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Michael Shames, Individually and On v. Hertz Corporation

November 5, 2012

MICHAEL SHAMES, INDIVIDUALLY AND ON
BEHALF OF OTHERS SIMILARLY SITUATED, AND, GARY
GRAMKOW, INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
HERTZ CORPORATION, ET AL., DEFENDANTS.



SYLLABUS BY THE COURT

Hon. Michael M. Anello United States District Judge

ORDER ON FINAL APPROVALOF CLASS ACTION SETTLEMENT, ATTORNEYS' FEES, COSTS, AND INCENTIVE AWARD; JUDGMENT AND DISMISSAL [Doc. Nos. 327 & 328]

On October 29, 2012, this matter came before the Court on Plaintiffs' Motion for Final Approval of Class Settlement, [Doc. No. 327], and Motion for Attorney Fees, Reimbursement of Expenses, and Incentive Award [Doc. No. 328].*fn1 For the reasons explained below, the Court GRANTS Plaintiffs' motions in their entirety.

I.BACKGROUND

A. Class Action Allegations*fn2

A "nonprofit mutual benefit corporation" created by state legislation in order to expand and

develop California's tourism industry, the California Travel and Tourism Commission (the "Commission") is governed by thirty-seven commissioners, who simultaneously serve as directors.*fn3

The Secretary of the Business, Transportation and Housing Agency chairs the Commission. Twelve commissioners are appointed by the governor, while the remaining twenty-four are elected by the tourism industry itself.

In 2006, the passenger rental car industry (hereafter, the "Rental Car Defendants") proposed changes to California law which were subsequently enacted. Under these changes, the passenger rental car industry became the fifth tourism industry category under the Commission scheme and agreed to pay a high assessment fee, greatly increasing the Commission's budget. In exchange for this increased funding, the Rental Car Defendants were allowed to "unbundle" fees charged to customers and itemize such fees separately from the base rental rate. Significantly, the adopted changes allowed the companies to "pass on some or all of the assessment to customers."

Plaintiffs allege this led to the imposition of two specific fees on leisure rental car customers. First, pursuant to an agreement between the Rental Car Defendants and the Commission, a 2.5% tourism assessment fee was added to the cost of a car rental which, in turn, helped fund the Commission. Plaintiffs allege that the Commission then colluded with the Rental Car Defendants, fixing rental car prices by passing on the 2.5% tourism assessment fee to customers. Second, the Rental Car Defendants "unbundled" the already-existing airport concession fee charged to customers to pay airports for the right to conduct business on airport premises; this fee has traditionally amounted to 9% of the rental price. The bill permitted the Rental Car Defendants to charge this concession fee separately from the base rental rate. According to Plaintiffs, the Commission also colluded with the passenger rental car industry in passing the 9% concession fee on to customers as an uniform add-on charge. Plaintiffs allege that these agreements between the rental car companies and the Commission constituted price-fixing of rental car rates in violation of the Sherman Act section 1. Plaintiffs also claim the Commission committed a host of Bagley-Keene Open Meeting Act violations, specifically, failing to adhere to detailed notice requirements and impermissibly holding closed session meetings.

Plaintiffs allege that, as a result of the Rental Car Defendants' collusion, they and similarly situated renters in the proposed settlement class paid a higher total price for the rental of a car at California airports than they would have otherwise. Plaintiffs sought damages on behalf of themselves and the class.

B. Procedural History

Plaintiffs originally filed suit on November 14, 2007. After several extensions of time to file responsive pleadings, the Rental Car Defendants filed a motion to dismiss in January 2008. The Commission and a now-dismissed individual defendant filed motions to dismiss shortly thereafter. On April 8, 2008, the Court granted all three motions to dismiss, denied a pending motion for preliminary injunction, and granted Plaintiffs leave to amend their Complaint.

On May 1, 2008, Plaintiffs filed a First Amended Complaint. Thereafter, all Defendants filed a second round of motions to dismiss. On July 28, 2008, the Court granted the Commission's motion to dismiss and entered judgment in its favor on September 24, 2008. The Rental Car Defendants answered the First Amended Complaint on August 25, 2008. On October 23, 2008, Plaintiffs appealed the Commission's dismissal.

On November 2, 2008, the case was transferred to the undersigned's caseload.

On January 18, 2011, after extensive briefing, oral argument, and a petition for rehearing, the Ninth Circuit reversed the dismissal and reinstated the Commission in this case. In the meantime, the remaining parties participated in settlement discussions with the assigned Magistrate Judge, met and conferred to coordinate discovery among related cases, drafted multiple discovery plans, and participated in scheduling and status conferences with the Court.

Moreover, the parties conducted extensive discovery, including multiple rounds of written discovery; the production, organization, and review of 737,000 pages of documents; 27 witness depositions across the country; 17 third-party subpoenas resulting in the production of 1,200 documents; and devotion of 1,932 hours of expert witness time by Plaintiffs alone.

Once the Commission re-entered the case, the parties continued litigation, participating in additional status conferences, discovery conferences, and sixprivate mediation sessions with Judge Ronald M. Sabraw (ret.).

On October 10, 2011, the Court granted a stay of all proceedings to facilitate the parties' settlement efforts. The Court extended the stay several times until the parties moved for preliminary approval of class settlement on May 17, 2012.

This matter is now before the Court on final approval of the settlement, award of attorneys' fees and costs, and approval of a class representative incentive award. On October 29, 2012, the Court held a hearing on Plaintiffs' pending motions. Professor Robert Fellmeth and attorneys Dennis Stewart and Donald Rez appeared and argued on behalf of Plaintiffs. Attorney Michael Tubach, accompanied by several other attorneys, appeared and argued on behalf of all Rental Car Defendants. Objector Stephen Hagen appeared and argued on his own behalf, and attorney Steven Miller appeared and argued on behalf of Objector Steven Signer.

C. The Settlement

1. Settlement Class

The settlement class is comprised of all Persons (other than those Persons who timely and validly request exclusion from the Class) who rented a car directly from a Rental Car Defendant for pick-up at a California Airport Location during the period from January 1, 2007 through November 14, 2007, and were charged and paid to the Rental Car Defendant an Airport Concession Fee, Tourism Commission Assessment Fee, or both, for that rental car as a separate line item or items on their invoices.

Excluded from the Class are: (i) rentals made pursuant to a pre-existing agreement between a business or governmental entity and a Rental Car Defendant pursuant to which the rental charge was determined; and (ii) rentals in which the customer paid a package price to a third party tour operator or on-line booking agency rather than a Rental Car Defendant. Also excluded from the Class are the Defendants, the directors, officers, subsidiaries, and affiliates of Defendants, any person, firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest, and the legal representatives, affiliates, heirs, successors-in-interest or assigns of any such excluded person, and Related Parties as well as any judges or mediators involved in the Litigation (including U.S. District Judge Michael M. Anello, U.S. Magistrate Judge McCurine, and Judge Ronald Sabraw (ret.)).

2. Settlement Terms

The settlement allows class members to choose from one of two payment options:

(1) Cash Option. Class members may choose to receive cash in the amount of $2.00 per rental day with a minimum payment of $5, no matter the length of the rental. For example, a class member who had a total of 10 rental days can choose to receive $20 cash. A class member who rented for only 1 day may choose to receive $5.

(2) Voucher Option. Class members who rented for a total of less than 8 days during the class period may choose a voucher for one free rental day (time and mileage) on any class of car up to full size, no matter what class of car the class member originally rented.

Class members who rented for a total of more than 8 days during the class period may choose a voucher for two free rental days on any class of car.

The free rental day vouchers may be stacked and may be used with most other rate discounts and promotions otherwise available to renters. The vouchers may be used at any company-owned location of the brand for which it is issued anywhere in the United States.*fn4 They also may be used by anyone in the class member's household at the same address. Defendants' obligation to issue and redeem vouchers and to pay all cash claims is uncapped.

Finally, the Commission has agreed, with no time limitation, to undertakings assuring future compliance with the Bagley-Keene Act and other measures designed to assure that: (1) consumers are correctly informed about the Tourism Commission Assessment; and (2) the Commission does not facilitate concerted decision making by the Rental Car Defendants or by any other class of assessed businesses on whether and how much to charge consumers for their respective Tourism Commission Assessment obligations.

The sole class representative, Gary Gramkow, will receive an incentive award of $2,000.*fn5 The parties have agreed that Defendants will not oppose Plaintiffs' motion for attorneys' fees and costs, seeking a total of $5,870,000, which includes costs of $746,664. The parties agreed that any attorneys' fees and costs shall be paid separately from the settlement and shall not reduce the benefits that accrue to the class. The parties negotiated this fee and cost award separately and after agreeing on the class settlement. Judge Ronald Sabraw (ret.), who acted as the mediator for the class settlement negotiations, also helped negotiate the fee and cost arrangement in a separate mediation session.

II.DISCUSSION

A. Motion for Final Approval of Class Settlement

1. Class Certification

A plaintiff seeking a Rule 23(b)(3) class certification must first satisfy the prerequisites of Rule 23(a). Once subsection (a) is satisfied, the purported class must then fulfill the requirements of Rule 23(b)(3). In the present case, the Court previously preliminarily certified the following class:

[A]ll Persons (other than those Persons who timely and validly request exclusion from the Class) who rented a car directly from a Rental Car Defendant for pick up at a California Airport Location during the period from January 1, 2007 through November 14, 2007, and were charged and paid to the Rental Car Defendant an Airport Concession Fee, Tourism Commission Assessment Fee, or both, for that rental car as a separate line item or items on their invoices.

At that time, the Court concluded that the proposed class satisfied the numerosity, commonality, typicality, and adequacy of representation requirements of Rule 23(a). [See Doc. No. 313.] The Court also found that the proposed class satisfied the predominance and superiority requirements of Rule 23(b)(3). The Court reaffirms its prior certification of the class for the purpose of settlement. No party or class member has objected to certification of the settlement class.

2. The Settlement

a. Legal Standard

Courts require a higher standard of fairness when settlement takes place prior to formal class certification to ensure class counsel and defendant have not colluded in settling the case. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). Ultimately, "[t]he court's intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned." Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir. 1982). "The question [the Court] address[es] is not whether the final product could be prettier, smarter or snazzier, but whether it is fair, adequate and free from collusion." Hanlon, 150 F.3d at 1027.

Courts considers several factors when determining whether a proposed settlement is "fair, adequate and reasonable" under Rule 23(e). Such factors may include: "[1] the strength of the plaintiffs' case; [2] the risk, expense, complexity, and likely duration of further litigation; [3] the risk of maintaining class action status throughout the trial; [4] the amount offered in settlement; [5] the extent of discovery completed and the stage of the proceedings; [6] the experience and views of counsel; [7] the presence of a governmental participant; and [8] the reaction of the class members to the proposed settlement." Hanlon, 150 F.3d at 1026; see also Lane v. Facebook, Inc., ___ F.3d ___, 2012 U.S. App. LEXIS 19767, at *10 (9th Cir. Sept. 20, 2012) (quoting Hanlon, 150 F.3d at 1026).

Judicial policy favors settlement in class actions and other complex litigation where substantial resources can be conserved by avoiding the time, cost, and rigors of formal litigation. In re Wash. Pub. Power Supply Sys. Sec. Litig., 720 F. Supp. 1379, 1387 (D. Ariz. 1989).

b. Analysis

i. The strength of the case and the risk, expense, complexity and likely duration of further litigation

To determine whether the proposed settlement is fair, reasonable, and adequate, the Court must balance against the risks of continued litigation (including the strengths and weaknesses of Plaintiffs' case), the benefits afforded to members of the Class, and the immediacy and certainty of a substantial recovery. In ...


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