VIRGINIA A. PHILLIPS, District Judge.
Plaintiffs' Motion for Final Approval of Settlement and Motion for Attorneys' Fees and Incentive Awards came before the Court for a hearing on February 22, 2010. After reviewing and considering all papers filed in support of, and in opposition to, the Motions, as well as the arguments advanced at the hearing, the Court DENIES both motions, as set forth below.
Plaintiff John True ("True") filed this lawsuit against American Honda Motor Company ("Defendant" or "AHM") on behalf of a putative class of Honda Civic Hybrid ("HCH") purchasers and lessees on March 9, 2007.
Plaintiffs allege the class members were exposed to false and misleading advertising regarding the fuel economy of HCHs and relied on these representations in paying a "Hybrid premium"
On August 27, 2009, the Court preliminarily certified a settlement class, preliminarily approved the initial proposed settlement, and directed notice be given to the class. On February 8, 2010, Plaintiffs filed a motion seeking final approval of a revised settlement ("the proposed settlement"), as well as a motion for the disbursement of attorneys' fees and incentive awards. AHM also submitted a brief and evidence in support of approval on February 9, 2010.
Several objectors filed oppositions to the motions on February 17 and 18, 2010, as have twelve state Attorneys General as amici curiae on February 19, 2010. The Court held a fairness hearing on February 22, 2010, and heard argument from the parties, as well as objectors to the terms of the settlement.
The parties engaged in approximately 11 months of discovery and motion practice before engaging in mediation. In December 2008, after several rounds of mediation, the parties informed the Court they had reached a settlement of the claims, and on March 2, 2009, Plaintiffs moved for preliminary approval of that settlement on behalf of the class. On March 25, 2009, 2009 WL 838284, the Court denied that motion with leave to submit additional materials. Upon the submission of supplemental materials and a second hearing, the Court granted the motion for preliminary approval and preliminarily certified a settlement class on August 27, 2009. The class was defined as "All persons who purchased or leased a new Honda Civic Hybrid automobile model years 2003 through 2008 in the United States of America including the District of Columbia," except certain persons affiliated with AHM, class counsel, and those who opt out of the class. (Doc. 114 at 4.)
In accordance with the Court's Order granting preliminary approval, notice was both mailed to class members and posted on a website ("the HCH Fuel Economy Website"). (Pls.' Mem. at 7-8; Lifosjoe Decl. ¶¶ 3, 6, 10; Wright Decl. ¶¶ 3-5; Cooper Decl. ¶¶ 2-4.) The website also contained other documents, including the initial proposed settlement agreement itself. (Lifosjoe Decl., Ex. D.) The Settlement Administrator, AHM, also sent the notice by electronic mail message ("e-mail") to the 55,469 class members for whom it had e-mail addresses. (Lifosjoe Decl. ¶¶ 12-14, Ex. E.) It also operated a toll-free telephone "helpline," which received 1,591 calls as of January 31, 2010. (Lifosjoe Decl. ¶ 16.)
Notice of the initial proposed settlement was also mailed to the United States Attorney General and the Attorneys General of each of the fifty states and the District of Columbia, as required by the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1715(b).
Both before and after the preliminary approval of the initial proposed settlement, the Court received several filings in opposition to approval of the settlement. These include formal objections from objecting class members Gaetano Paduano; Robyn Major; Francine P. Peterman; Stephen and Richard Vise ("the Vise objectors"); Joseph K. Goldberg, Valerie M. Nannery, and Katherine A. Burghardt ("the Goldberg objectors"); and the State of Texas (collectively, "the Objectors"). A coalition of twenty-five state Attorneys General and one state Office of Consumer Affairs also filed an amicus curiae brief in opposition to the initial proposed settlement.
Several additional objections were sent directly to class counsel by unrepresented class members. These include letters from Norman Whitton, Daniel Bergmann, Keith Cyrnek, Michael Beishe, Robert Tighe, and Gerald Nicholson. (Plaintiffs' Consolidated Response to Objections to Settlement Agreement ("Pls.' Resp. to
The Court has reviewed these submissions, as well as the opt-out forms submitted to the Settlement Administrator, which have been lodged with the Court.
The parties also reviewed the various communications from class members. As a result, they agreed to several adjustments and "clarifications" to the terms of the settlement, as described below. (Pls.' Mem., Ex. A.)
On February 8, 2010, Plaintiffs filed a Motion for Final Approval of Settlement and a Motion for the Approval of Attorneys' Fees and Incentive Awards. Plaintiffs seek a Final Order (1) certifying a class for settlement purposes; (2) granting approval of the proposed settlement; and (3) "granting such other and additional relief as the court may deem just and appropriate." (Mot. at 1.)
The proposed settlement does not create a settlement fund. Rather, it provides for up to four kinds of relief for class members, as well as incentive payments for the two named plaintiffs and attorneys' fees for class counsel. The declarations of Plaintiffs' counsel and the third-party mediator, as well as other materials in the record, demonstrate the parties engaged in substantial and arms-length negotiations over several sessions, in person and through various electronic media.
(a) Fuel Economy DVD—AHM will mail all class members a DVD, produced by AHM specifically for purposes of this settlement, "demonstrating how to operate and maintain [HCH] vehicles to maximize and optimize fuel economy." (Pls.' Mem. at 4.) The content of the DVD will also be accessible in streaming video format on the HCH Fuel Economy Website for a limited time. (Id.) Class members will not, however, be required to view this material before submitting a claim.
(b) Rebates—Class members will be able to select from one of two rebate options, referred to as "Option A" and "Option B."
— "Option A" is a $1,000 cash rebate for those class members "who sell or otherwise trade in
— "Option B" is a $500 cash rebate, available to those class members "who retain their HCH and purchase an Eligible Honda Vehicle." (Id., emphasis added.) This rebate is transferable to certain family members, and also expires twelve (12) months after the later of the effective date of settlement or October 31, 2011.
(c) Cash—A subset of class members will be eligible to receive, in addition to any rebates they receive under Option A or B,
AHM will "promptly undertake to review all of its fuel economy advertising for the HCH" and "modify its disclaimer language, including, at a minimum, changing language from `actual mileage may vary' to `actual mileage will vary.'" (Pls.' Mem. at 5.) The modified language will be in use for "a period of no fewer than twenty-four (24) months from the Effective Date [of settlement]." (Id.)
In exchange for the relief described above, under the proposed settlement, class members who do not opt out will be barred from:
(Settlement Agreement at 28.) These class members will also be barred from organizing members of the class who did not opt out into a separate class for purposes of pursuing another class action "relating to and/or arising out of the claims and causes of action or the facts and circumstances giving rise to this Lawsuit or the Released Claims." (Id.) The "Released Claims" are those "relating to, arising out of or in any way connected with, directly or indirectly, the advertising of the fuel economy or m.p.g. of the HCH, AHM's representations concerning the fuel economy or m.p.g. of the HCH and any claims that were, could have been or should have been brought in the Lawsuit by the Named Plaintiffs and/or the Settlement Class." (Settlement Agreement at 7-8.) The release specifically excludes claims related to the manufacturer's limited warranty except those related to "advertising or representations made by AHM with respect to fuel economy, mileage, or m.p.g." (Id. at 8.)
In revising the proposed settlement, the parties have added language clarifying that the release will not preclude class members "from participating in regulatory actions (if any) initiated by a state or
Plaintiffs seek approval of incentive payments of $12,500 for Plaintiff True and $10,000 for Plaintiff Delgado. (Pls.' Mem. in Supp. of Mot. for Attorneys' Fees at 9.) Plaintiffs' counsel seek an award of attorneys' fees in the amount of $2,950,000, and AHM does not oppose such an award. (Id. at 1.)
All class members automatically will be mailed the DVD. (Pls.' Mem. at 4, 9.) To receive either rebates under Options A or B, or a cash payment under Option C, class members will be required to log onto the HCH Fuel Economy Website, enter their vehicle identification number ("VIN"), and download and submit a claim form within 60 days of the date the Fuel Economy Video is posted on the HCH website.
Where "the parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement." Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir.2003).
Under Rule 23(a), in order to bring a class action, a plaintiff must demonstrate: the class is so numerous that joinder of all members is impracticable ["numerosity"], (2) there are questions of law or fact common to the class ["commonality"], (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class ["typicality"], and (4) the representative parties will fairly and adequately protect the interests of the class ["adequacy of representation"].
In addition to these prerequisites, a plaintiff must satisfy one of the prongs of Rule 23(b) in order to maintain a class action. Where, as here, a plaintiff moves for class certification under Rule 23(b)(3), the plaintiff must prove that:
The matters pertinent to the findings include: (1) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (2) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; and (3) the desirability or undesirability of concentrating the litigation of the claims in the particular forum.
Before approving a settlement, the court must hold a hearing and find that "the settlement ... is fair, reasonable, and adequate." Fed.R.Civ.P. 23(e)(1)(C). Review of a proposed settlement generally proceeds in two stages, a hearing on preliminary approval followed by a final fairness hearing. See Federal Judicial Center, Manual for Complex Litigation, § 21.632 (4th ed.2004).
In determining whether a settlement is fair, reasonable, and adequate, a court is to balance several factors, including:
Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1291 (9th Cir.1992), citing Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir.1982); see also In re Heritage Bond Litig., 546 F.3d 667, 674 (9th Cir.2008). This is "by no means an exhaustive list of relevant considerations," though, and "[t]he relative degree of importance to be attached to any particular factor will depend on the unique circumstances of each case." Officers for Justice, 688 F.2d at 625.
In evaluating a proposed settlement, "[i]t is the settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir.1998). The Court "does not have the ability to delete, modify, or substitute certain provisions," and "[t]he settlement must stand or fall in its entirety." Id. The question is not whether the settlement "could be prettier, smarter, or snazzier," but solely "whether it is fair, adequate, and free from collusion." Id., 150 F.3d at 1027.
Before examining the fairness of the proposed settlement, the Court examines the suitability of certification of the settlement class.
To establish, under Rule 23(a)(1), that joinder of all members is "impracticable," the plaintiff need not show that it would be "impossible" to join every class member. Haley v. Medtronic, Inc., 169 F.R.D. 643, 647 (C.D.Cal.1996). There is no specific number requirement, as the court may examine the specific facts of each case. Ballard v. Equifax Check Servs., Inc., 186 F.R.D. 589, 594 (E.D.Cal. 1999).
Here, Plaintiffs' counsel estimates the proposed class consists of 176,990 persons nationwide. (Pls.' Mem. at 1, n. 1, 19.) This satisfies the numerosity requirement of Rule 23(a).
"[T]he commonality requirement is interpreted to require very little." In re Paxil Litig., 212 F.R.D. 539, 549 (C.D.Cal. 2003). As the Ninth Circuit has explained:
Here, the FAC alleges several common questions of fact and law: (1) whether Defendant's advertising was false and misleading; (2) whether Defendant's claims about fuel economy were material to class members' decision to purchase HCH vehicles; (3) whether the class members suffered damages as a result of Defendant's conduct; (4) whether Defendant knew or should have known its advertising was false or misleading; (5) whether Defendant knew or should have known the class members would experience significantly less fuel economy than advertised; and (6) whether Defendant concealed or failed to tell class members about material facts regarding fuel economy. (Mot. at 19-20; FAC ¶¶ 26-32.)
Due to these common questions, the class satisfies the commonality requirement.
To gauge typicality, a "court does not need to find that the claims of the purported class representative[s] are identical to the claims of the other class members." Haley, 169 F.R.D. at 649. Rather, "[u]nder the rule's permissive standards, representative claims are `typical' if they are reasonably co-extensive with those of absent class members." Hanlon, 150 F.3d at 1020. Additionally, the class representatives "must be able to pursue [their] claims under the same legal or remedial theories as the unrepresented class members." Paxil, 212 F.R.D. at 549.
The representative plaintiffs' claims are typical of the settlement class members in that they arise from the same alleged course of events: (1) AHM's misrepresentations regarding the fuel economy of the HCH; (2) customers' reliance on these misrepresentations when purchasing or leasing HCHs; and (3) the HCH's failure to achieve the advertised fuel economy. Both representative plaintiffs have declared that they relied on the alleged misrepresentations in purchasing their HCHs, and that their vehicles did not achieve the advertised fuel economy. (Pls.' Mem. at 20; True Supp. Decl. ¶¶ 5-8; Delgado Supp. Decl. ¶¶ 6, 9, 12.)
The only relevant objection to a finding of typicality comes from the Vise Objectors. They contend that certification is inappropriate because "the class is composed of people with vastly different claims."
Neither of the purported differences change the fact that class members' injuries are similar and result from the same injurious course of conduct. See Armstrong v. Davis, 275 F.3d 849, 869 (9th Cir.2001). The Court thus finds the typicality requirement is met here.
Traditionally, courts have engaged in a two-part analysis to determine if a plaintiff has met the requirements of Rule 23(a) (4): (1) the class representative must not have interests antagonistic to the unnamed class members, and (2) the representative must be able to prosecute the action "vigorously through qualified counsel." Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir.1978).
Adequate representation "depends on the qualifications of counsel for the representatives, an absence of antagonism, a sharing of interests between representatives and absentees, and the unlikelihood that the suit is collusive." Paxil, 212 F.R.D. at 550. Courts determine the adequacy of counsel using the factors specified by Fed. R. Civ. Pro. 23(g). See, e.g., Hill v. Merrill Gardens, LLC, No. 1:04CV-248, 2005 WL 2465250, at *3 (N.D.Ind. Oct. 6, 2005); Fed. R. Civ. Pro. 23 Advisory Committee Notes.
Both Plaintiffs True and Delgado have been sufficiently involved with the litigation as it has progressed, participating in discovery and settlement negotiations. (True Supp. Decl. ¶¶ 12-22, 25; Delgado Supp. Decl. ¶¶ 12-26, 30.) The Court nonetheless has misgivings about their adequacy as representatives, due to their membership in the limited group of class members who are eligible to receive cash payments of $100 under Option C, and the potential conflict this creates.
In connection with their motion for preliminary approval, Plaintiffs submitted substantial evidence of class counsel's experience with class action, complex, and other large-scale litigation, including substantial trial experience. Neither objectors nor amici have made any challenge to Plaintiffs' counsel's qualifications. Based on the evidence submitted in connection with the motion for preliminary approval, and its own observation of their work throughout the case, the Court concludes Plaintiffs' counsel have made an adequate showing of their qualifications. See Fed. R.Civ.P. 23(g).
Plaintiffs satisfy the requirements of Rule 23(b). Common questions of fact predominate, common questions of law predominate, and a class action is the superior way to resolve this controversy.
First, this action concerns claims based on nationwide advertising created and distributed on behalf of a single company regarding a single product; all class members allegedly wrongly paid a "hybrid premium," or additional cost to obtain a hybrid rather than conventional vehicle. The Court already has determined it can infer that plaintiffs relied on the advertising because the alleged misrepresentations were material. (Pls.' Mem. at 23; June 22, 2007, 520 F.Supp.2d 1175 (C.D.Cal.2007), Order Denying Defendant's Mot. to Dismiss at 12-13.) Although individual damages; including restitution for unanticipated fuel expenses, would vary, common issues of fact predominate over individualized inquiries. (See Pls.' Mem. at 23.)
Second, common legal issues predominate because Plaintiffs assert that uniform law, namely that of California, applies to the claims of all members of the nation-wide class because: (1) AHM's headquarters are in California; (2) AHM's primary advertising agency, RPA, is in California; (3) "RPA created and placed all or substantially all of the advertising and promotional materials at issue in this Lawsuit for AHM from its offices in California"; (4) "AHM and RPA coordinated Honda's national and regional advertising, and AHM regulated or reviewed dealer advertising from its headquarters in Southern California"; (5) AHM's advertisements were reviewed by its legal and regulatory employees in California; and (6) substantially more HCHs were sold in California than in any other single state. (Pls.' Mem. at 22; citing Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605, 613, 236 Cal.Rptr. 605 (1987); Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 242, 110 Cal.Rptr.2d 145 (2001).)
These elements establish that a "common nucleus of facts and potential legal remedies dominates this litigation." Hanlon, 150 F.3d at 1022. Plaintiffs also have shown that a class action is a superior method of resolving this controversy, as each class member has a relatively small and uniform injury, and the costs of litigation would make individual cases impracticable.
The Court now turns to the terms of the proposed settlement to ascertain whether the settlement is fair, adequate and reasonable. In addition to the standard factors noted above, the Court notes two aspects of this proposed settlement that warrant special attention.
As noted above, the proposed settlement's award of a cash payment—"Option C"—to only a select sub-group of the class creates the most significant obstacle to
Courts generally are wary of settlement agreements where some class members are treated differently than others. See, e.g., In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liability Litig. ("In re GMC Pick-Up Litig."), 55 F.3d 768, 808 (3rd Cir.1995) ("One sign that a settlement may not be fair is that some segments of the class are treated differently from others."). Compare Hanlon, 150 F.3d at 1021 (rejecting objection to settlement where settlement "does not propose different terms for different class members"). While differential treatment of class members may be appropriate where "the settlement terms are rationally based on legitimate considerations," this does not appear to be the case here. In re PaineWebber Ltd. P'ships Litig., 171 F.R.D. 104, 131 (S.D.N.Y.1997), quoting In re "Agent Orange" Product Liability Litig., 611 F.Supp. 1396, 1411 (E.D.N.Y. 1985). See also In re Portal Software Inc., Securities Litig., No. C-03-5138 VRW, 2007 WL 4171201, at *6 (N.D.Cal. Nov. 26, 2007) (approving distribution of "settlement proceeds according to the relative strengths and weaknesses of the various claims"); Petruzzi's, Inc. v. Darling-Delaware Co., Inc., 880 F.Supp. 292, 300-01 (M.D.Pa.1995) ("[W]hile disparate treatment of class members may be justified by a demonstration that the favored class members have different claims or greater damages ... no such demonstration has been made here.").
Plaintiffs do not suggest that those in the "Option C" sub-group have any different legal claims than the other class members, or that they suffered any greater damages. They only argue that these class members should get greater relief because, simply put, they were moved to complain.
The specific inclusion of class members who made complaints to class counsel in the Option C sub-group makes the Court even more skeptical of the sub-group's appropriateness. The only class members who benefit from the addition of this inclusion appear to be the named representatives themselves. Those class members who complained to class counsel did not suffer any different injuries, do not have different legal claims, and are no more "aggrieved" than those class members who contacted other attorneys or no attorneys at all. Inasmuch as the parties seek to "reward" those class members who brought attention to the problem with HCHs, the proper reward lies in incentive payments, and only "named plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments." Staton, 327 F.3d at 977.
The distinction in relief available to different class members in the proposed settlement is similar to that offered in the proposed settlement rejected by the court in Acosta v. Trans Union, LLC, 243 F.R.D. 377 (C.D.Cal.2007). There, the court considered a settlement that provided "economic relief" only to a subclass, differentiated from other class members solely based on the dates on which they obtained bankruptcy discharge orders. 243 F.R.D. at 387. In rejecting the proposed settlement, the court noted that the dates used to divide the class were "arbitrary and b[ore] no relationship to the procedural or substantive limitations on the class members' claims." Id. The court also found the "arbitrary structural division of class members" was "compounded" by the fact that the class members outside
As in Acosta, the settlement here draws an arbitrary distinction among class members with identical legal claims and injuries, and allows some to receive a cash award, and others only a DVD and limited rebate. This is patently unfair, and counsels against approval of the proposed settlement.
The primary relief offered by this settlement is the $500 or $1000 rebate given to class members who purchase another Honda or Acura over the next nineteen months. Thus, the settlement is largely a "coupon settlement."
Although the "fair, reasonable, and adequate" language used in section 1712(e) is identical to the language relating to settlement approval contained in Fed. R. Civ. Pro. 23(e)(2), several courts have interpreted section 1712(e) as imposing a heightened level of scrutiny in reviewing such settlements. See, e.g., Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 654 (7th Cir.2006); Figueroa, 517 F.Supp.2d at 1321. See also S.Rep. No. 109-14, at 27 (2005), as reprinted in 2005 U.S.C.C.A.N. 3, 27 (Section 5 of CAFA "requires greater scrutiny of coupon settlements"); Fed. R. Civ. Pro. 23(h), 2003 Advisory Committee Notes ("Settlements involving nonmonetary provisions for class members also deserve careful scrutiny to ensure that these provisions have actual value to the class.").
The Court acknowledges the wide range of judicial and scholarly criticism of coupon settlements cited by the Objectors and amici, and concurs that such settlements are generally disfavored. This is due to three common problems with coupon settlements: "they often do not provide meaningful compensation to class members; they often fail to disgorge ill-gotten gains from the defendant; and they often require class members to do future business with the defendant in order to receive compensation." Figueroa v. Sharper Image Corp., 517 F.Supp.2d 1292, 1302 (S.D.Fla.2007), citing Christopher R. Leslie, "The Need to Study Coupon Settlements in Class Action Litigation," 18 Geo. J. Legal Ethics 1395, 1396-97. See also Synfuel Techs., 463 F.3d at 654; In re Mexico Money Transfer Litig., 267 F.3d 743, 748 (7th Cir.2001); In re GMC Pick-Up Litig., 55 F.3d at 807-10 (3d Cir.1995); Kearns v. Ford Motor Co., No. CV 05-5644 GAF, 2005 WL 3967998, at *1 n. 1 (C.D.Cal. Nov. 21, 2005).
This does not mean that a coupon settlement can never be approved as fair, adequate, and reasonable, though. For example, in In re Mexico Money Transfer Litigation, 267 F.3d at 748-49, the Seventh Circuit affirmed the approval of a
Plaintiffs contend they "would face significant risks in continuing to litigate this case." (Pls.' Mem. at 11.) AHM contends that the case is "relatively weak on the merits and poses significant manageability problems." (Def.'s Sub. at 22.) The Objectors and amici disagree with these characterizations. See, e.g., AGs Amicus Br. at 22; Goldberg Obj. at 18. The Court thus examines each of the purported weaknesses.
The parties address several potential issues with Plaintiffs' claims that, they contend, show the weakness of the case.
AHM identifies weaknesses in the claims of the two representative plaintiffs.
There are two mileage gauges in each HCH. One shows the current fuel economy rate, and the other shows an "average" fuel economy rate, based on the average fuel economy over the period since that gauge was last reset. In his deposition testimony, representative plaintiff True conceded that he "hardly ever" reset the average mileage gauge in his HCH, and did not understand what that gauge actually showed. (True Dep. at 31:20-33:23.) Therefore, his conclusions that his efforts to improve his mileage were having no effect may have been in error, calling into question the underlying factual basis of his claim.
AHM also suggests that representative plaintiff Delgado did not properly "understand the features of his vehicle." (Def.'s Sub. at 11.) For example, at his deposition, Delgado did not know what weight oil is recommended for use in the HCH, what factors influenced the activation of the vehicle's "auto stop" function, or that use of the cruise control function increased fuel usage. (Delgado Dep. 147:17-21; 173:24-174:10; 178:5-11.) Much of Delgado's lack of understanding derives from the theft of his owner's manual four days after his purchase of the HCH. (Delgado Dep. 149:15-150:9.) Delgado's lack of familiarity with the fuel-saving features of the HCH weakens Delgado's case.
These problems with True's and Delgado's claims counsel both in favor of and against approval. Inasmuch as they show the weakness of Plaintiffs' claims, they weigh in favor of approval. The weaknesses are specific to these plaintiffs, however. Other class members may well have better understood how the various features of the car worked, and nothing in True's or Delgado's testimony relates to Honda's knowledge as to the accuracy of its representations regarding fuel economy. The situation is thus different from one where there are weaknesses in the legal theory underlying an entire class's claims. Accordingly, the problems with True's and Delgado's claims raise concerns about their adequacy as representative plaintiffs, and call the certification of a settlement class into question.
In Robinson v. Sheriff of Cook County, 167 F.3d 1155 (7th Cir.1999), cert. denied, 528 U.S. 824, 120 S.Ct. 71, 145 L.Ed.2d 60 (1999), the Seventh Circuit explained the difference between these kind of weaknesses
Developments in a California state court lawsuit alleging substantially similar claims suggest it may be the claims of the representative plaintiffs, not the claims of the entire class, that are weak. In Paduano v. American Honda Motor Company, Inc., 169 Cal.App.4th 1453, 1470-1473, 88 Cal.Rptr.3d 90 (2009), the California Court of Appeal reversed a grant of summary judgment to AHM, holding that an HCH owner had presented a sufficient question of fact for his UCL and CLRA claims based on the false or misleading nature of AHM's fuel economy representations to go to trial. Paduano has now been settled, and AHM has agreed to pay Gaetano Paduano $50,000 to settle his claims, in addition to a minimum of $50,000 for his attorney's fees. See Goldberg Objs. Resp. to Pls.' Mot., Ex. 1 (Settlement Agreement, Paduano v. Am. Honda Motor Co., San Diego Super. Ct. Case No. GIC 852441). This suggests the claims of the class members may have significant value.
AHM suggests that Plaintiffs' claims are preempted by federal law. (Def.'s Sub. at 23.) The Court already denied AHM's motion to dismiss this action on this basis. (See Doc. No. 23.) Without addressing the merits of this argument any further, the Court notes that this very argument was made in the California Court of Appeal, and rejected. Paduano, 169 Cal.App.4th at 1474-1485, 88 Cal.Rptr.3d 90. The situation is thus readily distinguished from that before this Court in Wilson v. Airborne, Inc., No. EDCV 07-770-VAP, 2008 WL 3854963 (C.D.Cal. Aug. 13, 2008), cited by Defendant. (Def.'s Sub. at 23.) Although the Paduano court's holding is not binding on this Court, combined with this Court's earlier holding, it suggests that preemption does not pose a great obstacle to Plaintiffs' claims.
AHM points out that should this case proceed, it would contest Plaintiffs' attempt to apply California law to a nationwide class. (Def.'s Sub. at 24.) Whether California law can be applied to a nationwide class is a case-specific determination, and the Court cannot determine how this issue affects the merits of Plaintiffs' claims based on the limited information and briefing before the Court. See, e.g., Menagerie Productions v. Citysearch, No. CV 08-4263 CAS, 2009 WL 3770668, at *15 (C.D.Cal. Nov. 9, 2009) (finding California UCL could be applied to nationwide class based on specifics of case); Mazza v. Am. Honda Motor Co., 254 F.R.D. 610 (C.D.Cal.2008) (finding UCL and CLRA could be applied to nationwide class).
AHM notes that Plaintiffs will have to prove that the advertising for the HCH
Plaintiffs acknowledge that this decision "provides support to Plaintiffs' allegations, particularly Plaintiff's [sic] allegations of reliance on exposure to AHM's long-term ad campaigns." (Pls.' Mem. at 12, n. 6.) They suggest, however, that "uncertainty remains" as "Defendant is likely to challenge the significance and applicability of the Tobacco II cases to the present facts." (Id.) AHM does not address this case in its submission to the Court.
AHM also contends that the general satisfaction of class members with their HCHs and Honda is relevant to the strength of the Plaintiffs' claims on the merits. (Def.'s Sub. at 1-8.) This argument is overreaching. The general satisfaction of class members is irrelevant to the merits of Plaintiffs' claims, as general satisfaction is not mutually exclusive with any of the elements of the particular claims here relating to Honda's fuel economy representations.
The satisfaction of HCH owners and lessees as to the fuel economy of their HCHs is relevant, though. This is not because the owners are happy with their cars, but because these class members have made statements which directly contradict Plaintiffs' claims. In particular, many of these class members have included information about the fuel economy they have obtained from their HCHs, suggesting that Honda's representations were not misleading as to the fuel economy of the HCH. See, e.g., Opt-Out Nos. 14 (average of 48 m.p.g.); 89 (average of 48-49 m.p.g.); 155 (average of 52-53 m.p.g.); 189 ("better than advertised mileage"); 213 (average of 45-50 m.p.g.); 315 ("48 mpg in town and up to 60 mpg on the highway"). In this respect, the experience of other class members does weaken Plaintiffs' claims, though it is not necessarily fatal.
AHM also argues that the varied experiences of class members in terms of the fuel economy they obtained will present significant manageability problems, and would make it difficult for plaintiffs to maintain class status throughout trial. (Def.'s Sub. at 19.) This concern is likely overstated, as whether the representations made by Honda about the HCH were knowingly or intentionally misleading will not depend on the individual fuel economy achieved by each class member, but about the HCH's fuel economy in general. For this reason, AHM's arguments that the various factors that influenced the mileage an individual class member achieved would make class action inappropriate are also unavailing. (Def.'s Sub. at 21-22.)
Beyond the substance of the claims and the differences in fuel economy achieved by class members, the parties raise several other issues related to the ability of plaintiffs to maintain class status throughout trial.
Plaintiffs note that, should they proceed with their case, "AHM would vigorously
The Court acknowledges that there remain many unsettled questions related to Plaintiffs' claims and their ability to proceed as a class that decrease their claims' value. The Court also acknowledges that there are specific weaknesses in the cases of the representative plaintiffs. The Court cannot, however, conclude that the claims are of negligible value. Even if Plaintiffs would face substantial obstacles in order to prevail, "colorable legal claims are not worthless merely because they may not prevail at trial. A colorable claim may have considerable settlement value (and not merely nuisance settlement value) because the defendant may no more want to assume a nontrivial risk of losing than the plaintiff does." Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781, 783 (7th Cir.2004).
Plaintiffs contend that the settlement is valued at between $23,610,649 and $45,893,083, (Pls.' Mem. at 13), a figure vigorously disputed by the Objectors and amici. This figure is based on valuations of each of the component measures of the proposed settlement. The Court thus examines each component in turn.
In ascertaining the fairness of a coupon settlement, the Court is to "consider, among other things, the real monetary value and likely utilization rate of the coupons provided by the settlement." S.Rep. No. 109-14, at 31, as reprinted in 2005 U.S.C.C.A.N. 3, 31. Plaintiffs rely on Professor Xavier Drèze
As several objectors and amici note, there are problems with both Drèze's calculations and Plaintiffs' reliance on them. As a preliminary matter, even if they were accurate as to the initial proposed settlement, Drèze's calculations are now inaccurate in light of the subsequent revisions to the settlement. Drèze's calculations were also based on several assumptions flawed as a matter of logic or law.
In determining how many class members were likely to take advantage of Options A and B,
To discern what proportion of the class would fall into the first two categories, Drèze appears to have considered Honda owners' loyalty, Honda's market share, and the general frequency with which Americans replace their automobiles. (Drèze Decl. ¶ 7.) There are two flaws with this analysis.
First, Drèze's calculations were based on a premise that class members would have 24 months in which they could redeem rebates. (Id.) The proposed settlement provides that customers may only redeem rebates through either October 2011, or twelve months from the approval of the settlement, which occurs later. (Pls.' Mot., Ex. A.)
Second, Drèze assumed that the class members will be as likely as any other Honda owner to purchase another Honda. See Pls.' Resp. to Objs. at 11 (analysis is based on an estimate of "class members who would be purchasing a Honda in the next two years regardless of the existence of any settlement"). This figure not only disregards the existence of any settlement, but also the alleged facts underlying the claims in this suit. The class includes persons who believe they were misled about the fuel economy of their vehicle or were otherwise disappointed in the car they bought. See, e.g., Major Obj. at 6 (noting Ms. Major is "disillusioned with Honda after [her] disappointment with the Civic hybrid mileage, and do[es] not wish to continue to do business with Honda"). Some class members undoubtedly will purchase another Honda, see, e.g., Def.'s Sub. at 2-3 (citing testimony of plaintiffs), but it appears unlikely that aggrieved HCH owners or lessees will make repeat Honda purchases at the same rate as Honda customers in general. Plaintiffs themselves seem to have recognized this concept, in that in negotiating the initial settlement agreement, they "assumed that Settlement Class Members dissatisfied with the fuel economy of their HCH would not be interested in purchasing another hybrid Honda vehicle." (Pls.' Mem. at 13.)
Even if the calculations at the first two steps of his analysis were reliable and accurate, though, the final step is particularly flawed. Drèze acknowledged that redemption rates in coupon settlements have ranged from less than one percent to over 90 percent, and therefore made estimates of likely redemption rates "based on a review of publically [sic] available evidence and scholarly writing on settlements." (Drèze Decl. ¶ 7.) Based on these unspecified sources, Drèze apparently concluded that 40% of those eligible for rebates under Option A and 20% of those eligible for rebates under Option B would redeem them. Applying these baseless figures, Drèze concluded that 7% of the total class will take advantage of Option A, and an additional 6% of the total class will take advantage of Option B. The Court is extremely skeptical of this outcome, particularly in light of the experience in other cases where less than 2% of the class redeemed similar rebates. See, e.g., White v. Gen. Motors Corp., 835 So.2d 892, 896-97 (La.Ct.App.2002) (less than 1.7% of class redeemed coupons); Goldberg Obj., Ditlow Decl. ¶ 9, Att. A (settlement report from Gray v. Ford Motor Co., Sacramento
Drèze's analysis as to the value of the rebates to those class members who redeem them is also flawed, as he values the rebates at their full face value. (Drèze Decl., Att. 2.) Courts have generally rejected the idea that the face value of coupons or rebates should be used for settlement valuation purposes; "[c]ompensation in kind is worth less than cash of the same nominal value." Acosta, 243 F.R.D. at 390, quoting In re Mexico Money Transfer Litig., 267 F.3d at 748. See also In re GMC Pick-Up Litig., 55 F.3d at 807. Where a coupon or rebate is not freely transferable on the open market, as is the case here, it has even less value. See In re Compact Disc Minimum Advertised Price Antitrust Litig., 216 F.R.D. 197, 221 n. 58 (D.Me.2003); In re Lloyd's Am. Trust Fund Litig., No. 96 Civ. 1262 RWS, 2002 WL 31663577, at *16 (S.D.N.Y. Nov. 26, 2002); Clement v. Am. Honda Finance Corp., 176 F.R.D. 15, 27 (D.Conn.1997). Compare In re Mexico Money Transfer Litig., 267 F.3d at 748 (analyzing value of transferable coupons).
Plaintiffs' argument that face value is the proper measure ignores the basic economics of coupons and rebates. "Coupons promote sales without lowering the price to everyone (that is, holding a `sale')." Menasha Corp. v. News America Marketing In-Store, Inc., 354 F.3d 661, 662 (7th Cir.2004). In the automobile context, "[r]ebates are given to encourage purchases by reducing the total amount of money the buyer needs to acquire the new car or by providing the debtor a premium that can be used for some purpose other than acquiring the new car." In re Gray, 382 B.R. 438, 442 (Bankr.E.D.Tenn.2008). Since rebates and coupons aim to facilitate a sale to a purchaser who would not otherwise purchase a product at a higher price, the Court cannot, as Plaintiffs do, assume that every sale to a class member "would have happened anyway." (Pls.' Resp. to Objs. at 15.) Class members may purchase new Honda or Acura vehicles only "because they fe[el] beholden to use the certificates," not because they would have otherwise. In re GMC Pick-Up Litig., 55 F.3d at 808.
The Court also notes that the coupons are not only worth less than face value to class members, but they cost AHM less as well. If many class members do in fact take advantage of the rebates offered by Options A and B, the Settlement can result in a "tremendous sales bonanza" for AHM. In re GMC Pick-Up Litig., 55 F.3d at 808, quoting Bloyed v. General Motors Corp., 881 S.W.2d 422, 431 (Tex.Ct.App.1994). For each class member who purchases another Honda or Acura who would not have done so without the settlement rebate, AHM will experience a net benefit.
These multiple flaws in Professor Drèze's analysis preclude the Court from giving it great weight. The Court concludes that although Options A, B, and C, have value, this value is far less than Plaintiffs suggest.
Plaintiffs also contend that the DVD offers benefits to the class of $7,427,477 to $29,709,911 "depending on actual fuel savings
Many of the Objectors and the amici question the value of the DVD in light of the fact that many of the "tips" in the DVD are already available from free, public sources, as well as the HCH owners' manual. See, e.g., AGs Amicus Br. at 8; Paduano Resp. to Mot. for Prelim. App. at 4-5; Major Obj. at 9; Goldberg Obj. at 7.
Even if Plaintiffs are correct that the DVD is superior to the free information already available to class members, the proper measure of the value of the DVD is not the total savings in fuel economy that a class member would achieve after viewing it, but the marginal value of these savings as compared to those a class member could achieve from viewing that which is already available to the class members, either on the internet or through the HCH Owners' Manual, plus any "convenience" value due to the "user friendliness" of the DVD.
The Court also is concerned that the DVD has yet to be "finalized," and AHM is not required to produce a script or story boards for the DVD until forty-five days after the settlement is given final approval. (Prop. Settlement at 14.) Not only will the Court lack jurisdiction to review the content of the DVD at that time, but, should fees be disbursed as proposed, class counsel will have been paid already, and thus have no incentive to review the proposed script or story boards meaningfully. Since the content of the DVD remains substantially uncertain, the Court questions how it or Plaintiffs can be assured the DVD will be of "substantial value" to the class members, or that "no single publicly available source contains all of the information to be presented in the DVD in one place."
Neither Plaintiffs nor Objectors have argued that the injunctive relief is a source of significant value to the class members, although AHM has. See Major Obj. at 10; Pls.' Resp. to Objs. at 8; Def.'s Sub. at 15. The Court is inclined to agree with Plaintiffs and the Objectors that the injunctive relief is of minor, if any, value. This is largely a byproduct of the nature of Plaintiffs' claims, though. No changes to future advertising by Honda will benefit those who already were misled by Honda's representations regarding fuel economy. In addition, due to regulatory changes by the Environmental Protection Agency, Honda has already substantially lowered the fuel economy estimates it uses in marketing and other customer communications. (See Pls.' Resp. to Objs. at 8.)
Although the Court does not rule on Plaintiffs' motion for attorneys' fees and incentive payments at this time, the Court still reviews the related provisions in the proposed settlement in determining the fairness of the proposal. "[T]o avoid abdicating its responsibility to review the agreement for the protection of the class, a district court must carefully assess the reasonableness of a fee amount spelled out in a class action settlement agreement." Staton, 327 F.3d at 963.
The Court acknowledges that both representative plaintiffs' True and Delgado have been personally involved in this litigation. Although the Court does not make final determinations as to the appropriateness of the requested incentive fees at this time, the Court does not find these payments illustrate any flaw in the substantive terms of the proposed settlement agreement.
Plaintiffs' counsel seek an award of nearly three million dollars in attorneys' fees, based on a lodestar analysis and in accordance with a "clear sailing" provision in the proposed settlement agreement.
Here, of all the components of the settlement, the only components with any determinate value are the attorneys' fees and incentive payments. Under the terms of the settlement, there is no certainty that class members will receive any cash payments or rebates at all, but class counsel will receive a three million dollar payment regardless of whether one or 10,000 class members file valid claims. Since there is no guarantee that AHM will pay any money out of the settlement to either class members or a cypress beneficiary, to award three million dollars to class counsel who may have achieved no financial recovery for the class would be unconscionable.
The Court concludes that the Plaintiffs have significantly overestimated the value of the settlement at $23.6 to 45.9 million. According to AHM's published information, the cheapest 2010 Honda available costs $15,610.
Plaintiffs filed this action on March 9, 2007. Over a two-year time span, class counsel reviewed "thousands of pages of relevant documents" produced by AHM and third parties, "took four depositions of AHM executives and third parties including AHM's advertising agency, RPA [Rubin Postaer and Associates]," and engaged various experts "to assist them in the review and analysis of information obtained through discovery." (Pls.' Mem. at 14.) The Court concludes discovery has been sufficient to permit the parties to enter into a well-informed settlement, and this factor weighs in favor of approval.
As explained above, class counsel have demonstrated experience with class
The Court has the benefit of the views of numerous class members here: objectors, class members who opted out, and other class members who submitted communications to class counsel or the Settlement Administrator. The Court summarizes these varied views before discussing whether the reaction of class members as a whole weighs in favor of settlement.
As noted above, sixteen class members, including the State of Texas, have "objected" to the settlement. The Court has also received an amicus brief filed on behalf of 26 state officials opposing the settlement as insufficiently beneficial to class members. The Court addresses the views of the various states and state officials separately below.
"In an effort to measure the class's own reaction to the settlement's terms directly, courts look to the number and vociferousness of the objectors." In re GMC Pick-Up Litig., 55 F.3d at 812. See also Pallas v. Pacific Bell, No. C-89-2373 DLJ, 1999 WL 1209495, at *6 (N.D.Cal. July 13, 1999) ("The greater the number of objectors, the heavier the burden on the proponents of settlement to prove fairness."). "However, a combination of observations about the practical realities of class actions has led a number of courts to be considerably more cautious about inferring support from a small number of objectors to a sophisticated settlement." In re GMC Pick-Up Litig., 55 F.3d at 812, citing In re Corrugated Container Antitmst Litig., 643 F.2d 195, 217-18 (5th Cir.1981); In re General Motors Corp. Engine Interchange Litig., 594 F.2d 1106, 1137 (7th Cir.1979). "[A] low number of objectors is almost guaranteed by an opt-out regime, especially one in which the putative class members receive notice of the action and notice of the settlement offer simultaneously." Ellis v. Edward D. Jones & Co., L.P., 527 F.Supp.2d 439, 446 (W.D.Pa.2007).
Although some of the Objectors' arguments are more helpful than others, the Objectors here have raised serious, legitimate concerns about the adequacy of the proposed settlement. Nevertheless, Plaintiffs suggest the Court should disregard their opposition to the proposed settlement. (Pls.' Resp. to Obj. at 15-18.)
First, Plaintiffs attack many of the Objectors' counsel because they have represented objectors in other actions in the past. (Id. at 17.) This has no greater bearing on the merits of the objections raised than a plaintiffs counsel's experience in filing class action suits speaks to the merits of claims he brings.
Second, Plaintiffs suggest that the Court should not give weight to the objections of the Goldberg objectors, as they are all attorneys. (Pls.' Resp. to Objs. at 17). Plaintiffs cite no authority for this proposition, and the Court sees no reason why it should give less consideration to the views of any class member simply because of his or her profession.
Third, Plaintiffs contend some of the Objectors are opposed to class action litigation in general, not this specific settlement. (Id.) The Court does not give any weight to arguments about the propriety of class action litigation, but the views of Objectors or their counsel on that subject does not discredit the points they have
Fourth, Plaintiffs suggest that the objections are entitled to little credence because the Objectors did not make suggestions as to how to make the settlement better. (Id.) This argument is unavailing for two reasons. The proponents of a settlement bear the burden of proving its fairness. 4 Newberg on Class Actions § 11:42 (4th Ed.2009). Objectors do not have a duty to produce a fairer alternative. Even so, the Objectors here did explicitly note elements of the proposed settlement that could be made fairer (e.g., the release language, the limitation on rebate-eligible Honda models), and the parties responded by making changes to the proposed settlement.
Finally, Plaintiffs also argue that the Objectors' views should not weigh against approval of the settlement, since the Objectors had the option to opt out of the settlement. (Pls.' Resp. to Objs. 18.) This argument was specifically rejected by the Third Circuit in In re GMC Pick-Up Litig. Responding to an argument that class members "dissatisfied with the settlement's terms [ ] could simply opt out of the class and pursue their own relief individually," the court explained:
55 F.3d at 809. The Court agrees with this reasoning, and thus has considered the views of the objectors on the merits.
Of the formal objections lodged with the court, each expressed dissatisfaction with the suit as substantively unfair based on the insufficient relief offered.
Of the objections submitted solely to class counsel, one objected solely to the attorneys' fee award (Pls.' Resp. to Obj., Ex. A at 2-4); four objected on the grounds that the case was frivolous or that they were satisfied with their fuel economy (id. at 5-9, 16-33); and one objected to the inadequate remedies, excessive attorneys' fees, and breadth of the settlement (id. at 10-15).
Five hundred eighty-four members of the class submitted opt-out forms to the Settlement Administrator. (Pls.' Mem. at 18; Lifosjoe Decl. ¶ 19.)
Many of the opt-out notices included comments on the terms of the proposed settlement. The Court has reviewed these comments. Several class members cited their own inability to benefit from the settlement, as they had not formally filed complaints with Honda or had no intention of purchasing one of the specified Honda vehicles, and thus would not qualify for Options A, B, or C. See, e.g., Opt-Out Nos. 1, 93, 199 204, 240, 544, 550, 555, 558, 559, 561, 563, 564, 565, 566, 570, 571, 579, 580. Many class members cited the attorneys' fee request as too high. See, e.g., Opt-Out Nos. 34, 81, 176, 276, 535, 536, 539, 550, 567, 577, 578. Others stated that the relief provided was generally of insubstantial or insufficient benefit. See, e.g., Opt-Out Nos. 535-538, 540, 541, 543-545, 549, 551, 560, 570, 572, 574, 577, 578, 580-582. One class member argued the incentive payment award was too high. Opt-Out No. 539.
The majority of the class members who opted-out and provided comments, though, cited their satisfaction with the gas mileage they were receiving from their HCHs, or otherwise opposed the merits of the suit.
Plaintiffs contend that only one opt-out submission "clearly expressed a desire to commence an individual lawsuit." (Pls.' Mem. at 18.) The Court has identified several submissions, though, which, either explicitly or in tenor, contemplate individual suits. See, e.g., Opt-Out Nos. 35 ("I would like to consider my options outside the terms contained in the settlement offer."); 542 ("I may be suing Honda myself."); 549 ("Considering legal action against Honda on my own"); 552 ("I will seek my own legal action as this settlement offer is completely inadequate.") Therefore, the Court cannot conclude that there is no "threat of individual lawsuits against AHM based on the same claims in this Lawsuit," as Plaintiffs have. (Pls.' Mem. at 18.)
The Court has reviewed six letters submitted to the Settlement Administrator which provide substantive comments on the settlement. Three of these letters expressed opposition to the merits of the lawsuit, based on the authors' experiences driving HCHs and achieving the advertised fuel economy. (Other Communication Nos. 5, 6, and 14.) Another letter writer also expressed his own experience achieving the advertised fuel economy, but asked the Court to require Honda to make unrelated changes to HCHs as part of any settlement. (Other Communication No. 18.) One letter writer explicitly objected to any settlement that would provide any relief to the class or class counsel. (Other Communication No. 16.) One letter writer objected to the terms of the settlement on the bases that the settlement did not assist class members "in any meaningful way" and "will cause a chilling effect ... with regard to the implementation of new energy efficient technology," and that the attorneys' fees requested are too high. (Other Communication No. 1.)
The Court has also reviewed other communications from class members sent directly to class counsel. Two letter writers found the relief offered insufficient (Pls.' Resp. to Objs. at 35, 37-38); two letter writers expressed their belief that there was no merit to the suit (id. at 36, 44); and one letter writer expressed disdain for class action suits in general (id. at 39-43).
Although the Objectors have identified significant issues relating to the value of the settlement and the fairness of the distribution of its relief, the Court notes that a large number of class members appear to think that the settlement is more than fair to the class, since they believe the case has no merit whatsoever. Therefore, this factor is at least neutral, but more likely weighs in favor of approval of the proposed settlement.
Twenty-six states have filed an amicus brief urging the Court to reject the proposed settlement as unfair. The State of Texas has also objected as a class member. This factor thus weighs against approval of the settlement.
The Court concludes that the differential treatment of class members, the low value of the settlement, and the views of the governmental participants outweigh those factors that weigh in favor of approval. The Court thus cannot find the proposed settlement to be "fair, reasonable and adequate" under either Rule 23(e) or 28 U.S.C. § 1712(e).
Even if the Court were to find the substance of the proposed settlement fair, adequate, and reasonable, the Court could not grant final approval of the settlement at this juncture. The only notice sent to class members contained the terms of the initial proposed settlement, to which the parties have agreed to make several substantive changes. These changes, particularly the change as to which Honda vehicles are eligible for a rebate, may have an effect on the decisions of the Objectors and opting-out class members. See, e.g., Opt-Out Nos. 67 (noting no intent to buy one of the eligible vehicles); 566 (same). Thus, the parties should have sent notice of the revised settlement to at least these class members. See, e.g., In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F.Supp. 450, 473 n. 10 (D.N.J.1997). Compare White v. Nat'l Football League, 41 F.3d 402, 408 (8th Cir.1994), abrogated on other grounds by Amchem Prods., Inc., 521 U.S. at 620, 117 S.Ct. 2231, (notice of revised settlement sent to entire class prior
In addition, the parties only sent notice of the revisions to the proposed settlement to the Attorneys General of each of the fifty states and the District of Columbia on February 12, 2010. (Kiser Supp. Decl. ¶ 3.) A mailing sent only ten days prior to the final approval hearing cannot possibly give adequate notice to the Attorneys General in order to achieve the purposes of 28 U.S.C. § 1715(b). This delay makes it questionable whether the Court even has the authority to issue an order giving final approval to the proposed settlement in light of 28 U.S.C. § 1715(d), which states: "An order giving final approval of a proposed settlement may not be issued earlier than 90 days after the later of the dates on which the appropriate Federal official and the appropriate State official are served with the notice required under subsection (b)." While the text of this section is unclear as to its application to revisions of proposed settlements, the Court finds the mailing inadequate under any measure of reasonable timing.
In light of the Court's denial of the motion for final approval of the settlement, Plaintiffs' motion for attorneys' fees is denied without prejudice as premature.
For the foregoing reasons, Plaintiffs' Motion for Final Approval of the Settlement and Motion for Attorneys' Fees and Incentive Payments are DENIED without prejudice.
"Class members who object to a class action settlement do not have an absolute right to discovery; the Court may, in its discretion, limit the discovery or presentation of evidence to that which may assist it in determining the fairness and adequacy of the settlement." Hemphill v. San Diego Ass'n of Realtors, 225 F.R.D. 616, 619 (S.D.Cal.2005). Here, Plaintiffs have already produced sufficient evidence for the Court to evaluate the value of the relief for class members in the proposed settlement, and thus further discovery is unnecessary. The Court further finds no additional discovery is needed as to class counsels' time and expense in this case, in light of the evidence produced in connection with the motion for attorneys' fees and the Court's deferral of any issues regarding fees to a later date.
Peterman's requests for discovery about class counsel's conduct during settlement negotiations, as well as "why" monetary relief did not form a greater part of the settlement are evaluated under an even stricter standard. An objector is only entitled to discovery of settlement negotiations if he or she "lays a foundation by adducing from other sources evidence indicating that the settlement may be collusive." Lobatz v. U.S. West Cellular of Cal., Inc., 222 F.3d 1142, 1148 (9th Cir.2000). See also Horton v. USAA Casualty Ins. Co., No. CV 06-2810-PHX-DGC, 2009 WL 2372187, at *2 (D.Ariz. Aug. 3, 2009); Hemphill, 225 F.R.D. at 621. While the Court agrees with the Objectors that there are issues as to the fairness of the settlement, there is no evidence that there was improper collusion between the parties, and thus the request for discovery is DENIED.
