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In re HP Printer Firmware Update Litigation

United States District Court, N.D. California, San Jose Division

June 28, 2019





         The court approved the parties' settlement of this consumer class action suit. Presently before the court is Plaintiffs' motion for attorneys' fees in the amount of $2, 750, 000, costs in the amount of $83, 011.78 and $5, 000 service awards to each of the five class representatives. Having considered the parties' briefing and conducted an in camera review of the billing records, the court will grant in part and deny in part Plaintiffs' motion for attorneys' fees, and will grant Plaintiffs' motion for costs and service awards.


         Numerous consumers reported that their HP printers unexpectedly stopped working on or around September 13, 2016. Approximately a month later, Plaintiffs Richard San Miguel and DeLores Lawty filed suit, alleging that HP had violated California's Unfair Competition Law (“UCL”) by executing a firmware update that disabled HP inkjet printers that were fitted with certain replacement ink cartridges manufactured by HP's competitors. Dkt. No. 1. Plaintiffs alleged that the failed HP printers displayed a false or misleading error message that the ink cartridges were “damaged or missing, ” when in fact HP had disabled the printers to induce purchases of its own higher-priced cartridges. Id. ¶ 2. Approximately a week after the lawsuit was filed, HP issued a modified apology on its website to add an offer of a remedial “patch” that HP claimed would restore printer functionality.

         In December of 2016, HP moved to dismiss the action, arguing that it had no duty to keep its printers compatible with third-party ink cartridges with infringing security chips, and that it made no representation of that compatibility. Dkt. No. 19. After a few cases were related and consolidated, Plaintiffs filed a consolidated amended complaint adding several more claims. Dkt. No. 60. HP renewed its motion to dismiss (Dkt. No. 66) and the matter was taken under submission. Dkt. No. 83.

         Meanwhile, the parties engaged in discovery. Plaintiffs learned that HP's “Dynamic Security” technology caused the printers to stop functioning, but that HP had “turned off” the Dynamic Security technology in the Class Printers as of December 2017. Dynamic Security is “an HP-developed technology which causes Class Printers to run authentication checks that change over time on installed ink cartridges to determine whether the ink cartridges contain a non-HP security chip, and that may prevent Class Printers from operating with any such ink cartridges.” Dkt. No. 110-2, p. 6.

         Plaintiffs later moved for a hybrid Rule 23(b)(2)-(c)(4) certification of (1) a subclass of California printer owners seeking injunctive relief under the UCL, and (2) a national class of consumers who experienced print interruptions for purposes of adjudicating the liability elements of the Computer Fraud and Abuse Act (“CFAA”) and trespass-to-chattels claims, with individualized damages proceedings to follow. Dkt. No. 91. Plaintiffs also sought and were granted leave to file a consolidated amended complaint. Dkt. Nos. 92, 94. The parties stipulated that the pending motion to dismiss would apply to the consolidated amended complaint. Dkt. No. 92.

         In March of 2018, the court entered an order granting in part and denying in part HP's motion to dismiss. Dkt. No. 97. The court upheld Plaintiffs' computer intrusion claims under the CFAA and the California Penal Code, the trespass claims at common law (id. at 7-13), and the statutory consumer fraud claims to the extent they were based on HP's misleading error messages and material omissions (id. at 16-17). The court dismissed Plaintiffs' UCL unfairness and tortious interference claims and others with leave to amend. Id. at 17-23. A few days later the parties entered into settlement discussions and succeeded in reaching a settlement in principle in mid-July of 2018. Dkt. No. 106. In November of 2018, the court granted Plaintiffs' motion for preliminary approval of the proposed settlement (“Settlement”), and in April of 2019, the court granted final approval of the settlement. Dkt. Nos. 116, 139.

         Through the Settlement, HP agreed to pay $1.5 million in compensation to owners of certain HP inkjet printers. Dkt. No. 110-2 ¶ 1.32. HP also agreed to pay for all notice and administration costs required to effectuate the Settlement. Id. ¶ 2.2. With respect to non-monetary relief, HP agreed not to reactivate Dynamic Security on the printers at issue. Id. ¶ 2.3. HP also agreed to reimburse Plaintiffs' counsel for out-of-pocket litigation costs that were “actually and reasonably incurred.” Id. ¶ 6.1. The Settlement further provided that Plaintiffs' counsel would apply to the court for attorneys' fees and expenses to be paid by HP. Id.


         A. Attorneys' Fees

         Federal Rule of Civil Procedure 23(h) permits the court to award reasonable attorney's fees and costs in class action settlements as authorized by law or by the parties' agreement. Fed.R.Civ.P. 23(h). Here, the Settlement Agreement provides that “HP shall not dispute that plaintiffs are successful parties for purposes of California Code of Civil Procedure section 1021.5.” Settlement Agreement ¶ 6.1 (Dkt. No. 110-2).

         Under California law, “absent circumstances rendering the award unjust, an attorney fee award should ordinarily include compensation for all the hours reasonably spent, including those relating solely to the fee.” Ketchum v. Moses, 24 Cal.4th 1122, 1133 (2001) (emphasis omitted). Section 1021.5 authorizes fee shifting and provides that a court may award attorney fees to a successful party when the action has resulted in the enforcement of an important right affecting the public interest. See Graham v. DaimlerChrysler Corp., 34 Cal.4th 553, 560-61 (2004) (awarding fees in nationwide class settlement under section 1021.5). In addition to section 1021.5, the CLRA-under which Plaintiffs brought a claim-mandates fee-shifting to the prevailing party. Cal. Civ. Code §1780(e).

         One well-accepted method of determining fees is the lodestar method. Morales v. City of San Rafael, 96 F.3d 359, 363 (9th Cir. 1996). The lodestar is calculated by multiplying the number of hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate. Id. “The reasonableness of an hourly rate should be determined based on the rates prevailing in the community for ‘lawyers of reasonably comparable skill, experience and reputation.'” Lewis v. Silvertree Mohave Homeonwers' Ass'n, Inc., No. 16-3581 HWA, 2017 WL 5495816, at *3 (N.D. Cal. Nov. 16, 2017) (quoting Blum v. Stenson, 465 U.S. 886, n.11 (1984)). The lodestar figure may then be increased or decreased depending on a variety of factors, including the quality of the representation, the benefit obtained for the class, the complexity and novelty of the issues presented, and the risk of nonpayment. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir. 1998).[1] The Supreme Court “has instructed district courts to . . . ‘award only that amount of fees that is reasonable in relation to the results obtained.'” Id. (quoting Hensley v. Eckerhart, 461 U.S. 424, 436, 440 (1983)). ...

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