60126211
Jan 26 2017
04:38PM
1
2
3
4
5
6
7
8
9
10
11
12
STEVENS, LC
Paul D. Stevens, State Bar No. 207107
[email protected]
700 S. Flower Street, Suite 660
Los Angeles, CA 90017
Telephone: (213) 270-1215
Facsimile: (213) 270-1223
FLAHERTY HENNESSY, LLP
Raquel A. Flaherty, State Bar No. 237803
[email protected]
Sarah L. Hennessy, State Bar No. 247220
[email protected]
8055 W. Manchester, Suite 420
Playa Del Rey, CA 90293
Telephone: (310) 305-1280
Facsimile: (310) 305-1210
MILSTEIN, ADELMAN, JACKSON,
FAIRCHILD & WADE, LLP
Mark A. Milstein, State Bar No. 155513
[email protected]
10250 Constellation Blvd, Suite 1400
Los Angeles, CA 90067
13
Attorneys for Plaintiff and Plaintiff Class
14
15
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES, CENTRAL CIVIL WEST
16
17
18
19
DANNY SOZZI and BRETT LONG
individually and on behalf of all others
similarly situated, ,
22
23
24
25
Assigned for all purposes to the
Hon. Ann I. Jones
Plaintiff,
20
21
CASE NO. BC513925
v.
PROVIDE COMMERCE, INC., a Delaware
Corporation, d/b/a PROFLOWERS; and
DOES 1 through 10, inclusive,
Defendant.
PLAINTIFFS’ MEMORANDUM OF
POINTS AND AUTHORITIES IN
SUPPORT OF MOTION FOR
PRELIMINARY APPROVAL OF
CLASS ACTION SETTLEMENT
Complaint Filed: July 1, 2013
Hearing Date:
TBD
Dept:308
26
27
28
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
I.
1
INTRODUCTION
2
By this application, Plaintiff seeks preliminary approval of a stipulated class action
3
4
settlement that was reached through extensive arms-length negotiation.
5
In sum, as a result of this settlement, Defendant has agreed to ensure that the practice at
6
the heart of this litigation will permanently cease. At base, the primary issue in this case was
7
whether ProFlowers (“PF”) failed to adequately disclose how its floral arrangements are shipped
8
and delivered unassembled in a shipping box as opposed to a hand delivered finished bouquet.
9
The proposed settlement provides that Defendant will modify, now and in the future, the alleged
10
inadequate disclosure and ensure that the practice will permanently cease. In addition, the
11
settlement provides for additional relief in the form of a voucher in the amount of $10.00 that can
12
be redeemed at ProFlowers.com. This voucher will be offered to approximately 2 million
13
customers and represents 16% of the average cost of the Product at issue.
14
The proposed settlement follows close to four (4) years of litigation and the proposed
15
settlement was reached after formal mediation and two months of negotiation, which occurred
16
under the supervision and recommendation of the Honorable Carl J. West, Ret. By the time the
17
settlement was reached, all of the critical facts regarding Defendant’s disputed practices were on
18
the table and each pertinent legal issue had been thoroughly briefed, argued and debated with
19
Judge West. The result of the litigation, negotiation and Judge West’s assistance is a fair
20
compromise and settlement of this case as described in the Stipulation and Agreement of
21
Settlement (“Settlement Agreement”) is attached as Exhibit 1 to the Notice of Lodgment of
22
Proposed Class Action Settlement Agreement filed concurrently herewith (“NOL”).
23
\\\\
24
\\\\
25
\\\\
26
\\\\
27
\\\\
28
\\\\
1
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
II.
2
3
STATEMENT OF FACTS
A.
The Claims
Plaintiff’s Claims
4
1.
5
This is a statewide class action concerning false and deceptive advertising by and through
6
Defendant’s Website, ProFlowers.com. The primary claims alleged in the action are that PF failed
7
to adequately disclose that its floral arrangements are shipped and delivered unassembled in a
8
shipping box, rather than hand delivered as a completed, finished bouquet in violation of Cal. Bus.
9
& Prof. C. §17200, et seq. (“UCL”), Cal. Bus. & Prof. C. §17500, et seq. (“FAL”), and the
10
California Consumer Legal Remedies Act (“CLRA”).
By his complaint, Plaintiff sought
11
equitable relief in the form of changes and disclosures on PF’s website, restitution and damages
12
on behalf of a California statewide class. Plaintiff’s operative complaint is attached as Exhibit 2
13
to the NOL. PF denies Plaintiff’s claims.
14
Background on Defendant’s Business Model and Practice
15
2.
16
PF is an online flower company that ships directly from the flower fields to the consumer.
17
In shipping directly to consumers, PF relies on UPS or other third-party commercial shippers to
18
deliver the product. As such, the arrangements come packaged in a box. Upon delivery, the
19
customer must take the flowers out of the box, insert them into a vase (which may be ordered
20
separately), arrange them and add water to the vase.
21
The Subject Advertising\Non-Disclosure and Plaintiff’s Experience
22
3.
23
PF advertises the flowers as vibrant bouquets of flowers for order and delivery from their
24
Website for all types of occasions, listing specific categories and special events such as
25
Anniversary, Birthday, Get Well, Love & Romance. PF depicted the product Plaintiff purchased
26
on its Website as a vibrant bouquet of flowers in a vase for delivery like an arrangement that could
27
be purchased from a florist. True and correct copies of the website pages are filed concurrently
28
herewith as Exhibit 1 to the Declaration of Sarah L. Hennessy (“Hennessy Decl.”).
2
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
Plaintiff purchased flowers on ProFlowers.com for his mother for Mother’s Day. Based on
2
the advertising and desire to give his mother the experience of a delivered bouquet of flowers, on
3
May 8, 2013, Plaintiff ordered a "Deluxe Hugs and Kisses" bouquet from the ProFlowers website
4
for $89.98. See Exhibit 2 to Hennessy Decl. Along with the bouquet, Plaintiff also added to his
5
order a "Ruby Gathering Vase," which cost an additional $14.99. With tax, shipping, and other
6
fees, Plaintiff paid $145 total. See Exhibit 3 to Hennessy Decl. However, Plaintiff’s mother did
7
not receive the represented beautiful bouquet of flowers delivery experience, but instead was
8
delivered flowers in a shipping box via UPS mail carrier which required unpacking, unwrapping,
9
cutting of the stems and assembly. See Exhibit 4 to Hennessy Decl.
10
At the heart of this litigation was that PF’s Website did not apprise or alert Plaintiff that the
11
flowers would be delivered in this manner anywhere on the product or ordering pages. Instead, the
12
only notice or disclosure of how the flowers would be delivered was located in two obscure sections
13
of the Website: via a “FAQ” hyperlink and an “About Us” page which Plaintiff had no idea he
14
should view. The "About Us" page had a bullet point titled "Flowers directly to you" which stated
15
that "[o]nce hand-picked, our flowers are delivered directly to you." See Exhibit 5 to Hennessy
16
Decl. The "FAQ Page" included statements that "[i]n order to guarantee the freshness of our
17
products, our flowers are shipped fresh from the growers to your doorstep." It also stated that
18
the flowers are “arranged as shown in our decsriptions” and shipped in a "specially designed
19
gift box to ensure freshness during delivery." See Exhibit 6 to Hennessy Decl. However, while
20
the "FAQs" page appeared during the ordering process, the link was not located on all pages and
21
when the link did appear, it only referenced and directed consumers to click on the FAQ page to
22
learn more about two unrelated issues. See Exhibit 7 to Hennessy Decl.
23
Us” page link was located in fine print at the bottom of its general page among other corporate
24
links. See Exhibit 1, pp.4-5 to Hennessy Decl. By comparison, a different seller, 1800flowers,
25
included a conspicuous disclosure on every page immediately below each product photo - it states
26
“shipped in a gift box”. See Exhibit 8 to Hennessy Decl.
Similarly, the “About
27
Based on the graphic images on the product and ordering pages, the product delivered by
28
PF was not what Plaintiff expected and not what he would have paid if he were aware of the manner
3
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
in which they would be delivered. In fact, Plaintiff was disappointed, embarrassed and outraged
2
that his mother received flowers via a UPS shipping box instead of a finished bouquet delivered to
3
the door. Based on the foregoing, it was Plaintiff’s contention that PF falsely represented and did
4
not adequately disclose that the products depicted on its website would be delivered in a shipping
5
box requiring assembly by the recipient instead of a finished product.
6
7
B.
Procedural History
8
9
1. Six (6) Months Pre Lawsuit Activity
10
On January 21, 2013, Plaintiff served PF, by certified mail, notice of contentions
11
concerning PF’s alleged deceptive advertising and demanded remedy and relief pursuant to the
12
Consumer Legal Remedies Act. For six (6) months thereafter, the parties met and conferred in
13
detail on the claims, including written briefs addressing PF’s assertion of a right to arbitrate,
14
Plaintiff's and class member’s grievances and a proposal for settlement. PF was unwilling to
15
provide any of the requested relief and thus, Plaintiff filed a class action complaint.
16
17
2. Litigation and the Arbitration Issue
18
Plaintiff filed a class action complaint on July 1, 2013. Plaintiff’s served pre-class
19
certification discovery shortly after filing the complaint on July 25, 2013.
20
With regard to arbitration, this issue was raised in November 2013 and the trial court took
21
briefing and argument for 6 months before ruling on May 25, 2014. The trial court denied PF’s
22
Motion to Compel Arbitration, and PF immediately filed an appeal. The case remained on appeal
23
until May 2016. PF sought to compel arbitration and enforce a class action waiver (as well as a
24
venue clause) based on a provision contained in the Website’s “Terms of Use,” which were only
25
26
27
28
viewable via a hyperlink at the bottom of each page on PF’s Website. The trial court and Court of
Appeal both found the hyperlinks and overall design of PF’s Website would not have put a
reasonably prudent Internet user on notice of PF’s Terms of Use. See Long v. Provide Commerce,
Inc., 245 Cal. App. 4th 855, 858 (March 17, 2016). PF did not seek further writ review.
4
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
Following remittitur (remittitur issued on May 19, 2016), the parties met and conferred in
2
person on June 13, 2016. The parties agreed to mediate and PF agreed to provide information
3
relative to Plaintiff’s outstanding discovery prior to the mediation.
4
5
3. Changes Made to PF’s Website After Filing of the Action.
6
In April 2016, following return of this matter from the Court of Appeal, PF made changes
7
to its Website which Plaintiff demanded prior to filing this action. PF changed the content of its
8
Website to include a disclosure on the actual product pages making it clearer to consumers the
9
manner in which the products will be delivered. See Exhibits 9-11 of Hennessy Decl. Of particular
10
importance, this change was something Plaintiff demanded before filing suit. Specifically, in April
11
2016 – 3 years into this litigation - PF made changes and corrections to its Website that did not
12
previously exist and which Plaintiff demanded. These include:
13

On the ProFlowers "Product" page, where customers preview specific
bouquets, the product description immediately below the picture of the
flowers added the statement: "Ships in custom ProFlowers packaging
and gift box." See Exhibit 9 to Hennessy Decl.

Immediately following the above statement is a hyperlink titled
"Details", which leads the customer to the "FAQ" page. See Exhibit
14
15
16
17
10 to Hennessy Decl.
18

The “Product” also now states "Blooms are also wrapped and shipped
in a specially designed box to ensure long lasting freshness."
Immediately below that is the further disclosure that "[i]f requested at
checkout, a vase and other accessories will be delivered in the box as
well." See Exhibit 10 to Hennessy Decl.

The "Calendar" page, which allows customers to select a delivery date,
now states at the top of the page, "Ships in custom ProFlowers
packaging and gift box." See Exhibit 12 to Hennessy Decl.
19
20
21
22
23
24
\\\\
25
\\\\
26
\\\\
27
\\\\
28
\\\\
5
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
C.
Plaintiff’s Investigation
2
Prior to filing suit and thereafter, Class Counsel investigated and researched the facts and
3
circumstances underlying the issues raised in this action and the law applicable thereto. Plaintiffs
4
began investigating this matter in or about September 2012. See Hennessy Decl. at ¶48. Plaintiffs,
5
among other things:

6
7
Reviewed hundreds of Defendants website pages related to the claims to understand
the disclosures, ordering process, etc;
8

Conducted a significant amount of consumer research relating to the claims; and
9

Conducted a significant amount of legal research on class issues, potential defenses
10
to class certification and merit issues. Hennessy Decl. at ¶¶48.
11
Based upon the results of this investigation, on July 1, 2013, Plaintiff Danny Sozzi and
12
Brett Long filed the initial complaint, seeking primarily equitable relief with respect to the
13
advertising and labeling of the ProFlowers products.
14
With regard to discovery, Plaintiff’s served pre class certification discovery shortly after
15
filing the complaint on July 25, 2013. The discovery included Special Interrogatories, Requests
16
for Production of Documents and Notices of Deposition of PF’s Persons Most Knowledgeable
17
regarding, among other things, the following (note: this discovery was stayed pending litigation of
18
the arbitration issue):
19






20
21
22
23
PF’s advertising of its floral products during the class period;
All representations and disclosures regarding assembly of PF’s products;
PF’s website order process and content;
Disclosure of terms and conditions concerning PF’s floral products;
Distribution and sales of PF’s products during the class period;
Consumer complaints regarding assembly of the floral products
Hennessy Decl. at ¶¶48(c).
24
25
26
27
28
\\\\
\\\\
\\\\
\\\\
6
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
D.
Number of Potentially Affected Class Members
2
ProFlowers produced information relative to orders by California customers for the
3
relevant time period. Because Plaintiff filed suit in 2013, and the longest applicable statute of
4
limitations is four years, ProFlowers pulled data beginning calendar year 2009 and through the last
5
full calendar year (2015). During that time, approximately 2 million unique California purchasers
6
ordered flowers with a vase through ProFlowers.com. The average order value was $60.
It is PF’s position that the data overstates the relevant number of purchases and that a
7
8
significant portion of these purchases fall outside the scope of Plaintiff s class definition.
PF
9
argues many purchases were not for "personal use," as required by the class definition, including
10
purchases by corporate accounts and ProFlowers' wholesale partners. Replacement orders, for
11
which no consumer was charged, are also included. Furthermore, the data included purchases by
12
customers who, prior to their purchase, received a ProFlowers bouquet and therefore necessarily
13
understood the delivery method. Excluding these orders, along with the initial orders of repeat
14
purchasers (whose subsequent purchases demonstrate that they did not view the need to unpack
15
the shipment as material) would decrease the number of relevant orders to less than 1.1 million
16
during the relevant time period. See Stevens Decl. at ¶¶21-23.
17
18
19
E.
Estimate of The Nature And Amount Of Recovery That Each
Class Member Could Have Obtained If Plaintiff Prevailed.
20
Under the UCL and FAL, "[p]revailing plaintiffs are generally limited to injunctive
21
relief and restitution ." Zhang v. Superior Court, (2013) 57 Cal. 4th 364, 371. Restitution is
22
calculated as the amount paid minus the actual value of the product in light of the
23
misrepresentation, otherwise known as a price premium. Pulaski & Middleman, LLC v.
24
Google, Inc., 802 F.3d 979, 989 (9th Cir. 2015), cert. denied, 136 S. Ct. 2410 (2016).
25
Likewise, under the CLRA a plaintiff can recover damages or restitution, which are
26
measured in the same manner. Wiener v. Dannon Co., 255 F.R.D. 658, 670 (C.D. Cal. 2009).
27
Here, the plaintiff paid a total of $145.51, which includes the taxes and the delivery
28
charge. The question is the value of what Plaintiff received versus the price premium. It was
7
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
PF’s position Plaintiff likely received more than the entire price premium that could be attributed
2
to the flowers arriving in a box and the amount attributed to of cutting the stems and placing the
3
bouquet in a vase de minimus. This issue and the various challenges were discussed at length
4
with Judge Carl J. West, Retired. See Declaration of Paul D. Stevens filed concurrently
5
herewith, at ¶¶25-27.
6
7
F.
Defendant’s Arguments
8
Defendant denies Plaintiff’s claims and contends that their past and current advertising
9
and do not violate California consumer protection laws. Defendant’s counsel’s position included,
10
11
but was not limited to the, following:

In the e-commerce world we live in, most (if not all) consumers understand that
goods have to be protected during shipping and therefore require some minimal
unpacking before they are ready to use.”

Plaintiff s entire argument is based on how the "floral product [is] depicted" on
ProFlowers' website, or how the website "infers" that the flowers will be
delivered in a vase. But the picture of the flowers in a vase, without any statement
about delivery, is not a "specific or measurable claim" or a statement of "objective
fact." Vitt v. Apple Comput., Inc., 469 F. App'x 605, 607 (9th Cir. 2012);

PF did not omit facts about delivery that it had a duty to disclose and did not
actively conceal.

ProFlowers affirmatively disclosed at several points on its website that it ships
directly from the farm to the consumer, it ships "in a specially designed box to
ensure long-lasting freshness," and flowers would need to be transferred to the
vase. ProFlowers further specified the manner of shipping on the "FAQ Page."
It explained that the flowers are shipped in a "specially designed gift box to
ensure freshness during delivery."
23

Consumers' Knowledge of the Delivery Method Requires Individual Inquiry.
24

27
Restitution is calculated as the amount paid minus the actual value of the
product in light of the misrepresentation, otherwise known as a price premium.
See Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 989 (9th Cir.
2015). Plaintiff likely received the entire price premium that could be attributed to
the flowers arriving in a box and difficult if not impossible to calculate (i.e. no
recognizable benchmark for price premium).
28
See Stevens Decl. at ¶28.
12
13
14
15
16
17
18
19
20
21
22
25
26
8
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
G.
Mediation and Settlement Discussions
2
The Parties engaged in lengthy and informed arms-length negotiations prior to reaching
3
agreement on the proposed settlement. The proposed class action settlement follows more than
4
three (3) years of litigation. Following remittitur from the Court of Appeal after resolution of the
5
arbitration issue, the parties met and conferred in person on June 13, 2016 and agreed to mediate.
6
The proposed class action settlement was ultimately reached after formal mediation and two (2)
7
further months of negotiation, which occurred under the supervision and recommendations of the
8
Honorable Carl J. West, Ret. See Stevens Decl. at ¶¶30-32.
9
10
H.
The Terms of The Settlement
11
The agreement reached between the Parties is set forth fully in the Proposed Settlement
12
Agreement attached as Exhibit 1 to the Notice of Lodgment of Proposed Class Action Settlement
13
Agreement filed concurrently herewith. The principle terms of the settlement are as follows:
14
1.
Under the terms of the settlement, this matter will be settled on a class-wide
basis to include all claims related to Plaintiff’s allegations in the Complaint.
2.
The parties agree to stipulate to class certification, for purposes of settlement
only, on the Settlement Class defined herein and related to the released claims.
3.
The “Settlement Class” includes all persons identified by reference to
ProFlowers’ records that: (a) provided a California billing address; and (b)
ordered and paid for a floral arrangement from ProFlowers during the Class
Period of July 1, 2009 through April 30, 2016.
4.
Under the terms of the Settlement, ProFlowers agrees to modify the disclosures
that were the subject of this lawsuit and provide a gift code or coupon voucher
to participating class members, as described more fully below:
15
16
17
18
19
20
21
22
23
24
25
26
27
28
a.
Injunctive Relief and Future Conduct by Pro Flowers
The primary issue in this matter was the alleged inadequate disclosure of the
manner in which ProFlowers floral arrangements are delivered to consumers.
Plaintiff alleges that ProFlowers failed to adequately disclose that its floral
arrangements are shipped unassembled in a box and not hand delivered as a
complete bouquet. ProFlowers contends that its flowers are delivered assembled
in a box, and that its disclosures were adequate. Although ProFlowers believes its
disclosures were adequate, ProFlowers has agreed to enhance and has enhanced its
disclosure that its floral arrangements are shipped in a box. To do so, ProFlowers
has implemented the following:
9
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
i.
On the “Product” page, where customers view individual floral
arrangements, the product description now includes “Ships in custom
ProFlowers packaging and gift box” under the image of the floral
arrangements and provides a link to the “FAQ” page, which provides
even further detail about the manner of shipment and specifically
notes that “[i]f requested at checkout, a vase and other accessories
will be delivered in the box as well.”
ii.
The “Calendar” page, where customers select delivery dates for
each floral arrangement, states conspicuously at the top of the page
“Ships in custom ProFlowers packaging and gift box.”
2
3
4
5
6
7
b.
8
Other Equitable Relief To Class Members
All Class Members who do not exclude themselves from the class will
be sent a $10 gift code to be used towards a purchase at
www.ProFlowers.com. The $10 gift code will be a standard ProFlowers
gift code, which operate as e-codes that consumers use when making a
purchase on-line and will be subject to the following standard terms and
conditions: the gift codes (1) are not redeemable for cash; (2) are nontransferable; (3) have no expiration date; (4) are available for a one-time
use; and (5) cannot be used for shipping, care and handling fees, or taxes.
9
10
11
12
13
5.
Defendant agrees to pay an amount not to exceed $525,000.00 as reasonable
attorneys’ fees (for work already done and to be done) and reimbursement of
costs, separate and apart from the benefits paid for the class member benefits;
6.
17
Defendant agrees to pay $5,000.00 to the class representative, as compensation
for the services, efforts and risks taken by him on behalf of the class.
18
See Hennessy Decl. at ¶¶81.
14
15
16
19
20
21
22
23
24
25
26
27
28
III.
CRITERIA FOR PRELIMINARY SETTLEMENT APPROVAL
As this Court is aware, there are three steps to the Court's settlement approval process: (1)
preliminary approval of the proposed settlement at an informal hearing to allow the court to
determine whether the agreement is sufficiently fair and reasonable to merit class notice and further
proceedings. Cal. Rules of Court, Rule 3.769(c); (2) dissemination of notice of the settlement to
all affected class members; and (3) a ''formal fairness hearing,'' or final settlement approval
hearing, to determine whether the settlement is fair, adequate, and reasonable in light of the
circumstances of the action and the Class Members' response to the notice. The foregoing three10
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
step settlement approval process is prescribed by the Manual for Complex Litigation, Fourth
2
(Federal Judicial Center 1995) § 21.63, is widely followed by federal courts, and has been adopted
3
by California courts. (Manual for Complex Litigation, Fourth § 21.63; Bell v. American Title Ins.
4
Co. (1991) 226 Cal.App.3d 1589, 1599-1602);
5
The purpose of the preliminary evaluation of class action settlements is to determine
6
whether the proposed settlement is within the range of possible approval, and thus whether notice
7
to the class of the terms and conditions and the scheduling of a formal fairness hearing are
8
worthwhile. 2 Newberg on Class Actions, Settlement of Class Actions, § 11.25; Wershba v. Apple
9
Computer, Inc. (2001) 91 Cal.App.4th 224, 245-46.
The trial court has broad discretion to determine whether the settlement is fair. Dunk v. Ford
10
11
Motor Co (1996) 48 Cal.App.4th 1794, 1801.
In determining whether a proposed class action
12
settlement merits final approval, it should consider: 1) the strength of Plaintiffs' case; 2) the risk,
13
expense, complexity and likely duration of further litigation; 3) the risk of maintaining class action
14
status through trial; 4) the amount offered in settlement; 5) the extent of discovery completed and
15
the stage of the proceedings; 6) the experience and views of counsel; and 7) the reaction of the class
16
members to the proposed settlement. Wershba, supra, at 244; Dunk, supra, at 1801.
17
The Court is to give due regard “to what is otherwise a private consensual agreement
18
between the parties.” Id. The Court’s inquiry is “limited to the extent necessary to reach a reasoned
19
judgment that the agreement is not the product of fraud or overreaching by, or collusion between,
20
the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to
21
all concerned.” Id. A presumption of fairness applies if the settlement has been reached under the
22
following conditions: (1) The parties reached settlement after arm's-length negotiations; (2)
23
Investigation and discovery were sufficient to allow counsel and the court to act intelligently; and
24
(3) Counsel is experienced in the litigation. Id.; Manual for Complex Litigation, supra, § 30.42.
A review of these criteria demonstrates a substantial basis for granting the preliminary
25
26
approval requested by this Motion and proceeding to a full settlement hearing.
27
\\\\
28
\\\\
11
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
IV.
2
THE COURT SHOULD GRANT PRELIMINARY APPROVAL
3
OF THE CLASS ACTION SETTLEMENT AND
4
SET A FINAL SETTLEMENT HEARING.
5
6
7
A.
The Settlement Meets the Criteria for a Presumption that the Proposed
Settlement is Fair
8
9
10
1.
The Settlement Is The Product Of Serious, Informed, Non-Collusive
Negotiations.
11
Absent a finding of fraud or collusion, settlement agreements negotiated and endorsed by
12
experienced counsel are presumptively fair and reasonable. See Dunk, supra, 48 Cal.App.4th at
13
1802. As set forth in the previous sections, experienced counsel, operating at arms length, have
14
weighed the strengths and weaknesses of the case, examined all of the issues and, as a result,
15
endorse the proposed settlement.
16
Here, the Parties engaged in lengthy and informed arms-length negotiations during formal
17
mediation and two (2) further months of negotiation, which occurred under the supervision and
18
recommendations of the Honorable Carl J. West, Retired. This only occurred after the parties
19
had litigated a key threshold issue. In order to ultimately reach a consensual resolution of this
20
Action, many difficult legal and factual issues were debated, discussed and weighed by Defendant,
21
the three law firms representing Plaintiff and Judge West in the mediation process. Ultimately, the
22
Settlement reached between the Parties in this case required that each of the Parties make
23
significant compromises in light of the facts, issues and risks presented in this Action. Further, it
24
was the recommendation of Judge West that the parties resolve this matter on the terms set forth
25
in the proposed settlement. Thus, the Settlement Agreement was the result of arms length
26
negotiations. (See Dunk, supra, 48 Cal.App.4th at pp. 1802–1803) (the participation of a neutral
27
mediator “helps to ensure that the proceedings [a]re free of collusion and undue pressure.”).
28
12
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
2
2.
The Settlement Follows Substantial Investigation And Discovery To
Allow Counsel And The Court To Act Intelligently.
3
Representative Plaintiff and Class Members have been represented by experienced counsel
4
who have years of experience in complex multi-party litigation and class action litigation. As set
5
forth below, Class Counsel conducted full investigation of the facts and vetted all applicable legal
6
issues. As set forth in counsel’s declarations, Class Counsel’s factual investigation included:
7
8
9
10
11
(a)
Review of numerous electronic images and hard copies of web pages and
advertisements for ProFlowers;
(b)
PF’s advertising of its floral products during the class period;
(c)
all representations and disclosures regarding assembly of PF’s products;
(d)
PF’s website order process and content;
(e)
disclosure of terms and conditions concerning PF’s floral products;
(f)
distribution and sales of PF’s products during the class period;
(g)
consumer complaints regarding assembly of the floral products;
(h)
extensive legal analysis and communications regarding Counsel’s
evaluation of the merits and weaknesses of the case;
(i)
analysis of potential class-wide damages;
(j)
consumer research with other putative class members; and
(k)
extensive legal research and evaluation of the applicable law with respect
to the claims and the potential defenses to the claims.
12
13
14
15
16
17
18
19
20
21
See Hennessy Decl. ¶48(a)
22
23
24
25
26
27
28
In addition, as noted, the Proposed Settlement is the result of intensive settlement
negotiations between the Parties, conducted at arms-length, with the benefit of qualified counsel
and an experienced retired Judge in Judge West. The proceedings necessitated extensive briefings
and negotiations regarding issues related to the merits of the litigation. This litigation, as such,
has reached the stage where Plaintiff has a clear view of the strengths and weaknesses of the case
sufficient to support the reasonableness of the Settlement Agreement and its terms.
13
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
3.
Counsel Is Experienced In This Type Of Litigation.
2
Counsel representing the parties on both sides specialize in representing plaintiffs in
3
complex multi-party and class actions. As set forth in the Declarations of Paul D. Stevens, Esq.,
4
Mark A. Milstein and Sarah Hennessy filed concurrently herewith, counsel has acted as court-
5
appointed class counsel in many other class-action cases and has pursued such litigation
6
successfully in courts throughout this state from the trial court level through the Court of Appeal
7
to the United States Supreme Court.
8
counsel to the class and vigorously advanced their rights and claims.
In sum, the experience of counsel provided competent
9
10
B.
The Settlement Satisfies All Other Criteria Considered for Final Approval.
11
Notwithstanding that the proposed settlement satisfies all criteria to establish a
12
presumption of fairness, adequacy and reasonableness, the proposed settlement also satisfies the
13
other criteria typically evaluated to merit final approval, including the following: (1) the value of
14
the settlement; (2) the risks inherent in continued litigation; and (3) complexity, expense and
15
likely duration of the litigation in the absence of settlement. As explained below, each of these
16
criteria supports final approval of the settlement.
17
18
1.
The Value of the Settlement Is Substantial.
19
Coupon settlements, in which class members receive a coupon, voucher, or discount that
20
would partly defray the cost of making a new purchase of goods or services from the defendant,
21
are not inherently suspect or improper. Although the valuation of a coupon settlement may pose
22
special challenges, there are numerous cases in which these settlements have been found to be fair
23
and reasonable. See Chavez v. Netflix, Inc.(2008) 162 Cal.App.4th 43, 52–55 (upholding coupon
24
settlement which provided one month of free DVD rental service or one month of free upgrades
25
to DVD rental service because coupon benefit directly addressed harm alleged in complaint,
26
individual damages were small, and plaintiffs would have encountered considerable difficulty in
27
trying to prove their amount); In re Microsoft I–V Cases (2006) 135 Cal.App.4th 706, 710
28
(affirming approval of settlement where 100 percent of settlement was paid in vouchers); Wershba,
14
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
supra, 91 Cal.App.4th at 247 (coupons were fair portion of settlement also involving cash refunds,
2
reimbursements, and reinstatement of free service); Dunk, supra, 48 Cal.App.4th at 1804 ($400
3
coupon which could be applied against purchase price of new car, with no cash payable to the class
4
members, was fair as settlement of claims that vehicles were defective).
5
Of note, any challenge to the settlement terms must overcome the presumption of fairness
6
to which they are entitled. Chavez, supra, 162 Cal.App.4th at 54. The issue before the trial court
7
is not whether the settlement agreement is the best one that class members could have possibly
8
obtained, but whether it is “fair, adequate, and reasonable.” Id. citing Dunk, supra, 48 Cal.App.4th
9
at p. 1801. In assessing the value of a proposed settlement, the court may consider the total sum
10
made available for the class to claim. Id. at 1804; (calculating potential value of settlement based
11
upon number of class members and dollar value of benefits offered to determine value to class).
12
See also Wershba, supra, 91 Cal. App. 4th at 254.
13
Here, the total benefits reached by this proposed class Settlement includes the value of
14
Defendant’s agreement to, among other things, remedy the practice, which gave impetus to this
15
class action lawsuit. As the California Supreme Court directed in In re Tobacco II Cases, (2009)
16
46 Cal. 4th 298, “[t]his is significant because under section 17203, the primary form of relief
17
available under the UCL to protect consumers from unfair business practices is an injunction, along
18
with ancillary relief in the form of such restitution “as may be necessary to restore to any person
19
in interest any money or property, real or personal, which may have been acquired by means of
20
unfair competition.’” Id. at 318.
21
The settlement also offers a $10 benefit to approximately 2 million customers to be used
22
on a future purchase. This amounts to $20 million and is significant due to the number of repeat
23
ProFlowers customers and that it represents more than 16% of the average cost of the Products.
24
This amount is consistent and or exceeds other coupon settlements, which have been found to be
25
fair and reasonable. See Chavez, supra (one free dvd rental or month of service) month; see, e.g.,
26
Dunk, 48 Cal.App.4th at 1804 ($400 credit toward vehicle in tens of thousands).
27
28
In the final analysis, the settlement is fair, reasonable and adequate and should be
approved. See Declaration of Robert Fellmeth
15
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
2.
2
To assess the adequacy of a class action settlement, the Court should weigh the immediacy
3
and certainty of settlement against the risk inherent in continued litigation. See Dunk, supra, 48
4
Cal.App.4th at 1801-02. This factor supports approval here.
5
The Risks Inherent in Continued Litigation Are Substantial.
In entering into the Settlement Agreement, Defendant waived several legal and factual
6
defenses (noted above). Class Counsel is familiar with the issues raised by Defendant.
They
7
spent considerable time and effort developing evidence and ways to advance the class claims.
8
However, they are cognizant that whether they would prevail on each of the expected challenges
9
is not a certainty. Class Counsel and the Class Representative balanced the likelihood of prevailing
10
in light of the risks in deciding what terms to accept and which to reject. While Class Counsel
11
believes the Class’ claims are meritorious, counsel is experienced, realistic and understands that
12
the duration and outcome of this litigation are inherently uncertain. These risks and delays must
13
be considered in assessing the fairness of the settlement. Given the risks inherent in further
14
litigation, it is reasonable for the Class Representative and Class Counsel to elect to settle the
15
Action under the terms of the Settlement. Indeed, it was the strong recommendation of Judge West
16
that the parties agree to settle on the terms proposed.
17
18
3.
The Complexity, Expense and Likely Duration of Continued Litigation
Militate in Favor of Final Approval.
19
Another factor for the court to consider in assessing the fairness of a settlement is the
20
complexity, expense and likely duration of the litigation had a settlement not been reached. See
21
Dunk, supra, 48 Cal.App.4th at 1801.
22
Consumer class actions are expensive and time-consuming to prosecute. Class counsel has
23
already expended hundreds of hours prosecuting this matter. Continued litigation of this action
24
would be difficult, exponentially expensive and protracted. The Class Plaintiff appreciates that,
25
in addition to the litigation risks of continued proceedings, the primary relief has already been
26
obtained. For these reasons, this factor weighs in favor of final approval.
27
28
16
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
V.
2
THE COURT SHOULD GRANT PROVISIONAL CLASS CERTIFICATION OF THE
3
SETTLEMENT CLASS AND APPOINTMENT OF CLASS REPRESENTATIVE AND
4
CLASS COUNSEL
5
Plaintiff requests that the Court provisionally certify the proposed class for settlement
6
purposes only. Pursuant to Rule of Court 3.769(d), “the Court may make an order approving or
7
denying certification of a provisional settlement class after the preliminary settlement hearing.”
8
Cal. R. Ct. 3.769(d).
9
Under California law, the prerequisites for class certification are and should be
10
substantively relaxed for “settlement classes” as opposed to the standards applied in ordinary
11
certification proceedings.” See Wershba, supra, 91 Cal. App. 4th at 237-44; 7-Eleven Owners,
12
(2000) 85 Cal. App. 4th 1135, 1160-62. As the Dunk Court made clear, when certifying a
13
settlement class, a trial court need not make the findings as to whether the “usual” certification
14
prerequisites are satisfied. Dunk, supra, 48 Cal. App. 4th at 1805-06. Further, unlike federal law,
15
California law does not require trial courts to scrutinize the prerequisites to certification in
16
settlement cases. Wershba, supra, 91 Cal. App. 4th at 239-40. Instead, heightened concerns over
17
the appropriateness of California settlement classes are satisfied by a “careful fairness review of
18
the settlement by the trial court.” Id. at 240.
19
Here, California courts have historically certified for class treatment cases involving false
20
or misleading advertising claims. See Vasquez v. Super. Ct. of San Joaquin County, (1971) 4
21
Cal.3d 800, 808; Mass. Mut. Life Ins. Co. v. Super. Ct., (2002) 97 Cal. App.4th 1282, 1290. With
22
regard to the focus in such cases, the California Supreme Court has made clear, the focus in a
23
consumer matter is “on the defendant's conduct, rather than the plaintiff's damages, in service of
24
the statute’s larger purpose of protecting the general public against unscrupulous business
25
practices.” In re Tobacco II Cases, supra, 46 Cal. 4th at 312. It follows that liability on a class
26
basis may be established by “materiality,” meaning that if the trial court finds that “material”
27
misrepresentations have been made to the class, an inference of deception, reliance, causation and
28
injury arises as to the class and liability may be established on a class wide basis. Stearns v.
17
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
Ticketmaster Corp., 655 F.3d 1013, 1022 (9th Cir. 2011); In re Tobacco II, supra, at 327; Mass.
2
Mut., supra, 1289. 1 At certification, Plaintiff need only present evidence that the Defendant made
3
common undisclosed or misrepresented information to the class as a whole. Mass Mutual, supra,
4
at 1292. Once broad dissemination of common (mis)information has been established, “the
5
ultimate question of whether the undisclosed or affirmatively misrepresented information was
6
“material” is a common question of fact suitable for treatment in a class action.” Id. The California
7
Supreme Court’s decision in Tobacco II made clear that this objective test renders claims under
8
the CLRA ideal for class certification because they will not require the court to investigate class
9
members individual interactions with the product. Id. at 312. All that is required is that the named
10
Plaintiff plead she purchased the product(s) as result of, and in reliance on, PF’s
11
marketing\advertising and that the representation(s) played a substantial part in influencing her
12
decision. Id. at 326. While a plaintiff must show that the misrepresentation was a cause of the
13
injury-producing conduct, the plaintiff need not demonstrate it was the only cause. Id.
14
This matter involves common misrepresentations and omissions in the form of alleged
15
misleading internet website product pages and alleged non-disclosure of the manner and method in
16
which the ProFlowers.com product would be delivered (i.e. unassembled in a shipping box as
17
opposed to a hand delivered finished bouquet) to which every consumer was exposed and which
18
did not materially change over the course of the class period. In addition, Plaintiff has submitted
19
that he would not have purchased the PF product for delivery to his mother on Mother’s Day if he
20
had known the flowers would be delivered in the manner they were instead of the finished delivered
21
bouquet as depicted in the advertising. Thus, Plaintiff has produced sufficient evidence of
22
materiality to which reliance and causation can be presumed on a class wide basis. Therefore,
23
provisional certification would be appropriate.
24
\\\\
25
\\\\
26
\\\\
27
1
28
“Materiality” is established “if a reasonable man would attach importance to its existence or
nonexistence in determining his choice of action in the transaction in question.” Stearns at 1022.
18
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
VI.
2
THE PROPOSED PAYMENT FOR REIMBURSEMENT OF COSTS AND
3
ATTORNEYS’ FEES IS FAIR AND REASONABLE UNDER THE APPLICABLE
4
LEGAL STANDARDS
5
By this application, Plaintiff requests that the Court approve the award and payment of
6
$525,000.00 in accordance with the Settlement Agreement as reasonable reimbursement of
7
attorneys’ fees and costs in this Action.2 Class Counsel agrees to split the attorneys’ fees, with
8
MA receiving 30%, Stevens, LC 30% and Flaherty Hennessy LLP 40%.
9
compensation contemplated by the Settlement Agreement is fair and reasonable under California
10
As set forth below, the
law for the time and risk of over 4 years of litigation.
11
12
A.
The Trial Court Has Discretion Over the Amount of Class Counsel's Fee Award.
13
The rule with respect to attorney’s fees is that the amount to be awarded as attorney’s fees
14
is left to the sound discretion of the trial court. The trial judge is in the best position to evaluate
15
the services rendered by an attorney in his courtroom; his judgment will not be disturbed unless it
16
is clearly wrong''. Serrano v. Priest, (1977) 20 Cal.3d 25, 49. Thus, the trial court’s order will
17
only be set aside if the lower court abused its discretion.
18
19
B.
Legal Basis For Attorneys’ Fees
20
The lodestar-multiplier method is to be utilized to determine reasonable attorneys' fees,
21
with consideration given to whether and what multiplier of that lodestar amount is appropriate.
22
Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 42-50. In Ketchum v. Moses (2001)
23
24 Cal.4th 1122, the California Supreme Court re-affirmed adherence to the ''lodestar-multiplier''
24
or ''lodestar-adjustment'' approach. In doing so, the Court traced the history of attorneys' fee law
25
from its origins in Serrano v. Priest, supra.. In Serrano, the Court advised that trial courts
26
2
27
28
As set forth in ¶33 to the Stevens Declaration, Counsel for Plaintiff and the class have an
agreement to assign and split the requested attorneys’ fees based on each attorney’s lodestar time
in the case, with consideration for the time each of the attorneys accrued while they were
employed at MA and their attendant compensation structures, as follows: MA 30%, Stevens, LC
30% and Flaherty Hennessy LLP 40%.
19
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
assessing attorneys' fee requests must begin with the touchstone or lodestar figure, but that figure
2
may be adjusted upward based on the various factors such as: (1) the novelty and difficulty of the
3
questions involved, (2) the skill displayed by class counsel’s representation, (3) the extent to which
4
the nature of the litigation precluded other employment by the attorneys, and (4) the contingent
5
nature of the fee award. Id at 49. According to Ketchum, interpreting Serrano, ''[i]n effect, the
6
court determines, retrospectively, whether the litigation involved a contingent risk or required
7
extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate
8
the fair market rate for such services'' Ketchum, supra, 24 Cal.4th at 1132 (emphasis added).
9
10
C.
Class Counsels’ Fee Request Is Supported By An Enhanced/Adjusted Lodestar -
11
Positive Multiplier Approach.
12
Here, Class Counsel seeks reimbursement of costs and attorney's fees in the amount of
13
$525,000.00. This amount represents a slight multiplier of 1.14 of class counsel's combined
14
lodestar of $448,750 and costs of $11,672.00 ($460,422.00 total) to prosecute this matter through
15
mediation. (See Declarations of Paul D. Stevens, Sarah Hennessy and Mark Milstein filed in
16
Support hereof). A positive multiplier would be warranted and well within the norm and was
17
thoroughly considered after the Class Members’ Settlement was agreed to, and during the
18
subsequent negotiations that focused on the maximum Class Counsel Fee that Defendant would
19
20
agree to pay. In light of the risks and effort required to litigate these claims, the time and effort
expended and the results achieved, the fee requested has been fairly earned.
21
22
1.
The Results Obtained.
23
As noted, here the total benefits reached by this Settlement Agreement include the value
24
of Defendant’s agreement to, among other things, remedy the practice, which gave impetus to this
25
class action lawsuit. As the California Supreme Court directed in In re Tobacco II, supra, 46 Cal.
26
4th 298, “[t]his is significant because under section 17203, the primary form of relief available
27
under the UCL to protect consumers from unfair business practices is an injunction, along with
28
20
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
ancillary relief in the form of such restitution ‘as may be necessary to restore to any person in
2
interest any money or property, real or personal, which may have been acquired by means of unfair
3
competition.’”] Id. at 318.
4
In addition, the settlement offers a $10 benefit to approximately 2 million purchasers to be
5
used on a future purchase. This amount is significant and represents more than 16% of the average
6
cost of the Products and is consistent with other coupon settlements, which have been found to be
7
fair and reasonable. (See, e.g., Dunk, supra, 48 Cal.App.4th at 1804; In re Microsoft I–V Cases,
8
supra, 135 Cal.App.4th at pp. 711–713; Wershba, supra, 91 Cal.App.4th 224, 247. As set forth
9
in the Declaration of Robert Fellmeth, the value of the settlement is substantial.
10
11
2.
The Time And Labor Required By The Litigation.
12
This case was commenced in October 2012 and filed in July 2013. As noted here, the case
13
was vigorously contested from the beginning until the date of the settlement. As set forth in the
14
declarations of counsel, counsel has expended in excess of 881 hours in loadstar time to prosecute
15
this matter. This time and costs were expended in connection with the many complex tasks required
16
to be performed by Class Counsel on behalf of the proposed class, among others, litigation the issue
17
of the arbitration agreement and class waiver through the California Court of Appeal.
18
19
3.
The Experience Reputation And Ability Of The Class Counsel The Skill
20
Displayed In The Litigation And The Novelty Complexity And Difficulty Of
21
The Case
22
The court is fully aware of the difficulties and risks of class litigation in class action cases.
23
Accordingly, class counsel will not recite in detail the legal and practical risk undertaken by class
24
counsel in pursuit of this litigation. Suffice to say that the representation of class claimants required
25
expertise in several disciplines (class action law and procedure, false advertising law, class
26
remedies, enforceability of arbitration agreements,) and counsel for the class brought to the
27
representation a very high level of expertise and experience in each discipline. Finally, the
28
prosecution of class action litigation poses a significant number of legal and proof issues. Class
21
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
Counsel was required to demonstrate to highly experienced and qualified defense counsel that they
2
could address such issues in a manner which made it reasonable for Defendant to address the issue
3
raised in this litigation and settle the litigation.
4
5
4.
The Contingent Nature of The Case And Delay In Payment To Class Counsel
6
As to the significance of a contingent risk, the Court, relying on Rader v. Thrasher (1962)
7
57 Cal.2d 244, 253, observed that a ''contingent fee contract, since it involves a gamble on the
8
result, may properly provide for a larger compensation than would otherwise be reasonable.'' The
9
purpose of a fee enhancement for contingent risk, the Ketchum court stated, is to bring the financial
10
incentives for attorneys operating without certainty of payment and representing an anonymous
11
class ''into line with incentives they have to undertake claims for which they are paid on a fee-for-
12
services basis.'' Ketchum, supra 24 Cal.4th at 1132.
13
Circuit Court of Appeals, the Court further explained its economic rationale for fee enhancement:
Relying on Judge Posner of the Seventh
14
15
16
17
18
'' 'A contingent fee must be higher than the fee for the same legal services
paid as they are performed. The contingent fee compensates the lawyer not
only for the legal services he renders but for the loan of those services. The
implicit interest rate on such a loan is higher because the risk of default (the loss
of the case, which cancels the debt of the client to the lawyer) is much higher
than that of conventional loans' ''
Ketchum, supra 24 Cal.4th at 1132-1133, quoting Posner, Economic Analysis
of the Law (4th ed. 1992) pp. 534, 567.
19
20
21
22
23
24
25
26
27
28
Furthermore, '' '[a] lawyer who both bears the risk of not being paid and provides legal
services is not receiving the fair market value of his work if he is paid only for the second of
these functions. If he is paid no more, competent counsel will be reluctant to accept fee award
cases' '' Id. at 1132, quoting Leubsdorf, The Contingency Factor in Attorney Fee Awards (1981)
90 Yale L.J. 473, 480).
The adjustment to the lodestar figure, e.g., to provide a fee enhancement
reflecting the risk that the attorney will not receive payment if the suit does not
succeed, constitutes earned compensation; unlike a windfall, it is neither
unexpected nor fortuitous. Rather, it is intended to approximate market level
compensation for such services, which typically includes a premium for the risk
of nonpayment or delay in payment of attorney fees.
Ketchum v. Moses, 24 Cal.4th 1122,1138.22
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
Here, Class Counsel pursued this litigation on a pure contingent fee basis. Class Counsel
2
has not been paid any fees to date nor been reimbursed any of their costs to date. There was a
3
significant risk to class counsel that both the fees and costs incurred would never be recovered.
4
Unless they recovered on the claims, they would receive nothing for their time, effort and costs.
5
Nor was this a case in which the practical risk of nonpayment was minimal. Rather, the
6
difficulties and risks of class litigation in class action cases and requiring proof of appreciable
7
harm to the class were substantial, especially in a consumer action involving an arbitration clause
8
following Concepcion.
9
Finally, Class Counsel has also been compelled to wait significant periods of time to
10
receive the compensation, which they risked so much to earn. As noted previously, this litigation
11
has been pending since October of 2012.
12
13
5.
The extent the litigation precluded other employment by class counsel.
14
This litigation represents a significant investment of time and precluded substantial
15
additional employment opportunities.
A case of this magnitude represents a significant
16
undertaking for any firm, which precludes accepting other major cases. Class Counsel
17
commenced the investigation of this action in October of 2012 and has been engaged continuously
18
in the pursuit of these claims from that date forward.
19
made them unavailable to take advantage of opportunities for other work, which could have
20
significant value in this market.
Simply put, undertaking this litigation
21
22
6.
The Informed Consent of The Client To The Fee Agreement
23
Although this issue is of less significance in a class action case in which applications for
24
fees must be approved by the Court, the client in this case was aware of the contingent nature of
25
the fee in this case and the implications of such an arrangement.
26
\\\\
27
\\\\
28
\\\\
23
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
VII.
2
THE PROPOSED INCENTIVE PAYMENT TO THE CLASS REPRESENTATIVE IS
3
REASONABLE AND FAIR.
4
The proposed participation premium of the Class Representative is $5,000.00.
5
It is appropriate to provide incentive payment to the class representative. This sort of
6
payment to class representatives has been a common feature of settlements negotiated by Class
7
Counsel and routinely approved by trial courts. See Munoz v BCI Coca-Cola Bottling Co. (2010)
8
186 CA4th 399, 412 (upholding judge's incentive award of $5,000 to two class representatives);
9
In re Cellphone Fee Termination Cases (2010) 186 CA4th 1380, 1393-1395 (upholding judge's
10
incentive awards of $10,000 to each of four class representatives who assisted with investigation,
11
responded to discovery requests, reviewed pleadings and documents, and testified as witnesses).
12
A judge has discretion to make an incentive award to a named plaintiff after considering the actions
13
that the plaintiff has taken to protect the interests of the class, the degree to which the class has
14
benefited from those actions, and the amount of time and effort the plaintiff has expended in
15
pursuing the litigation. Clark v American Residential Servs. LLC (2009) 175 CA4th 785, 804.
16
The judge may also consider the risk to the class representative in commencing suit, both
17
financial and otherwise, the notoriety and personal difficulties the class representative
18
encountered, the duration of the litigation, and the personal benefit or lack of benefit to the class
19
representative from the litigation. Clark v American Residential Servs. LLC, supra, 175 CA4th at
20
804. The rationale for making incentive awards to named plaintiffs is that they should be
21
compensated for the expense or risk they have incurred in conferring a benefit on other members
22
of the class, e.g., for time spent conferring with class counsel, reviewing documents and
23
participating in mediation. 175 CA4th at 806. The named plaintiffs must present specific evidence
24
justifying such an award. See Golba v Dick's Sporting Goods, Inc. (2015) 238 CA4th 1251, 1272.
25
Here, the Representative Plaintiff satisfies these elements.
26
As set forth in the declaration submitted by Plaintiff Brett Long, Plaintiff had extensive
27
involvement in the litigation, mediation and settlement process.
He spent significant time
28
discussing, providing information, assisting to ultimately protect the interests of the class. As set
24
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
forth herein, the class has benefited from those actions by, among other things, overcoming a
2
complex class action waiver issue through the California Court of Appeal and fully achieving the
3
primary remedy sought (i.e. the modification of the alleged inadequate disclosure).
4
In addition, as also set forth in the Declaration of Brett Long, the named Plaintiff
5
encountered unusual difficulty as he became a law student following the filing of this action and
6
was very concerned how the lawsuit and serving as a class representative would affect his school
7
duties and the effect it might have on his moral character application, so much so that, whether his
8
concern was justified or not, he at one time sought to be substituted out and replaced as the class
9
representative, which the court denied. Indeed, Mr. Long was ordered to continue to serve as a
10
class representative by the trial court after he requested to be substituted out and replaced as the
11
class representative. Mr. Long endured this concern for close to 3 ½ years. Finally, to date, the
12
Representative Plaintiff has received no compensation for his out of pocket expense in purchasing
13
the Product. In sum, it is appropriate and just that the Representative Plaintiff receive a reasonable
14
and relatively nominal payment for his service on behalf of the Class.
15
16
VIII.
17
THE PROPOSED “NOTICE” PROVIDES ADEQUATE NOTICE TO THE CLASS
18
California Civil Code section 1781(f) and California Rules of Court, Rule 3.769 require
19
that a class action shall not be dismissed, settled, or compromised without notice to each member.
20
If the court has provisionally certified the action as a class action, notice of the final approval
21
hearing must be given to the class members in the manner specified by the court. The form and
22
content of the notice, and the method used to notify the class (e.g., by mail or by publication), are
23
within the trial court's discretion. Wershba, supra, 91 CA4th 224, 251.
24
The Notice proposed by the Parties, and as set forth in the Settlement Agreement, meets all
25
constitutional standards as it provides all the information a reasonable Class Member would need
26
to make a fully informed decision. As set forth below, it will notify all Class Members of the terms
27
of the proposed settlement, that their rights may be affected by the Settlement, their options as class
28
members (i.e. participate, object, opt-out) and provide sources to obtain additional information.
25
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
A.
The Proposed Class Notice Program Provides Adequate And Superior Manner Of
2
Notice To The Class
3
California courts have recognized a wide variety of modern techniques, and have applied
4
the flexibility and pragmatism that they have been urged to exercise in supervising class actions.
5
Cartt v. Superior Court (1975) 50 Cal. App. 3d 960, 970.
6
by individual direct notice, publication, internet websites, and/or other media, and can be supported
7
by many other types of activities, including internet banners, email messages, store postings, or
8
information sent by third parties. 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000)
9
85 Cal.App.4th 1135, 1143. The Judicial Council of California's Deskbook on the Management
10
of Complex Civil Litigation, supra, § 3.74, notes that individual direct notice is preferred when
11
possible. In Chavez v. Netflix, supra, where, as here, class members had conducted business with
12
defendant over the Internet, an e-mail “summary notice” of the essential terms of a proposed
13
settlement coupled with a link to an Internet Web site where more detailed information was
14
available, was held to be “a sensible and efficient way of providing notice.” Chavez v. Netflix, Inc.
15
(2008) 162 CA4th 43, 57; see also In re Cellphone Fee Termination Cases (2010) 186 CA4th
16
1380, 1391 (upholding short-form notice directing class members to Web site to learn full details
17
of settlement).
Notice in California can be achieved
18
Here, upon Preliminary Approval of this Agreement and the Settlement by the Court(s), a
19
Third Party Notice Administrator shall cause the Notice(s) of Proposed Class Action Settlement
20
describing this proposed Agreement and the Fairness Hearing to be disseminated to the members
21
of the Plaintiff Settlement Class via direct electronic email. The Notices will direct class members
22
to a website that will also provide information about the proposed class action settlement. It is
23
proposed that Class members will have 60 days from the date of the email to opt out or object to
24
the settlement. This program would meet the requirements of sufficient notice.
25
\\\\
26
\\\\
27
\\\\
28
\\\\
26
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
1
B.
The Content of the Proposed Notice Fulfills All Criteria
2
California Rules of Court, Rule 3.769(f) provides the rules for notice of class of proposed
3
Settlement and Notice of final approval hearing. Rule 3.769 provides the notice must contain an
4
explanation of the proposed settlement and procedures for class members to file written objections,
5
arranging, if they desire, to appear at the hearing to state their objections, and for opt-outs to provide
6
their requests for exclusion. CRC 3.769(f); See also Litwin v. iRenew Bio Energy Solutions, LLC
7
(2014) 226 CA4th 877, 883-884.
8
The proposed notice, attached at Exhibit C to the Settlement Agreement, meets these
9
constitutional standards. The notice provides an explanation of the proposed settlement, notifies
10
class members that their rights may be affected by the Settlement, their options as class members
11
(i.e. participate, object, opt-out), provides sources to obtain additional information and provides the
12
procedures for class members to follow in filing written objections or in arranging to appear at the
13
settlement hearing. In the sum, the proposed Notice fully comports with due process requirements.
14
15
IX.
16
CONCLUSION
17
For the reasons stated, the Plaintiff requests that the Court enter an Order: (1) preliminarily
18
approving the class action settlement embodied in the Settlement Agreement of Class Action
19
Claims; (2) Preliminarily Approving Incentive Payment To Class Representatives of $5,000.00; (3)
20
Preliminarily Approving Reimbursement of Costs and Attorneys’ Fees in the amount of
21
$525,000.00; (4) Approving and Directing The Notice Of Class Action Settlement; and (5) Setting
22
The Final Approval Hearing And Scheduling Order.
23
24
25
26
27
DATED: January 23, 2017
STEVENS, LC
By:
______
Paul D. Stevens
Attorneys for Plaintiff and the Plaintiff Class
28
27
MEMORANDUM OF POINTS AND AUTHORITIES - PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT