9th Cir.: Dollar Value of Injunctive Relief Not Needed for Settlement Approval in Laguna v. Coverall
Earlier this month, the U.S. Court of Appeal for the Ninth Circuit affirmed the district court’s approval of a proposed class action settlement and an award of attorneys’ fees. Laguna v. Coverall North America, Inc., No. 12-55479 (9th Cir. June 3, 2014) (slip op. available here). The suit alleged that Coverall, a janitorial franchising company, misclassified its California franchisees as independent contractors and improperly removed customer accounts from franchisees to re-sell them to other franchisees.
The decision came after one franchisee objected to the settlement, which included cash payouts, credits toward a new franchise, and a promise from Coverall to assign customer accounts to current franchisees once full franchise fees were paid, among other relief. As to the settlement as a whole, the panel found that the district court had not erred by considering the Churchill factors in granting approval, such as the difficulty of obtaining class certification in the wake of Dukes, the defendant’s poor financial health, the fact that no governmental entity had participated in the matter, the experience of class counsel, and the fact that only two class members had opted out of participating in the settlement. Slip op. at 8-10 (citing Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004) (internal citations omitted). The objector argued that the district court had not properly assessed the value of the non-monetary injunctive relief, the assignment of customer accounts. The panel found, however, that the district court was not obligated to conduct such a monetary valuation to determine whether the proposed settlement was fair, stating, “[w]e have never required a district court to assign a monetary value to purely injunctive relief.” Id. at 10.
The Ninth Circuit also held that the lower court had not abused its discretion in awarding fees based on the lodestar method “because the lodestar method is most appropriate where the relief sought is ‘primarily injunctive in nature,’ and a fee-shifting statute authorizes ‘the award of fees to ensure compensation for counsel undertaking socially beneficial litigation.’” Slip op. at 6. Furthermore, the panel found the award of approximately $995,000 in attorneys’ fees to be fair where the value of the cash settlement and injunctive relief provided (the assignment of accounts and the promise of programmatic changes) was likely more than $4 million. Id. at 7-8. Also, the district court had not abused its discretion in finding that the fee award, which was approximately a third of the lodestar amount, was reasonable. Id. at 8.
Dissenting Judge Edward M. Chen from the Northern District of California, sitting by designation, wrote that he would have remanded the case for fuller development of the record, due to the lack of “crucial information,” such as the proportion of the class eligible to receive the non-monetary benefit of the settlement, the value of the monetary relief to the class, and the justification (if any) for imposing a claims process with a reverter of unclaimed funds back to Coverall, without which the district court could not fully evaluate the adequacy of the settlement or the reasonableness of the attorneys’ fee award. Slip op. at 17.