United States District Court, S.D. California
SONIA HOFMANN, an individual and on behalf of all others similarly situated, Plaintiff,
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]
GONZALO P. CURIEL UNITED STATES DISTRICT JUDGE
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.
First Motion for Preliminary Approval
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.
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.
Second Motion for Preliminary Approval
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
Third Motion for Preliminary Approval
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.
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
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.
Fundamental Fairness of Settlement
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.”
assessing the fairness of a settlement, a court generally
(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.
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