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Hofmann v. Dutch, LLC

United States District Court, S.D. California

March 2, 2017

SONIA HOFMANN, an individual and on behalf of all others similarly situated, Plaintiff,
v.
DUTCH LLC, a California Limited Liability Company; and DOES 1 through 100, inclusive, Defendant.

          ORDER DENYING MOTION FOR PRELIMINARY APPROVAL OF PROPOSED CLASS SETTLEMENT [DKT. NO. 43]

          HON. GONZALO P. CURIEL UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff's third motion for preliminary approval of the proposed class settlement. Dkt. No. 43-1. Because all parties have agreed to the proposed settlement, Defendant Dutch, LLC (“Defendant”) does not oppose this motion. Dkt. No. 45. On January 10, 2016, the Court issued a tentative ruling denying Plaintiff's motion for preliminary approval. Dkt. No. 48. The Court held a hearing on the motion on January 19, 2017. After considering the parties' submissions and oral argument, and for the reasons that follow, the Court DENIES Plaintiff's motion for preliminary approval.

         BACKGROUND

         1. First Motion for Preliminary Approval

         On April 26, 2016, the Court denied Plaintiff's initial motion for preliminary approval of the class settlement. Dkt. No. 37. The initial proposed settlement provided for: (1) $20 worth of e-gift certificates for each of the class members; (2) $250, 000 in cy pres awards; and (3) up to $175, 000 in plaintiff's attorney's fees with a “clear sailing” provision attached.[1]

         The Court identified three problems with the proposed settlement, namely: (1) that the e-gift certificates effectively constituted coupons because they required class members to pay out of their own pocket before they could redeem them; (2) that the cy pres award failed to meet the objectives of the underlying consumer protection statutes; and (3) that, when considered in conjunction with the other provisions of the proposed settlement, the “clear sailing” provision “created at least a danger of collusion during the settlement negotiations which is not refuted by the record.” Id. at 9-15. The Court permitted the parties an additional sixty days to file a renewed motion for preliminary approval of class action settlement that cured the deficiencies identified. Id. at 15.

         2. Second Motion for Preliminary Approval

         On August 16, 2016, the Court denied Plaintiff's second motion for preliminary approval of the class settlement. Dkt. No. 41. For the renewed attempt to propose a settlement, Plaintiff proposed the following: (1) one denim tote bag ($128 retail value) and $20 e-gift certificates for the class members; (2) $250, 000 in cy pres awards, to the same charities as proposed in the initial settlement; and (3) up to $175, 000 in Plaintiff's attorney's fees with the same “clear sailing” provision attached. See Dkt. No. 38, Ex. 1. In other words, the only difference between the first and second proposed settlement was the addition of the denim tote bag. The Court denied the parties' renewed motion for preliminary approval because it did not cure the deficiencies that the Court had previously identified. Dkt. No. 41 at 2. In particular, the Court emphasized that the second motion did nothing to address the Court's concern that the proposed cy pres award did not conform to Ninth Circuit legal authority. Id.

         3. Third Motion for Preliminary Approval

         Plaintiff filed the instant motion for preliminary approval on October 14, 2016. Dkt. No. 43. Here, the proposed settlement consists of (1) a current-Elliot brand tote bag (retail value of $128.00) and electronic gift card codes “redeemable on www.CurrentElliott.com only and loaded with values of multiples of $20.00 corresponding to the number of units of Class Products purchased during the Class Period”; (2) $250, 000 in cy pres awards; (3) up to $175, 000 in attorney's fees, with the same “clear sailing” provision; and (4) injunctive relief. Id. at 6, 11-13.

         DISCUSSION

         The Ninth Circuit has a strong judicial policy that favors settlements in class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 168, 1276 (9th Cir. 1992). However, when the parties settle before class certification, as is the case here, the court 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). To that end, a reviewing court must engage in two, separate inquiries: (1) whether the proposed class meets the certification requirements and (2) whether the proposed settlement is “fundamentally fair, adequate, and reasonable.” Id.

         The Court previously addressed both of these requirements in its April 26, 2016 Order denying Plaintiff's first motion for preliminary approval. Dkt. No. 37. At that time, it concluded that Plaintiff had demonstrated that it was proper to certify the class, but had failed to demonstrate that the settlement was fundamentally fair, adequate, and reasonable. Id. As such, the Court's inquiry, here, will focus on the latter inquiry.

         A. Fundamental Fairness of Settlement

         Before approving a proposed class action settlement, a court must find that the settlement is “fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e). When assessing whether a settlement meets these criteria, the court must evaluate the “settlement as a whole, rather than assessing its individual components.” Lane v. Facebook, Inc., 696 F.3d 811, 818 (9th Cir. 2012). It is, therefore, not within the district court's role to “delete, modify or substitute certain provisions” of the settlement. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998) (quoting Officers for Justice v. Civil Serv. Comm'n of San Francisco, 688 F.2d 615, 628 (9th Cir. 1982)). Rather, “[t]he settlement must stand or fall in its entirety.” Id.

         In assessing the fairness of a settlement, a court generally must weigh:

(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 of the proposed settlement.

         In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011). An even more exacting fairness standard is required where, as here, the settlement under review was negotiated prior to class certification. Id. (“consideration of these eight [ ] factors alone is not enough to survive appellate review” when there has been no class certification). A more probing inquiry is warranted under such circumstances because there is an increased danger of “collusion between class counsel and the defendant, as well as the need for additional protections when the settlement is not negotiated by a courtdesignated class representative.” Hanlon, 150 F.3d at 1026. “[C]ourts therefore must be particularly vigilant not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” In re Bluetooth, 654 F.3d at 947.

         B. Blue ...


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