Posts belonging to Category Settlements

Cy Pres Settlement Approved in Google Privacy Action

Last month, a Northern District of California judge finally approved an $8.5 million settlement of a class action challenging Google Inc.’s privacy policies. The plaintiffs alleged that Google invaded their and class members’ privacy rights by sharing personal information with third parties without authorization. Specifically, the plaintiffs alleged that Google improperly shared search terms—including credit card numbers, medical information, and other private data—with advertisers and other third parties. See Order Granting Motion for Final Approval, In re Google Referrer Header Privacy Litig., No. 10-4809 (N.D. Cal. March 31, 2015) (available here).

The settlement is notable in that Google is not required to compensate the class members directly. Rather, the company will distribute proceeds to the AARP Foundation, the World Privacy forum, and to four university-based, Internet-related foundations. The court justified its decision by noting that it would be impractical to distribute the settlement fund to the nearly 130 million class members affected by the challenged practices. Under these circumstances, the Court found that the proper approach would be to put the funds to the next best use (i.e., donating them to public interest organizations focusing on privacy issues) under the cy pres doctrine.

The cy pres doctrine provides a solution for cases where the class members are difficult to identify and/or where the individual class member damages are minimal. These cases include consumer class actions, because few class members maintain records of purchases of inexpensive goods, as well as cases where the costs of class settlement administration would exceed class members’ individual recoveries. In such instances, the obvious alternative to the defendant keeping its ill-gotten gains is for the court to award the settlement funds or judgment to non-profit organizations that promote the policies underlying the laws that the defendant violated. With a growing number of class actions brought on behalf of millions of affected class members, such as data breach cases, we expect cy pres awards to become increasingly common.

Authored by: 
Stan Karas, Senior Counsel

Settlement Process Speeds Along in Toyota Unintended Acceleration Litigation

In a Joint Status Report filed on March 17, 2015, with Judge James V. Selna in the Central District of California, the parties informed the court that settlement deals continue to be made at a steady pace in In Re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation (“In Re: Toyota”). In Re: Toyota, No. 10-2151, Dkt. No. 4932 (C.D. Cal. March 16, 2015) (Joint Status Report, available here).

This multidistrict litigation (“MDL”) is made up of hundreds of individual suits alleging negligence and product liability based on a defect in some Toyota models which caused the vehicles to accelerate suddenly, leading to numerous accidents. Plaintiffs are seeking compensatory and punitive damages for injuries and/or deaths caused by the unintended acceleration. So far, a total of 289 cases have either settled or reached an agreement to settle in principle, including: 132 of 171 cases consolidated in the MDL; 45 of 84 cases consolidated in the Judicial Council Coordinated Proceeding (“JCCP”); and 112 individual cases litigated outside of the consolidated proceedings.

In the Joint Status Report, the parties attribute the efficacy of the litigation to the Intensive Settlement Process (“ISP”), which was confirmed and adopted on January 14, 2014, stating that the “ISP is continuing to make good progress.” Report at 2. Case in point, of the 39 unintended acceleration lawsuits still pending in the MDL, all but four have requested ISP, and of the 39 cases remaining in the JCCP, all but two have requested it.

These settlements come more than five years after Toyota began recalling millions of vehicles for the unintended acceleration defect and more than thirteen months after counsel for Toyota contacted the 300+ plaintiffs’ attorneys to inform them of the proposed settlement process. Since each case is being negotiated separately, the total value of the settlement will not be clear until all of the cases are resolved. In a related class action settlement that won final approval before Judge Selna in July of 2013, Toyota agreed to pay an estimated $1.1 billion to settle a claim that the unintended acceleration defect diminished the value of the class vehicles. The settlement also provided for $200 million in plaintiffs’ attorney fees and up to $27 million in expenses.

In addition to over a billion dollars in legal settlements so far, Toyota was also hit with a $1.2 billion criminal penalty by the United States Department of Justice in March of 2014. U.S. Attorney General Eric Holder described Toyota’s actions as “shameful” and a “blatant disregard” for the law. He went on to warn that “other car companies should not repeat Toyota’s mistake.” U.S. Attorney General Eric Holder, Press Conference at the Department of Justice (March 19, 2014).

Thus, while Toyota may be nearing the end of its civil litigation involving the unintended acceleration defect, the automotive and legal industries will feel its effects for years to come.

Authored by: 
Lucas Rogers, Associate

Ninth Circuit Affirms Final Approval of Walmart Gift Card Settlement

The Ninth Circuit’s recent decision in In re Online DVD-Rental Antitrust Litig., 12-15705 (9th Cir. Feb. 27, 2015) (“Online DVD-Rental”), which affirmed an order granting final approval of a class action settlement totaling more than $27 million in cash and gift cards for a class of over 35 million DVD rental subscribers, will likely become one of this circuit’s leading cases in support of common-fund attorneys’ fees and incentive awards (slip opinion available here).

In Online DVD-Rental, the plaintiffs alleged that Defendants Walmart and Netflix violated federal antitrust laws by entering into an anticompetitive agreement under which Netflix would stop selling DVDs and focus instead on DVD rentals, and Walmart would discontinue its own rental service and concentrate on DVD sales. In exchange for a dismissal with prejudice of all claims alleged on behalf of a class of Netflix subscribers, Walmart agreed to pay a total of $27.25 million, inclusive of attorneys’ fees and litigation costs, incentive awards to each of the nine plaintiffs, and administration costs. The balance was to be divided evenly among all class members who submitted claims for payment, with class members having the option to claim their payments either in the form of gift cards or the cash equivalent. Over 1.18 million class members submitted claims (of whom 744,202 requested gift cards), 722 opted out, and 30 objected. The district court overruled all objections, finding that “not one objection was sufficient . . . singular or in the aggregate . . . to preclude [the court] from approving [the] settlement.” Slip op. at 13.

Six objectors appealed the order granting final approval, largely on the grounds that the attorneys’ fees and incentive awards were excessive. With respect to attorneys’ fees, several of the objectors argued that the district court should have characterized the settlement as a “coupon settlement” under the Class Action Fairness Act of 2005 (“CAFA”), which provides in relevant part that the “portion of any attorney’s fee award to class counsel that is attributable to the award of the coupons shall be based on the value to class members of the coupons that are redeemed.” Slip op. at 29-30. The objectors thus argued that the district court erred by calculating the fee award as a percentage (25%) of the overall settlement fund, including the total dollar value of the gift cards, rather than only as a percentage of the gift cards that were actually redeemed.

In rejecting this argument, the Ninth Circuit noted that several district courts have declined to classify gift card settlements as coupon settlements under CAFA. Slip op. at 33-34. Moreover, unlike coupon settlements, which require “class members to hand over more of their own money before they can take advantage of the coupon,” the Walmart gift cards could be spent on any item carried on the “website of [the] giant, low-cost retailer,” and without the need for class members to spend any of their own money, which “gives class members considerably more flexibility than [coupon settlements].” Slip op. at 32-33. The Ninth Circuit also found that the district court did not err in calculating the fee award as a percentage of the total settlement fund:

We have repeatedly held that the reasonableness of attorneys’ fees is not measured by the choice of the denominator . . . Here, the district court concluded that class counsels’ fee request, which applied the 25% benchmark percentage to the entire common fund, was reasonable. Indeed, the court explicitly explained how administrative costs in particular make it possible to distribute a settlement award in a meaningful and significant way. Similarly, notice costs allow class members to learn about a settlement and litigation expenses make the entire action possible.

Slip op. at 37-38 (internal citations and quotations omitted).

The Ninth Circuit also soundly rejected an objector’s argument, based chiefly on Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003), that the incentive awards distributed in Online DVD-Rental were so out of proportion to the average class member recovery ($12 per claimant) as to create a conflict of interest between the representatives and the class. Slip op. at 25. In distinguishing the Staton settlement from the Walmart settlement, the Ninth Circuit held that “[i]ncentive payments to class representatives do not, by themselves, create an impermissible conflict between class members and their representatives” and “the $45,000 in incentive awards [divided equally between the 9 named plaintiffs] makes up a mere .17% of the total settlement fund of $27,250,000, which is far less than the 6% of the settlement fund in Staton that went to incentive awards.” Slip op. at 16, 26.

Tellingly, the Ninth Circuit seems to have distanced itself from some of its reasoning in Radcliffe v. Experian Info. Solutions, 715 F.3d 1157 (9th Cir. Cal. 2013), where the Court noted that, “concerns over potential conflicts may be especially pressing where, as here, the proposed service fees greatly exceed the payments to absent class members . . . There is a serious question whether class representatives could be expected to fairly evaluate whether awards ranging from $26 to $750 is a fair settlement value when they would receive $5,000 incentive awards.” Radcliffe at 1165 (internal citations and quotations omitted). But presumably if, as echoed in Amchem Prods. v. Windsor, 521 U.S. 591, 617 (1997), the “policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights,” then surely the ratio between the incentive awards and the average class member recovery should not—in itself—raise “serious question [about] whether class representatives [can] be expected to fairly evaluate” the reasonableness of their settlements. Indeed, if class representative incentive awards are meant to incentivize the filing of class actions that might not otherwise have been brought given the relatively modest individual amounts in controversy, then comparable proportions between class member recoveries and incentive awards are to be expected and tolerated.

Authored by: 
Eduardo Santos, Associate

Jamba Juice Plaintiffs Seek Injunctive Relief, Forgo Monetary Damages in Proposed Settlement

In a proposed settlement of a consumer class action regarding false advertising claims against Jamba Juice’s smoothie kits, the plaintiffs avoided the process of identifying class members by not seeking monetary damages for the class. See Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement, Lilly, et al. v. Jamba Juice Company, et al., No. 13-cv-02998 JST (N.D. Cal.) (available here). The plaintiffs’ initial complaint, filed in June 2013 in the U.S. District Court for the Northern District of California, alleged defendants Jamba Juice and Inventure Foods, Inc. misled buyers by marketing a line of at-home frozen smoothie kits as “all natural.” The smoothie kits were available in various flavors and contained ascorbic acid, xanthan gum, and other unnatural-sounding ingredients. The complaint brought causes of action under California law, including the Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 et seq., False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq., Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., and for breach of warranty pursuant to Cal. Comm. Code § 2313, on behalf of a class of California consumers who purchased the smoothie kit products.

The defendants had previously sought to defeat the case on ascertainability grounds at the certification stage, arguing in their opposition that it would be too difficult to identify and locate buyers of such a low-priced grocery item. In a September order granting in part and denying in part the plaintiffs’ motion for class certification, Judge Jon Tigar rejected the defendants’ ascertainability arguments and certified the class solely for purposes of determining liability, rejecting the Carrera approach from the Third Circuit. See Order Granting in Part and Denying in Part Motion for Class Certification, Lilly, et al. v. Jamba Juice Company, et al., No. 13-cv-02998 JST (N.D. Cal. Sept. 18, 2014) (citing Carrera v. Bayer Corp., 727 F.3d 300, 308 (3d Cir. 2013), where class certification was denied, even though the criteria for class membership was objective, because plaintiffs were unable to show at the certification stage that they will be able to identify absent class members) (slip op. available here). The court stated, “Few people retain receipts for low-priced goods . . . . Yet it is precisely in circumstances like these, where the injury to any individual consumer is small, but the cumulative injury to consumers as a group is substantial, that the class action mechanism provides one of its most important social benefits.” Slip op. at 7. However, the court stopped short of certifying the class for the purpose of damages.

In a motion for preliminary approval filed on December 1, 2014, the parties agreed, for purposes of settlement only, to certify a nationwide injunctive relief-only class, which would require Jamba Juice to cease labeling and marketing its smoothie kits as “all natural” so long as the challenged products contain the challenged ingredients, and to compensate the named plaintiffs with up to $5,000 each in incentive awards. See Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement, at 3-5. The defendants have agreed to pay a total of $425,000 for attorney’s fees and costs, subject to court approval. Id. at 5. Because class members would not be awarded any monetary damages nor would they release any monetary claims, no notices or opt-out rights to potential members would need to be sent out. Id. at 8-10. Developments in this proposed settlement will be closely watched by plaintiffs’ and defense counsel alike.