE IN THE CASE. THEY WERE DEPOSED. THEY SUBMITTED FOR DEPOSITIONS
AND RESPONDED TO DISCOVERY AND TOOK
ALL THE SAME RISKS THAT ROMERO AND BAILEY DID.
AND THEN FINALLY WALTERS AND DICKEY.
WE REQUESTED A SMALLER ENHANCEMENT
FOR THEM. THEY WERE ACTUALLY SET TO BE
DEPOSED AND THEY WERE WILLING TO BE DEPOSED, BUT THEIR DEPOSITIONS WERE TAKEN
OFF CALENDAR WHEN WE GOT SERIOUS ABOUT
SETTLEMENT. BUT THEY DID PARTICIPATE IN
DISCOVERY, IN PROVIDING A LOT OF INFORMATION, AND CERTAINLY TOOK THE SAME
RISKS AS EVERYBODY ELSE THAT THE CASE
WOULDN’T HAVE SETTLED, AND THAT THEY
MIGHT HAVE BEEN SUBJECTED TO FURTHER
LITIGATION AND, POTENTIALLY, COSTS AND
JUDGMENT.
I WILL CLOSE WITH JUST ONE ADDITIONAL
POINT, AND THIS GOES BACK TO THE WEBLOYALTY CASE THAT I MENTIONED EARLIER. WE
CERTAINLY DON’T THINK THERE SHOULD BE
18a
ANY MODIFICATIONS TO THE DEAL. WE THINK
IT’S A GREAT DEAL. TO THE EXTENT THAT THE
COURT HAS ANY DIFFERENT IDEAS OR SOME
MIGHT DEVELOP THROUGHOUT THE DAY, WE
WOULD ASK THE COURT TO KEEP IN MIND
THAT THERE IS [15] THAT WEBLOYALTY CASE
OUT THERE. THE NINTH CIRCUIT COULD ISSUE
A RULING IN THAT CASE AT ANY TIME. IT COULD
HAVE A DRAMATIC IMPACT ON THIS PARTICULAR CASE AND THE SETTLEMENT. IF THE
COURT WERE TO MAKE ANY MATERIAL MODIFICATIONS THAT REQUIRED THE DEFENSE TO
SIGN OFF ON THEM, YOU’D POTENTIALLY PROVIDE THEM WITH A FREE OUT-OF-THE-DEAL,
AND THEY MIGHT HAVE THE BENEFIT OF SEEING WHAT THE NINTH CIRCUIT IS ULTIMATELY
GOING TO SAY IN WEBLOYALTY IN DECIDING
WHETHER OR NOT THEY WOULD LIKE TO PROCEED.
THE COURT:
OKAY. WELL, THANK YOU.
FROM THE DEFENSE STANDPOINT, SIR,
WHAT WOULD YOU LIKE TO ADD?
MR. RHODES: GOOD AFTERNOON, YOUR
HONOR. MICHAEL RHODES WITH COOLEY. I
WOULD LIKE TO GIVE YOU A LITTLE BIT OF A
DIFFERENT PERSPECTIVE ON SOME OF THE
POINTS THAT YOU’VE RAISED, TO HELP YOU UNDERSTAND SOME OF THE UNDERLYING RATIONALES, IF I MIGHT. YOU ASKED ABOUT
19a
THE LOCATION OF THE CY PRES RECIPIENTS.
LET ME TAKE THAT ONE HEAD-ON.
YOU’LL KNOW THAT THE STATE OF THE ART
RIGHT NOW IN THE NINTH CIRCUIT IS THE
LANE V. FACEBOOK CASE. THIS CASE WAS A CREATIVE SETTLEMENT THAT I ACTUALLY HANDLED, IN WHICH WE SET UP A FOUNDATION TO
THEN PROVIDE CY PRES DISTRIBUTIONS. AND
THE COURT SAID THAT WAS FINE, GIVEN THAT
THERE WAS A DRIVING NEXUS, IN LINE WITH
THE KELLOG DECISION, BETWEEN THE RECIPIENTS AND THE PURPOSES OF THE CASE.
[16] THERE WAS A REASON, AND I DON’T
FAULT MR. PATTERSON FOR NOT ADDRESSING
IT DIRECTLY WITH YOU. IT WAS ACTUALLY NEGOTIATED THROUGH MR. STECKLER AND ME
DIRECTLY. ONE OF THE REASONS WE PICKED
SAN DIEGO – ASIDE FROM WHAT MR. PATTERSON SAID – WHICH IS THAT THE LOCALE OF
THIS CASE WAS SAN DIEGO, THE COMPANY IS
BASED HERE, THERE WAS PRIVITY OF CONTRACT HERE – WAS THE FACT THAT I DO A LOT
OF WORK IN THIS SPACE. AND TO THE EXTENT
YOU ARE LOOKING FOR RECIPIENTS OF THIS
AMOUNT OF MONEY, A LOT OF THE PEOPLE
THAT YOU WOULD OTHERWISE GIVE THE
MONEY TO ARE ALREADY FUNDED, IN A SENSE.
AND SO WHAT WE THOUGHT WAS WE
COULD ADD THREE NEW ACTORS. THREE NEW
VOICES TO THE CHORUS, SO TO SPEAK, TO ACT
20a
AS WATCHDOGS OF THESE TYPES OF INTERESTS IN SAN DIEGO, BY ENDOWING CHAIRS AND
RESEARCH IN THESE THREE LOCAL INSTITUTIONS. TO A LARGE DEGREE, THEY WEREN’T ALREADY DOING THAT WORK. AND WE THOUGHT
THIS WOULD BE A WAY TO GET MORE ACTORS
INTO THE FIELD, PROVIDE FUNDING. AND AS
MR. PATTERSON SAID, PROVIDE FUNDING IN A
SIGNIFICANT AMOUNT SUCH THAT THE INTEREST BEING ADVOCATED BY THE CLASS COULD
BE ADDRESSED THAT WAY.
SO THAT WAS ONE OF THE REASONS WHY
WE PICKED THE GEOGRAPHY WE DID, BECAUSE
THE MONEY HISTORICALLY HAS GONE TO
PLACES LIKE STANFORD AND CAL AND HARVARD AND SO FORTH. AND WE THOUGHT WE
WERE TRYING TO BE A LITTLE BIT DIFFERENT
ON THAT.
THE COURT:
OKAY.
MR. RHODES: LET ME TAKE A STEP
BACK AND TALK TO YOU [17] A LITTLE BIT
ABOUT THE PROCESS. THE PROCESS OF A
CLASS ACTION SETTLEMENT OFTEN WILL REVEAL ITS SOUNDNESS, ITS FAIRNESS, REASONABILITY AND ADEQUACY. AND HERE WE HAVE
A PROCESS THAT WAS TORTURED, FRANKLY.
WE HAVE A CASE THAT STARTS OUT. AS YOU
SAW WE WENT THROUGH ROUNDS AND ROUNDS
OF PLEADINGS. INDEED, THE CURRENT COMPLAINT – I BELIEVE IT’S THE FOURTH AMENDED
21a
COMPLAINT – WE’VE NEVER ANSWERED IT.
WE’VE FILED A MOTION TO DISMISS IT.
WE’VE BEEN THROUGH MULTIPLE ROUNDS
OF PLEADING MOTIONS, MULTIPLE ROUNDS
OF DISCOVERY. BUT MORE FUNDAMENTALLY,
FROM THE VERY BEGINNING, WE’VE HAD A SETTLEMENT DIALOGUE. WE HAVE VERY EXPERIENCED COUNSEL ON BOTH SIDES. WE KNOW
EACH OTHER QUITE WELL. AND BECAUSE OF
THAT, WE WERE ABLE TO PUT ASIDE A LOT OF
THE POSTURING THAT YOU GET IN TOO MANY
OF THESE CASES, AND WE TRIED TO HAVE AN
HONEST AND OPEN DIALOGUE ABOUT THE
CASE.
SO WE STARTED OFF TALKING INFORMALLY, AND THAT LED UP TO A FORMAL ONEDAY MEDIATION AT MY OFFICE, WHERE WE HAD
25 PEOPLE IN ATTENDANCE, AT LEAST – LAWYERS, INSURANCE COMPANY REPRESENTATIVES. WE MADE SOME HEADWAY, BUT WE
DIDN’T ULTIMATELY GET THERE.
THE NEXT MEANINGFUL STEP, YOUR
HONOR, WE ACTUALLY – YOU MAY RECALL THIS.
WE WERE IN A DEPOSITION IN MY OFFICE AND
THERE WAS A POWER OUTAGE IN SAN DIEGO
AND IT SHUT DOWN THE CITY. THAT WAS THE
DAY OF THE DEPOSITION. AND A BUNCH OF
[18] THESE LAWYERS HAD FLOWN OUT FOR THE
DEPOSITION. AND I FORGET WHY, BUT WE WERE
22a
ACTUALLY ON THE PHONE WITH THE COURT
FOR SOME REASON. AND I FORGET WHAT IT
WAS. AND WE WERE TALKING TO JUDGE GALLO
AND THE LINE WENT BLANK, AND WE SAT
THERE IN MY OFFICE WITHOUT THE POWER.
AND AS YOU REMEMBER, IT WAS JUST GRIDLOCK. SO I WENT – LITERALLY WENT INTO THE
KITCHEN, GRABBED A BUNCH OF COLD BEERS,
AND WE WENT OUT ON MY PATIO FOR THE BETTER PART OF THREE, FOUR HOURS, AND WE
STARTED HAVING ANOTHER ONE OF THESE
SETTLEMENT DIALOGUES.
FROM THERE WHAT HAPPENED WAS WE REPORTED TO JUDGE GALLO ON THOSE TWO SEMINAL EVENTS, AND THEN WE WENT OFF AND
SPENT LITERALLY DAYS WITH JUDGE GALLO.
INDEED, IN THE RECORD IT IS NOT REFLECTED,
BUT I WILL ADVISE THE COURT THERE WAS
A POINT IN TIME WHEN I WAS PERSONALLY
CALLING JUDGE GALLO ESSENTIALLY EVERY
FRIDAY OR EVERY OTHER FRIDAY IN THE
MORNING, AT 8:30 – AND I THINK A COUPLE OF
MY COLLEAGUES HAD TO COVER FOR ME WHEN
I WAS TRAVELING OR SOMETHING – TO REPORT
ON WHERE WE WERE THAT WEEK WITH REGARD TO SETTLEMENT. AND THE REASON FOR
THAT WAS THERE WAS A PRIMARY DIALOGUE
GOING ON THIS WAY, PLAINTIFFS TO DEFENDANTS. THERE WAS MY CO-COUNSEL, MR. CHERRY
AND HIS ASSOCIATES. WE WERE NEGOTIATING BETWEEN OURSELVES BECAUSE WE HAD
23a
INDEMNITY DISCUSSIONS TO BE HAD. AND
THEN WE HAD DISCUSSIONS WITH OUR OWN
CARRIERS, OF WHICH THERE WERE THREE
GROUPS.
SO IT WAS HERDING CATS. SO THIS WENT
ON AND ON AND [19] ON. AND WE WERE CONSTANTLY NEGOTIATING. ULTIMATELY, OUT OF
THIS PROCESS, IT DISTILLED A PRIMARY RELATIONSHIP WITH MR. STECKLER AND I, WHERE
WE DECIDED WE WERE GOING TO BE THE
LEADS FOR BOTH SIDES, AND WE HAD CONSTANT, ONGOING DIALOGUE.
AND AS WE STARTED TO GET A LITTLE BIT
CLOSER TO FLUSHING OUT THE WAY WE MIGHT
BE ABLE TO DO A SETTLEMENT, AND AS WE
WERE NEGOTIATING WITH DEFENSE COUNSEL
AND OUR CARRIERS TO CIRCLE UP THE FUNDS,
WE ULTIMATELY CALLED UP JUDGE INFANTE,
WHO I HAVE DONE A LOT OF WORK WITH, AND
WE WERE ABLE TO SPEND THE BETTER PART OF
A DAY AND BANG OUT THE AGREEMENT.
SO I WANTED YOU TO UNDERSTAND THAT
BECAUSE WE HAVE SPENT A LOT OF TIME AND
ENERGY LITIGATING THE CASE, AT THE SAME
TIME FOR THE BETTER PART OF A YEAR OR TWO
ENGAGED IN AN ONGOING SETTLEMENT DISCUSSION SUPERVISED BY THE COURT, THROUGH
THE AUSPICES OF JUDGE GALLO – AND YOU
KNOW WHAT KIND OF A SHIP, AS MR. PATTERSON
24a
SAYS, HE RUNS – SUPERVISED BY MEDIATOR INFANTE, AND OF COURSE, JUDGE PAPAS.
THAT PROCESS IN AND OF ITSELF SHOULD
BE A COMFORT TO THE COURT IN TERMS OF
THE FAIRNESS, THE REASONABLENESS, AND
THE ADEQUACY OF THE SETTLEMENT.
LET ME ADDRESS THE SUBSTANCE, IF I MAY.
THE COURT:
SURE.
MR. RHODES: THERE ARE SEVERAL
TRANCHES THAT ARE SET UP IN THE DEAL. IN
TERMS OF THE CLAIM FORM, THERE IS ACTUALLY SOME MADNESS TO WHAT WE WERE TRYING TO DO HERE. IF YOU TAKE A [20] STEP BACK,
THE THEORY OF THE CASE WAS THAT WHEN
YOU WERE COMPLETED WITH YOUR PURCHASE
WITH MY CLIENT ONLINE, THERE WAS SOME
POP-UP, IF YOU WILL, THAT INVITED YOU TO
JOIN WHAT IS CALLED A LOYALTY PROGRAM OR
A BENEFITS PROGRAM. THAT WAS ADMINISTERED BY CHERRY’S CLIENT. WE WERE THE
PROVIDER OF THE PROFLOWERS AND THE
OTHER WEBSITE SERVICES BY WHICH YOU ACTUALLY BOUGHT SOMETHING.
THE THEORY OF THE CASE, IN ESSENCE,
WAS THAT WHAT THE CUSTOMER SAW AT THAT
MOMENT WASN’T ADEQUATE. IT WAS MISLEADING, IT WAS INCOMPLETE. THEY HAD A NUMBER OF THEORIES, BUT THE BASIC GIST OF IT
WAS YOU GOT HOODWINKED INTO JOINING
25a
THE PROGRAM, AND THEN YOUR CREDIT CARD
STARTED GETTING CHARGED MONTH AFTER
MONTH AFTER MONTH.
SO WHEN MR. STECKLER AND I WERE SITTING DOWN TRYING TO FIGURE OUT HOW DO
WE IDENTIFY THE PEOPLE THAT SHOULD GET
MONEY, WE SAID WHAT ACTUALLY HAPPENED
DURING THE PROGRAM. AND THERE WERE ESSENTIALLY THREE BUCKETS.
THERE WAS A GROUP OF PEOPLE WHO SAW,
THAT FIRST MONTH, A CHARGE, AND THEY SAID
WHAT’S THIS? AND THEY CALLED EITHER US OR
MR. CHERRY’S CLIENT OR PERHAPS THE
CREDIT CARD COMPANY, AND A DISCUSSION
TOOK PLACE. AND IN MANY INSTANCES THEY
GOT FULL REFUNDS OR PARTIAL REFUNDS,
BUT THEY WERE ABLE TO KIND OF HANDLE IT
THEMSELVES. THEY OBJECTED TO THE PROGRAM, THEY WERE ABLE TO GET OUT, AND
THEY DIDN’T LOSE ANY MONEY.
THERE WAS ANOTHER GROUP OF PEOPLE
THAT GOT INTO THE [21] PROGRAM AND LOOKED
AT THE MATERIALS THAT MR. CHERRY’S CLIENT PROVIDED AND THEY LIKED THE PROGRAM AND THEY TOOK ADVANTAGE OF IT. THEY
DID RENT THE CAR AND GET THE 20 PERCENT
OFF. THEY DID TAKE THE TRIPS THAT THEY
WERE ADVERTISED TO TAKE.
PART OF THE PROBLEM WAS WE DIDN’T REALLY HAVE A GOOD RECORD BASIS TO FIGURE
26a
OUT WHO THOSE FOLKS WERE. SO WHAT MR.
STECKLER AND I DECIDED TO DO WAS TO SAY
WHAT IS REALLY AT ISSUE HERE ARE PEOPLE
WHO PROBABLY DIDN’T PAY ATTENTION AND
DIDN’T KNOW THAT THEY GOTTEN ENROLLED.
AND IF YOU CREDIT THE PLAINTIFFS’ THEORY,
THEY WERE ENROLLED UNWITTINGLY. SO
THEY DIDN’T GET A REFUND, AND THEY DIDN’T
TAKE ADVANTAGE OF THE PROGRAM. SO WHAT
WE SAID IS WE’LL MAKE A PILE OF MONEY
AVAILABLE TO THOSE PEOPLE IF THEY JUST
COME TO COURT AND SAY I DIDN’T KNOW AND I
WANT MY MONEY BACK. THAT IS REALLY ALL
THEY HAD TO DO.
NOW, AS MR. PATTERSON SAID, WE SENT
OUT NOTICES. AND IF YOU LOOK AT THE GARDEN CITY GROUP DECLARATIONS, THEY PROVIDE THE LOGISTICS. AND THERE WAS ONE
OBJECTOR, AND WE HAVE HIM HERE TODAY.
AND THAT OBJECTOR COMPLAINS ABOUT THE
DEAL AND THE UNFAIRNESS OF IT AND HOW
BURDENSOME IT IS. AND YET LOOK WHAT HAPPENED. THAT OBJECTOR SUBMITTED A FORM
AND WILL GET A FULL REFUND. SO SOMETHING
WORKED, RIGHT?
THE THING WE WERE TRYING TO SOLVE IS
TO IDENTIFY THE PEOPLE IN THE CLASS WHO
CLAIMED TO HAVE UNWITTINGLY ENROLLED,
AND WE GIVE THEM THE OPPORTUNITY TO
GET 100 CENTS ON THE [22] DOLLAR. AND MR.
27a
PERRYMAN WILL GET HIS HUNDRED CENTS OF
HIS $122 AND CHANGE. OKAY. SO FAR SO GOOD.
AND THEN WE SAID ALL RIGHT. ANOTHER
THEORY OF THIS CASE WAS THAT WHEN YOU
ANSWERED THAT POP-UP AND WENT INTO
THAT SECONDARY PROGRAM, YOU WERE PROMISED A $15 GIFT – CARD, CREDIT OR WHATEVER
YOU WANT TO CALL IT. SO WE SAID WE’LL PUSH
OUT TO EVERY MEMBER OF THE CLASS – THEY
DON’T HAVE TO DO ANYTHING. WE’LL PUSH OUT
A $20 CREDIT TO THEM. AND THE REASON WE
PICKED $20 IS YOU CAN ACTUALLY GO ONTO
THESE WEBSITES AND BUY SOMETHING FOR
$20. AND I KNOW THE COURT IS FAMILIAR WITH
THESE CASES, BUT IF YOU LOOK AT A LOT OF
THE COUPON CASES, THE DEVIL IN THAT DETAIL IS TYPICALLY YOU GET $50 OFF ON A $500
ITEM. YOU HAVE TO BUY SOMETHING FAIRLY
SIGNIFICANT AND YOU JUST GET A DISCOUNT.
WE’RE NOT TRYING TO DO THAT HERE.
AND WITH ALL DUE RESPECT TO MR. PERRYMAN, HE IS FLAT-OUT WRONG. HE IS JUST ABSOLUTELY DEAD WRONG WHEN HE CALLS IT A
COUPON. IT’S A VOUCHER. YOU DON’T HAVE TO
DO ANYTHING TO GET IT, AND IT’S JUST AS
GOOD AS CASH ON THE WEBSITE.
NOW, THEY COMPLAIN ABOUT THE BLACKOUT DATES. YOU WILL NOTICE THERE IS ALL
THESE DATES. IN FACT, I THINK IT WAS YOU AND
ME THAT HAD A FAIRLY HEALTHY AND ROBUST
28a
DISCUSSION ABOUT THOSE BLACKOUT DATES.
AGAIN, TO GIVE THE COURT THE CONTEXT,
THERE IS A REASON FOR THOSE DATES. THE
REASON IS IF YOU ARE IN THE FLOWERS BUSINESS, FULFILLMENT AT SOME OF THESE HOLIDAYS IS VERY, VERY TOUGH.
[23] SO ONE OF THE THINGS WE NEGOTIATED ON – AND WE WERE VERY FRANK WITH
THEM ABOUT – WAS IT’S GOING TO MAKE IT
VERY TOUGH ON US TO NOT BE ABLE TO PROGNOSTICATE ADDITIONAL FULFILLMENT PRESSURE ON OUR DISTRIBUTION SYSTEM IF WE
GIVE OUT ALL THESE CREDITS. SO WHAT WE
DID WAS WE SAID CAN WE CARVE OUT SOME OF
THE MAJOR HOLIDAYS. AND JUDGE INFANTE
SPENT HOURS WITH THE TWO OF US, NEGOTIATING OVER THAT, BECAUSE IT’S PART OF OUR
BUSINESS.
NOW, THE COURT CAN SAY WELL, I DON’T
KNOW WHY I WOULD AGREE TO THAT, BUT THE
REALITY IS THERE IS A BUSINESS REASON UNDERLYING THAT PRINCIPLE IN THE SETTLEMENT. IT IS NOT, AGAIN – YOU KNOW, WHEN YOU
SIT IN THE BLEACHERS, SOMETIMES YOU HAVE
A DIFFERENT VIEW OF THE WORLD. BUT THAT
IS THE REASON WHY WE HAVE THOSE BLACKOUT DATES IN THERE.
THE COURT: AND THE NEGOTIATION
YOU HAVE BEEN TALKING ABOUT WAS WITH
YOU AND MS. ANDERSON?
29a
MR. RHODES:
THE COURT:
ORD IS CLEAR.
YES, YES.
OKAY. JUST SO THE REC-
MR. RHODES: YES. WHEN I SAY “HER,”
I APOLOGIZE. YES, THAT’S WHO I’M TALKING
ABOUT. BUT THE REASON I REMEMBER IT WAS
WE ACTUALLY HAD A ROBUST DISCUSSION, I
THINK IT’S FAIR TO SAY.
MR. STECKLER: VERY ROBUST, YOUR
HONOR.
THE COURT:
SHE IS SMILING.
MR. RHODES: WE ARE ALL SMILING
TODAY, YOUR HONOR. [24] BY THE WAY, YOU
KNOW, AS AN ASIDE – A COMIC ASIDE – WHEN
YOU TAKE THE PLAINTIFF’S DEPOSITION DURING THE CASE, THE PLAINTIFF TELLS YOU, AS A
DEFENSE LAWYER, YOU DIDN’T LAY A HAND ON
THEM. NOW, OF COURSE, WE ROUGHED HER UP.
WE DRAGGED HER OVER THE COALS. I FOUND
THAT AMUSING.
MR. PATTERSON TALKED ABOUT THE PRACTICE STOPPING. IT DID STOP. AND IT HAS NOT
BEEN REINTRODUCED. AND I THINK MR.
CHERRY CAN SPEAK ABOUT THE CURRENT
STATE OF HIS CLIENT’S BUSINESSES. WE ARE
NOT IN THIS BUSINESS ANYMORE AND WE HAVEN’T BEEN.
30a
OBVIOUSLY, WHEN YOU GET SUED AND YOU
GET TO SPEND THREE AND HALF YEARS IN LITIGATION, IT’S LESS THAN OPTIMAL. SO TO THE
EXTENT THE COURT WANTS TO FACTOR THAT
INTO THE ANALYSIS, I CREDIT MR. PATTERSON’S REMARK. AND I WOULD AT LEAST STATE
FOR THE RECORD THAT I THINK THEY CAN LEGITIMATELY TAKE SOME CREDIT FOR THE FACT
THAT THAT PRACTICE HAS STOPPED.
IT WAS ON ITS WAY OUT ANYWAY, BUT IN
THE INTEREST OF FULL DISCLOSURE I WOULD
GIVE THEM SOME CREDIT FOR THAT.
THE COURT:
THE DOOR.
THEY HASTENED IT OUT
MR. RHODES: YES. ONE OF THE OBJECTIONS IS THAT IN THE ATTORNEYS’ FEES
CONTEXT, MR. PERRYMAN’S COUNSEL STATES
THAT THERE IS A FREE RIDING PROVISION,
WHICH IS A FREE SAILING PROVISION, WHICH
IS THAT WE TIED OUR HANDS AND ARE MUTE
TO TALK IN FRONT OF THE COURT. NOT SO. AND
I WANTED TO POINT OUT TO THE COURT THE
RECORD. IF YOU LOOK AT THE ACTUAL AGREEMENT – I [25] WILL DIG IT UP HERE, YOUR
HONOR. THIS IS PAGE SIX OF THE SETTLEMENT
AGREEMENT, SECTION 2.1C. IT STATES EXPLICITLY THAT THE ISSUE OF ATTORNEYS’ FEES
AND COSTS AND ENHANCED AWARDS IS UP
TO THE COURT’S DISCRETION, BASED ON THE
SUBMISSION OF PAPERS FROM PLAINTIFFS’
31a
COUNSEL. BUT CONTRARY TO WHAT THE OBJECTOR IS ARGUING, EVERY DOLLAR THAT
DOESN’T GO TO THEM GOES TO THE CLASS.
THERE IS NO REVERSION TO MY CLIENT. SO
I DON’T KNOW WHAT HE IS TALKING ABOUT
WHEN HE SAYS THERE IS A FREE SAILING PROVISION. FREE SAILING MEANS THAT IT’S BASICALLY FEES OR NOTHING. BUT HERE, IT’S A
CONTAINED FUND FROM WHICH THE EXPENSES OF THE ADMINISTRATION OF THE SETTLEMENT COME OFF THE TOP. AND WHATEVER
FEES THEY GET, THEY GET. AND IF THEY DON’T
GET A DOLLAR THEY ASK FOR, IT GOES BACK TO
THE CLASS. SO THAT COMPLIES WITH THE CURRENT STATE OF THE LAW, AND PARTICULARLY
THINGS LIKE BLUETOOTH, THAT CASE.
I THINK THAT’S ALL THE POINTS I WANTED
TO MAKE, YOUR HONOR. AND, OBVIOUSLY WE
ARE HAPPY TO ENTERTAIN QUESTIONS IF YOU
HAVE ANY ADDITIONAL ONES.
THE COURT:
SURE.
MR. CHERRY, DID YOU WANT TO SAY ANYTHING ON BEHALF OF YOUR CLIENT?
MR.
HONOR.
CHERRY:
THANK
YOU,
YOUR
I WOULD LIKE TO POINT OUT THAT THE SETTLEMENT IS IN A SENSE CONTRARY TO A LOT
OF LAW THAT HAS HAPPENED IN THIS [26] DISTRICT AND AROUND THE COUNTRY. SO IF YOU
32a
HAD TO PICK A SERIES OF CASES, THE SETTLEMENT CREDITS, THE MINORITY OF THOSE
CASES AS OPPOSED TO THE MAJORITY – IF
WE WERE TO FOLLOW THE MAJORITY RULES,
THE SETTLEMENT WOULD NOT HAVE BEEN
ENTERED INTO ON THE BASIS THAT BOTH
PROFLOWERS AND OUR CLIENT RIGOROUSLY
DISAGREED ABOUT THE MERITS OF THE WEBSITE. AND I POINT THAT OUT ONLY TO SAY THAT
IN ROUGH TERMS THIS SETTLEMENT IS CLOSE
TO 40 PERCENT OF POTENTIAL DAMAGES, WITH
MOST OF THE CASE LAW AGAINST IT.
NOBODY, EVEN THE OBJECTORS, CRITICIZES THE SETTLEMENT. SO MR. PERRYMAN
APPROVES THE SETTLEMENT. NOW, WHY IS
THAT IMPORTANT? WELL, THAT’S IMPORTANT
BECAUSE HIS ONLY OBJECTION IS KIND OF
WHAT’S FOR DESSERT. IN OTHER WORDS, HE
SAYS HE DOESN’T LIKE THE DISTRIBUTIONS TO
THE CY PRES PEOPLE, AND HE CRITICIZES THE
ATTORNEYS’ FEES, WHICH BOTH PROFLOWERS
AND I ARE NOT GOING TO TAKE A POSITION ON.
WE DON’T OBJECT TO IT.
BUT THE DECIDING FACTOR ON WHAT
YOU DO WITH RESPECT TO THE CY PRES DOCTORATE IS REALLY LIKE DESSERT. IT’S THE
PRODUCT OF NEGOTIATIONS THAT HAPPEN IN
CONNECTION WITH IT. SO IF YOU ARE GOING
TO AGREE TO TAKE THE BENEFITS OF THE
MENU ITSELF, WHICH HE DOESN’T OBJECT TO,
IT SEEMS TO ME WHILE AN OBJECTION CAN BE
33a
MADE AND SAY I WOULD RATHER GIVE IT TO
THIS GUY VERSUS THAT GUY, THAT IS NOT A
VERY SUBSTANTIAL ANALYSIS. THIS WAS ALL
DONE IN THE HEAT OF NEGOTIATIONS. AND
FOR SOMEONE [27] TO COME IN AND SAY I
COULD HAVE DONE BETTER, OR I HAVE A DIFFERENT CHOICE, DOESN’T SEEM TO ME TO BE
WELL SAID.
IT’S ALREADY BEEN POINTED OUT, YOUR
HONOR, THAT ESSENTIALLY NO ONE DISAGREES WITH THIS SETTLEMENT FROM THE
CLASS. THERE WERE 39 OPT-OUTS. SO ON ALL ISSUES THERE IS COMPLETE AGREEMENT. AND I
WOULD SAY, YOUR HONOR, THAT THIS IS A SETTLEMENT WHICH IS BENEFICIAL TO THE
CLASS, IT WAS NEGOTIATED AT ARM’S LENGTH,
AND
IS REALLY THE PRODUCT OF A SETTLEMENT
BECAUSE NOT EVERYBODY GOT WHAT THEY
WANTED, AND PARTIES PARTICIPATED IN PROVIDING THINGS THAT THEY DID NOT THINK
THEY OUGHT TO UNDER THE LAW. THANK YOU.
THE COURT:
THANK YOU.
MR. RHODES: YOUR HONOR, MAY I
JUST ADD ONE MORE POINT?
THE COURT:
SURE.
MR. RHODES: I KNOW I AM SPEAKING
OUT OF TURN, BUT I APOLOGIZE. AS I ALLUDED
TO IN MY REMARKS, ONE OF THE COMPLEX-
34a
ITIES OF THIS PARTICULAR DEAL WAS THE ORBIT OF THE INSURANCE COMPANIES AROUND
US. WE HAVE A TOWER OF THREE DIFFERENT
CARRIERS. AND THERE WAS A COMPLEXITY BECAUSE SOME OF THOSE CARRIERS WERE COMMON TO BOTH MR. CHERRY’S CLIENT AND
MINE. AND THERE WERE SOME VERY ODD COVERAGE POSITIONS BEING TAKEN. IT TOOK US
AN EXTENSIVE AMOUNT OF WORK. IN FACT, WE
HAD TO HIRE MR. PAUL HILDING, WHO THE
COURT MAY KNOW, TO REPRESENT OUR INTERESTS IN ACTUAL LITIGATION AGAINST SOME OF
[28] THESE CARRIERS. WE FINALLY GOT EVERYTHING CIRCLED UP. AND IF THE COURT HAS
ANY HESITATION ABOUT THE SETTLEMENT,
THE ONE THING I WANT THE COURT TO BE
THINKING ABOUT IS FRAGILITY OF THE MONEY
THAT WE CIRCLED UP.
IT’S REFLECTED, ACTUALLY, IN THE AGREEMENT ITSELF, IN SECTION 2.1F, WHERE IT
MAKES IT EXPLICIT THAT THE FUNDING IS
CONDITIONED UPON US BEING ABLE TO GET
THE INSURANCE COMPANIES TO ACTUALLY
GIVE US THE MONEY. WE HAVE THAT MONEY
CIRCLED UP TODAY. IT TOOK US AN AWFUL LOT
OF TIME AND, FRANKLY, A LOT OF MONEY AND
ACTUAL LITIGATION AGAINST THEM TO GET
THAT MONEY CIRCLED UP.
AND ONE OF THE TRAGEDIES OF THE SYSTEM THAT WE HAVE – AND I DO CLASS ACTIONS
FOR A LIVING, AS DOES MR. PATTERSON – IS THAT
35a
WHEN A SOLE OBJECTOR COMES FORWARD TO
ADVANCE A POLITICAL AND PHILOSOPHICAL
AGENDA AND CHALLENGE A SETTLEMENT, THE
REALITY IS IF THEY APPEAL, AS THEY DID IN
THE LANE V. FACEBOOK CASE THAT I NEGOTIATED IN THE SPRING OF 2009, WHICH HAS YET
TO BE FUNDED, A $9.5 MILLION DEAL, WE RISK
– WE RISK GETTING THEM MONEY FROM THE
CARRIER. BECAUSE A LOT OF INTERVENING ACTIONS CAN TAKE PLACE.
SO I WOULD JUST HOPE THE COURT WOULD
EXPRESS A VIEWPOINT TO THE OBJECTOR, IF
THE COURT FINDS THAT THE OBJECTION IS
NOT WELL TAKEN, THAT WHAT AMOUNTS TO A
SINGLE OBJECTOR, WHO GETS 100 CENTS ON
HIS DOLLAR, ENDS UP HOLDING THE REST OF
US HOSTAGE AND RISKS MY CLIENT HAVING TO
WAIT TO SEE [29] WHETHER THE CARRIERS PAY
THE MONEY IN TWO OR THREE YEARS AFTER
THEY APPEAL. THANK YOU.
THE COURT:
WELL, THANK YOU FOR
THAT.
SO MR. SCHULMAN, WOULD YOU LIKE TO
MAKE COMMENTS ON BEHALF OF THE OBJECTOR?
MR SCHULMAN:
YOUR HONOR.
YES. THANK YOU,
THERE ARE SEVERAL POINTS I WOULD LIKE
TO TOUCH ON, BUT IF THE COURT HAS ANY
36a
PRESSING AREAS IT WOULD LIKE ME TO ADDRESS, I WOULD BE GLAD TO BEGIN THERE.
THE COURT: NO. I WOULD SAY GO
AHEAD WITH YOUR ANTICIPATED REMARKS.
MR SCHULMAN: SURE. WELL, THEN,
WHAT I WOULD LIKE TO DO IS START TO ADDRESS THE PARTIES’ RESPONSES TO US, BUT
FEEL WELCOME TO DIVERT ME AT ANY TIME ON
ISSUES OR QUESTIONS YOU MAY HAVE.
THE COURT:
OKAY.
MR SCHULMAN: PRIMARILY, THERE
ARE A FEW MATTERS RAISED IN THE PLAINTIFFS’ RESPONSE, TO WHICH OUR TWO SUPPLEMENTAL DECLARATIONS WERE ADDRESSED.
WE FILED THOSE LAST FRIDAY. BUT UNLESS
YOUR HONOR IS PLANNING TO STRIKE MR. PERRYMAN’S OBJECTION AS MADE WITHOUT
STANDING, OR TO GRANT THE ILLEGAL APPEAL
BOND REQUEST THAT WASN’T PROPERLY NOTICED UNDER RULE 7, I’LL PROCEED DIRECTLY
TO THE SUBSTANTIVE CRITIQUES OF THE OBJECTIONS.
THE COURT:
STANCE.
LET’S GO TO THE SUB-
[30] MR SCHULMAN: SOUNDS GOOD.
BUT TO KEEP THE COURT FULLY ADVISED, I DO
WANT TO NOTE THAT WE DID SERVE CO-LEAD
CLASS COUNSEL LAST WEEK WITH NOTICE OF
A RULE 11(C)(2) MOTION FOR SANCTION, WHICH
37a
GIVES THEM THREE WEEKS TO WITHDRAW
THEIR FILING ENTIRELY, OR WE INTEND TO
FILE A MOTION FOR SANCTIONS AT THAT TIME.
BUT ON TO THE SUBSTANTIVE ARGUMENTS.
LET ME BEGIN WITH THE BASIC STRUCTURE OF
MR. PERRYMAN’S OBJECTION. BOILED DOWN
ALL THE WAY, THERE ARE TWO CENTRAL OBJECTIONS. FIRST, THE SETTLING PARTIES, IN
CONTRAVENTION OF THE CLASS ACTION FAIRNESS ACT, ARE ATTEMPTING TO HAVE THIS
COURT VALUE THE COUPON PORTION OF THE
SETTLEMENT AT MORE THAN $26 MILLION.
HOWEVER, IF THIS COURT PROPERLY VALUES
THE COUPONS AT ZERO UNTIL THEIR REDEMPTION, THE ATTORNEYS’ AWARD IS OVER 71 PERCENT OF THE SETTLEMENT PROCEEDS AND
THE SETTLEMENT IS DISPROPORTIONATE AND
UNFAIR UNDER THE NINTH CIRCUIT DECISIONS IN BLUETOOTH AND DENNIS. THIS
SHORTCOMING, HOWEVER, CAN BE REMEDIED
BY DEFERRING A PORTION OF THE ATTORNEY
FEE AWARD PENDING THE COUPON REDEMPTION PROCESS.
THE SETTLING PARTIES RETORT THAT THIS
ISN’T A COUPON SETTLEMENT UNDER CAFA.
AND THEIR MAIN ARGUMENT SEEMS TO BE
THAT THE MERCHANDISE CODES CAN BE USED
TO PURCHASE ENTIRE ITEMS UNDER $20, AND
BECAUSE OF THIS AREN’T COUPONS.
38a
THE PLAINTIFFS CITE TO THE UNPUBLISHED DECISION IN CLRB HANSON INDUSTRIES V. WEISS, WHICH HELD THAT
FORGIVENESS OF [31] INDEBTEDNESS WAS NOT
A COUPON. BUT THAT DECISION HAS NO BEARING HERE WHERE THE MERCHANDISE CODES
ONLY ACQUIRE EFFECT UPON A FUTURE PURCHASE. THE FACT THAT THE CODES COULD BE
USED TO PURCHASE A WHOLE PRODUCT DOES
NOT MAKE THEM ANY LESS OF A COUPON.
CAFA’S LEGISLATIVE HISTORY, AS DISCUSSED IN FLEURY V. RICHEMONT, EXPLICITLY
REFUTED THAT ARGUMENT. THE LEGISLATIVE
HISTORY CITES EXAMPLES, INCLUDING A FREE
CRIB REPAIR KIT, FREE SPRINGWATER, FREE
GOLF CLUBS AND FREE GOLF BALLS. AND THE
CITATION TO THAT LEGISLATIVE HISTORY IS
SENATE REPORT 109-14, 2005.
THE WHOLE PRODUCT ARGUMENT WAS
ALSO REJECTED IN JUDGE WOOD’S SYNFUEL
DECISION OUT OF THE SEVENTH CIRCUIT,
WHICH IS REPORTED AT 463 F3D 646. THERE,
THE COURT HELD THAT PREPAID SHIPPING ENVELOPES SHOULD BE CONSIDERED COUPONS
UNDER CAFA.
THE DEFENDANTS’ SECOND SUGGESTION
IS THAT THE EXISTENCE OF A SEPARATE CASH
FUND UNDER THE SETTLEMENT MEANS THAT
CAFA COUPON RESTRICTIONS DO NOT APPLY.
39a
THE PRECISE TEXT OF CAFA CONTEMPLATES AND REJECTS THIS ARGUMENT. IF YOU
LOOK AT 28 U.S.C. 1712(A), IN RELEVANT PART, IT
READS: THE PORTION OF ANY ATTORNEY’S FEE
AWARD TO CLASS COUNSEL THAT IS ATTRIBUTABLE TO THE AWARD OF THE COUPONS SHALL
BE BASED ON THE VALUE TO CLASS MEMBERS
OF THE COUPONS THAT ARE REDEEMED.
THE AWARD IS PORTIONED; THAT IS TO SAY,
CAFA ITSELF [32] HAS DETERMINED THAT IT IS
STILL A COUPON SETTLEMENT EVEN WHEN
THERE IS ANOTHER NON-COUPON PORTION OF
THE FEE ATTRIBUTABLE TO MONETARY RELIEF.
IN THIS CASE, CAFA PERMITS APPLYING
THE PERCENTAGE METHOD, WHICH IS FAVORED BY THE NINTH CIRCUIT, TO THE NONCOUPON $12.5 MILLION CASH FUND, WHICH
WOULD EQUATE TO JUST OVER $3 MILLION
BASED UPON THE 25 PERCENT BENCHMARK,
BUT IT DOES NOT PERMIT AN ADDITIONAL 25
PERCENT FEE BASED ON THE FACE VALUE OF
THE COUPONS OR BASED ON 85 PERCENT OF
THE COUPONS OR BASED ON ANY PERCENTAGE
THAT YOU’D LIKE. INSTEAD, IT REQUIRES THAT
THE AWARD SHALL BE BASED ON THE VALUE TO
CLASS MEMBERS OF THE COUPONS THAT ARE
REDEEMED.
LASTLY, THE DEFENDANTS IMPLY THAT MR.
PERRYMAN BELIEVES COUPON SETTLEMENTS
40a
ARE, PER SE, UNFAIR. THAT’S NOT CORRECT.
WHILE HE DOES BELIEVE THEY REQUIRE
HEIGHTENED SCRUTINY – AND IN THIS CASE
THE PARTIES HAVE DONE NOTHING TO DISPEL
THE FEARS THAT THE COUPONS HAVE NO REAL
VALUE TO CLASS MEMBERS, DUE IN PART TO
THEIR BLACKOUT DATES, AND IN GREATER
PART TO THE FACT THAT THEY ARE DUPLICATIVE OF PROMOTIONAL OFFERS ALREADY
AVAILABLE, SUBMITTED IN EXHIBITS TO MR.
PERRYMAN’S INITIAL DECLARATION.
BUT THAT IS NOT THE CRUX OF MR. PERRYMAN’S OBJECTION TO THE COUPON PORTION.
THE CRUX IS SIMPLY THAT CAFA PROHIBITS
THE COURT FROM TAKING 85 PERCENT OF THE
FACE VALUE OF THE COUPONS TO BE THEIR
VALUE FOR PURPOSES OF AWARDING FEES.
[33] AND DEFENDANTS CAN’T TODAY ADVANCE THE ARGUMENT THAT THE COUPONS
AREN’T COUPONS BECAUSE THEY HAVE BEEN
NAMED SOMETHING ELSE IN THIS CASE: MERCHANDISE CREDITS. WELL, WE THOROUGHLY
BRIEFED WHY THAT ARGUMENT IS INCORRECT
IN MR. PERRYMAN’S INITIAL OBJECTION.
WE WOULD LIKE TO SAY THAT EVEN IF THIS
COURT WERE TO DECLINE TO APPLY CAFA, THE
RESULT WOULDN’T CHANGE. WE SUBMIT THAT
JUDGE CARTER’S OPINION IN ACOSTA V.
TRANSUNION IS A MODEL ROADMAP FOR AN
41a
OPINION REJECTING THIS TYPE OF SETTLEMENT. THAT IS AT 243 FRD 377.
IT INVOLVED THE SAME TRI-PARTE RELIEF
STRUCTURE PRESENT HERE AND WAS BRIEFED
THOROUGHLY IN THE OBJECTION. YET NEITHER SETTLING PARTY EVEN ATTEMPTED TO
DISTINGUISH IT IN THEIR FINAL APPROVAL PAPERS.
THAT BRINGS ME TO MY CLIENT’S SECOND
CARDINAL OBJECTION, THE IMPERMISSIBLE
USE OF CY PRES. THE RECIPIENTS ARE IMPROPER IN THAT SAN DIEGO SCHOOL OF LAW IS
THE ALMA MATER OF VARIOUS COUNSEL IN
THIS CASE, THUS CREATING A CONFLICT OF INTEREST.
MR. PERRYMAN’S CONCERN IS NOT ALLAYED BY THE DECLARATION SUBMITTED
THAT THE RECIPIENTS WERE NOT IN FACT
CHOSEN ON THIS BASIS BECAUSE THE MERE
APPEARANCE OF IMPROPRIETY IS ENOUGH TO
MAKE THE CY PRES AWARD IMPROPER. YOU
CAN TELL IN NACHSHIN THAT THE NINTH CIRCUIT IS VERY SENSITIVE TO THIS CONCERN.
[34] IN HIS OBJECTION, MR. PERRYMAN
CITED AUTHORITIES, INCLUDING THE SCHWARTZ
CASE, WHICH SPECIFICALLY RECOGNIZED THE
PROBLEM WITH CY PRES DONATIONS TO THE
ALMA MATER OF PARTICIPANTS IN THE PROCEEDINGS. AND MANY OF THOSE AUTHORITIES
WERE ALSO CITED BY THE NINTH CIRCUIT IN
42a
NACHSHIN CASE, THE LIPTAK ARTICLE FROM
THE NEW YORK TIMES AND A COUPLE OF
OTHER SECONDARY SOURCES.
THE PARTIES HAVE CITED NO CASES WHICH
THEY CLAIM PERMITS SUCH A THIRD-PARTY
DISTRIBUTION. MOREOVER, THE CY PRES AWARDS
TO LOCAL INSTITUTIONS FAIL TO APPROXIMATE THE NATIONWIDE SCOPE OF THE CLASS.
THE NINTH CIRCUIT, SINCE BACK IN SIX MEXICAN WORKERS, HAS SAID THAT THIS IS IMPROPER.
LANE V. FACEBOOK, MENTIONED BY DEFENDANTS’ COUNSEL, HAS NOTHING TO SAY
ABOUT GEOGRAPHIC APPROXIMATION. THAT
WASN’T AN OBJECTION THERE. THE INSTITUTION THAT WAS BEING ESTABLISHED WAS A NATIONWIDE INSTITUTION THAT SERVED THE
ENTIRE SCOPE OF THE CLASS.
BUT THE PLAINTIFFS ARGUE THAT THE
CENTRALIZATION IN SAN DIEGO IS OKAY BECAUSE, QUOTE, THE RECIPIENTS, WHILE LOCAL
TO THIS COURT, ENGAGE IN A NATIONWIDE ACADEMIC DIALOGUE AND PLACE STUDENTS
FROM ACROSS THE COUNTRY.
BUT THAT IS NOT PRECISELY CORRECT. IF
YOU LOOK AT EXHIBIT F TO MR. NORTON’S FINAL APPROVAL DECLARATION, IT SHOWS THAT
92.5 PERCENT OF SAN DIEGO STATE UNDERGRADUATE ENROLLEES ARE FROM IN STATE. I
BELIEVE UCSD – CHECKED ONLINE – IS A [35]
43a
SIMILAR PERCENTAGE. AND CERTAINLY THE
NUMBER OF FACULTY AND EMPLOYEES OF
THOSE INSTITUTIONS WHO LIVE IN THE STATE
IS NEAR IF NOT 100 PERCENT.
BUT EVEN IF THE STUDENT AND EMPLOYEE
GEOGRAPHIC MAKEUP WERE MORE BALANCED,
IT WOULD DO NOTHING TO DISTINGUISH THIS
AWARD FROM ONE OF THE LOCAL UNIVERSITIES THAT THE SEVENTH AND EIGHTH CIRCUIT
REJECTED IN AIRLINE TICKET COMMISSION
AND HOUCK. BOTH CASES WERE SPECIFICALLY
FOLLOWED BY THE NINTH CIRCUIT IN
NACHSHIN. FOR EXAMPLE, THE CY PRES PROPOSED IN HOUCK WAS TO, QUOTE, RESEARCH
PROJECTS IN THE AREA OF CLASS ACTIONS
AND PARTICULARLY ANTITRUST LAW, RESEARCH THAT THEORETICALLY WOULD HAVE
HAD A NATIONWIDE BENEFIT. BUT THAT DIDN’T
PREVENT THE SEVENTH CIRCUIT FROM REVERSING ON ACCOUNT OF THE CONCENTRATION TO SCHOOLS LOCAL TO CHICAGO.
THE DEFENDANTS POINT OUT SOME LANGUAGE IN THE FIRST CIRCUIT’S LUPRON CASE,
WHICH RUNS COUNTER TO THESE HOLDINGS.
BUT IN NACHSHIN THE NINTH CIRCUIT HAD
CLEARLY PLANTED ITS FLAG WITH THE SEVENTH AND EIGHTH CIRCUIT’S DECISIONS.
ALSO, A CLOSER LOOK AT LUPRON REVELS
[sic] THAT THE FIRST CIRCUIT WAS PRIMED TO
REVERSE IN VIRTUE OF THE SETTLEMENT’S
44a
USE OF CY PRES, BUT ULTIMATELY AFFIRMED
ONLY BECAUSE THE OBJECTORS HAD WAIVED
ANY CHALLENGE TO THE UNDERLYING SETTLEMENT AGREEMENT. MR. PERRYMAN, OF COURSE,
HAS MADE NO SUCH WAIVER IN THIS CASE.
LUPRON, IN FACT, AFFIRMATIVELY SUPPORTS [36] MR. PERRYMAN’S THIRD ARGUMENT
AGAINST THE CY PRES. IT CITES THE ALI PRINCIPLES FOR THE PROPOSITION THAT CY PRES
SHOULD NOT BE USED AT ALL WHEN DISTRIBUTIONS TO THE CLASS ARE FEASIBLE AND THE
CLASS HASN’T BEEN FULLY COMPENSATED.
MR. PERRYMAN’S OBJECTION IS NOT THAT
THE USE OF CY PRES IS LESS THAN PERFECT –
OR AS MR. CHERRY SAID, THAT MR. PERRYMAN
IS JUST ASKING WHAT’S FOR DESSERT. IT’S
THAT THE USE OF CY PRES IS IMPERMISSIBLE
ENTIRELY WHERE CLASS MEMBERS HAVE NOT
RECEIVED FULL, LEGAL MEASURE OF COMPENSATION AND IT IS FEASIBLE TO DO SO. ADEQUATE REPRESENTATIVES MAY NOT PREFER
CY PRES RECIPIENTS TO ABSENT CLASS MEMBERS.
THE DEFENDANTS ADVANCE THE CONCERN
THAT THE FUND WAS ESTABLISHED TO BENEFIT ALL CLASS MEMBERS, NOT JUST THOSE
WHO HAVE MADE CLAIMS. IN HIS OBJECTION,
MR. PERRYMAN ADDRESSED THIS AND NOTED
THAT IF THIS WAS A CONCERN THE PARTIES
45a
COULD HAVE OPTED FOR THE OTHER TWO
MECHANISMS DESCRIBED AT PAGE 13 OF HIS
OBJECTION, EITHER A SUPPLEMENTAL OUTREACH PROGRAM TO THE CLASS OR RANDOM
SAMPLING OF THE CLASS AND MAKING PAYOUTS ON A LOTTERY BASIS.
GIVEN NOW WE KNOW THERE IS A POT OF
$3 MILLION OF UNCLAIMED MONEY AVAILABLE
– MORE, IF THE COURT PROPERLY RESTRICTS
THE ATTORNEY FEE AWARD TO 25 PERCENT OF
THE $12.5 MILLION DOLLAR FUND – ALL ALTERNATIVES WOULD BE FEASIBLE.
IN THIS CIRCUIT, CY PRES MUST REMAIN
A LAST RESORT, TO BE USED ONLY WHEN
THE FUND IS, QUOTE/UNQUOTE, [37] NONDISTRIBUTABLE. AND IN THIS SETTLEMENT IT
HAS NOT BEEN EMPLOYED THAT WAY.
THE CY PRES SHORTCOMINGS CANNOT BE
REMEDIED BY THE COURT ITSELF, SO THE SETTLEMENT MUST BE REJECTED FOR THAT REASON AND THE PARTIES MUST REVISE IT.
AND FINALLY, I WOULD LIKE TO TOUCH
UPON ONE ESSENTIAL MATTER NEGLECTED BY
BOTH SETTLING PARTIES IN THEIR FINAL SUBMISSIONS, AND THAT IS THE NUMBER OF CLASS
MEMBERS WHO HAVE SUBMITTED CASH
CLAIMS AND THE AGGREGATE VALUE OF THOSE
CLAIMS.
46a
THE DEADLINE PASSED OVER A MONTH
AGO AND THE PLAINTIFFS SUBMITTED TWO
DECLARATIONS FROM THE CLAIMS ADMINISTRATOR, WHICH WERE ABLE TO DETAIL,
AMONG OTHER THINGS, THE SUM VALUE OF
MR. PERRYMAN’S CLAIM. YET CONSPICUOUSLY
ABSENT FROM THOSE TWO DECLARATIONS
WERE THE TOTAL NUMBER OF CLAIMS AND
THE VALUE OF THOSE CLAIMS.
THE COURT SHOULD DRAW AN ADVERSE INFERENCE THAT THE NUMBER OF CLAIMS IS EXTREMELY LOW FROM THE FAILURE OF THE
SETTLING PARTIES TO ANNOUNCE IT. WE DID
GET SOME INSIGHT FROM MR. PATTERSON TODAY THAT THERE IS $3 MILLION LEFT OVER. A
ROUGH BACK-SOLVING WOULD SEEM TO SHOW
THAT THEN THERE HAS BEEN LESS THAN A –
DEDUCTING THE NOTICE AND ADMINISTRATION COSTS THERE HAS BEEN LESS THAN A
MILLION DOLLARS CLAIMED, WHICH WOULD
MEAN THAT YOU COULD SEE A 16-TO-1 DISPROPORTION BETWEEN THE AMOUNT OF MONEY –
POSSIBLY GREATER THAN THAT – BETWEEN
THE AMOUNT OF MONEY CLAIMED IN THE ATTORNEY FEES OF THE CLASS.
[38] AND THAT’S INFORMATION THAT THIS
COURT NEEDS TO INTELLIGENTLY APPROVE
THE SETTLEMENT. THE SETTLEMENT CAN’T BE
INTELLIGENTLY APPROVED UNTIL THE COURT
REQUIRES THE PARTIES TO SUBMIT THOSE FIGURES ONTO THE RECORD.
47a
AND BLUETOOTH WAS QUITE CLEAR THAT
THE LOWER COURT MUST VALUE THE SETTLEMENT RELIEF WHEN APPROVING IT. AND
THAT’S EVEN IF IT’S APPLYING THE LODESTAR
METHOD. BLUETOOTH REQUIRED THAT THE
COURT VALUE THE RELIEF AS SORT OF A PERCENTAGE OF THE RECOVERY CROSS-CHECK IN
EFFECT.
AND PERRY HAS CITED TO NUMEROUS
COURTS POST BLUETOOTH, THAT HAVE TAKEN
CARE TO SCRUTINIZE THE AMOUNTS CLAIMED.
A PARTICULARLY GOOD EXAMPLE WAS JUDGE
KOH’S DECISION REJECTING THE FERRINGTON
V. MCAFEE SETTLEMENT IN THE NORTHERN
DISTRICT OF CALIFORNIA. AND EVEN AFTER
THAT, DENNIS HAS FURTHER CLARIFIED THAT
IT IS NOT ENOUGH FOR THE PARTIES TO SAY
JUST TRUST US. BUT THAT IS EXACTLY WHAT IS
OCCURRING HERE WITH THE CLAIMS RATE.
AND I URGE YOUR HONOR TO APPLY THE UTMOST SECURITY.
I WOULD BE HAPPY TO ANSWER ANY QUESTIONS THAT YOUR HONOR HAS.
THE COURT: I DON’T HAVE ANY AT
THE MOMENT, BUT THANK YOU.
NOW, MS. ANDERSON, I HEARD YOU WERE
GOING TO ADDRESS THE OBJECTIONS. DO YOU
WANT TO SPEAK NEXT?
48a
MS. ANDERSON: I WOULD LIKE TO
SPEAK BUT MR. RHODES [39] HAS ASKED TO INTERJECT A COUPLE OF COMMENTS.
THE COURT: OKAY. WHATEVER MAKES
EVERYBODY HAPPY. GO AHEAD.
MR.
HONOR.
RHODES:
THANK
YOU,
YOUR
LET ME TAKE UP THE GEOGRAPHIC ISSUE,
JUST BRIEFLY. I WOULD NOTE FOR THE RECORD THAT THE MAJORITY OF THE CLASS MEMBERS WERE LOCATED IN CALIFORNIA. SO
THERE IS A LOCUS, IF YOU WILL, IN CALIFORNIA
TO THE UNDERLYING ACTS. BUT THERE IS NO
ARGUMENT MADE BY MR. PERRYMAN AS TO
WHY, INTRINSICALLY THE CY PRES RECIPIENTS
ARE WRONG, BEYOND THE SPECIOUS, AND I
THINK OFFENSIVE CONTENTION THAT BECAUSE ONE OF MY PARTNERS WENT TO THAT
LAW SCHOOL – AND I THINK MR. PATTERSON
HAS, AS WELL – THAT IT IS OFF THE TABLE.
I WOULD POINT OUT, FOR THE RECORD,
THIS IS THE MOST RECENT NINTH CIRCUIT ARTICULATION OF THE ISSUE. I KNOW THIS CASE
WELL SINCE I ARGUED IT. THIS IS THE LANE
CASE, AT 696 F3D 811. THE COURT STATES
THERE THAT THE OBJECTOR IN THAT CASE WAS
UPSET THAT WHEN WE CREATED, IN THAT CONTEXT, A NEW FOUNDATION TO RECEIVE THE
MONEY AND THAT PLAINTIFFS’ COUNSEL AND
MYSELF WERE TO SERVE ON AN ADVISORY
49a
BOARD TO ENSURE THAT THE COURT’S DIRECTIVES WERE ACTUALLY FULFILLED, THE OBJECTOR IN THAT CASE SAID WELL, YOU CAN’T
HAVE FACEBOOK’S HAND IN THE COOKIE JAR
BECAUSE MR. RHODES IS ONE OF FACEBOOK’S
LEAD LAWYERS, HE NEGOTIATED THE DEAL,
AND IT WOULD BE INAPPROPRIATE FOR HIM TO
HAVE ANY ROLE IN THAT. AND THEN THEY
WENT ON TO SAY THAT ONE [40] OF THE THREE
DIRECTORS OF THE NEW FOUNDATION WAS GOING TO BE DESIGNATED BY FACEBOOK. AND
THAT TOO WOULD MEAN THAT THE FOUNDATION WOULD BE AN INAPPROPRIATE RECEIVER
OF THESE FUNDS.
AND THE COURT JUST REJECTED THAT AND
MADE THE NOT SURPRISING COMMENT THAT,
QUOTE, THAT FACEBOOK RETAINED AND WILL
USE ITS SAY IN HOW CY PRES FUNDS WILL BE
DISTRIBUTED SO AS TO ENSURE THAT THE
FUNDS WILL NOT BE USED IN A WAY THAT
HARMS FACEBOOK IS THE UNREMARKABLE
RESULT OF THE PARTIES’ GIVE-AND-TAKE NEGOTIATIONS. AND THE DISTRICT COURT
PROPERLY DECLINED TO UNDERMINE THOSE
NEGOTIATIONS BY SECOND-GUESSING THE
PARTIES’ DECISION AS PART OF THE FAIRNESS
REVIEW OVER THE SETTLEMENT AGREEMENT.
THAT’S AT PAGE 821, YOUR HONOR.
THE COURT:
OKAY. THANK YOU.
50a
MR. RHODES: SO THAT IS THE NINTH
CIRCUIT’S PRONOUNCEMENT: THE EXACT
SAME OBJECTION MADE, AND IT WAS OVERRULED.
THE OTHER THING I WANT TO POINT OUT IS
THAT COUNSEL CONFLATES THESE VOUCHERS
WITH COUPONS AS IF TO SAY THAT THE SYLLOGISM IS IF IT’S A COUPON, THE SETTLEMENT IS
DEAD. BUT THE POINT IS THAT UNDER STATUTE
– THIS IS 28 U.S.C. 1712(E) THAT, OF COURSE, IS
NOT THE CASE.
THIS IS QUOTING THE TRUE CASE, 749 F
SUPP SECOND AT PAGE 1070, QUOTE, A DISTRICT COURT’S INQUIRY DOES NOT END WITH A
DETERMINATION THAT A PROPOSED SETTLEMENT IS A COUPON [41] SETTLEMENT.
WE SUBMIT THAT IT’S NOT A COUPON SETTLEMENT, FOR THE REASONS GIVEN IN THE
RECORD. BUT EVEN IF THAT WERE THE CASE,
THAT IS ONLY THE BEGINNING OF THE ANALYSIS.
AND HERE, DESPITE MR. PERRYMAN’S OBJECTION AND DESPITE THE FACT THAT HE
WILL PARTICIPATE AS A FULL 100 PERCENT
CLAIMANT UNDER THE AGREEMENT, HE
HAS CERTAINLY NOT MADE ANY CASE FOR WHY
– EVEN IF YOU DEEM THE VOUCHER A COUPON
– GIVEN THE TOTALITY OF THE OTHER
RELIEF MADE AVAILABLE AND THE TOTALITY
OF THE CIRCUMSTANCES PRESENTED, THE
51a
SETTLEMENT IS NOT FAIR, REASONABLE AND
ADEQUATE. THANK YOU, YOUR HONOR.
THE COURT: OKAY. THANK YOU. AND
THEN, MS. ANDERSON.
MS. ANDERSON: THANK YOU, YOUR
HONOR. I WILL BEGIN WITH A COUPLE COMMENTS ABOUT THE CY PRES, TO DOVETAIL
WITH WHAT MR. RHODES HAD TO SAY. I THINK
IT’S IMPORTANT TO NOTE THAT MR. PERRY (SIC)
HAS FAILED TO EXPLAIN HOW FUNDS GOING TO
ANOTHER GEOGRAPHIC AREA WOULD BE MORE
BENEFICIAL TO HIM OR WHY FUNDS GOING
TO THE CURRENTLY PROPOSED RECIPIENTS
WOULD HARM HIM.
THIS IS NOT A CASE WHERE THERE ARE
SERVICES ON THE GROUND, FOOD BEING DISTRIBUTED STATE BY STATE, SERVICES BEING
DISTRIBUTED STATE BY STATE. THIS IS AN INTERNET CASE. CALIFORNIA. HE PURCHASED A
PRODUCT FROM A SAN DIEGO COMPANY, BUT A
COMPANY THAT CONDUCTS BUSINESS, VIA THE
INTERNET, [42] NATIONWIDE. CALIFORNIA INSTITUTIONS, INCLUDING THE ONES THAT ARE
PROPOSED, ARE PART OF THE NATIONWIDE ACADEMIC DIALOGUE, AND CALIFORNIA NOTABLY
IS ALSO THE HEART OF INTERNET RESEARCH,
INNOVATION AND POLICY. SO QUITE ARGUABLY
A BETTER PLACE TO HAVE NATIONAL IMPACT
THAN PERHAPS OTHER STATES.
52a
BUT, MOREOVER, A CY PRES IS NOT JUST TO
BE ADJUSTED BECAUSE THE CHOSEN RECIPIENTS ARE NOT WHO THE OBJECTOR WOULD
HAVE CHOSEN, BUT RATHER WHETHER IT
MEETS THE STANDARD OF BEING SUFFICIENTLY TETHERED TO THE CLAIMS IN THE
CASE. AND HERE IT DOES.
AS MY COLLEAGUE HAS DESCRIBED – MR.
PATTERSON DESCRIBED THAT THIS IS EARMARKED FOR PROJECTS AIMED AT EDUCATION
OF INTERNET PRIVACY AND SECURITY. THAT IS
DIRECTLY LINKED TO THE CLAIMS IN THIS
CASE. THE CASES THAT HAVE BEEN CITED BY
MR. PERRYMAN ARE DISTINGUISHABLE IN THIS
EFFECT, EVEN THE ONES HE REITERATED TODAY, SUCH AS AIRLINE TICKET AND SCHWARTZ.
THE COURT FOUND IN BOTH OF THOSE THAT
THE RECIPIENTS AND EVEN THE GOALS THAT
WERE SET HAD NO CONNECTION TO THE STATUTES THAT WERE BEING BROKEN. IN AIRLINE
TICKET THEY FOUND THERE WAS NO CONNECTION TO GIVING A LAW SCHOOL MONEY WHEN
THE ISSUE WAS OVERCHARGES BY TRAVEL
AGENTS.
AND IN SCHWARTZ, AGAIN, THEY FOUND
THAT THERE WAS NO ARTICULATED CONNECTION BETWEEN THE RECIPIENTS AND THE
GOALS OF THE ANTITRUST STATUTES AT ISSUE
IN THAT CASE.
53a
HERE, THE STATUTES AT ISSUE ARE CONSUMER PROTECTION [43] AND SPECIFICALLY
ELECTRONIC TRANSFER AND PRIVACY AND SECURITY ISSUES THAT ARE BEING DIRECTLY ADDRESSED SPECIFICALLY BY THE SPECIFIC AND
NARROW AREAS OF STUDY THAT THE CY PRES
WILL FUND.
AND IT BEARS NOTING, ALSO, THAT IN HIS
PAPERS MR. PERRYMAN CITES THE WELLS
FARGO CASE, BUT, IN FACT, IF YOU LOOK AT
WELLS FARGO, THE CASE REJECTED COUNSEL’S NOTION THAT CY PRES SHOULD GO TO
THE BAR ASSOCIATION OF SAN FRANCISCO
AND, INSTEAD, ACCEPTED AND APPROVED
THAT THE CY PRES, INSTEAD, GO TO THE STANFORD LAW SCHOOL’S SECURITIES CLEARINGHOUSE BECAUSE THAT WAS A SECURITIES
CASE AND THAT WOULD ADDRESS THE CONCERNS OF THE CLASS. AND THIS DOES THE
SAME THING.
AS FAR AS ALTERNATE MEANS, OTHER WAYS
TO USE THE MONEY WOULD BE CONCERNED, I
THINK IT’S IMPORTANT TO REMEMBER WHAT
THE PURPOSE IS BEHIND A CY PRES. HERE, MR.
RHODES HAD SAID THAT MONEY THAT DOESN’T
GO TO ATTORNEYS’ FEES WILL GO TO THE
CLASS. AND THAT’S TRUE, BUT I WANT TO REMIND YOUR HONOR THAT THAT IS TO THE CY
PRES. NOTHING IN THE ATTORNEYS’ FEES REQUEST WILL REDUCE THE AMOUNT OF CASH
THAT IS PAID TO PEOPLE WHO FILED A CLAIM.
54a
AND EVERYBODY WILL STILL RECEIVE THEIR
$20 VOUCHER. BUT IT WILL ONLY AFFECT THE
AMOUNT OF MONEY THAT GOES TO THE CY
PRES. THERE IS A SIGNIFICANT AMOUNT OF
MONEY GOING TO CY PRES. CURRENTLY, UNDER THE PROPOSED PLAN, ALMOST A MILLION
DOLLARS PER INSTITUTION.
THE ALTERNATIVES FOR DISTRIBUTION OF
THAT BOTH HAVE THE EXACT PROBLEMS THAT
CY PRES ARE MEANT TO ADDRESS. ONE [44]
SUGGESTED OPTION IS THAT CLASS MEMBERS
WHO HAVE MADE THIS CLAIM AND ATTEST
THAT THEY DID NOT ENROLL, THAT THEY GET
AN UPWARD ADJUSTMENT. BUT THAT WOULD
TRULY BE A HUGE WINDFALL IN THIS CASE.
THE OTHER ALTERNATIVE IS TO ATTEMPT
TO DISTRIBUTE THIS MONEY TO ONE – $3 MILLION TO 1.3 MILLION CLASS MEMBERS, BUT
THE ADMINISTRATIVE COSTS WOULD DWARF
ANY MEANINGFUL VALUE THAT THAT WOULD
RENDER. AND, MOREOVER, THAT DOESN’T ADDRESS THE CONCERN THAT MANY CLASS MEMBERS SIGNED UP WANTING TO SIGN UP, AND
DID USE THE BENEFITS.
SO WE REALLY FEEL THAT THE CY PRES IS
APPROPRIATE, BOTH IN RECIPIENTS AND IN
THE AMOUNT AS FAR AS DISTRIBUTION OF
FUNDS ARE CONCERNED.
AS FAR AS MR. PERRYMAN’S COUNSEL’S
COMMENTS ON THE FEES, I HAVE A FEW
55a
THINGS TO SAY ABOUT THAT. THIS TRULY IS
NOT A COUPON SETTLEMENT. AND WE CAN
ALSO CITE LEGISLATIVE HISTORY. IN THE VERY
SAME CASE HE CITED, THE FLEURY CASE,
WHICH IS AT 2008 WESTLAW 3287154 AT 2 – IT’S
CITED ALSO IN OUR PAPERS – IT TALKS ABOUT
THE LEGISLATIVE HISTORY. AND WHILE THE
STATUTE DOESN’T DEFINE COUPON, THE LEGISLATIVE HISTORY DISCUSSES COUPON AS A
DISCOUNT ON A PRODUCT OR SERVICE OFFERED BY THE DEFENDANT.
THIS IS NOT A DISCOUNT. THIS IS AN OPPORTUNITY FOR PEOPLE TO CLAIM A PRODUCT
FROM ONE OF FOUR DIFFERENT WEBSITES
THAT VARY FROM FLOWERS TO FOOD ITEMS TO
NON-PERISHABLE ITEMS; FOR INSTANCE, THE
REDENVELOPE.COM WEBSITE.
[45] ADDITIONALLY, THIS IS VERY CLOSELY
CONNECTED TO THE CLAIMS, AS HAS BEEN DISCUSSED TODAY. EVERY SINGLE CLASS MEMBER
ASKED FOR A COUPON. NOW THEY ARE GETTING NOT JUST A COUPON, BUT A LARGER
VOUCHER THAT IS FULLY TRANSFERABLE, AND
THEY CAN PURCHASE SOMETHING FREE AND
CLEAR WITH.
THE $20 VALUE, WHICH IS RELEVANT TO
THIS COURT WHEN ASSESSING THE VALUE
OF SETTLEMENT OVERALL, IS INDEED VALID.
CONTRARY TO WHAT MR. PERRYMAN HAS
SAID, IT CAN BE USED IN CONNECTION WITH
56a
MARKDOWNS, DISCOUNTS, ETC. AND IT CAN BE
USED FOR A WHOLE PRODUCT. SO WE THINK
THAT THAT IS A VALID MEASUREMENT AND
THAT THE VALUE OF THE SETTLEMENT
SHOULD BE $38 MILLION. OF COURSE, THEN,
THE FEE IS CLEARLY NOT DISPROPORTIONATE
BECAUSE IT FALLS WITHIN THE NINTH CIRCUIT’S 25 PERCENT BENCHMARK.
SO WE BELIEVE CAFA RESTRICTIONS ARE
COMPLETELY INAPPLICABLE HERE. HOWEVER,
EVEN IF CAFA RESTRICTIONS DID APPLY, IT IS
CLEAR UNDER CAFA THAT THE COURT CAN
ALSO CHOOSE TO ALLOCATE FEES USING THE
LODESTAR MULTIPLIER MODEL. BECAUSE
HERE, PLAINTIFFS’ CLAIMS ARISE FROM STATUTES THAT HAVE ATTORNEYS’ FEES IN THEM.
AS MR. PATTERSON POINTED OUT, BOTH THE
CLRA AND THE EFTA.
NOTABLY, MR. PERRYMAN MAKES NO OBJECTION WITH RESPECT TO THE HOURS SPENT
ON THE CASE OR THE HOURLY RATES, BOTH
OF WHICH ARE REASONABLE. AND FOR THE
REASONS SET FORTH IN THE PAPERS AND REITERATED BY MR. PATTERSON, A TWO TIMES
MULTIPLIER [46] IS EXTREMELY REASONABLE.
SO THAT, TOO, IS AN OPTION FOR THE
COURT, TO GO THE LODESTAR ROUTE, EVEN IF
THERE ARE CONCERNS ABOUT THE NATURE OF
THE VOUCHERS.
57a
DO YOU HAVE ANY ADDITIONAL COMMENTS, YOUR HONOR?
THE COURT: SURE. ONE OF THE
THINGS THAT MR. SCHULMAN POINTED OUT,
THOUGH, WAS THE TOTAL NUMBER OF CLAIMS
AND THE VALUE. SHOULD I JUST SUPPOSE
THAT BECAUSE THERE IS 3 MILLION FOR THE
CY PRES BENEFICIARIES, I’LL CALL THEM, THAT
THAT MEANS NINE MILLION IN CLAIMS HAVE
COME IN, OR DO WE HAVE THOSE NUMBERS?
MS. ANDERSON: WE DO HAVE THOSE
NUMBERS.
MR. PATTERSON: YOUR HONOR, WE
MADE A DECISION TO KEEP THE CLAIMS PROCESS OPEN, AND IT’S STILL BEEN OPEN. THE ADMINISTRATOR HAS BEEN ACCEPTING CLAIMS
AS THEY COME IN. IT’S NOT SOMETHING WE
ARE TRYING TO HIDE FROM THE COURT. THE
CLAIMS RATE IS LOW. I MEAN, 3,000 PEOPLE
HAVE MADE CLAIMS. YOU CAN DEDUCE, FROM
THE NUMBERS THAT WE HAVE SUGGESTED
WOULD BE DISTRIBUTED TO THE CY PRES RECIPIENTS, WHAT THE APPROXIMATE VALUE OF
THOSE CLAIMS ARE. THE ADMINISTRATOR HAS
THE EXACT NUMBERS AND KNOWS EXACTLY.
ULTIMATELY, WE’LL KNOW EXACTLY HOW
MUCH IS GOING TO BE DISTRIBUTED OUT. BUT
HERE IS THE THING. IF THE MONEY IS NOT
CLAIMED, IT’S GOING TO ROLL INTO THE CY
58a
PRES. THAT’S THE WHOLE POINT OF THE CY
PRES.
THE COURT:
RIGHT.
[47] MR. PATTERSON: I THINK YOU
CAN CERTAINLY CONSIDER AND TAKE A LOOK
AT THE FACT THAT IN ORDER TO ACTUALLY GET
THE REFUND, ALL YOU HAD TO DO WAS SUBMIT
AN ONLINE CLAIM FORM. WE MADE IT AS SIMPLE AS POSSIBLE FOR THESE PEOPLE TO MAKE
A CLAIM. THE ONLY ATTESTATION THEY HAD
TO MAKE WAS THAT THEY DIDN’T INTEND TO
SIGN UP. SO WE FEEL LIKE WE DID THE BEST WE
COULD, AND THE NEXT BEST THING IS THE CY
PRES ROLLOVER.
THE COURT: AND WE KNOW MR. PERRYMAN’S 122 BUCKS, BUT OF THESE 3,000
CLAIMS, WHAT IS THE VALUE OF THOSE AT THE
PRESENT?
MR. PATTERSON: I THINK IT’S GOING
TO BE APPROXIMATELY $225,000 IN CASH REFUNDS – FULL REFUND TO THE 3,000 OR SO
PEOPLE WHO ASSERTED A CLAIM.
THE COURT: OKAY. ALL RIGHT. SO
ANYTHING ELSE ON THE PLAINTIFFS’ SIDE OF
THE TABLE, OR THE DEFENSE?
I IMAGINE, MR. SCHULMAN, YOU HAVE
SOME FINAL COMMENTS TO REPLY. I WILL GIVE
YOU THE LAST CHANCE HERE.
59a
MR SCHULMAN: SURE. THANK YOU,
YOUR HONOR. I WILL JUST REPLY TO A FEW OF
THE COMMENTS MADE BY MS. ANDERSON, THE
FIRST BEING THAT SHE SAID THAT IT WOULD
BE A WINDFALL IF YOU WERE TO – IF THEY
WERE TO AUGMENT UPWARD THE AMOUNT OF
EACH CLAIMANT. AND I THINK THAT IS COMPLETELY INCORRECT, AND IT’S BELIED BY THE
– IF YOU LOOK AT THE COMPLAINT ASKING FOR
STATUTORY DAMAGES, PUNITIVE DAMAGES, A
TON OF MEASURES BEYOND JUST ONE-TO-ONE
RESTITUTION. THAT IS NOT TO SAY THAT THE
[48] SETTLEMENT NEEDS TO BE ADEQUATE TO
DO THAT, BUT IT IS TO SAY THAT YOU CAN’T PREFER A CY PRES RECIPIENT BEFORE HAVING
SATISFIED THE FULL LEGAL MEASURE. THAT IS
THE ALI PRINCIPLES WHICH WERE ADOPTED
BY NACHSHIN’S COURT.
THE SECOND IS THE LODESTAR MULTIPLIER METHOD. I THINK PROBABLY THE BEST
CASE TO LOOK AT WHY YOU DON’T WANT TO APPLY USING THAT METHOD IS THE SOBEL V.
HERTZ CASE OUT OF THE DISTRICT OF NEVADA,
WHICH I BELIEVE WE CITE IN THE OBJECTION.
THE COURT:
IT IS CITED.
MR SCHULMAN: I REFER YOU TO
THAT. MS. ANDERSON ALSO MENTIONS THAT CY
PRES IS WELL RELATED TO THE CAUSE OF ACTION. AND WE DIDN’T CHALLENGE IT ON THIS
GROUND, BUT, ACTUALLY, WE THINK THAT ONE
60a
PROBLEM WITH AWARDING THE MONEY TO A
UNIVERSITY IS EVEN THOUGH IT’S EARMARKED FOR ESTABLISHING A CHAIR FOR INTERNET PRIVACY, THAT MONEY MAY HAVE
ALREADY BEEN IN THE PIPES FOR DOING THAT
SO THAT THEY WILL JUST SHIFT, YOU KNOW,
THE GENERAL FUND ALLOCATION AROUND.
WHEREAS IF YOU WERE ACTUALLY GIVING
IT TO A NATIONWIDE ORGANIZATION, WHICH
NACHSHIN RECOMMENDED, THEN YOU WOULDN’T
HAVE THAT PROBLEM OF TAKING MONEY – OR
FUNGIBILITY. IT’S ALSO A PROBLEM THAT IS REFERRED TO IN THE DENNIS V. KELLOGG DECISION.
AND THANK YOU FOR YOUR TIME, YOUR
HONOR.
THE COURT:
THANK YOU.
MR. RHODES, YOU HAVE A COMMENT?
MR. RHODES: YES, YOUR HONOR. I
JUST WANTED TO [49] RECITE ONE OTHER SECTION OF THE LANE CASE, WHICH IS 696 F3D 811,
AT PAGE 820 TO 821, WHERE THE NINTH CIRCUIT EXPLAINS THE PURPOSE AND THE BACKGROUND OF CY PRES. THEY STATE THERE,
QUOTE, WE DO NOT REQUIRE, AS PART OF THAT
DOCTRINE, THAT SETTLING PARTIES SELECT
A CY PRES RECIPIENT THAT THE COURT OR
CLASS MEMBERS WOULD FIND IDEAL. ON THE
CONTRARY, SUCH AN INTRUSION INTO THE
PRIVATE PARTIES’ NEGOTIATIONS WOULD BE
61a
IMPROPER AND DISRUPTIVE TO THE SETTLEMENT PROCESS.
AND THEN THE NINTH CIRCUIT GOES ON TO
EXPLAIN THAT WHEN, QUOTE, DIRECT MONETARY PAYMENTS TO THE CLASS OF REMAINING
SETTLEMENT FUNDS WOULD BE INFEASIBLE,
GIVEN THAT EACH CLASS MEMBER’S DIRECT
RECOVERY WOULD BE DE MINIMIS, CLOSE
QUOTE.
THAT IS WHEN A CY PRES STRUCTURE
MAKES SENSE. AND I AGREE WITH WHAT MS.
ANDRUS SAID IN THAT REGARD HERE, WHICH
IS DESPITE THE FACT THAT THE CLAIM RATE IS
CURRENTLY LOW, REMEMBER WHAT I SAID
ABOUT THE STRUCTURE OF THE CLAIM? WE
WERE TRYING TO FIND THOSE PEOPLE IN THE
CLASS WHO HAD NOT PREVIOUSLY GOTTEN A
REFUND DIRECTLY FROM MY CLIENT OR MR.
CHERRY’S CLIENT, BECAUSE THEY HAD COMPLAINED, AND WE WERE TRYING TO EXCLUDE
FROM THE CLASS THOSE PEOPLE WHO ACTUALLY AVAILED THEMSELVES OF THE PROGRAM
BENEFITS, AND TRYING TO FIND THOSE PEOPLE IN THE CLASS, WITHOUT KNOWING AT THE
BEGINNING WHETHER THERE WAS ONE OR
100,000 OF THEM WHO BELIEVE, FOR WHATEVER REASON, THAT THEY WENT INTO THE
PROGRAM UNWITTINGLY AND WERE CHARGED
A MONTHLY FEE WITHOUT THEIR KNOWLEDGE
OR CONSENT.
62a
[50] WE FOUND ONE OF THEM. HIS NAME IS
MR. PERRYMAN. HE IS THE ONLY OBJECTOR IN
THE CASE. HE WILL GET 100 CENTS ON THE
DOLLAR. THAT IS WHO WE WERE TARGETING.
SO THE FACT THAT THE CLAIMS RATE IS LOW
DOES NOT INDICATE, TO ME, WHAT THE FAIRNESS, REASONABILITY OR ADEQUACY OF THE
SETTLEMENT IS WHEN IT’S BACKSTOPPED BY
THE FACT THAT WE TOOK A PRIMARY CY PRES
STRUCTURE.
AND IN THE LANE CASE, REMEMBER,
THERE WAS NO ATTEMPT TO GIVE MONEY DIRECTLY TO THE CLASS MEMBERS, SPECIFICALLY FOR THE REASON IT WOULD HAVE BEEN,
AS MS. ANDRUS (SIC) ALLUDED TO, ADMINISTRATIVELY FUTILE. AND THAT’S WHY.
HERE, WE DID BOTH THE DIRECT CASH
CLAIM METHOD, AND THE CY PRES METHOD,
AND THEN WE SAID ON TOP OF THAT WE’RE GOING TO GIVE EVERY SINGLE PERSON IN THE
CLASS, WITHOUT DOING ANYTHING, A $20
VOUCHER. THE TOTALITY OF THOSE CIRCUMSTANCES, COUPLED WITH THE CESSATION OF
THE PROGRAM, MEANS THAT THIS IS A SETTLEMENT THAT THE COURT SHOULD FIND IS FAIR,
REASONABLE AND ADEQUATE. THANK YOU.
THE COURT: WELL, THANK YOU. AND
THANK YOU ALL. YOU HAVE GIVEN ME A NUMBER OF THINGS TO THINK ABOUT, IN ADDITION
TO THE BRIEFING AND SO FORTH. SO I WILL
63a
TAKE THE MATTER UNDER SUBMISSION AND
WILL RENDER A RULING AS SOON AS POSSIBLE,
KNOWING THAT TIME IS OF THE ESSENCE WITH
APPELLATE COURTS AND OTHER MATTERS IN
THE MIX HERE.
I DO WANT TO THANK YOU FOR ALL OF THE
EFFORTS AND THE [51] ADVOCACY. SO THE MATTER IS UNDER SUBMISSION, AND WE ARE IN RECESS FOR THE DAY.
MR. RHODES: GOOD AFTERNOON, YOUR
HONOR.
MR. PATTERSON: GOOD AFTERNOON,
YOUR HONOR. THANK YOU.
MS. ANDERSON: GOOD AFTERNOON,
YOUR HONOR.
(PROCEEDINGS CONCLUDED AT 3:17 P.M.)
[Certification Omitted]
64a
APPENDIX B
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
In re EasySaver
Rewards Litigation
) Case No. 3:09-cv-02094) AJB (WVG)
) DECLARATION OF
) JENNIFER M. KEOUGH
) REGARDING BRIAN
) PERRYMAN AND
AARON MEYER
)
JENNIFER M. KEOUGH declares and states as
follows:
1. I am Chief Operating Officer of The Garden
City Group, Inc. (“GCG”). The following statements are
based on my personal knowledge and information provided by other GCG employees working under my supervision and, if called on to do so, I could and would
testify competently thereto.
2. As addressed in my Declaration dated January 11, 2013, GCG was selected and engaged in the
above-captioned litigation (the “Litigation”) to serve as
Claims Administrator for the Settlement as described
in the Settlement Agreement and Release (“the Settlement Agreement”) preliminarily approved by this
Court in its Order Granting Preliminary Approval of
Class Settlement and Provisional Class Certification,
executed June 26, 2012 and the Order extending certain deadlines under the Court’s June 26, 2012 Order
65a
(Dkt. Nos 252, 254) (the “Preliminary Approval Orders”).
3. I submit this Declaration in order to provide
the Court and parties in the above-captioned matter
with information relating to Settlement Class Members Brian Perryman and Aaron Meyer.
4. On December 17, 2012, Plaintiffs’ Counsel informed GCG that Class Member Brian Perryman filed
an Objection to the Proposed Settlement and the Notice of Intent to Appear (Dkt. 258) on December 7, 2012
through his attorney. The objection was not provided to
GCG by the Class Member or his personal attorney;
Plaintiffs’ Counsel provided a copy of the objection to
GCG.
5. Based on the records provided to GCG by defendant Regent Group, Inc. dba Encore Marketing International, Inc. (“EMI”), Brian Perryman is a Class
Member in the Settlement residing at 5538 10th Street
N., Arlington, VA 22205.
6. On November 29, 2012, Brian Perryman filed
a timely, valid claim online through the Settlement
website, www.membershipprogramsettlement.com (the
“Settlement Website,” maintained by GCG pursuant to
the Preliminary Approval Orders and Paragraph
3.3(a) of the Settlement Agreement).
7. Per Paragraph 2.1(d) of the Settlement Agreement, “Settlement Payments to Class Members” and
according to the data provided to GCG by EMI, Mr.
66a
Perryman did not use or request a benefit or service
provided through any of the Membership Programs
(other than the dollar-off-code for a future Provide
Commerce website purchase), was actually enrolled in
a Membership Program, was charged both an activation fee and at least one monthly membership fee, and
did not receive a complete refund or chargeback of the
monthly membership fees he paid. From these parameters and the monthly membership fees paid by Mr.
Perryman, his claim is valued at $121.55.
8. Based on claims submitted, and taking into
account all fees, costs, and incentive awards to potentially be paid from the Gross Cash Fund, all Authorized Claimants, including Mr. Perryman, will receive a
full refund of all monthly charges for which they have
not previously received a refund or chargeback.
9. Based on the records provided to GCG by defendant EMI, Aaron Meyer is a Class Member in the
Settlement residing at 6474 Glenwood Trace, Zionsville,
IN 46077. According to these records, Mr. Meyer never
was charged a single monthly membership fee.
I declare under penalty of perjury under the laws
of the United States that the foregoing is true and correct.
Executed this 17th day of January, 2013, at Seattle, Washington.
/s/ Jennifer M. Keough
Jennifer M. Keough
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.