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Cohen v. Trump University, LLC

United States District Court, S.D. California

March 31, 2017

SONNY LOW, J.R. EVERETT and JOHN BROWN, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,
v.
TRUMP UNIVERSITY, LLC, a New York Limited Liability Company, and DONALD J. TRUMP, Defendants. ART COHEN, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
DONALD J. TRUMP, Defendant.

          ORDER: (1) GRANTING JOINT MOTION FOR FINAL APPROVAL OF THE PROPOSED CLASS ACTION SETTLEMENT; AND (2) GRANTING PLAINTIFFS' MOTION FOR APPROVAL OF CLASS REPRESENTATIVE AWARDS [10CV940, ECF NOS. 589, 590.] [13CV2519, ECF NOS. 294, 295.]

          Hon. Gonzalo P. Curiel United States District Judge

         On February 17, 2017, the Parties in the above-captioned, related actions (collectively, “Actions”; individually, “Low” and “Cohen”) jointly moved the Court for final approval of the proposed class action settlement (“Settlement”).[1] (Low, Dkt. No. 589; Cohen, Dkt. No. 294.)[2] Plaintiffs also moved for approval of class representative awards. (Low, Dkt. No. 590; Cohen, Dkt. No. 295.) Defendants do not oppose the motion.

         The Court held a final approval hearing on March 30, 2017. (Low, Dkt. No. 617; Cohen, Dkt. No. 304.) Amber Eck, Jason Forge, Patrick Coughlin, Rachel Jensen, Daniel Pfefferbaum, and Jeffrey Stein appeared on behalf of Plaintiffs. (Id.) David Kirman, Daniel Petrocelli, and Jill Martin appeared on behalf of Defendants. (Id.) Gary Friedman and IIann Maazel appeared on behalf of objector Sherri B. Simpson. (Id.)

         The Court has now considered: (1) the memorandum submitted in support of the Joint Motion for Final Approval of Class Action Settlement (“Final Approval Motion”); (2) the declarations submitted in support of the Final Approval Motion; (3) the declaration submitted in support of the Service Award Motion; (4) the Stipulation of Class Action Settlement, including its Exhibits (collectively, “Agreement”); (5) the Objection of Sherri B. Simpson, accompanying declarations, and responses thereto; (6) the entire record in these Actions, including, but not limited to, the Motion for Preliminary Approval of Class Action Settlement (“Preliminary Approval Motion”), and the declarations and exhibits submitted in support thereof; (7) the oral presentations at the Fairness Hearing; (8) the Court's findings and conclusions contained in its Preliminary Approval Order; (9) this Court's experiences and observations while presiding over these Actions, and the Court's file herein; and (10) the relevant law.

         Having considered the above, the Court GRANTS the Parties' joint motion for final approval of the Settlement and GRANTS Plaintiffs' motion for approval of class representative awards.

         RELEVANT PROCEDURAL BACKGROUND[3]

         On December 19, 2016, the Parties entered into a Stipulation of Class Action Settlement (“Agreement”), after arm's-length settlement negotiations overseen by the Honorable Jeffrey T. Miller. (Low, Dkt. No. 583; Cohen, Dkt. No. 281.) On December 20, 2016, the Court, after determining the proposed Settlement to be fair, reasonable, adequate, and within the range of possible approval, entered an Order (1) preliminarily approving the Settlement, (2) directing dissemination of the Class Notice, and (3) setting a final approval hearing. (Low, Dkt. No. 584; Cohen, Dkt. No. 282.)

         On December 29, 2016, Defendants effectuated the notice required by the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1715(b), to all appropriate federal and state officials. (See Low, Dkt. No. 585; Cohen, Dkt. No. 283). On January 4, 2017, the Better Business Bureau of Metropolitan New York (“Settlement Administrator”) mailed and emailed the Long-form Notice and Claim Form to 8, 253 potential Class Members and published the Summary Notice in USA Today. (See Low, Dkt. No. 589-3, Declaration of Edward A. Wulff in Support of Joint Motion for Final Approval of Class Action Settlement (“Wulff Decl”) ¶¶ 6, 11; Cohen, Dkt. No. 294-3, Wulff Decl. ¶¶ 6, 11.)

         On January 17, 2017, Trump University's (“TU's”) successor entity, Trump Entrepreneur Initiative (“TEI”), paid the full $25 million Settlement Amount to the Escrow Agent. (See Low, Dkt. No. 589-2, Declaration of Rachel L. Jensen in Support of Joint Motion for Final Approval of Class Action Settlement (“Jensen Decl”) ¶ 14; Cohen, Dkt. No. 294-2, Jensen Decl. ¶ 14.) The Escrow Agent distributed $4 million to the New York Attorney General (“NYAG”) for settlement of the NYAG action pursuant to the Agreement and the Memorandum of Agreement. (See id.) The remaining $21 million has been invested and is earning interest for the benefit of Class Members. (See id.)

         The Claims Deadline and Objection Date expired on March 6, 2017. The Settlement Administrator received a total of 4, 090 Claim Forms from potential Class Members submitted or postmarked by March 6, 2017. (Low, Dkt. No. 612-2, Reply Declaration of Edward A. Wulff (“Wulff Reply Decl”) ¶ 5; Cohen, Dkt. No. 301-2, Wulff Reply Decl. ¶ 5.) Only one procedurally valid objection was filed.[4] (Low, Dkt. Nos. 592-97.)

         LEGAL STANDARD

         The Ninth Circuit adheres to a “strong judicial policy that favors settlements, particularly where complex class action litigation is concerned.” Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992); see also Rodriguez v. W. Publ 'g Corp., 563 F.3d 948, 965 (9th Cir. 2009) (“We put a good deal of stock in the product of an arms-length, non-collusive, negotiated resolution[.]”). “[T]he decision to approve or reject a settlement is committed to the sound discretion of the trial judge [.]” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998).

         Federal Rule of Civil Procedure 23(e) provides that a court may approve a proposed settlement “only after a hearing and on finding that it is fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2); see also Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003). In making this determination, a district court must consider a number of factors, including, but not limited to:

the strength of 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.

Staton, 327 F.3d at 959 (internal citation and quotation marks omitted).

         In examining the settlement for “overall fairness, ” a court must review the settlement “as a whole, rather than the individual component parts.” Hanlon, 150 F.3d at 1026. A court cannot “delete, modify or substitute certain provisions.” Officers for Justice v. Civil Serv. Comm 'n of City & Cnty. of San Francisco, 688 F.2d 615, 630 (9th Cir. 1982). Rather, “[t]he settlement must stand or fall in its entirety.” Hanlon, 150 F.3d at 1026.

         DISCUSSION

         I. The Settlement is Fair, Adequate, and Reasonable

         The Court concludes that the Settlement is fair, adequate, and reasonable in light of the following factors.

         A. The Strength of Plaintiffs' Case

         The Settlement reflects both the strength of Plaintiffs' case and the strength of Defendants' defense. Having adjudicated numerous dispositive motions in both Actions, and having concluded all pretrial proceedings in Low, the Court has been “exposed to the litigants, and their strategies, positions and proofs, ” and is duly “aware of the expense and possible legal bars to success.” Officers for Justice, 688 F.2d at 626 (quoting Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30, 34 (3d Cir. 1971)). Plaintiffs survived substantive hurdles, including class certification, motions to dismiss, motions for summary judgment, and motions for decertification. Defendants likewise zealously litigated the Actions, ultimately securing the decertification of damages issues in Low. Moreover, the Court concludes that the proposed Settlement, reached after arm's-length negotiations overseen by the Honorable Jeffrey T. Miller, was “not the product of fraud or overreaching by, or collusion between, the negotiating parties.” Id. at 625. Based on the Court's evaluation of the Actions, the Court concludes that this factor weighs in favor of final approval of the Settlement.

         B. The Risk, Expense, Complexity, and Likely Duration of Further Litigation; and the Risk of Maintaining Class Action Status Throughout the Trial

         Settlement is favored where a case is “complex and likely to be expensive and lengthy to try.” Rodriguez v. W. Publ 'g Corp., 563 F.3d 948, 966 (9th Cir. 2009). Beyond the “inherent risks of litigation, ” Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 1993), there were numerous risks specific to the instant Actions. Class Counsel acknowledges that in Low, Plaintiffs faced challenges, including: obtaining a unanimous jury verdict on liability against then-President Elect Trump, if the trial began as scheduled, or against President Trump, if the trial were continued; prevailing in thousands of individual damages proceedings, which, by any estimate, would have taken several years to complete; collecting a judgment against TU; and prevailing in a lengthy appeal process, with the corresponding risk that Class Members would receive no recovery. (Low, Dkt. No. 589-2, Jensen Decl. ¶ 7; Dkt. No. 294-2, Jensen Decl. ¶ 7.) Class Counsel further acknowledges that in Cohen, Plaintiff risked the possibilities that: the Court would grant Defendant's motion for decertification in its entirety, or decertify damages as it did in Low; the Court would stay the proceedings during President Trump's tenure; Plaintiff would be unable to obtain a unanimous jury verdict against President Trump on his civil RICO claim; and Plaintiff may not prevail in a lengthy appeal process, with the corresponding risk that Class Members would receive no recovery. (Low, Dkt. No. 589-2, Jensen Decl. ¶ 8; Dkt. No. 294-2, Jensen Decl. ¶ 8.)

         In light of the above, the Court concludes that the risks, expense, complexity, and likely duration of further litigation weigh in favor of final approval.

         C. The Amount Offered in Settlement

         A settlement is not judged against only the amount that might have been recovered had the plaintiff prevailed at trial; nor must the settlement provide full recovery of the damages sought to be fair and reasonable. See Linney v. Cellular Alaska P 'ship, 151 F.3d 1234, 1242 (9th Cir. 1998). “Naturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with litigation.” Officers for Justice, 688 F.2d at 624 (quoting United States v. Armour & Co., 402 U.S. 673, 681 (1971)). “It is well-settled law that a cash settlement amounting to only a fraction of the potential recovery will not per se render the settlement inadequate or unfair.” Id. at 628.

         In granting the Parties' joint motion for preliminary approval, the Court concluded that the amount offered in settlement was fair, reasonable, and adequate. (See Low, Dkt. No. 584 at 3-5; Cohen, Dkt. No. 282 at 3-5.) At the time the Court preliminarily approved the Settlement, it was estimated that Eligible Class Members would receive recovery amounting to 50% of what they spent on TU Live Events, less any refunds received. (Low, Dkt. No. 583 at 11; Cohen, Dkt. No. 281 at 11.) The Court further observed that Eligible Class Members may potentially recover more than 50% of what they spent: if any money remains in the Net Settlement Fund after the initial distribution, the Settlement Administrator will make additional pro rata distributions to Eligible Class Members who have cashed their Award checks, until the Net Settlement Fund is exhausted. (Low, Dkt. No. 583-1 ¶ III.8; Cohen, Dkt. No. 281-1 ¶ III.8.)

         Presently, the Court confirms its preliminary finding in light of updated information from the Parties. The recovery rate for Eligible Class Members is likely to greatly exceed the 50% recovery rate preliminarily approved by the Court. According to the Parties' and the Settlement Administrator's records, it is estimated that Eligible Class Members will receive over 80%-with 80% being a conservative estimate-of their Net Purchase Amounts.[5] (Low, Dkt. No. 612 at 8; Cohen, Dkt. No. 301 at 8.) At the final approval hearing, Class Counsel represented to the Court that Eligible Class Members are likely to receive at least 90% of their Net Purchase Amounts.

         As the Court previously noted, courts have approved settlements with recovery rates far lower than provided for in the instant Settlement. See, e.g., Bellinghausen v. Tractor Supply Co., 306 F.R.D. 245, 256 (N.D. Cal. 2015) (approving settlement where the “common fund represent[ed] between 27 percent and 11 percent of the total potential recovery”); Greko v. Diesel U.S.A., Inc., No. 10-CV-02576 NC, 2013 WL 1789602, at *5 (N.D. Cal. Apr. 26, 2013) (approving settlement in which the average settlement payment amounted to under 3% of the gross settlement value); In re Omnivision Techs., Inc., 559 F.Supp.2d 1036, 1042 (N.D. Cal. 2008) (approving settlement in which class received payments in excess of 6% of potential damages); Glass v. UBS Fin. Servs., Inc., No. C-06-4068 MMC, 2007 WL 221862, at *4 (N.D. Cal. Jan. 26, 2007), aff'd, 331 F. App'x 452 (9th Cir. 2009) (approving settlement in which amount of settlement amounted to 25% to 35% of potential damages).

         Here, the amount offered in settlement provides significant and immediate recovery for Eligible Class Members. The extraordinary amount of recovery for Eligible Class Members-an estimated 80%, and potentially higher-is all the more exceptional when viewed in light of the risk of establishing liability at trial, the likelihood of appeal, the possibility of reversal, the complexity of conducting thousands of individual damages determinations, and the likely lengthy duration of further litigation. Moreover, none of the amount offered in settlement will inure to Class Counsel's benefit, as Class Counsel do not seek any fees or costs. The Court finds that the amount offered in settlement is fair, adequate, and reasonable, and accordingly concludes that this factor weighs in favor of final approval.

         D. The Extent of Discovery Completed and the Stage of the Proceedings

         Where a “case is near trial, and the parties have conducted extensive discovery” and thoroughly litigated the issues, the extent of discovery and the stage of the proceedings weigh in favor of the proposed settlement. Cervantez v. Celestica Corp., No. EDCV 07-729-VAP, 2010 WL 2712267, at *4 (CD. Cal. July 6, 2010). Here, the Parties conducted extensive fact discovery for four years, including propounding and responding to hundreds of requests for production of documents, special interrogatories, and requests for admission; reviewing half of a million pages of produced documents; taking and defending sixty-five depositions; and briefing and arguing over a dozen discovery disputes. (Low, Dkt. No. 589-2, Jensen Decl. ¶¶ 4-5; Dkt. No. 294-2, Jensen Decl. ¶¶ 4-5.) The Parties also completed expert discovery in Cohen, including taking and defending expert depositions, and briefing and arguing the Parties' five motions to exclude expert testimony. (Id.) In total, the Parties briefed 156 motions before executing the Settlement Term Sheet on November 18, 2016. (Id.)

         Moreover, all pretrial proceedings had concluded in Low. The Court ruled on fifteen substantive and procedural motions in limine, and the liability phase of trial was scheduled to commence on November 28, 2016. (Low, Dkt. Nos. 502, 572.) When the Parties settled the Actions on the eve of trial, (Low, Dkt. No. 577), the Parties were in a position to clearly and frankly evaluate the strengths and weaknesses of their respective cases. In sum, the Court concludes that the extent of discovery and the stage of the proceedings weigh in favor of final approval of the Settlement.

         E. The Experience and Views of Counsel

         Where “[b]oth Parties are represented by experienced counsel, ” the recommendation of experienced counsel to adopt the terms of the proposed settlement “is entitled to great deal of weight.” In re Immune Response Sec. Litig., 497 F.Supp.2d 1166, 1174 (S.D. Cal. 2007). In particular, “[t]he recommendations of plaintiffs' counsel should be given a presumption of reasonableness.” In re Omnivision Techs., Inc., 559 F.Supp.2d 1036, 1043 (N.D. Cal. 2008) (internal citation and quotation marks omitted).

         As the Court noted in preliminarily approving the Settlement, both Parties are represented by experienced, able counsel, and counsel on both sides believe that the Settlement provides a fair, adequate, and reasonable recovery for Class Members. Moreover, not only have Class Counsel (Robbins Geller Rudman & Dowd LLP (“RGRD”) and Zeldes Haeggquist & Eck, LLP (“ZHE”)) actively litigated the instant Actions for nearly seven years, they have significant experience prosecuting class actions and handling complex litigation. (Low, Dkt. No. 583 at 17-18; Cohen, Dkt. No. 281 at 17-18.) After carefully evaluating the strengths and weaknesses of the Parties' positions in both Actions, Class Counsel attest to their “confidence] that the Settlement represents a favorable resolution, which is in the best interests of Class Members.” (Low, Dkt. No. 589-2, Jensen Decl. ¶ 9; Dkt. No. 294-2, Jensen Decl. ¶ 9.) In light of the foregoing, the Court concludes that this factor weighs in favor of final approval of the Settlement.

         F. The Presence of a Governmental Participant

         After the Court preliminarily approved the Settlement, Defendants sent CAFA notices to the Attorneys General of all states, territories, and the District of Columbia, as well as to the Attorney General of the United States. (Low, Dkt. No. 613 at 2; Cohen, Dkt. No. 302 at 2.) Defendants informed the Court that to Defendants' knowledge, no government entity has objected to the Settlement. (See id.) Accordingly, the Court finds that Defendants are in full compliance with CAFA, 28 U.S.C. § 1815, and concludes that this factor weighs in favor of final approval. See, e.g., Schuchardt v. Law Office of Rory W. Clark,314 F.R.D. 673, 685 (N.D. Cal. 2016) ...


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