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Reed v. 1-800 Contacts, Inc.

United States District Court, Ninth Circuit

January 2, 2014

ROBERT REED, individually and on behalf of all others similarly situated, Plaintiff,
v.
1-800 CONTACTS, INC., a Delaware corporation, and DOES 1-50, inclusive, Defendant.

ORDER GRANTING (1) FINAL APPROVAL OF CLASS ACTION SETTLEMENT, AND (2) MOTION FOR ATTORNEY FEES, LITIGATION EXPENSES, AND PLAINTIFF ENHANCEMENT AWARD Dkt. Nos. 49 and 48, respectively

JEFFREY T. MILLER, District Judge.

On August 15, 2012, Plaintiffs filed a class action complaint in California state court against Defendant 1-800 Contacts based on its purported violation of California Penal Code Section 630 et seq. Specifically, the complaint alleged that 1-800 Contacts violated Sections 632 and 632.7 by intentionally recording confidential telephonic communications with class members without obtaining their consent. In June 2013, the parties agreed to settle the case. See Dkt. No. 38. The court granted preliminary approval of the settlement on August 29, 2013. Dkt. No. 45. Class counsel now seeks final approval of the settlement, Dkt. No. 49, as well as attorneys' fees, litigation expenses, and a class representative enhancement award for Reed, Dkt. No. 48. For the reasons stated below, the court GRANTS both motions.

BACKGROUND

A. Class Allegations

From August 2011 to September 2012, Defendant 1-800 Contacts allegedly recorded telephone calls made to and received from California residents without their consent in violation of the California Invasion of Privacy Act, Cal. Penal Code § 630 et seq. (the "Privacy Act"). Plaintiff alleges approximately 300, 000 calls were recorded. The complaint sought statutory damages on behalf of Plaintiff and other Class Members. The Privacy Act permits civil plaintiffs to recover three times the amount of damages they suffered or $5, 000, whichever is greater. Cal. Penal Code § 637.2. Suffering actual damages is not a prerequisite to recovery. Id . In June 2013, the parties agreed to settle the case. See Dkt. No. 38. The proposed class for settlement purposes is "[a]ll natural persons who, while present in California, participated in at least one recorded telephone call with 1-800 Contacts, Inc. between August 15, 2011 and September 10, 2012 (the Class Period')."

B. Class Notice

Following the court's preliminary approval of the class settlement, the claims administrator, Rust Consulting, Inc. ("Rust"), mailed the class notice and claim form ("Notice") to 99, 884 potential class members by standard U.S. mail on September 13, 2013. When the USPS returned 7, 410 Notices as undeliverable, Rust resent Notices to 316 forwarding addresses provided by the USPS and to 3, 683 addresses Rust found through additional searches. Rust also mailed 117 additional Notices at the request of either class members or class counsel. Through November 15, 2013, Rust mailed an aggregate of 104, 000 Notices, including those that were undeliverable and those that were resent.

Rust also published Notice on three separate occasions in the Los Angeles Times, San Francisco Chronicle, San Diego Union-Tribune, Sacramento Bee, and Fresno Bee. On September 13, 2013, Rust created a website, www.1800ContactsSettlement.com, where the Notice, settlement agreement, and other relevant documents were made available. Rust also established a toll-free telephone number with a pre-recorded message containing pertinent information regarding the request and with an option to request a copy of Notice.

C. Claim Process and Response from Class

Rust created a toll-free fax number and leased a case-dedicated Post Office Box to enable class members to submit their claim forms and other communications. The deadline for filing claims, objecting to the settlement, or opting out was November 14, 2013. As of November 15, 2013, Rust had received 16, 506 claim forms. After reviewing these claims, Rust determined that 13, 665 of the received claims were valid, equating to approximately 13.7% of the 99, 884 potential class members. Dkt. No. 55. In addition to these claims, Rust has also received 49 requests for exclusion from the class settlement, approximately.048% of the class members to whom Notice was mailed. Dkt. No. 56. No objections to the settlement or to the requested attorney's fees, litigation expenses, and enhancement award have been filed with the court or received by class counsel.

D. Effective Date of Settlement, Funds Distribution, and Final Judgment

In accordance with the proposed settlement terms, 1-800 Contacts transmitted via wire transfer $11.7 million into an interest-bearing account administered by Rust on September 3, 2013. In the absence of objections, the date the court enters an order granting final approval will be the "Effective Date" for the settlement. Within ten business days of the Effective Date, Rust will pay any attorneys' fees, litigation expenses, and class representative's enhancement award granted by the court and will also mail each participating class member a check representing the person's pro-rata share of the Net Settlement Amount. Provided the parties have performed all of their obligations under the settlement, the parties will file a proposed judgment terminating the action with prejudice within fifteen business days of the Effective Date.

If any settlement checks are uncashed after 120 days, the funds will be distributed to the court-approved cy pres recipient. The proposed cy pres recipient is San Francisco Consumer Action, a California non-profit organization and a public charity focused on protecting the rights of consumers in the areas of banking and credit, housing, privacy, telecommunications, and insurance. Consumer Action has confirmed that any cy pres funds provided to Consumer Action from this lawsuit will be earmarked to be used only for the protection of California consumers' privacy rights.

MOTION FOR FINAL SETTLEMENT APPROVAL

I. Legal Standard

Federal Rule of Civil Procedure ("Rule") 23(e) requires a district court's approval for any "claims, issues, or defenses of a certified class" to be "settled, voluntarily dismissed, or compromised." "The initial decision to approve or reject a settlement proposal is committed to the sound discretion of the trial judge." Officers for Justice v. Civil Serv. Comm'n , 688 F.2d 615, 625 (9th Cir. 1982). When reviewing the proposed settlement, the court must look at "whether the settlement is fundamentally fair, adequate and reasonable." Id . This includes an examination and balancing of multiple factors, including but not limited to:

the strength of the plaintiffs' case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed, and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement.

Id. Rule 23(e)(1) requires the court to take certain steps to ensure proper administration of the settlement, including "direct[ing] notice in a reasonable manner to all class members who would be bound by the proposal."

Where "the parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement." Staton v. Boeing Co. , 327 F.3d 938, 952 (9th Cir. 2003). Accordingly, where the class is certified by stipulation of the parties for settlement purposes only, the court must nevertheless examine, and indeed give "heightened[] attention" to, the question of whether that stipulated class meets the requirements for certification under Rule 23(a) and (b). Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 620-21 (1997). Rule 23(a) lays out the four basic prerequisites of numerosity, commonality, typicality, and adequacy of representation. Id. at 613. Rule 23(b) also requires that this action fall within one of three enumerated categories of cases. Id. at 614.

II. Rule 23(a) and (b) Analysis

To certify a class under Rule 23(a), the court must find that there is (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. If these elements are met, the court must also decide whether the plaintiffs have met one of the 23(b) requirements.

In order to satisfy the numerosity requirement, the class members must be "so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a)(1). In deciding whether the numerosity requirement is met, courts must decide whether, without the formation of a class, "potential class members would suffer a strong litigation hardship or inconvenience if joinder were required." Harris v. Palm Springs Alpine Estates, Inc. , 329 F.2d 909, 913 (9th Cir. 1964). Here, the numerosity requirement is met as 81, 706 prospective class members were originally identified, and the claims administrator ultimately mailed Notice to 99, 884 prospective class members. See, e.g., General Tel. Co. of the Northwest, Inc. v. EEOC , 446 U.S. 318, 330 (1980) (deciding that a class of 15 was too small and citing to various cases where class size is under 50).

To establish commonality, Rule 23(a)(2) states that there must be "questions of law or fact common to the class." For each prospective class member, the common question is whether 1-800 Contacts violated the class members' privacy by recording telephone conversations it initiated or answered. This common question provides the basis for the sole cause of action alleged against 1-800 Contacts. Accordingly, the court concludes the element of commonality has therefore been met.

In addition to establishing numerosity and commonality, the claims of the representative parties must be typical of the claims of the entire class under Rule 23(a)(3). In Hanlon v. Chrysler Corp. , 150 F.3d 1011 (9th Cir. 1998), the Ninth Circuit noted that the typicality requirement embodies "permissive standards, " and noted that the claims need only be "reasonably co-extensive with those of absent class members; they need not be substantially identical." Id. at 1021. Reed, the class representative, was allegedly recorded during a telephone conversation with 1-800 Contacts, which is the same allegation made on behalf of the other class members. Any minor differences regarding the calls would not sufficiently change the nature of the claims such that Reed's claims would not be considered reasonably co-extensive with the claims of other class members. Therefore, typicality exists.

The final element under Rule 23(a) requires a determination that "the representative parties will fairly and adequately protect the interests of the class." When considering adequacy of representation, the court must decide (1) whether the named plaintiffs and their attorneys have conflicts of interest with other class members, and (2) whether the named plaintiffs and counsel have vigorously prosecuted the case for the entire class. Hanlon , 150 F.3d at 1020. At present, there is nothing in the record indicating that Reed or his attorneys have conflicts of interest with other class members. It appears both Reed and his attorneys have vigorously pursued this case and its settlement. Accordingly, the court concludes adequacy of representation has been established.

Having satisfied the four elements set forth in Rule 23(a), the complaint must also meet one of Rule 23(b)'s requirements. Here, Reed's allegations satisfy the predominance requirement under Rule 23(b)(3), which applies when "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." The Supreme Court has noted that Rule 23(b)(3)'s standard (known as the "predominance requirement") is "far more demanding" than Rule 23(a)'s commonality requirement." Amchem Products, Inc. v. Windsor , 521 U.S. 591, 624 (1997). The Ninth Circuit has explained that Rule 23(b)(3)'s predominance requirement is met when common issues are "sufficiently cohesive to warrant adjudication by representation." In re Wells Fargo Home Mortg. Overtime Pay Litigation , 571 F.3d 953, 957 (9th Cir. 2009) (citations omitted). Here, approximately one hundred thousand prospective class members were allegedly recorded without their consent during telephone calls with 1-800 Contacts. Minor variations in the calls' contents, length, or other characteristics would not be dispositive over whether the Privacy Act was violated. Requiring each member to litigate their claim separately would pose an undue burden on the courts and the parties that could easily be resolved by litigating the matter as a class action. Therefore, predominance is met.

Additionally, class actions brought under Rule 23(b)(3) must satisfy the notice provisions of Rule 23(c)(2). In its order preliminarily approving the settlement, the court approved the proposed forms of class notice and concluded the notice procedure met the requirements of Rule 23. In light of the parties' indication that the court-approved notice procedure was followed by the claims administrator, the court concludes the applicable notice provisions have been met.

For these reasons, the court concludes that the stipulated class meets the requirements for ...


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