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Zepeda v. Paypal, Inc.

United States District Court, N.D. California, Oakland Division

March 24, 2017

MOISES ZEPEDA, MICHAEL SPEAR, RONYA OSMAN, BRIAN PATTEE, Y CHING, DENAE ZAMORA, MICHAEL LAVANGA, and GARY MILLER, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
PAYPAL, INC., E-BAY INC., and DOES 1 through 10, inclusive, Defendants.

          ORDER RE MOTION FOR FINAL APPROVAL AND MOTIONS FOR ATTORNEYS' FEES AND SERVICE AWARDS Dkt. 295, 296, 297, 340

          SAUNDRA BROWN ARMSTRONG Senior United States District Judge.

         This is a putative nationwide class action brought by Plaintiffs Moises Zepeda, Michael Spear, Ronya Osman, Brian Pattee, Casey Ching, Denae Zamora, Michael Lavanga and Gary Miller (collectively “Plaintiffs”) against PayPal, Inc., and its parent entity, eBay, Inc., (collectively “Defendants”). Plaintiffs allege that PayPal improperly handled disputed transactions relating to their user accounts by unilaterally placing holds and reserves thereon without explanation. PayPal also is alleged to have failed to provide annual error-resolution notices and monthly account statements in violation of the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693, et seq. The parties have resolved the above-captioned action on a class-wide basis and entered into a Settlement Agreement, as amended (“the Settlement”), which the Court preliminarily approved in a prior order.

         The parties are presently before the Court on the following motions: (1) Plaintiffs' Motion for Final Approval of Amended Class Action Settlement Agreement; (2) Motion for Award of Attorneys' Fees and Reimbursement for Costs and Service Awards, filed by the Lexington Law Group and Quantum Legal LLC (“Class Counsel Fee Motion”); (3) Motion for Attorneys' Fees and Reimbursement of Expenses filed by Marina Trubitsky (“Trubitsky Fee Motion”); and (4) Application for Attorney Fees by Local Counsel David Hicks (“Hicks Fee Application”).[1] Also before the Court are various objections that the Court has received in response to Notice of the Settlement.

         This matter came before the Court for a hearing on the above-mentioned matters on February 8, 2017. The parties in this action and related action, Fernando v. PayPal, No. C 10-1668 SBA, appeared through their counsel of record. Attorney Anthony Ferrigno appeared for Objectors Wally Collins and Lucinda Christian (collectively “Collins Objectors”), and Objector Sam Miorelli (“Miorelli”), an attorney, appeared pro se. Having read and considered the papers filed in connection with these matters and upon consideration of the arguments presented at the hearing, the Court hereby GRANTS Plaintiffs' Motion for Final Approval, GRANTS IN PART the Class Counsel Fee Motion and the Hicks Fee Application, and DENIES the Trubitsky Fee Motion. All objections to final settlement approval are OVERRULED.

         I. BACKGROUND

         A. Overview

         PayPal operates an on-line payment processing service that functions as a third party intermediary to facilitate payments between buyers and sellers of goods and services sold on-line through commercial websites, such as eBay. As a condition of using PayPal's service, subscribers must abide by the PayPal User Agreement (“User Agreement”), among other agreements. Third Am. Compl (“TAC”). ¶ 35, Dkt. 291. The User Agreement provides that upon a breach of its terms-such as by engaging in defined “Restricted Activities”-PayPal “may hold funds in a seller's account by placing reserves on accounts and/or limiting and/or suspending seller's accounts and holding the funds in the accounts for up to and in some cases exceeding 180 days.” Id. ¶ 38. Among other things, Restricted Activities are defined to include a breach of the User Agreement or any other agreements with PayPal, selling counterfeit goods, and providing false or inaccurate information. Id. ¶ 39. Plaintiffs are PayPal users who allege that PayPal placed holds on their account funds TAC ¶¶ 10-17. The foregoing policies and practices have given rise to several actions including the instant case, Zepeda v. PayPal, No. 10-2500 SBA, and Fernando v. PayPal, No. 10-1668 SBA.[2] The procedural history of these actions is summarized below.

         1. Zepeda v. PayPal

         On May 12, 2010, Ronya Osman and Brian Pattee filed a complaint in this Court against PayPal and eBay. See Osman v. PayPal, Inc., No. C 10-2046 PVT. A month later on June 7, 2010, Moises Zepeda (“Zepeda”) filed the instant action against PayPal. Two days thereafter, Michael Spear filed a third complaint against PayPal and eBay in the matter styled as Spear v. PayPal, Inc. and eBay, Inc., No. C 10-2555 PVT. In July 2010, the plaintiffs in Osman and Spear voluntarily dismissed their respective actions under Federal Rule of Civil Procedure 41(a), without prejudice. In their place, Zepeda filed a First Amended Class Action Complaint (“FAC”) on August 13, 2010, which joined the plaintiffs from the Osman and Spear actions, among others. Dkt. 22.

         The FAC alleged causes of action against PayPal for: (1) breach of contract; (2) breach of fiduciary duty; (3) accounting; (4) violation of California's Consumers Legal Remedies Act (“CLRA”); (5) violation of California's Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200; and (6) unjust enrichment. The FAC was filed on behalf of a nationwide class defined as “[a]ll PayPal, Inc. account holders whose funds have been held by Pay[P]al or whose accounts were closed, suspended, or limited by PayPal, ” along with a natural person class defined as “[a]ll natural persons whose funds have been held by Pay[P]al or whose accounts were closed, suspended, or limited by PayPal.” FAC ¶ 57. Mark Todzo of Lexington Law Group LLC and Jeffrey Leon of Quantum Legal LLC (formerly Complex Litigation Group LLC) have served as the principal attorneys representing Plaintiffs and are now Class Counsel.

         After Plaintiffs filed the FAC, the Honorable Lucy Koh, the judge originally assigned to the action, recused herself and the matter was reassigned to the Honorable Jeremy Fogel. On September 30, 2010, PayPal filed a motion to dismiss the FAC, pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. 26. Shortly thereafter, Plaintiffs filed a motion for the appointment of lead counsel. Dkt. 28. On February 15, 2011, Judge Fogel granted PayPal's motion and dismissed all claims with leave to file a Second Amended Complaint (“SAC”) within thirty days. See 2/15/11 Order Granting Motions to Dismiss and to Appoint Interim Lead, Liaison, and Class Counsel (“2/15/11 Order”) (reported as Zepeda v. PayPal, Inc., 777 F.Supp.2d 1215, 1220-21 (N.D. Cal. 2011)), Dkt. 49. In the same order, Judge Fogel granted Plaintiffs' motion for the appointment of lead counsel. Zepeda, 777 F.Supp.2d at 1223-24.

         In rejecting Plaintiffs' tort and contract claims and demand for an accounting, Judge Fogel ruled that: (1) the PayPal User Agreement affords PayPal “sole discretion” to place holds on its users' accounts, irrespective of whether the user has engaged in restricted activities; and (2) PayPal has no contractual obligation to provide users with an explanation as to why their accounts may have been frozen. Id. at 1219-221. Judge Fogel also rejected the CLRA claim on the ground that Plaintiffs are not “consumers” and therefore lack prudential standing. Id. at 1222. As to the UCL claim, Judge Fogel ruled that the pleadings failed to satisfy the heightened standard for pleading fraudulent conduct under Federal Rule of Civil Procedure 9(b). Id. at 1222-23. Finally, he dismissed the unjust enrichment claim on the ground that the parties' relationship was governed by an express contract. Id. at 1223.

         While Plaintiffs were given the opportunity to attempt to replead their claims, it became apparent to them that filing a SAC would trigger another motion to dismiss and engender further delay and cost. Mot. for Prelim. Approval at 3, Dkt. 166. In addition, Plaintiffs were concerned that, in light of Judge Fogel's interpretation of the User Agreement, it would be difficult to cure the deficiencies that resulted in the dismissal of the FAC. Id. For its part, PayPal was receptive to discussing settlement. Id. Thus, instead of amending the pleadings, Plaintiffs commenced settlement discussions with PayPal. Id.

         2. Fernando v. PayPal and eBay

         On April 19, 2010, Devinda Fernando and Vadim Tsigel, represented by New York attorney Trubitsky and local counsel Hicks, filed the Fernando putative class action against PayPal and eBay. On March 22, 2011, the plaintiffs filed a First Amended Class Action Complaint (“Fernando FAC”), which, inter alia, joined Michail Zinger, Amy Rickel, Fred Rickel, Ira Gilman, Lacy Reintsma and Shaul Behr as additional party-plaintiffs. Fernando FAC, Dkt. 23.

         The Fernando FAC alleges that PayPal improperly restricts, freezes or closes customer accounts because of “suspicious activity, ” without notice, explanation or responding to the inquiries of affected users. Id. ¶¶ 23-24. The pleadings also aver that PayPal freezes the accounts of affected users, thereby preventing them from cancelling their accounts and recovering their funds. Id. ¶ 25. Such conduct is alleged to violate the EFTA, as well as Section III of the Injunctive Relief portion of the settlement agreement reached in In re PayPal Litigation (Comb v. PayPal, Inc.), Nos. C 02-1227 JF, C 02-2777 JF. Id. ¶¶ 25-26.[3] The Fernando FAC alleges six claims for: (1) violation of the EFTA; (2) violation of the Combsettlement agreement; (3) conversion; (4) money had and received; (5) unjust enrichment; and (6) negligence. Fernando, Dkt. 1. Although PayPal filed a motion to dismiss the FAC, the motion was taken off calendar to facilitate settlement discussions. Id., Dkt. 26, 52.

         B. Settlement Negotiations

         1. The Original Settlement

         a) Zepeda

         Following the dismissal of the FAC by Judge Fogel in Zepeda, PayPal shared detailed and confidential information concerning its hold and reserve practices with the Plaintiffs' counsel. Dkt. 166 at 9. The parties thereafter engaged in settlement negotiations over the course of several months regarding the underlying claims and facts. Mot. for Prelim. Approval at 5, Dkt. 112. The parties then participated in a mediation which took place on or about May 11, 2011, supervised by mediator Randall Wulff of Dispute Resolution. Id. Those discussions and the ensuing mediation resulted in the first settlement in this action. Id.; 2/24/14 Order at 4, Dkt. 205.

         According to the original Settlement Agreement, “the primary focus of the settlement is the implementation (or maintenance) of business practices” with respect to PayPal's policies and practices regarding “holds, ” “reserves” and “limitations, ” as those terms are used by PayPal. Settlement Agt. § 3.3, Dkt. 166-1. To that end, PayPal agreed to provide prospective injunctive relief to a Settlement Class defined as “all current and former users of PayPal who had an active PayPal account between April 19, 2006 and the date of entry of the Preliminary Approval Order.” Id. § 1.26. Defendants agreed to pay $1, 425, 000 into a Settlement Fund, from which $712, 500 in attorneys' fees, and $5, 000 in incentive awards for each of the eight class representatives were to be deducted. Id. § 1.24. The remainder of the Settlement Fund was to be contributed as a cy pres award to the Electronic Frontier Foundation (“EFF”). Id. § 3.7. No part of the Settlement Fund was designated for a monetary distribution to the Class.

         b) Fernando

         On December 20, 2011, the parties in the Fernando action participated in a separate mediation before the Honorable Ellen James (Ret.), which resulted in a global settlement of both actions. Given the overlapping claims of both lawsuits, the parties decided to merge the settlements in Zepeda and Fernando in order to avoid confusing serial notices to the Class. Mot. for Prelim. Approval at 5-6. The Settlement Term Sheet[4] indicated that Plaintiffs in Zepeda were to file a Second Amended Complaint that joined eBay as a party-defendant, and joined the named plaintiffs from Fernando and incorporated their claims. Hicks Decl. Ex. E, Dkt. 295-2 at 1. In addition, Defendants agreed to contribute an additional $425, 000 to the global settlement fund in order to settle the Fernando action, and that Trubitsky and Hicks (collectively “Fernando counsel”) could submit a fee application seeking up to 50% of the additional settlement funds (i.e., $212, 500). Id.

         2. Trubitsky's Disruptive Conduct

         In January 2012, Trubitsky informed the other parties that certain of the Fernando plaintiffs no longer desired to participate in the global settlement, and demanded the opportunity to negotiate individual settlements with PayPal and eBay. 3/29/12 Case Mgt. Conf. Stmt. (“3/29/12 CMC Stmt.”) at 6-7, Dkt. 80; Moon Decl. in Supp. of Def.'s Opp'n to Intervenors' Mot to Intervene and for a Stay of Proceedings ¶¶ 2-5 (“Moon Decl.”), Dkt. 99-1. Trubitsky reiterated these demands at the Case Management Conference held on April 19, 2012, and insisted that the global settlement could not move forward. 4/19/12 Minute Order, Dkt. 84. The Court indicated that any party who did not desire to be bound by the settlement was free to opt out and file a separate action. Id. Counsel representing Plaintiffs in Zepeda, in turn, indicated their intention to proceed with the settlement and file a motion for preliminary approval. Stipulation, Dkt. 89.

         Consistent with the terms of their original settlement, Plaintiffs filed a SAC in Zepeda on October 9, 2012, which joined eBay, and added claims for violations of the EFTA and the Comb settlement, which had been alleged in the Fernando pleadings. However, the SAC did not join any of the Fernando plaintiffs as party-plaintiffs. On October 18, 2012, Plaintiffs in this action filed their initial motion for preliminary approval. Dkt. 112.

         Apparently as a result of the Zepeda plaintiffs' decision to move forward with the settlement without including the Fernando plaintiffs, Trubitsky began a series of actions ostensibly intended to derail the Zepeda settlement. Pls.' Opp'n to Mot. to Extend Deadline to File Mot. for Prelim. Approval at 2-3, Dkt. 88 at 2-3; 11/27/12 Order at 2, Dkt. 122; 2/24/14 Order at 5. Among other things, Trubitsky commenced a new lawsuit against eBay, styled as Dunkel, et al. v. eBay, Inc., No. C 12-1452 EJD, and moved for an order permitting the Dunkel plaintiffs to intervene in the Zepeda action. Id. In addition, Trubitsky separately sought to take control of the Zepeda action by resurrecting her dormant motions to consolidate Zepeda and Fernando, to be appointed lead counsel, and have those motions heard prior to Plaintiffs' motion for preliminary approval. See Fernando, Dkt. 79, 51.[5] The Court denied all motions without prejudice. 11/27/12 Order, Dkt. 122. Finding that it was in the best interest of all parties to resolve their differences and reach a global settlement, the Court instead referred the parties to Magistrate Judge Nathanael Cousins for a joint, mandatory settlement conference relating to Zepeda, Fernando and Dunkel. Id. at 4. Judge Edward Davila, who was presiding over the Dunkel action, also referred his case to Judge Cousins for the settlement conference.

         The global settlement conference was originally scheduled for January 17, 2013, but was reset to February 7, 2013. Fernando, Dkt. 84, 88. On February 7, 2013, counsel in Zepeda, Fernando and Dunkel appeared, though none of the Fernando plaintiffs attended the settlement conference, as required. Id., Dkt. 95. Judge Cousins continued the matter to the next day for further settlement discussions. Id. Trubitsky and her clients, however, failed to appear for the second day of the settlement conference and no settlement was reached in Fernando. 2/8/13 Minute Order, Dkt. 133. Accordingly, Judge Cousins issued an order to show cause (“OSC”) directing Trubitsky and the Fernando plaintiffs to show cause why that action should not be dismissed, civil sanctions should not be imposed, a payment of expenses to the other participants in the settlement conference should not be awarded, and/or the pro hac vice admission of Trubitsky should not be revoked. Order to Show Cause, Dkt. 135; Fernando, Dkt. 100.[6] The Fernando action was stayed until Judge Cousins later vacated the OSC. Fernando, Dkt. 158 at 9, 169.[7]

         C. Motions for Preliminary Approval

         1. Original Settlement

         Following the unsuccessful global settlement conference before Judge Cousins, the Zepeda plaintiffs filed a renewed motion for preliminary approval, based principally on the settlement they had previously reached with PayPal and eBay in May and December 2011. Dkt. 166. On February 24, 2014, the Court denied Plaintiffs' motion on the grounds that the settlement release was overbroad and the Settlement did not provide monetary relief for the class. 2/24/14 Order at 11-12. The Court granted the parties leave to resubmit a renewed motion for preliminary approval within thirty days. Id. at 12. The parties subsequently requested, and the Court granted, several continuances of that deadline in order to facilitate additional settlement discussions. 7/2/14 Order, Dkt. 234.

         2. Revised Settlement

         a) Terms

         The parties participated in two full-day mediations on March 24, 2014, and June 9, 2014, before Magistrate Judge Edward Infante (ret.) of JAMS, which eventually led to an Amendment to Settlement Agreement, which revised certain of the terms of the original Settlement. Todzo Decl. in Supp. of Mot. for Prelim. Approval ¶ 3, Dkt. 275-1. PayPal again agreed to provide the injunctive relief from the original settlement. But unlike its prior version, the revised Settlement created a $3, 200, 000 settlement fund to provide two forms of monetary relief to the class members who had a hold placed on their account: (1) a Basic Claim, which is a guaranteed payment based on the amount and length of a hold or reserve; and (2) an Alternate Claim, which compensates for business damages, subject to proof of such damages by Claims Class members. Am. Settlement Agt. §§ 1.2, 1.3, Dkt. 235-1. The payments for Basic Claims are equal to two-thirds of the average amount of interest at market rates[8] that would have accrued on the funds subject to a hold or reserve, subject to a $3 floor and rounded to the nearest $1 or $10, as follows:

LENGTH OF HOLD/RESERVE

HOLD/RESERVE UNDER $1, 000

HOLD/RESERVE UP TO $1, 000

HOLD/RESERVE OVER $10, 000

1-30 days

$3.00

$3.00

$3.00

31-90 days

$3.00

$5.00

$150.00

91-150 days

$3.00

$10.00

$100.00

Over 150 days

$14.00

$25.00

$440.00

         Alternate Claims will be paid in full, subject to proof, up to an individual cap of $2, 000 per claim. Id. § 5.1. If the total of Alternate Claims (including administration expenses associated with those claims) exceeds $800, 000, the Alternate Claims payments will be reduced on a pro-rata basis. Id. § 5.5.

         Of the $3, 200, 000 Settlement Fund, at least $1, 840, 000 will be available to pay Basic Claims. Id. § 4.4. If the Settlement Fund is not exhausted by the payment of Basic Claims, attorneys' fees and administrative costs, then up to an additional $200, 000 from the Settlement Fund may be used to pay Alternate Claims. Id. §§ 4.5, 5.4. If the additional $200, 000 is insufficient to cover all Alternate Claims, Defendants will pay an additional $800, 000 to accommodate those claims. Id. § 5.5. Any leftover funds from uncashed settlement checks will be distributed on a cy pres basis to the EFF, a non-profit organization that works to defend civil liberties in the digital world, including the rights of users of commercial websites, such as PayPal. Id. § 4.7. Notably, the Settlement provides for the upward proration of payments to Claims Class members to ensure that the maximum possible relief goes to Settlement Class Members rather than a cy pres recipient, and that the only funds that need to be distributed on a cy pres basis are funds from uncashed settlement checks. Id. § 5.4.

         Consistent with the above, the Settlement creates two Settlement Classes: A Claims Class and an Injunctive Relief Class. The Claims Class is comprised of “all current and former users of PayPal in the United States who: (1) had an active PayPal account between April 19, 2006 and the date of entry of the Preliminary Approval Order; and (2) had a hold or reserve placed on the account and/or the account was closed or suspended by PayPal.” Id. § 1.6. The Claims Class is intended to address claims for damages allegedly resulting from either a hold or a reserve on funds held in a PayPal account, or due to the suspension or closure of a PayPal account. Id. §§ 1.6, 1.7.

         The Injunctive Relief Class is defined as “all current and former users of PayPal in the United States who had an active PayPal account between April 19, 2006 and the date of entry of the Preliminary Approval Order.” Id. § 1.19. The Injunctive Relief Class is intended primarily to address claims that are not based on damages that arise from a violation of the settlement in Comb and related violations of the EFTA, including PayPal's alleged failure to provide annual error-resolution notices and monthly account statements. Id. §§ 1.19, 1.20.

         b) Second Motion for Preliminary Approval

         Plaintiffs filed a second motion for preliminary approval based on the revised settlement, which the Court denied on March 25, 2015. Dkt. 264. The Court found that while the revised settlement agreement resolved many of the concerns that resulted in the rejection of the prior agreement, two obvious deficiencies remained. First, the Court questioned whether it was appropriate to allege, much less settle, claims based on alleged violations of the Comb settlement. Since the judgment in that action specified that any disputes concerning the agreement must be litigated in that case, the Court found that this action was not the proper forum to address or release any claims arising from that settlement. Id. at 11. Second, the Court noted that, although the issue was raised in the order denying the first motion for preliminary approval, the parties still had not explained why both settlement classes include persons who have been PayPal accountholders since 2006, even though the practices at issue allegedly began in 2008. Id. at 12.

         3. Amendment to the Revised Settlement

         a) Terms

         Following the denial of Plaintiffs' second motion for preliminary approval, the parties agreed upon amendments to the settlement agreement. Todzo Decl. ¶ 6 & Ex. 1 (Amendment to Settlement Agreement), Dkt. 275-1, 275-2. To address the Court's concerns, the parties agreed that Plaintiffs would file a TAC that omits any claims based on the alleged breach of the Comb Settlement. Todzo Decl. Ex. 1 ¶ 5, Dkt. 275-2. The settlement release has correspondingly been modified to eliminate any reference to the Comb Settlement. Id. ¶¶ 1, 2. With regard to the issue pertaining to the Class Period, the parties continued to propose that the Class Period for both of the proposed settlement classes should run from April 19, 2006, which is four years prior to the filing of the Complaint in the Fernando Action on April 19, 2010. TAC ¶ 59. Importantly, they explained that this Class Period is appropriate because Plaintiffs claims include allegations based on the closing or suspending of accounts and claims arising from PayPal's handling of buyers' accounts, and these activities occurred both before and after 2008. To that end, the proposed TAC adds allegations that PayPal began engaging in the disputed practices prior to 2006. Id. ¶ 39.

         b) Third Motion for Preliminary Approval

         Based on the above amendments, Plaintiffs filed a third motion for preliminary approval on September 9, 2015. Dkt. 275. In connection with said request, Plaintiffs sought: (1) provisional certification of the two proposed Settlement Classes (i.e., the Claims Class and the Injunctive Relief Class); (2) the appointment of (a) the Complex Litigation Group, (b) Lexington Law Group, (c) Farmer, Jaffe, Weissing, Edwards, Fistos & Leherman, P.L., and (d) Seeger Weiss LLP, as Class Counsel; (3) approval of the proposed Class Notice; and (4) and the scheduling of a final approval hearing. Proposed Order, Dkt. 275-8. Non-party Reginald Burgess (“Burgess”), acting pro se, filed an Objection to Preliminary Approval of Settlement Motion and Demand Opt-Out if Proposed Settlement in Approved. Dkt. 277.

         On November 5, 2015, the Court granted Plaintiffs' motion for preliminary approval. Dkt. 281. In its Order, the Court conditionally certified a proposed Settlement Class comprised of a Claims Class and an Injunctive Relief Class, pursuant to Federal Rule of Civil Procedure 23(a) and (b)(2) & (3). The Injunctive Relief Class is defined as: “All current and former users of PayPal in the United States who had an active PayPal account between April 19, 2006 and the date of entry of the Preliminary Approval Order.” The Claims Class is defined as: “All current and former users of PayPal in the United States who: (1) had an active PayPal account between April 19, 2006 and the date of entry of the Preliminary Approval Order; and (2) had a hold or reserve placed on the account and/or the account was closed or suspended by PayPal. Excluded from the Claims Class are judicial officers presiding over this action and the members of their immediate families and judicial staff.”

         The Court appointed Plaintiffs Moises Zepeda, Michael Spear, Ronya Osman, Brian Pattee, Casey Ching, Denae Zamora, Michael Lavanga and Gary Miller as class representatives pursuant to Rule 23 of the Federal Rules of Civil Procedure. Only Jeffrey A. Leon of Quantum Legal LLC and Mark N. Todzo and Howard Hirsch of Lexington Law Group were appointed as counsel for the Settlement Class. Epiq Systems (“Epiq”) was appointed as claims administrator, and deemed responsible for performing the duties described in the Amended Settlement Agreement. The preliminary approval order approved, as to form and content, the proposed form of notice to the class via email notice, postcard notice, an Internet notice program and a settlement website including a long-form notice. 10/5/15 Order Granting Pls.' Motion for Prelim. Approval of Am. Class Action Settlement Agt. at 14-15, Dkt. 281. Following preliminary approval, notice of the Settlement was served on the Class Members. Marr Decl. ¶¶ 4-14, Dkt. 340-2; Leon Decl. ¶ 4, Dkt. 340-1. Per the terms of the Settlement, PayPal provided email notice to approximately 100 million PayPal customers, including approximately 10.5 million Claims Class members. Mot. for Final Approval at 10, Dkt. 340.

         D. Final Approval Schedule and Process

         On January 29, 2016, the Court approved the final approval schedule proposed by the parties. Dkt. 285, 290. On the same day, Plaintiffs filed their TAC, as contemplated by the Settlement. Dkt. 291. In March 2016, Class Counsel and Fernando counsel filed their respective motions for attorneys' fees in anticipation of the fairness hearing then scheduled for July 13, 2016. Dkt. 295, 296, 297. Shortly before the date set for the fairness hearing, however, the parties notified the Court that some members of the Settlement Class may not have received notice in accordance with the Court's scheduling Order. Stipulation, Dkt. 325. Thus, at the parties' request, the Court vacated and reset the fairness hearing and extended the deadlines governing notice and for the submission of claim forms, opt-out requests and objections to the Settlement. 7/6/16 Order, Dkt. 329; see also Wilson Decl. ¶ 2-4 & Exs. A & B, Dkt. 350.[9]

         As of November 4, 2016, the claims administrator has received 392, 191 claims, comprised of 379, 720 Basic Claims and 12, 448 Alternate Claims submitted electronically, and 23 paper claims by mail. Marr Decl. ¶ 8. Epiq has received a total of 75 opt-outs. Id. ¶ 7. In response to Notice of the proposed Settlement, the Court has received a total of 10 objections from: (1) Miorelli; (2) Collins Objectors; (3) Tammy Perkins (“Perkins”); (4) Larry A. Guess (“Guess”); (5) Glenn Greene (“Greene”); (6) Paul Leach (“Leach”); (7) Frank Phillips (“Phillips”); (8) Steve Schroeder (“Schroeder”); and (9) Carmen DeBellis (“DeBellis”). Dkt. 292, 293, 294, 303, 315, 317, 333, 337, 338, 339.

         Miorelli is an out of state attorney and a professional objector. See In re: Target Corp. Customer Data Sec. Breach Litig., No. MDL142522PAMJJK, 2016 WL 4942081, at *1 (D. Minn. Jan. 29, 2016). Collins Objectors are represented by the attorneys who are suing PayPal and eBay in a competing state court class action styled as, Chen v. eBay, Inc., Alameda Cty. Super. Ct., No RG 15780778. Perkins is represented by attorney Matthew Kurilich, a professional objector. The remaining Objectors submitted pro se objections.[10]

         E. Motion for Final Approval and Fee Motions

         On November 14, 2016, Plaintiffs filed a Motion for Final Approval of Amended Class Action Settlement. In their motion, Plaintiffs seek an order (1) conferring final approval of the Settlement Agreement and Amendment to Settlement Agreement, see Dkt. No. 275-2; and (2) confirming certification of the Settlement Class as defined therein. In addition, Plaintiffs' motion responds to each of the objections to the Settlement. Separately, in their companion Motion for Award of Attorneys' Fees, and Reimbursement for Costs and Service Awards, Plaintiffs seek payment of: (1) $902, 000 in attorneys' fees; (2) $38, 000 in costs; and (3) incentive (service) awards in the amount of $20, 000 ($2, 500 for each of the named plaintiffs in Zepeda). Fernando counsel filed separate fee motions requesting payment of $212, 500.

         The hearing on the aforementioned motions took place on February 7, 2017. Mark Todzo and Jeffrey Leon appeared on behalf of the Zepeda Plaintiffs; David Hicks and Christine Tour-Sarkissian (“Tour-Sarkissian”)-specially appearing for Trubitsky- appeared on behalf of the Fernando Plaintiffs; Julia Strickland and David Moon appeared by telephone for Defendants eBay and Paypal; Anthony Ferrigno appeared for Collins Objectors; and Objector Miorelli appeared pro se. At the conclusion of the hearing, the Court took all matters under advisement.[11]

         II. FINALAPPROVAL

         A. Legal Standard

         The Ninth Circuit maintains “a strong judicial policy” that favors class action settlements. Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015). Nonetheless, the Court may finally approve of a class settlement “only after a hearing and on finding that it is fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2). To assess the fairness of a settlement, courts are to consider the eight “Churchill factors, ” including:

(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 view of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement.

In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 944 (9th Cir. 2015) (quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)). “Additionally, when (as here) the settlement takes place before formal class certification, settlement approval requires a ‘higher standard of fairness.'” Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 2012) (citation omitted). The rationale for the heightened standard is to ensure that “class representatives and their counsel have [not] sacrificed the interests of absent class members for their own benefit.” Id.

         Courts must examine “the settlement taken as a whole, rather than the individual component parts” for fairness. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). The Court may approve or reject the settlement and cannot “delete, modify or substitute certain provisions” of the settlement. Id. “The proposed settlement is not to be judged against a hypothetical or speculative measure of what might have been achieved by the negotiators.” Officers for Justice v. Civil Serv. Comm'n of San Francisco, 688 F.2d 615, 624 (9th Cir. 1982). Rather, “the court's intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” Id. To that end, the Court should consider whether there are any objections to the proposed settlement ...


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