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Knutson v. Schwan's Home Service, Inc.

United States District Court, S.D. California

July 14, 2014

ERIK KNUTSON AND KEVIN LEMIEUX, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiffs,
v.
SCHWAN'S HOME SERVICE, INC.; AND CUSTOMER ELATION, INC., Defendants.

ORDER GRANTING MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT (ECF NO. 135)

GONZALO P. CURIEL, District Judge.

From April 18, 2008 through August 31, 2012, Defendants Schwan's Home Service, Inc. ("Schwan's") and Customer Elation, Inc. ("Customer Elation") (collectively, "Defendants") placed calls to past or present customers of NutriSystem, Inc. ("NutriSystem"). Plaintiffs Erik Knutson ("Knutson") and Kevin Lemieux ("Lemieux") (together, "Plaintiffs") allege Defendants violated the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. ยง 227 et seq., by placing automated and/or prerecorded telephone calls to persons without their prior express consent, using an automatic telephone dialing system ("ATDS").

Knutson, initiated this lawsuit (the "Action") on April 18, 2012. Knutson later filed a First Amended Complaint adding Lemieux. (ECF No. 28.) On January 25, 2013, Plaintiffs filed a motion for leave to file a Second Amended Complaint ("SAC") to add defendant Customer Elation. (ECF No. 30.) The Court granted that motion on February 20, 2013. (ECF No. 38.) In their SAC, Plaintiffs assert causes of action for (1) negligent violation of the TCPA and (2) knowing and/or willful violation of the TCPA. On May 8, 2013, Plaintiffs filed a motion for class certification, which the Court granted in part on September 5, 2013. (ECF No. 99.) The Court certified the following Rule 23(b)(3) class ("Class"):

All persons who are past or present customers of NutriSystem, Inc., who had or have a number assigned to a cellular telephone service, which number was called by Defendants using an automatic telephone dialing system and/or an artificial or prerecorded voice between April 18, 2008 and August 31, 2012. Excluded from the Class are persons who Defendants called for emergency purposes and persons who gave express consent to Defendants to call their cellular telephone number prior to Defendants first placing a call using an automatic telephone dialing system and/or artificial or prerecorded voice. Also excluded from the Class are Defendants, their officers and directors, families and legal representatives, heirs, successors or assigns and any other entity in which Defendants have a controlling interest, any judge assigned to this case and their immediate families.

(ECF No. 119.) Plaintiffs seek, in their SAC, $500 per negligent violation and $1, 500 per willful violation as well as injunctive relief.

Presently before the Court is Plaintiffs' Motion for Preliminary Approval of Class Action Settlement. (ECF No. 135.) Pursuant to the Parties' Settlement Agreement, Defendants do not oppose this Motion.

DISCUSSION

Prior to granting approval of a class action settlement, a court (1) assesses whether a class exists and (2) determines whether the proposed settlement is "fundamentally fair, adequate, and reasonable." Stanton v. Boeing Co. , 327 F.3d 938, 952 (9th Cir. 2003) (internal quotations omitted). Here, the Court has already granted class certification pursuant to Fed.R.Civ.P. 23(b)(3) and thus first turns to examining the fairness of the Settlement Agreement ("SA") followed by the questions of a claims administrator and class notice.

I. THE SETTLEMENT

Rule 23(e) requires the Court to determine whether a proposed settlement is "fundamentally fair, adequate, and reasonable." Stanton , 327 F.3d at 959 (internal quotations omitted). In making this determination, a court may consider: (1) the strength of the plaintiff's 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." Id . (internal quotations omitted). Moreover, the settlement may not be the product of collusion among the negotiating parties. In re Mego Fin Corp. Sec. Litig. , 213 F.3d 454, 458 (9th Cir. 2000).

Because some of these factors cannot be fully assessed until the Court conducts a final fairness hearing, "a full fairness analysis is unnecessary at this stage." See Alberto v. GMRI, Inc. , 252 F.R.D. 652, 665 (E.D. Cal. 2008) (internal quotations omitted). At the preliminary approval stage, a court need only review the parties' proposed settlement to determine whether it is within the permissible "range of possible approval" and thus, whether the notice to the class and the scheduling of formal fairness hearing is appropriate. Id. at 666.

A. THE STRENGTH OF PLAINTIFFS' CASE AND THE RISK, EXPENSE, COMPLEXITY AND LIKELY DURATION OF FURTHER LITIGATION, AND THE RISK OF MAINTAINING CLASS ACTION STATUS THROUGHOUT THE TRIAL

Both sides recognize the risks of continuing to litigate this Action. Class Counsel understands the uncertainties associated with complex, class-action litigation. Defendants argued in their Motion for Summary Judgment that, due to the circumstances surrounding the Class Members' relationships with NutriSystem and Schwan's, all Class Members consented to receiving calls on their cell phones The law interpreting the TCPA and its consent requirement has been in flux, making it difficult for Class Members to prove lack of consent under the TCPA. See, e.g., Baird v. Sabre Inc., 2014 WL 320205 (C.D. Cal. Jan. 28, 2014).

Moreover, Defendants filed a separate motion to decertify the Class or, in the alternative, to amend the Class definition based on arbitration and forum selection clauses in the Terms and Conditions agreed to by individuals purchasing products from NutriSystem. Defendants argue the arbitration and forum selection clauses fracture the Class and create individualized issues that defeat the requirements for class certification or call for this Court to reconsider the Class definition. Although now withdrawn, Defendants also filed an appeal of this Court's class certification order. Both the motion to decertify and the appeal present risks regarding the continued certification of the Class.

On the other hand, Defendants also understand the risks of litigation. Even if only a small percentage of Class Members recover damages, a large demand award could result. Further litigation would be very expensive. Defendants have already expended considerable resources on discovery and motions practice, as well as to ascertain the 16, 691 unique cellular telephone numbers, which represent the certified Class.

Taken together, the costs, the risks to both sides, and delays of continued litigation weigh in favor of preliminary approval of the proposed settlement.

B. THE EXTENT OF DISCOVERY AND THE STAGE OF THE PROCEEDINGS

As to class-action settlements, "formal discovery is not a necessary ticket to the bargaining table where the parties have sufficient information to make an informed decision about settlement." Linney v. Cellular Alaska P'ship , 151 F.3d 1234, 1239 (9th Cir. 1998) (internal quotations omitted).

Here, the Parties appear to have engaged in substantial discovery. In addition to participating in formal discovery (including the exchange of requests for admissions, interrogatories, and document requests), the Parties have taken extensive depositions. Defendants have taken both named Plaintiffs' depositions. Plaintiffs have taken nine depositions, and there have been numerous discovery disputes over call data. Plaintiffs also took the deposition of non-party NutriSystem regarding telephone numbers provided by NutriSystem to Schwan's. Moreover, the

Parties engaged in multiple lengthy direct negotiations, as well as two full days of mediation before the Honorable Leo S. Papas (Ret.) and one full day of mediation before the Honorable Leo Wagner (Ret.). The Parties also engaged in formal discovery to determine the Class size. Plaintiffs requested information on not only Class size, but how Defendants identified the Class certified by the Court. To do this, Defendants obtained a list of unique mobile numbers associated with NutriSystem customers that received calls on their cellular telephones using an ATDS or prerecorded messages and compared that ...


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