Posts belonging to Category Settlements

Lands’ End Agrees to Close the Loop on Necktie False Advertising Litigation

A year and a half after it was sued for falsely claiming that its neckties were made in the USA, retailer Lands’ End has agreed to refund its California customers the full purchase price of the neckties as part of a class action settlement. Oxina v. Lands’ End, No. 14-cv-2577-MMA (S.D. Cal., complaint filed Oct. 29, 2014). See Plaintiff’s Motion for Preliminary Approval of Class Action Settlement (Feb. 12, 2016) here. In August 2014, Plaintiff Elaine Oxina purchased a “Kids To-Be-Tied Plaid Necktie” from the clothing retailer’s website. The plaintiff alleged that the website represented that the necktie was “Made in [the] USA,” but the tag on the necktie that Oxina received stated it was “Made in China.” Oxina sued Lands’ End for false advertising and violations of federal and state consumer protection laws.

Following eleven months of litigation on the pleadings alone, the parties agreed to settle Plaintiff Oxina’s claims in exchange for complete relief for the 38 California class members who purchased the neckties during the 4-year settlement period. Under the proposed settlement, Lands’ End will refund class members their purchase price, plus interest at the rate of ten percent per year from the date of purchase. The settlement also provides for $32,500 in attorneys’ fees and expenses.

Although the parties have agreed to settle, the plaintiff initially had lost the battle over the pleadings. Judge Michael Anello previously dismissed (without prejudice) Oxina’s originally pled false advertising claim on the ground that the allegedly false statement “Made in [the] USA” appeared on the website rather than on the necktie itself:

Section 17533.7 sets forth the following: It is unlawful for any person, firm, corporation or association to sell or offer for sale in this State any merchandise on which merchandise or on its container there appears the words “Made in U.S.A.,” “Made in America,” “U.S.A.,” or similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States. Plaintiff fails to state a claim under § 17533.7 because she fails to allege that the words “Made in U.S.A.,” or similar words, appeared on the Necktie itself, or on the Necktie’s container. . . . It is clear and unambiguous that the text of § 17533.7 only creates liability where the words “Made in U.S.A.,” or words to that effect, appear on the merchandise, or on the merchandise’s container. It does not create liability for a product that is misleadingly described on a website with the words “Made in U.S.A.” (internal citations and quotations omitted.)

Order Granting Defendant’s Motion to Dismiss, at 13 (available here). The court’s holding suggests that the drafters of Section 17533.7 did not specifically intend for the statute to apply to statements on a merchant’s website. While this cannot be denied, that is because Section 17533.7 was enacted in 1961. The statute’s silence on the issue of internet advertising therefore says nothing about the Legislature’s intent for it to apply to the Internet. Further, because Section 17533.7 applies to print catalogs (see O’Brien v. Camisasca Automotive Mfg., Inc., 73 Cal. Rptr. 3d 911 (2008)) and other forms of advertising, clearly the statute is not limited to statements on merchandise or containers. To rule otherwise is to vitiate the protections afforded by Section 17533.7 to California consumers, who, in greater numbers, purchase goods online rather than in stores. In short, the court’s holding on the necktie false advertising case is too restrictive.

The parties’ joint motion for preliminary approval of the class action settlement is scheduled to be heard by Judge Anello on March 21, 2016.

Authored by: 
Eduardo Santos, Associate

Delivering Settlement Benefits to the Class: Dos and Don’ts

It is no secret that class action practitioners are facing a more difficult time getting a settlement approved. Not only must settling parties face a proliferation of professional objectors seeking to muck things up, but courts are also under pressure to scrutinize class action settlements more closely. See, e.g., Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015). One recent order illustrates the perils of the approval process. In Banks v. Nissan N. Am., No. 11-2022, 2015 WL 7710297 (N.D. Cal. Nov. 30, 2015) (slip op. available here), the court refused to grant final approval to a settlement to resolve claims for an alleged brake defect in certain Nissan and Infiniti vehicles. The court was particularly troubled by a cap on reimbursements that resulted in some class members recovering only a fraction of their out-of-pocket costs, with “more than one-third of the claimants . . . receiv[ing] a $60 (or less) reimbursement of a $1,000 repair bill.” Id. at 19. The court also criticized the plaintiffs for not detailing the risks of further litigation in their papers, id. at 16, and for a low claims rate. Id. at 18-19.

How to avoid the problem faced by the plaintiffs in Banks? First, if the benefits must be tailored to a narrow class, aim for substantial benefits to each individual class member. As part of a settlement to resolve automotive defect claims, plaintiffs often negotiate nonmonetary relief—a repair program or extended warranty coverage on the defect—to protect a broad group of current car owners. See, e.g., Eisen v. Porsche Cars N. Am., Inc., No. 11-09405, 2014 WL 439006, at *7 (C.D. Cal. Jan. 30, 2014) (approving settlement that included extended warranty coverage and reimbursement). That apparently was not feasible in Banks, as the class vehicles were too old to be covered under warranty. Instead, the Banks plaintiffs reasonably tried to direct the settlement’s benefits to those with out-of-pocket losses—a smaller class. But courts are much more likely to approve a reimbursement program if class members recover a substantial proportion of their out-of-pocket losses. See, e.g., Browne v. Am. Honda Motor Co., No. 09-06750, 2010 WL 9499072, at *12 (C.D. Cal. July 29, 2010) (approving reimbursement of 50 percent of the costs class members previously incurred replacing their brake pads). In stark contrast, the Banks plaintiffs obtained much less remuneration for out-of-pocket losses, failing to overcome the court’s concern that some class members would be recouping only $20 out of $1,000 repair bill under the settlement reimbursement formula.

Second, in seeking final approval, plaintiffs should thoroughly evaluate the risks of further litigation, and explain those risks in detail in their settlement approval motions. This is an important factor for settlement approval. See Churchill Village, LLC v. General Electric, 361 F.3d 566, 575 (9th Cir. 2004). As the Banks decision underscores, courts will not credit generic recitations of an action’s risks in considering whether the settlement is fair to the class. See Banks, at 16.

Third, when a settlement involves a claims process, plaintiffs should make sure as many class members as possible are aware of the settlement’s benefits. For instance, plaintiffs should ensure that updated addresses, such as those maintained in the National Change of Address database, are used for the class notice. Depending on the facts of the case, a plaintiff may also have the class administrator conduct a skip-trace for addresses with undeliverable notices, have reminder postcards sent out, have the administrator host a dedicated settlement website, and/or contact class members directly to educate them on the settlement’s benefits.

The factors detailed above are just a few of many that the court will analyze when evaluating the fairness of a proposed class action settlement; class action practitioners should analyze and weigh these carefully.

Authored By:
Ryan Wu, Senior Counsel

Cal. Supreme Court to Decide on Attorneys’ Fees Calculation Method in Laffitte v. Robert Half

Even seasoned class action practitioners might be surprised to learn that the percentage-of-the-fund method for awarding attorneys’ fees is not settled law in California. After all, California trial courts routinely award attorneys’ fees based on a percentage of the overall recovery, and numerous California courts have endorsed this approach. [1] This common practice has been called into question by David Brennan, an objector to the $19 million wage-and-hour class action settlement in the long-running Laffitte v. Robert Half Int’l, No. S222996, rev. granted, 342 P.3d 1232 (Feb. 25, 2015). [2] Laffitte, which was initially filed in 2004, involved independent contractor misclassification claims against the staffing agency Robert Half; in 2013, the trial court approved a $19 million settlement, including an attorneys’ fee award of one-third of the gross settlement.

In Laffitte, the California Supreme Court will decide whether use of the percentage method is valid under California law. In his petition for review and opening brief (available here and here, respectively), Objector Brennan seized on a footnote from Serrano v. Priest, 20 Cal.3d 25, 48 n. 23 (1977), where the California Supreme Court stated that “the starting point of every fee award . . . must be a calculation of the attorney’s services in terms of the time he has expended on the case,” to argue that California law requires use of the lodestar method for assessing fees. The lodestar method multiplies the number of hours reasonably expended by a reasonable hourly rate, and the resulting number can be adjusted at the court’s discretion. While Brennan correctly identified a source of potential confusion, his radical position, if adopted, would unsettle the landscape, upending not just the settlement in Laffitte, where the trial court awarded attorneys’ fees representing 33 1/3% of the settlement fund, but numerous other already-approved settlements. Further, the vast majority of California class action settlements currently pending final approval would have to be renegotiated.

However, there is little doubt that the California Supreme Court will enshrine the use of the percentage method for cases where an ascertainable fund is created. As Respondent Mark Laffitte discussed in his Answering Brief (available here), every Federal Circuit has authorized use of percentage method, with two Circuits, the Eleventh Circuit and the District of Columbia Circuit, requiring use of the percentage method for common fund cases. This is because the percentage method has several significant advantages over the lodestar method: (1) it is less demanding of judicial resources; (2) it connects the fee recovery more closely to the results obtained; (3) it aligns the interests of class members and class counsel; (4) it rewards efficient prosecution; (5) it better approximates the workings of the marketplace; and (6) it leads to greater predictability in fee awards. Lafitte Answering Brief at 35-39 (internal citations omitted).

California also has a venerable tradition of utilizing the percentage method for common fund cases, as detailed in Serrano itself. See Serrano, 20 Cal.3d at 34-38 (observing that the percentage method was first approved in California in 1895 and “has since been applied by the courts of this state in numerous cases”). Serrano declined to apply the percentage method principally because the settlement there did not create an ascertainable fund. Id. at 35-38. Contrary to Brennan’s position, there is nothing in Serrano that would preclude courts from applying the percentage method in awarding attorneys’ fees.

Although Laffitte presents only one question for review—whether the percentage method is permitted under Serrano—several open questions remain even if the Court cements the use of the percentage method. Among other issues, the Court may also decide whether a benchmark percentage is appropriate, and whether to require a “lodestar cross-check” if a court applies the percentage method in awarding fees. In sum: do not expect a sea change, but class action practitioners should nonetheless keep a close watch on Laffitte to see if the Court will provide further guidance to courts on when and how to apply the percentage method.

Authored By:
Ryan Wu, Senior Counsel

[1] See, e.g., In re Consumer Privacy Cases, 175 Cal. App. 4th 545, 558 (2009), Chavez v. Netflix, Inc., 162 Cal. App. 4th 43, 63 (2008), and Apple Computer v. Superior Ct., 126 Cal. App. 4th 1253, 1271 (2005).
[2] Capstone Law APC, on behalf of its clients, submitted a letter requesting publication that contributed to the publication of the intermediate court decision, Laffitte v. Robert Half Int’l Inc., 231 Cal. App. 4th 860 (2014), and intends to submit an amicus brief supporting Respondent Laffitte.

Survey Says. . . Gallup to Settle TCPA Litigation for $12 Million

Gallup, Inc. has agreed to pay up to $12 million to settle three separate class actions which alleged that the Washington D.C.-based pollster violated the Telephone Consumer Protection Act of 1991 (“TCPA”) by autodialing class members’ cell phones without their prior consent. Soto v. The Gallup Organization, Inc., No. 13-61747 (S.D. Fla., complaint filed Aug. 12, 2013). See Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement (May 15, 2015) available here, Settlement Agreement (May 15, 2015) here, and Order Granting Preliminary Approval (June 16, 2015) here.

Congress passed the TCPA in response to consumer complaints about invasive telemarketing practices, including “robodialing,” or the use of automatic telephone dialing systems (“ATDS”) to deliver artificial or prerecorded voice messages. Among other practices, the TCPA prohibits “a[] person . . . [from making] any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any [ATDS] or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C. § 227(b)(1). The TCPA directs the Federal Communications Commission (“FCC”) to prescribe implementing regulations, and creates a private cause of action for individuals to receive $500 in damages for each violation, or treble damages for all “willful” and “knowing” violations.

The Soto plaintiffs alleged that Gallup robodialed over 6.9 million cell phones during the class period. These calls were allegedly placed using an ATDS that had the capacity to store or produce numbers and dial them at random. Under the preliminarily approved settlement, Gallup agreed to establish a $12 million settlement fund, including $4 million in attorneys’ fees and costs, $2.5 million in settlement administration costs, and $2,000 incentive awards to each of the three plaintiffs. The $5.5 million balance will be divided evenly among all class members who submit claims for payment. Based on previous settlements, the parties anticipate that participating class members will receive between $25 and $80 per claim.

According to the FCC, TCPA complaints comprise the largest category of informal complaints filed with the agency. See FCC Encyclopedia, Quarterly Reports-Consumer Inquiries and Complaints, Top Complaint Subjects. The FCC received “approximately 63,000 complaints about illegal robocalls each month” during the fourth quarter of 2009, and “[b]y the fourth quarter of 2012, robocall complaints had peaked at more than 200,000 per month.” See Federal Trade Commission Staff’s Comments on Public Notice DA 14-1700 Regarding Call Blocking, CG Docket No. 02-278, WC Docket No. 07-135, at 2 n.5 (Jan. 23, 2015). The FTC also reports that, “[f]rom October 2013 to September 2014, [it] received an average of 261,757 do-not-call complaints per month, of which approximately 55% (144,550 per month) were complaints about robocalls.” Id. at 2 n.4. TCPA litigation is likewise on the rise. According to one estimate, “TCPA lawsuits were up 116 percent in September 2013 compared to September 2012. Echoing that trend, year-to-date TCPA lawsuits have increased 70 percent in 2013.”

Authored By:
Eduardo Santos, Associate