United States District Court, N.D. California
ORDER RE PLAINTIFFS' MOTION FOR FINAL APPROVAL OF
CLASS ACTION SETTLEMENT AND MOTION FOR APPROVAL OF CLASS
COUNSEL'S FEES AND EXPENSES AND SERVICE AWARDS TO NAMED
PLAINTIFFS DOCKET NOS. 167, 169
EDWARD
M. CHEN United States District Judge.
Plaintiffs
Ruiqi Ye and Yolin Han (collectively,
“Plaintiffs”) initiated the instant case in
November 2014. See Docket No. 1 (complaint).
Plaintiffs' lawsuit is a putative class action against
Defendant Sephora USA, Inc. based on its decision on or about
November 6, 2014 (i.e., during an annual sale for
“VIB”[1] customers which gives them a 20% discount
on products) to deactivate the accounts of customers who had
e-mail addresses associated with @qq.com; @126.com; or
@163.com. Plaintiffs take the position that the decision to
deactivate was discriminatory, as qq.com, 126.com, and
163.com are domains based in China and the websites are all
in Chinese. Sephora takes the position that, inter
alia, it had a nondiscriminatory motive for its action -
i.e., that it was trying to deactivate the accounts
of resellers and/or bots. In their operative complaint,
Plaintiffs have asserted three claims for relief against
Sephora: (1) violation of 42 U.S.C. § 1981; (2)
violation of 42 U.S.C. § 1982; and (3) breach of
contract.
In
August 2016, Plaintiffs informed the Court that the case had
been settled (with the assistance of Judge Corley).
See Docket No. 130 (notice). Several months later,
in January 2017, the Court granted Plaintiffs' motion for
preliminary approval of the class action settlement.
See Docket No. 161 (order). Currently pending before
the Court is Plaintiffs' motion for final approval, as
well as their related motion for attorney's fees, costs,
and incentive awards.
In
deciding whether to grant final approval, the Court must
consider factors such as the following:
(1) the strength of the plaintiffs' 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.
Churchill Vill., L.L.C. v. GE, 361 F.3d 566, 575
(9th Cir. 2004). The bulk of these factors were already
considered at the preliminary approval phase, and they
counseled in favor of preliminary approval. For example,
Plaintiffs faced a significant risk that no class would be
certified based on Sephora's argument that individualized
issues predominated. The main issues for purposes of final
approval is (1) whether notice to the class was sufficient
and (2) if so, what was the reaction of the class to the
proposed settlement? Based on the supplemental filing
provided by Plaintiffs, see Docket No. 173 (Supp.
Kratz Decl.), the Court is satisfied that the class was
adequately notified of the settlement (e.g., through
mail and/or email notice) and that the means of notice
comported with due process. The vast majority of class
members obtained notice by mail, email, or both. Also, the
reaction of the class has been positive - in response to the
class notice, only three requests for exclusion have been
made and one objection (presenting no substantive content).
See Christensen Decl., Ex. 5 (Kratz Decl.
¶¶ 11-12 & Exs. B-C) (opt-outs and objection).
Accordingly,
the Court hereby grants final approval of the class action
settlement.
As for
the related motion for attorneys' fees, costs, and
incentive awards, the Court grants in part and denies in part
the motion. The Court approves costs, but finds that both the
attorneys' fees and incentive awards requested are
excessive.
As to
fees, Plaintiffs argue that the lodestar method should be
employed because two of their claims are discrimination
claims (§§ 1981 and 1982) for which there is the
possibility of fee-shifting. Cf. Jones v. GN Netcom, Inc.
(In re Bluetooth Headset Prods. Liab. Litig.), 654 F.3d
935, 941 (9th Cir. 2011) (“The award of attorneys'
fees in a class action settlement is often justified by the
common fund or statutory fee-shifting exceptions to the
American Rule, and sometimes by both.”). But
Plaintiffs' claimed lodestar of $745, 306.50 (based on
New York hourly rates) is unreasonable, as is their
alternative lodestar of $633, 510.53 (based on California
hourly rates). The number of hours spent on discovery and for
pleadings and motions appears excessive, and Plaintiffs
achieved only limited success.
Plaintiffs
tout the amounts the claimants will be getting as proof of
success ($123.86 per cash claimant and $247.73 per gift card
claimant) but, if the entire class had made claims, then the
payout would be much smaller, i.e., approximately
$27 (i.e., $405, 777 net settlement fund ÷
15, 054 class members) if no differentiation were made
between gift cards and cash. Moreover, Plaintiffs focus
largely on economic loss and do not adequately account for
alleged discrimination injuries. To the extent Plaintiffs try
to claim success beyond money damages - e.g.,
“[a]bsent this litigation, the likelihood of [the]
accounts being reactivated was extremely low, ” Fee
Mot. at 10 -that is speculative.
In
addition, it is worth noting that some of the
“successes” for the class were based on the
Court's actions, and not those of Plaintiffs'
counsel. For example, Plaintiffs were initially content with
email notice only (which had limited success). Only with the
Court's pressing did the parties agree to additional mail
notice. Also, the Court was required to press for no
“implied reverter” if a gift card was not used
within a year.
Finally,
Plaintiffs ignore the percentage method cross-check, which is
particularly important given that the settlement here is
taking place within the context of Rule 23. See Feder v.
Frank (In re HP Inkjet Printer Litig.), 716 F.3d 1173,
1190 (9th Cir. 2013) (Berzon J., dissenting) (stating that,
“'[a]lthough a lodestar figure is
'presumptively reasonable, ' district courts have an
independent obligation under Federal Rule of Civil Procedure
23(h) to ensure the reasonableness of fees”); see
also Munoz v. UPS Ground Freight, Inc., No. C 07-00970
MHP, 2009 U.S. Dist. LEXIS 48755, at *4-6 (N.D. Cal. June 5,
2009) (“The use of the percentage method for a common
fund is appropriate even when the statute under which
plaintiffs sued has a fee-shifting provision”).
Plaintiffs' request for $418, 560 in attorney's fees,
out of a gross settlement fund of $950, 000 amounts to a fee
request of 44%. That is far above the 25% benchmark approved
by the Ninth Circuit. The effort spent and results obtained
do not warrant an excessive percentage so far above the 25%
presumptive benchmark.
Taking
into account all of the circumstances, the Court concludes
that a fee award of $316, 666 is reasonable. That sum is
approximately 33 1/3% of the gross settlement fund (well
above the 25% benchmark still) and better reflects the
limited success achieved. The percentage method provides a
fair cross-check on the lodestar.
As for
incentive awards, each named plaintiff has asked for $5, 000.
Although $5, 000 in this District is, in general,
presumptively reasonable, see Bellinghausen v. Tractor
Supply Co.,306 F.R.D. 245, 266 (N.D. Cal. 2015)
(Corley, J.), that does not mean that such an award is
automatically given. See also Id. at 267 (noting
that “[i]ncentive awards typically range from $2, 000
to $10, 000”). “A class representative must
justify an incentive award through 'evidence
demonstrating the quality of plaintiff s representative
service, ' such as 'substantial efforts taken as
class representative to justify the discrepancy between [his]
award and those of the unnamed plaintiffs.'”
Id. at 266; see also In re LinkedIn User Privacy
Litig., 309 F.R.D. 573, 591 (N.D. Cal. 2015) (Davila,
J.) (stating that “[t]o determine the appropriateness
of incentive awards a district court should use 'relevant
factors includ[ing] the actions the plaintiff has taken ...