United States District Court, S.D. California
February 4, 2013
In re EASYSAVER REWARDS LITIGATION. This document relates to all actions.
[Copyrighted Material Omitted]
Alisa Ann Martin, James R. Patterson, Patterson Law Group, LLP, Isam C. Khoury, Kimberly Dawn Neilson, Michael D. Singer, Cohelan Khoury & Singer, San Diego, CA, Bruce W. Steckler, The Steckler Law Firm, Mazin A. Sbaiti, Baron & Budd PC, Dallas, TX, Gene J. Stonebarger, Stonebarger Law, APC, Folsom, CA,
Jennie Lee Anderson, Andrus Anderson LLP, San Francisco, CA, Diane E. Sammons, Jay J. Rice, Nagel Rice, LLP, Roseland, NJ, for Plaintiffs.
Leo P. Norton, Michael G. Rhodes, Michelle C. Doolin, Cooley Godward Kronish LLP, Ethan Thomas Boyer, Michael L. Kirby, Kirby Noonan Lance and Hoge, LLP, San Diego, CA, Jacie C. Zolna, Myron Milton Cherry, Myron M. Cherry & Associates, LLC, Chicago, IL, for Defendants.
FINAL ORDER APPROVING CLASS ACTION SETTLEMENT; GRANTING PLAINTIFFS' MOTION FOR ATTORNEYS' FEES, COSTS, AND INCENTIVE AWARDS; OVERRULING PERRYMAN'S OBJECTIONS
ANTHONY J. BATTAGLIA, District Judge.
On January 28, 2013, this Court heard plaintiffs Josue Romero, Gina Bailey, Jennifer Lawler, John Walters, Daniel Cox, Christopher Dickey, Grant Jenkins, and Bradley Berentson's (collectively " Plaintiffs" ) Motion for Final Approval of Settlement (Doc. No. 262) and Motion for (1) Attorneys Fees' and Costs, and (2) Incentive Awards (Doc. No. 255). This Court reviewed and considered: (a) Plaintiffs' motions and the supporting papers, including the Settlement Agreement and Release (" Settlement Agreement" ); (b) defendant Provide Commerce, Inc.'s Statement Of Non-Opposition In Support Of Final Approval of Class Settlement (Doc. No. 263); (c) the objection filed by Brian Perryman (" Perryman" ) (Doc. No. 258); and (d) oral argument of counsel at the January 28, 2013 hearing. Based on this review and the findings set forth below, the Court GRANTS Plaintiffs' Motion for Final Approval of Settlement, (Doc. No. 262), and Plaintiffs' Motion for (1) Attorneys' Fees and Costs, and (2) Incentive Awards, (Doc. No. 255). The Court also overrules Perryman's objections for the reasons discussed further below.
Plaintiffs' factual allegations are extensive, as set forth in the Fourth Amended Complaint. (Doc. No. 221). In sum, they allege that Defendants' practices of enrolling customers in the Rewards Programs are unfair and unlawful. Plaintiffs contend that Provide-Commerce transmits its consumers' private payment information to its third party marketing partners, Defendants Regent Group, Inc., doing business under Encore Marketing International and Encore Marketing International, Inc. (referred to collectively as " Encore" ). ( Id. at ¶ 1.) Encore then uses this information to charge the consumers credit or debit accounts without permission under the guise that the consumers authorized the charges when they supposedly joined saving programs such as EasySaver Rewards, Red Envelope Rewards, or Preferred Buyers Pass, which Encore manages on Provide-Commerce's behalf. ( Id. )
Specifically, when class members completed a purchase on one of Provide Commerce's retail websites, they were presented with a pop-up window offering $15 off their next purchase as a " Thank You" gift, and asking them to enter their zip code and email address and click " Accept" to receive the gift. ( Id. at ¶¶ 3, 26.) Regardless of whether Class members actually or knowingly provided their zip code and email address and clicked " Accept," Plaintiffs' allege that Provide Commerce transmitted their private payment information to EMI without consent. ( Id. at ¶ 3.) EMI proceeded to enroll Plaintiffs and Class members in a Rewards Program and charged their credit and debit cards a $1.95 activation fee, followed by a $14.95 monthly fee. ( Id. at ¶¶ 3, 26.) Plaintiffs allege that the Rewards Programs provided
no meaningful benefits and that Class members were enrolled in the Rewards Programs without their knowledge or consent. ( Id. at ¶ 29.) Plaintiffs challenged Defendants' conduct as violating the California Unfair Competition Law, Cal. Bus. & Prof.Code § 17200, et seq., the California Consumers Legal Remedies Act, Cal. Civ.Code § 1750, et seq., and the Federal Electronic Funds Transfer Act, 15 U.S.C. § 1693, et seq. (as to EMI only), and Plaintiffs further alleged that the conduct constituted fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, invasion of privacy, unjust enrichment, and negligence.
The parties litigated this matter over a period of several years. Then, on June 13, 2012, Plaintiffs' filed an unopposed Motion for (1) Preliminary Approval of Class Action Settlement, (2) Provisional Class Certification, (3) Distribution of Class Notice, and (4) Scheduling of Fairness Hearing. (Doc. No. 248.) The Court granted Plaintiffs' Motion on June 26, 2012, (Doc. No. 252), and Plaintiffs' subsequently filed the instant Motion for Attorneys' Fees and Costs, and Incentive Awards on November 26, 2012, (Doc. No. 255.) On December 7, 2012, class member Perryman filed a response opposing Plaintiffs' Motion for Attorneys' Fees and objecting to the proposed settlement. (Doc. No. 258.) Plaintiffs' filed a response to Perryman's objections, (Doc. No. 262), and Defendant Provide Commerce, Inc. submitted a notice of non-opposition to Plaintiffs' Motion for Attorneys' Fees within their brief in support of final approval of the class settlement, (Doc. No. 265). As noted above, the Court held a hearing regarding final approval of the settlement and the fees, costs, and incentive award requested by Plaintiffs on January 28, 2013.
Proposed Settlement Terms
The proposed settlement agreement is attached to Plaintiffs' Motion for Preliminary Approval, (Doc. No. 248-3), which the Court granted. The Court sets forth some of the more significant terms of the settlement below.
A. Settlement Class
The proposed settlement class consists of:
All persons who, between August 19, 2005 and the date of entry of the Preliminary Approval order, placed an order with a website operated by Provide Commerce, Inc. and were subsequently enrolled by Regent Group Inc. d.b.a. Encore Marketing International, Inc. in one or more of the following membership programs: EasySaver Rewards, RedEnvelope Rewards, or Preferred Buyers Pass.
(Doc. No. 248-3 at § 1.8.) The class excludes: (a) Defendants; (b) any entities in which Defendants have a controlling interest or which have a controlling interest in Defendants; (c) the officers, directors, employees, subsidiaries, affiliates, and attorneys of Provide Commerce or EMI; and (d) the Judges presiding over this action and any of their employees or immediate family members. ( Id. at Ex. B-Long Notice Form.)
B. Relief to Class
Defendants have agreed to do the following in exchange for a release of claims and subject to this Court's approval:
(1) Defendants will, via a neutral professional claims administrator selected from among three proposed by the parties, notify all Class members via direct email or U.S. Mail about their rights under the Settlement Agreement. (Doc. No. 248-3 at § 3.3(a)-(c).)
(2) Provide Commerce will directly email every class member $20 in the form of a merchandise code (" $20 credit" ). ( Id. at § 2.2.)
• Class members are not required to submit a claim to receive the $20 credit. ( Id. )
• The $20 credits are fully transferable. ( Id. )
• The $20 credits will be valid for one year for online purchases at Proflowers.com, RedEnvelope.com, Berries.com and CherryMoonFarms.com. ( Id. )
• The $20 credits are not valid for use from December 17 to 24, 2012, February 4 to 14, 2013, May 1 to 12, 2013, and December 16 to 24, 2013 (and corresponding time periods in 2014 through the expiration date of the $20 credits). ( Id. )
• The $20 credits are not combinable with discount or gift codes, cannot be used with email offers or promotions, but may be used to purchase markdown, bundled, or discounted products. ( Id. )
• At the time of settlement and at the final approval hearing, Plaintiffs' counsel verified that these websites offered a selection of items under $20.
• The $20 credits may also be applied towards larger purchases.
(3) Defendants will fund a $12.5 million Cash Fund that eligible class members can make claims against for refunds of payments for monthly membership fees. (Doc. No. 248-3 at § 2.1.)
• To make a claim from the Cash Fund, class members can submit their claim electronically at the neutral Claims Administrator's website, a link is provided to them via the direct email notice, or by U.S. Mail. ( Id. at § 3.6.)
• Class members will only be required to submit their contact information and verify that they did not intend to enroll and did not use the benefits of the program (excluding the initial discount code offered for a future Provide Commerce website purchase). ( Id. at § 2.1(d).)
• Class members will not be required to submit documents, or other proof of having been charged to make a claim. ( See id. )
• The Claims Administrator will evaluate and calculate all claims for payment based upon Defendants' records. ( Id. at § 3.7.)
• Claims will be paid on a pro rata basis up to the full amount owed. ( Id. at § 3.6.)
• The parties must meet and confer in good faith to resolve any disputed claims, with EMI's records being entitled to a rebuttable presumption of accuracy. ( Id. at § 3.8.)
• The Cash Fund will also be used to pay attorneys' fees and costs, incentive awards and administration costs. ( Id. at § 2.1(a)-(c).)
• The Cash Fund is non-reversionary, and any remaining funds will be distributed as a cy pres award, subject to Court approval, to fund higher education projects relating
to internet privacy and consumer protection at California State University at San Diego (" San Diego State University" ), University of California at San Diego (" UCSD" ), and University of San Diego School of Law (" USD Law School" ). ( Id. at § 2.1(e).)
The total settlement will approximate $38 million dollars if the entire class use the credits and make claims for reimbursement.
C. Class Representatives' Incentive Payments
The proposed settlement agreement provides for incentive awards as follows: a) $15,000 for Class Representatives Romero and Bailey; b) $10,000 for Class Representatives Berentson, Jenkins, Cox and Lawler; and c) $5,000 for, Class Representatives Walters and Dickey. (Doc. No. 248-3 at § 2.1(b).)
D. Attorneys' Fees and Costs
The settlement provides that class counsel may request fees of up to a total of $8.65 million, plus actual costs up to $200,000. Class counsel has requested the entirety of these amounts in their pending motion. (Doc. No. 248-3 at § 2.1(c).)
E. Settlement Administration and Notice
Section 3.3 of the proposed settlement agreement provides the process for notifying the class members of the proposed settlement. The Court-appointed administrator, Garden City Group, sent direct notice via email and/or U.S. Mail to approximately 1.3 million class members in accordance with the approved plan. (Pls.' Final Approval Memo., Doc. No. 262 at 8, n. 2.) On October 11, 2012, the settlement administrator made available an official settlement website and posted the full notice. (Def. Non-Opp., Doc. No. 265 at 16.) Also on October 11, 2012, email notice was sent to 1,292,987 class members. ( Id. ) Subsequently, postcard notices were sent to 233,414 class members on October 31, 2012. ( Id. )
The notice informed class members who wished to object to the Settlement that they were required to file their objection with the Court by December 10, 2012, and deliver a copy of the objection to counsel for the parties. (Doc. No. 248-3 at § 3.9, Ex. C-Summary Notice.) As of this deadline, Perryman is the only class member to have filed an objection to the final settlement approval. (Doc. No. 258.) Aaron Meyer submitted a letter objecting to the settlement but it was never filed. (Pls. Final Approval Memo, Doc. No. 265 at 19, n. 5.)
Perryman's Objections to the Proposed Settlement and Opposition to Plaintiffs' Motion for Attorneys' Fees
On December 7, 2012, class member Brian Perryman filed his objection to the proposed final settlement and opposition to Plaintiffs' motion for attorneys' fees. (Doc. No. 258.) Perryman does not object to the total value of the settlement. Rather, Perryman contends that (1) the class counsel has seized a disproportionate share of the recovery in violation of Rule 23(e) and Ninth Circuit law; (2) the fee component does not comply with the Class Action Fairness Act (" CAFA" ); and (3) cy pres is used impermissibly.
A. Perryman's contention that the $20 credits constitute coupons under CAFA
As an initial matter, Perryman contends that the $20 credits are, for all intents and purposes, a coupon. Perryman considers the credits to be " particularly pernicious" coupons for two reasons: (1) the credits are not available for use during three flower-giving holidays of Valentine's Day, Mother's Day, and Christmas, and (2) the settlement bars " stacking" the credits with other promotions and coupons, which serves to reduce the value of the $20 credit as the websites often have promotions available. (Doc. No. 258 at 13.) Accordingly, Perryman contends that the $20 credits are actually coupons with a significantly lower value than $20, which inflates the overall proposed settlement award and the requested attorneys' fees are disproportionately high as result.
1. Legal Standard
Special considerations arise in cases involving coupon settlements. CAFA allows a court to approve coupon settlements " only after a hearing to determine whether, and making a written finding that, the settlement is fair, reasonable, and adequate for class members." 28 U.S.C. § 1712(e). Although this " fair, reasonable, and adequate" standard is identical to that contained in Rule 23(e)(2), " several courts have interpreted section 1712(e) as imposing a heightened level of scrutiny in reviewing such [coupon] settlements."  Likewise, Rule 23 itself may require closer scrutiny of coupon settlements. Accordingly, before granting final approval, the court " must discern if the value of a specific coupon settlement is reasonable in relation to the value of the claims surrendered." True, 749 F.Supp.2d at 1069. Although CAFA defines various other terms, it does not define what constitutes a " coupon." See 28 U.S.C. § 1711.
Having considered Perryman's objections along with the relevant case law considering coupon settlements under CAFA, the Court concludes that the $20 credit in addition to the cash reimbursement fund provides fair, reasonable, and adequate relief to class members based on the nature of Plaintiffs' claims and status of the case. While Perryman objects to the alleged " coupon" offered in the settlement, he largely ignores the fact that there
is also a cash fund that provides reimbursement to class members. The proposed settlement is thus not entirely a " coupon" settlement and distinguishable from other cases involving coupons or vouchers without an accompanying cash fund. 
Moreover, there is authority suggesting that CAFA does not apply where class members can opt between cash and credits like the ones objected to by Perryman. In Shames v. Hertz, the Court found " [p]ersuasive authority ... that CAFA does not apply to settlements, such as this one, that offer the option between cash and vouchers for free products (as opposed to discounts on products where class members are required to purchase the products and pay the difference between the full and coupon-discounted price)." Shames v. Hertz Corp., 2012 WL 5392159 (S.D.Cal. Nov. 5, 2012) (emphasis in original) (citing CLRB Hanson Indus., LLC v. Weiss & Assocs., PC, 465 Fed.Appx. 617, 619 (9th Cir.2012)). In a recent, unpublished memorandum, the Ninth Circuit noted that a settlement giving " every class member the option to receive its share of the settlement proceeds in cash or cash-equivalent forgiveness of indebtedness already incurred" is not a " coupon settlement" and therefore does not trigger the Class Action Fairness Act of 2005's limitations on contingent fees awarded in connection with such settlements. CLRB Hanson Indus., LLC, 465 Fed.Appx. at 619.
Significantly, and unlike the situation in Shames and CLRB Hanson, the proposed settlement in this instance does not require class members to choose between cash reimbursement or the $20 credit; they are entitled to both. The two forms of relief are tailored the nature of Plaintiffs' claims and the alleged harm caused by Defendants' programs. Specifically, the cash fund reimburses class members for the allegedly impermissible credit card charges and the $20 credit serves as a replacement for the $15 " Thank you" gift credit that led to their allegedly unauthorized entry into the membership programs. Based on the nature of the claims and the alleged harms, the Court concludes that cash fund reimbursement combined with the automatic $20 credit provided to every class member offers real and substantial value in relation to class members' injuries, and that the settlement as a whole is fair, reasonable, and adequate.
Furthermore, Perryman acknowledges that " there is no per se bar on coupon relief in settlements," but asks that the Court " apply rigorous scrutiny" to the alleged coupon settlement in order to comply with CAFA requirements. Assuming arguendo that the credits constitute coupons under CAFA, the Court has undertaken the " rigorous scrutiny" that Perryman requests. Specifically, the Court has satisfied CAFA's requirement that a hearing be held and the Court's findings be in writing. See 28 U.S.C. § 1712(e). Moreover, after careful consideration of the parties' arguments, Perryman's objections, and the nature of the settlement compared to Plaintiffs' allegations, the Court finds that the $20 credits, regardless of their
classification as coupons or credits, provide an actual value of $20 to the class members despite the blackout dates and inability to combine the credits with coupons and promotions. Certainly, these types of restrictions may be problematic in some coupon settlements; however, the $20 credits here are transferrable and may be used to purchase entire items without requiring the class members to spend additional money. Most importantly, the $20 credits are in addition to the cash fund reimbursement available to all class members.
For these reasons, the Court finds that the restrictions imposed on the $20 credits do not significantly alter the value of the credit to the class members. The Court further finds that the relief offered by the $20 credits serves a specific purpose that is narrowly tailored to reflect the nature of Plaintiffs' allegations, specifically class members will receive a usable $20 credit of the type that was offered by the websites initially and subsequently caused them to be enrolled in the membership programs. Accordingly, the Court concludes that the class members will receive $20 in value with these $20 credits. Thus, Perryman's objection to the $20 credits and their provisions is overruled.
B. Perryman's objection to the cy pres component of the proposed settlement agreement
The settlement designates three institutions as cy pres recipients in order to fund programs regarding internet privacy and security: San Diego State University, UCSD, and USD Law. Perryman argues that the cy pres distribution of the remainder of the $12.5 million cash fund is defective for the following three reasons: 1) there is an intolerable conflict of interest for class counsel owing to a preexisting relationship with a cy pres beneficiary; 2) there is an impermissible geographic discontinuity between the composition of the class and the location of the cy pres recipients; and 3) cy pres is improper when it is feasible to make further distributions to class members, at least when such distributions do not result in a legal windfall. The Court will address each of these arguments individually below.
1. Legal Standard
Several recent Ninth Circuit cases provide valuable insight into the proper application of cy pres distributions. To ensure that the settlement retains some connection to the plaintiff class and the underlying claims, a cy pres award must qualify as " the next best distribution" to giving the funds directly to class members. Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir.2012) (citing Six Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1308 (9th Cir.1990) (internal quotation marks omitted)). Not just any worthy recipient can qualify as an appropriate cy pres beneficiary. Id. To avoid the " many nascent dangers to the fairness of the distribution process," we require that there be " a driving nexus between the plaintiff class and the cy pres beneficiaries."
Nachshin v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir.2011). A cy pres award must be " guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members," and must not benefit a group " too remote from the plaintiff class," Six Mexican Workers, 904 F.2d at 1308-09. Thus, in addition to asking " whether the class settlement, taken as a whole, is fair, reasonable, and adequate to all concerned," we must also determine " whether the distribution of the approved class settlement complies with our standards governing cy pres awards." Nachshin, 663 F.3d at 1040 (internal quotation marks omitted).
To remedy growing concerns regarding cy pres distribution including the occasional appearance of impropriety by judges and counsel when choosing recipients, the Ninth Circuit held in Six Mexican Workers that cy pres distribution must be guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members. Id. (citing Six Mexican Workers, 904 F.2d at 1307).
Here, the proposed settlement designates three academic institutions as cy pres recipients, specifically San Diego State University, UCSD, and USD School of Law School. (Proposed Settlement, Doc. No. 248-3 at § 2.1(e)). The money awarded to the cy pres recipients will fund education programs or professorship positions regarding internet privacy or internet data security. ( Id. ) These provisions clearly tie the cy pres award to the policies of the statutes underlying Plaintiffs' claims such that the general nature of the distribution does not pose an obstacle to final settlement approval. However, Perryman makes three specific objections to the cy pres objections that the Court turns to now.
a. Appearance of Impropriety
First, Perryman objects to the fact that three of the attorneys in this action graduated from USD Law School— lead plaintiffs' counsel James Patterson, associate class counsel Alisa Martin, and defense counsel Michelle Doolin. This is not particularly surprising given that this case was filed in San Diego, counsel and their law firms are located in San Diego, and obviously USD Law School is located in San Diego as well. As support for his objection, Perryman relies upon several cases in which courts voiced concern regarding the appearance of impropriety based upon connections with the proposed cy pres beneficiaries. The Court has reviewed these cases and finds that each contained a more significant relationship with the proposed cy pres beneficiaries than the alma mater connections here. In
contrast to these cases, the appearance of impropriety is not substantial in this instance. There are no allegations of significant relationships with USD Law School beyond it being the alma mater of three attorneys out of the many associated with the case. There is no suggestion that counsel has any further relationship with the school than simply graduating from there. Significantly, USD Law School is one of the three proposed recipients and is not entitled to any greater award than the others. There 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 Plaintiffs claims. For these reasons, the Court does not find a significant appearance of impropriety such that it would necessitate replacing the recipients negotiated and agreed upon by the parties.
b. Geographic Distribution
With regard to the geographic distribution of the funds, Perryman contends that the recipients of the cy pres award are limited to San Diego, and the cy pres distribution is therefore impermissible as it fails to account for the nationwide scope of the class. (Perryman Obj., Doc. No. 258-19.) As support for this proposition, Perryman contends that the Ninth Circuit found local distributions to constitute reversible error in Nachshin v. AOL, LLC, 663 F.3d 1034, 1040 (9th Cir.2011).
In Nachshin, the class included more than 66 million AOL subscribers throughout the United States, and the settlement distributed two-thirds of the donations to local charities in Los Angeles, California. Id. The Ninth Circuit found that this did not account for the broad geographic distribution of the class. Id. However, this was not the full extent of the Ninth Circuit's basis for finding that the cy pres distributing failed to target the plaintiff class, or provide reasonable certainty that any member would be benefitted. The court continued as follows:
Even among the small percentage of plaintiffs located in Los Angeles, there is also no indication that any would benefit from donations to the Boys and Girls Clubs of Los Angeles and Santa Monica or Los Angeles Legal Aid. The proposed donation to the Federal Judicial Center Foundation at least conceivably benefits a national organization, but this organization has no apparent relation to the objectives of the underlying statutes, and it is not clear how this organization would benefit the plaintiff class....
We are also not persuaded by the parties' claims that the size and geographic diversity of the plaintiff class make it " impossible" to select an adequate charity. It is clear that all members of the class share two things in common: (1) they use the internet, and (2) their claims against AOL arise from a purportedly unlawful advertising campaign that exploited users' outgoing e-mail messages. The parties should not have trouble selecting beneficiaries from any number of non-profit organizations that work to protect internet users from fraud, predation, and other forms of online malfeasance.
Id. at 1040-41. Having considered the entirety of the Ninth Circuit's analysis, it
appears distinguishable from the cy pres distribution at issue here. Unlike the settlement in Nachshin, the cy pres distribution in this case is directly tied to the statutes underlying Plaintiffs' claims. In Nachshin, the benefits from cy pres distributions to the Los Angeles Boys and Girls Clubs and Legal Aid would be unlikely to flow to silent class members outside of the Los Angeles area. While those organization certainly provide a tangible benefit within local communities, they provide direct service to local community members with a more limited geographic impact. These two problematic aspects of the settlement in Nachshin are not present here.
Significantly, the recipients at issue here are not as limited in geographic scope as the recipients considered in Nachshin. As counsel argues, the internet is not limited by geographic boundaries, and the educational impact of the funded academic programs will have a nation-wide impact. By giving the money to academic institutions, counsel contends that the funds will directly contribute to the national academic dialogue involving internet privacy and security. The Court agrees insomuch as these schools serve a diverse student population of students from many states, issue widely-distributed publications, and engage in the overall national academic discourse. Moreover, the required use of the cy pres funds targets the class members and will benefit silent class members because the class members are all internet consumers. Regardless of their physical location, programs furthering the goals of internet security and privacy will benefit users of the internet everywhere.
On the whole, the location of the recipient is less important than " whether the projects funded will provide ‘ next best’ relief to the class."  In re Lupron Marketing and Sales Practices Litigation, 677 F.3d 21, 36 (1st Cir.2012). Indeed, it appears that the overall impact from the proposed cy pres distributions will not be limited to San Diego. All internet users will benefit from the proposed funding of ideas and research relating to consumer protection. Therefore, having reviewed the proposed distribution and considered the rationale offered for its structure, the Court concludes that the cy pres remedy bears a direct and substantial nexus to the interests of absent class members and thus properly provides for the " next best distribution" to the class despite the location of the proposed beneficiaries being limited to San Diego. See Lane v. Facebook, 696 F.3d 811, 821 (9th Cir.2012). Significantly, the settlement is not required to provide the " ideal" cy pres recipients. Id. at 820-21. Accordingly, the Court finds that the geographic distribution in this instance satisfies (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members. As such, Perryman's
objection to the geographic aspect of the distribution is overruled.
c. Disproportionate Attorneys' Fees Award
In addition to his first two objections, Perryman objects to the settlement including a cy pres distribution at all. Rather, Perryman asks the Court to distribute the cy pres leftovers to the class members in addition to the cash settlement fund reimbursements and $20 credits. Defendants raise a persuasive argument that this would constitute an impermissible windfall for the claimant class members at the expense of the silent class members. The settlement 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 to Plaintiffs' claims. In this way, class members may recoup their losses while also receiving some additional benefit through the $20 credit. While class members who avail themselves of both forms of recovery have arguably been made whole by their recovery, silent class members would not benefit from a further distribution to the claimant class members. Silent class members will receive greater benefit from the remaining funds if they are distributed to schools for the creation of internet privacy and security programs benefitting internet consumers such as themselves. For this reason, the Court declines Perryman's invitation to cancel the cy pres distributions in favor of claimant class members.
In sum, the Court finds that the cy pres distribution in the proposed settlement agreement meets the standards in Six Mexican Workers. The nature of the distribution and the proposed recipients are sufficiently tied to the objectives of the statutes underlying Plaintiffs' claims and to the interests of silent class members. Accordingly, and for the reasons set forth above, Perryman's objections to the cy pres distributions in the proposed settlement agreement are overruled.
C. Perryman's objection to the requested attorneys' fees and costs
In addition to the objections already discussed, Perryman further contends that the proposed settlement agreement inequitably enriches class counsel and the named Plaintiffs at the expense of the absent class members. In particular, Perryman contends that two of the various indicia that may suggest class counsel is improperly attuned to their own interests rather than those of the class are present here: (1) there is a disproportionate distribution of the award to class counsel, and (2) there is a clear sailing agreement in which opposing counsel agreed not to contest class counsels' requested attorneys' fees.
To the extent that Perryman objects to the amount of requested attorneys' fees based upon their disproportionate relationship with the total settlement award, the Court disagrees with his assessment of the situation. In this instance, class counsel has certainly achieved a favorable result for the class members. As previously noted, there is a significant cash fund for class member claimants plus automatic $20 credits for every class member that add significant value to the overall settlement award. Pursuant to these terms, class members may recover the entirety of their losses as well as achieve the additional benefit of the credit. As evidenced by the record, this case has been hotly contested over a period of several years. Understandably, class counsel put in a significant number of hours in order to achieve a beneficial result for the class. So long as the requested amount fits within the appropriate method for determining reasonable attorneys' fees, the Court can find no
other basis for finding the requested fees to be unreasonable. Based on these considerations, the Court does not find that class counsels' requested fees are out of proportion to settlement achieved.
Perryman also objects to the inclusion of a clear sailing agreement in the proposed settlement. Clear sailing agreements are not prohibited as a general matter, but they may be viewed with suspicion in certain instances. In In re Bluetooth Headset Products Liability Litigation, the Ninth Circuit noted that certain types of clear sailing agreements may indicate that class counsel " allowed pursuit of their own self-interests and that of certain class members to infect the negotiations." 654 F.3d 935, 947 (9th Cir.2011). Particularly, the court objected to the situation in which the " parties negotiate a ‘ clear sailing’ arrangement providing for the payment of attorneys' fees separate and apart from class funds, which carries ‘ the potential of enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class.’ " Id. (quoting Lobatz v. U.S.W. Cellular of CA, Inc., 222 F.3d 1142, 1148 (9th Cir.2000)). Similarly, the court found it problematic " when the parties arrange for fees not awarded to revert to defendants rather than be added to the class fund." Id. Significantly, however, neither of the situations found problematic in In re Bluetooth Headset Products are found here. The payment of attorneys' fees is incorporated into the final settlement of the entire action, and the funds for attorneys' fees are not held separate from the class funds. Attorneys' fees are to be taken directly from the cash fund established for class member reimbursement, and any remaining funds will be distributed to the cy pres beneficiaries. Moreover, there is no evidence suggesting that the parties reached this settlement as a result of collusion or self-interest. There were numerous settlement proceedings, several of which were presided over by well-respected retired district court judges and magistrate judges. By all accounts, the settlement resulted from an arms-length negotiation process with the benefit of the class members in mind. For all of these reasons, the Court finds little merit in Perryman's argument that the proposed settlement inequitably enriches class counsel and the named representatives at the expense of the absent class members. Accordingly, Perryman's objection in this regard is overruled.
When determining whether to approve the proposed settlement agreement, the Court must evaluate its fairness as a whole, rather than assessing its individual components. See Lane, 696 F.3d at 818-19. The Ninth Circuit does not require perfection in the view of the Court, but rather an overall determination that the settlement is fundamentally fair. Id. Here, the Court is convinced that the proposed settlement is " fair, adequate, and free from collusion." Id. Accordingly, Perryman's objections are overruled, and the Court approves the final settlement agreement proposed by the parties.
Plaintiffs' Request for the Imposition of an Appellate Bond Against Perryman
In Plaintiffs' memorandum in support of final approval of the settlement, Plaintiffs' ask that the Court require Perryman to post a bond in the amount of $60,000 should he appeal the final settlement approval. District courts " may require an appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal." Azizian v. Federated Dep't Stores, Inc., 499 F.3d 950, 954-55 (9th Cir.2007) (citing Fed. R.App. P. 7). " [T]he purpose of [an
appellate bond] is to protect an appellee against the risk of nonpayment by an unsuccessful appellant." Fleury v. Richemont N. Am., Inc., 2008 WL 4680033, at *6 (N.D.Cal. Oct. 21, 2008) (quotations and citations omitted).
In light of the circumstances, the Court declines to impose an appeal bond as the Court has no indication, as of yet, that Perryman intends to appeal the final settlement. While there is case law supporting the imposition of an appeal bond against objectors appealing final settlement approval in certain circumstances, the appeal bonds in those cases were only issued following the objectors' filing notices of appeal. This suggests, and the Court agrees, that the imposition of an appeal bond prior to Perryman filing a notice of appeal would be premature. Should Perryman file a notice of appeal in this action, Plaintiffs may file a renewed motion for an appeal bond. At this time, however, Plaintiffs' request for an appeal bond is denied.
Having overruled Perryman's objections and reviewed the proposed settlement agreement, the Court makes the following findings:
Unless otherwise specified, capitalized or defined, terms in this Order have the same definition as the same terms in the Settlement Agreement.
This Court has jurisdiction over the subject matter of this Action, all parties to the Action, and all Class Members who have not timely and validly requested exclusion.
Defendants Provide Commerce, Inc. (" Provide Commerce" ) and Regent Group, Inc. dba Encore Marketing International, Inc. (" EMI" or " RGI" ) (Provide Commerce and EMI collectively, " Defendants" ) provided notice to Class Members in compliance with Section 3.3 of the Settlement Agreement, due process, and Rule 23 of the Federal Rules of Civil Procedure. Notice was provided on the Internet at the web address of www. membership program settlement. com. Summary notice was provided by email to each Class Member at the email address that EMI maintains for each Class Member, including persons that had previously indicated that they do not wish to be contacted by EMI. Summary notice was provided by postcard via U.S. mail to all Class Members to whom notice by direct email was not deliverable and for whom EMI had a facially valid postal address, including persons that had previously indicated that they do not wish to be contacted by EMI. The notice: (i) fully and accurately informed Class Members about the lawsuit and settlement; (ii) provided
sufficient information so that Class Members were able to decide whether to accept the benefits offered, opt-out and pursue their own remedies, or object to the proposed settlement; (iii) provided procedures for Class Members to file written objections to the proposed settlement, to appear at the hearing, and to state objections to the proposed settlement; and (iv) provided the time, date and place of the final fairness hearing, which the Court subsequently changed and was noted on the settlement website.
Defendants gave notice on June 22, 2012, pursuant to 28 U.S.C. § 1715(b). (See Doc. No. 250.) The notice substantively complies with the requirements of 28 U.S.C. § 1715(b) and was sent to the appropriate state and federal officials.
For the reasons stated in the Order Granting Preliminary Approval of Class Settlement and Provisional Class Certification (Doc. No. 252), and having found nothing that would disturb these previous findings, this Court finds and determines that the proposed Class, as defined below, meets all of the legal requirements for class certification, for settlement purposes only, under Federal Rule of Civil Procedure 23(a) and (b)(3).
The Parties have adequately performed their obligations under the Settlement Agreement to date.
Upon review of the record pursuant to the factors identified in Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir.1982) and Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir.1998), the Court hereby finds that the terms and provisions of the Settlement Agreement have been entered into in good faith, and are fair, reasonable, and adequate as to, and in the best interest of, each of the Class Members, and in full compliance with all applicable requirements of the Federal Rules of Civil Procedure, the Rules of the Court, due process, and any other applicable law. With respect to the determination that the Settlement Agreement is fair, reasonable, and adequate, the Court specifically notes that (a) whether the outcome on the merits would result in a ruling in Plaintiffs and the Class's favor is substantially uncertain, see, e.g., Berry v. Webloyalty.com, Inc., No. 10-CV-1358-H (CAB), 2011 WL 1375665 at *4-6 (S.D.Cal. Apr. 11, 2011) (holding similar enrollment webpage for other subscription-based membership program was not deceptive);  (b) the parties had nearly completed discovery including, but not limited to, the exchange of a large number of documents, numerous depositions, and expert disclosures; (c) the Settlement Agreement was reached through negotiations with experienced and informed counsel; (d) the consideration provided to the Class reflects substantial benefits to the Class in light of the circumstances of the Action; (e) there are no governmental objectors; and (f) less than a fraction of one percent of the class objected to the settlement.
The Court also finds that extensive arm's-length negotiations have taken place, in good faith and free from collusion, between
Class Counsel and Defendants' Counsel resulting in the Settlement Agreement. Parts of these negotiations were presided over by Magistrate Judge William Gallo, and other parts of the negotiations were presided over by the experienced mediators Hon. Leo S. Papas (ret.) and Hon. Edward A. Infante (ret.).
The arguments of objector Brian Perryman do not preclude approval of the settlement. The primary relief provided in the Settlement Agreement is the availability of the cash payment; each Class Member had the opportunity to make a claim for a cash payment; and secondarily a $20 Credit was provided which not only provided the Class with a substantial benefit, but was more than the $10 to $15 off gift code that was being offered as part of the enrollment process at issue in this Action. The objector has not shown that the proposed cy pres recipients have a significant connection, ongoing or past, with Class Counsel or Defendants' Counsel, or that any of them stand to benefit from any distribution to the cy pres recipients. Further, the proposed cy pres recipients have the appropriate geographic scope given their enrollment and job placement statistics and the fact that this Action and the subject matter of the cy pres funds involve the internet, which lacks geographic scope. The benefits of the proposed cy pres recipients extend beyond San Diego County. Finally, the parties' agreement that Defendants would not oppose Class Counsel's request for attorneys' fees up to $8.65 million and costs up to $200,000 does not demonstrate self-dealing by Plaintiffs or Class Counsel.
10. Attorneys' Fees.
An award of $8,650,000 in attorneys' fees and of $200,000 in costs to Class Counsel is fair and reasonable in light of the nature of this case, Class Counsel's experience and efforts in prosecuting this Action, and the benefits obtained for the Class.
The Court used the common-fund method to calculate the attorneys' fees award, which is reasonably calculated by dividing the total fee award ($8.650,000) by the reasonable value of the settlement fund ($38,000,000). The value of the settlement fund is supported by the $12.5 million cash fund and the value of $20 Credits, which are fully transferrable and can be used to purchase items under $20 on a number of Provide Commerce's websites. See, e.g., Fernandez v. Victoria Secret Stores, LLC, 2008 WL 8150856, at *10-11, 2008 U.S. Dist. LEXIS 123546, at *38-40 (C.D.Cal.2008) and Young v. Polo Retail, LLC, 2007 WL 951821, at *8, *10, 2007 U.S. Dist. LEXIS 27269, at *22, *28 (N.D.Cal.2007). Applying this method, the fee awarded constitutes 22.7% of the settlement value, and is within the Ninth Circuit's attorneys' fees benchmark of 25% of the settlement value. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir.1998). The attorneys' fees are also reasonable and supported when applying a lodestar cross-check. Using the lodestar method, the Court finds that Class Counsel's hours and expenses were reasonable. The Court has considered the appropriate factors to determine that a multiplier of 2.1 is reasonable and appropriate given the results achieved and the risks undertaken by Class Counsel.
11. Enhancement Awards.
An enhancement award of $15,000 each to plaintiffs Josue Romero and Gina Bailey, of $10,000 each to plaintiffs Bradley Berentson, Grant Jenkins, Daniel Cox, and Jennifer Lawler, and of $5,000 to plaintiffs John Walters and Christopher Dickey is fair and reasonable in light of: (a) Plaintiffs'
respective risks (including financial, professional, and emotional) in commencing this action as the class representatives; (b) the time and effort spent by the respective Plaintiffs in litigating this action as the class representatives; and (c) Plaintiffs' public interest service.
12. Settlement Payments.
Defendants, through the Claims Administrator, must make Settlement Payments from the Net Cash Fund to Authorized Claimants according to Section 2.1(d) of the Settlement Agreement by mailing Settlement Payments to Authorized Claimants no later than twenty-five (25) calendar days after the Final Settlement Date, which is defined under Section 1.11 of the Settlement Agreement.
Any unclaimed portion of the Net Cash Fund after mailing of Settlement Payments to Authorized Claimants and after any mailed Settlements are returned to the Claims Administrator as undeliverable must be paid on an equal basis to the following non-profit college or university academic institutions located in San Diego County, California, with the payments specified to be used for a chair, professorship, fellowship, lectureship, seminar series or similar funding, gift or donation program developed and coordinated between Provide Commerce and the respective institutions (depending on the amount of the remainder) regarding internet privacy or internet data security: California State University at San Diego (San Diego State University), University of California at San Diego, and University of San Diego School of Law. Defendants, through the Claims Administrator, must mail or wire the payments from the Net Cash Fund according to the timeline set forth in Section 2.1(e) of the Settlement Agreement.
14. Objection Overruled.
The objection of Brian Perryman is overruled for the reasons stated above.
15. Appeal Bond.
Pursuant to Rule 7 of the Federal Rules of Civil Procedure, in a civil case, the district court may require an appellant to file a bond or provide other security in any form and amount necessary to insure that any appellants have the ability to pay Plaintiffs' costs and fees should opposing an appeal be necessary. See A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1028 (9th Cir.2001); See also Fed. R.App. P. 7 (" Rule 7" ). Given that Perryman has not filed a notice of appeal or provided the Court with any indication that he intends to appeal the final approval of the settlement, the Court finds an appeal bond to be untimely under the circumstances. Should Perryman file a notice of appeal in this action, Plaintiffs may file a renewed motion for an appeal bond. Accordingly, Plaintiffs' request for an appeal bond is DENIED.
16. Court's Jurisdiction.
Pursuant to the parties' request, the Court will retain jurisdiction over this action and the parties until final performance of the Settlement Agreement.
IT IS SO ORDERED.