DOUGLAS P. WOODLOCK, District Judge.
Before me, following a fairness hearing and the submission of various post-hearing materials as I directed, is a proposed settlement agreement between the defendants, Vibram USA Inc. and Vibram FiveFingers LLC (collectively, "Vibram"), both Massachusetts residents, and a nationwide class of consumers who purchased FiveFingers "barefoot" footwear directly from the defendants or through authorized retailers between March 21, 2008, and May 27, 2014. The plaintiffs in these consolidated actions allege that the defendants misrepresented in their advertising and marketing that this footwear provides certain health benefits to wearers.
The plaintiffs have moved for approval of the proposed settlement agreement, which would establish a $3,750,000 non-reversionary settlement fund to provide refunds to eligible class members and cover the costs associated with this litigation, including administrative costs, attorneys' fees and expenses, and incentive awards for the named plaintiffs. The agreement also provides that Vibram will refrain from making representations of health benefits associated with FiveFingers unless it has reliable evidence to support those representations.
In connection with settlement approval, class counsel for the plaintiffs seek $937,500 in attorneys' fees, $61,674.44 in expenses,
This memorandum sets forth in detail my reasons for finding that the proposed settlement agreement is fair, reasonable and adequate as required by Fed.R.Civ.P. 23(e). Accordingly, I will approve the class with finality and also approve the settlement agreement involving the class, Dkt. No. 80. I further award the attorneys' fees, expenses, and incentive awards requested.
In mid-2012, plaintiffs in three states filed putative class action complaints alleging that the defendants engaged in deceptive marketing of FiveFingers footwear by advertising through in-store and online mechanisms, as well as through product packaging, that wearing FiveFingers provides certain "health benefits," including muscle strengthening and more natural movement and alignment, and representing that these health benefits are supported by scientific research.
On March 21, 2012, Bezdek filed the first of the complaints in this court on behalf of a proposed nationwide class, alleging violations of Mass. Gen. Laws ch. 266, § 91 (untrue and misleading advertising), Mass. Gen. Laws ch. 93A, §§ 2, 9 (unfair and deceptive practices), and Florida Statutes § 501.201 et seq. (on behalf of an alternative Florida-based class), as well as unjust enrichment. Bezdek purchased a pair of FiveFingers footwear in April 2011 for $104.90 through the defendants' website, purportedly relying on the representations of health benefits associated with the footwear. She claims that if she, and other reasonable consumers, had known there was no scientific evidence supporting those benefits, she would not have purchased the footwear, and that she has suffered an economic loss attributable to the defendants' conduct.
The defendants moved to dismiss Bezdek's complaint, and on June 25, 2012, Bezdek responded by filing an amended complaint, which the defendants challenged through a renewed motion to dismiss. On February 20, 2013, I denied the initial motion to dismiss as moot, and denied
The second relevant complaint was filed on July 9, 2012 in the United States District Court for the Central District of California by Safavi, represented by the same counsel as Bezdek. See Safavi v. Vibram USA Inc., No. 12-cv-05900-BRO-JCG (C.D.Cal.) (Compl., July 9, 2012, ECF No. 1). Safavi purchased a pair of FiveFingers footwear in July 2011 from an REI store in California for $92.96, also purportedly relying on the representations of health benefits associated with the footwear. Id. ¶ 11. On behalf of a proposed class of California consumers, Safavi alleges violations of the California Unfair Competition Law, Business and Professions Code § 17200 et seq., the California Consumers Legal Remedies Act, Civil Code § 1750 et seq., and breach of express warranty. Id. ¶¶ 66-92. On September 24, 2012, the Safavi action was stayed pending a ruling on class certification in the Bezdek action. Safavi, No. 12-cv-05900-BRO-JCG (Order, Sept. 24, 2012, ECF No. 24). If the settlement is approved, Safavi and the defendants agree to file a stipulation of dismissal of that action in the Central District of California.
The third relevant complaint was filed on August 13, 2012 in Illinois state court by DeFalco. See De Falco v. Vibram USA, LLC, No. 12-cv-07238, 2013 WL 1122825, at *2 (N.D.Ill. Mar. 18, 2013). DeFalco purchased three pairs of FiveFingers footwear in or about December 2011 and April 2012 from a FiveFingers authorized retailer in Illinois, for prices of approximately $130 and $110. Id. at *1. On behalf of a proposed class of Illinois consumers, DeFalco alleges violations of the Illinois Fraud and Deceptive Business Practices Act, 815 ILCS § 505/1 et seq., breach of express warranty, and unjust enrichment. Id. at *6. The De Falco action was removed to the United States District Court for the Northern District of Illinois on September 11, 2012. Id. at *2. On March 18, 2013, the defendants' motion to dismiss was granted in part and denied in part, and its motion for transfer to this district was granted. Id. at *12.
I stayed the Bezdek matter from March to May 2013 to allow for the transfer of the De Falco matter from the Northern District of Illinois, and for the disposition of the motion to transfer the Safavi matter from the Central District of California. The Safavi matter was ultimately stayed rather than transferred. Following the transfer of the De Falco matter in April 2013, I consolidated it with the Bezdek action.
In July 2013, I set deadlines for discovery and motions for certification of the class in the now consolidated Bezdek/De Falco actions, anticipating that fact discovery would be completed by April 21, 2014. Counsel represent that over the course of the summer and fall of 2012, the parties engaged in extensive written discovery efforts, through written requests made by each party of the other, and through third-party document subpoenas.
Although mediation efforts in January 2013 failed, sometime in the fall of 2013 the parties resumed settlement negotiations and reached an agreement in principle on December 12, 2013. On December
On April 30, 2014, the parties submitted a proposed settlement agreement which was shortly thereafter replaced by a joint amended settlement agreement. The plaintiffs thereafter moved for preliminary review, authorization of class notice, and scheduling of a final fairness hearing.
Following a hearing, on May 12, 2014,
I then approved deadlines that would govern the class notice and periods for submitting claims, opt-outs, and objections. On August 1, 2014, the plaintiffs filed a motion for final approval of the proposed settlement agreement and award of attorneys' fees, out-of-pocket expenses, and incentive awards for the named plaintiffs. I held a fairness hearing on October 29, 2014, as a result of which I directed further submissions.
The agreement creates a non-reversionary settlement fund of $3,750,000, out of which will be paid the administrative costs (covering notice and claim processing expenses, and fees for the notice and settlement administrator's services); attorneys' fees and expenses; incentive awards for the plaintiffs; necessary taxes and fees; and finally payments to class members who submit valid and timely claims.
The class that stands to benefit from the agreement, briefly defined and discussed in greater detail below, includes all individuals who purchased certain FiveFingers footwear in the United States from Vibram and/or its authorized retailers between "March 21, 2008, up to and including the date of the first dissemination of the Summary Settlement Notice or Class Notice, whichever is earlier," which has since been defined as May 27, 2014.
Class members may request a refund for each pair of eligible FiveFingers footwear
The agreement also provides for injunctive relief in the form of restrictions on Vibram's advertising and marketing campaigns for its FiveFingers footwear. Specifically, Vibram agrees "to take commercially reasonable efforts to discontinue certain aspects of its advertising and marketing campaign," including not making, or assisting others in making, claims that the footwear is "effective in strengthening muscles or preventing injury," or provides any health benefit, unless such claims are based on competent and reliable scientific evidence and are true and non-misleading. Vibram also agrees to refrain from misrepresenting, and assisting others in misrepresenting, "the existence, contents, validity, results, conclusions, or interpretations of any test, study, or research relating to Vibram's FiveFingers footwear or products similar to the Fivefingers footwear."
Notice was distributed to the class pursuant to my order of authorization between May 27 and July 28, 2014. The plan provided for direct notice to individuals where practicable through e-mail and postal mail, as well as summary notice through publication in newspapers, magazines, and other media outlets; publication of banner advertisements on various informational and social media websites; and maintenance of a settlement website and toll-free telephone number providing information to class members.
On May 12, 2014, the notice administrator established a website, www.fivefingers settlement.com, to inform class members about the settlement. As of September 24, 2014, the claim filing deadline, more than 321,000 new first-time users had visited the site, with over 465,000 sessions. Twenty percent of this Internet traffic originated from RunnersWorld.com and its mobile counterpart, and the rest from social media and news websites.
The direct notice program was substantially completed by July 8, 2014. E-mail notice was delivered successfully (that is, not returned as bounced or undeliverable) to 195,674 unique e-mail addresses of people who had purchased Vibram products. Postcard notice was sent successfully to 64,962 addresses of unique class members.
The notice administrator published the summary settlement notice in the August 2014 print and online versions of the national magazine, Runner's World, which has "an estimated print circulation of approximately 673,000 and readership of 2.86 million." Banner advertisements ran for four weeks in June 2014 on Facebook (targeting class members' demographics) and RunnersWorld.com, as well as through
In addition to this intentional distribution of notice, the notice administrator observed more than 900 online news mentions, including 124 blog posts, and continued coverage on local, regional, national, and international media outlets through the claims deadline, which the administrator and class counsel have characterized as unusual unsolicited attention for a class action settlement of this nature.
The settlement administrator received 154,927 timely claims, representing 279,570 pairs of FiveFingers footwear, prior to the closing of the claim period on September 24, 2014. Of these claims, approximately 28% were for one pair, 67% were for two pairs, and 3% were for three or more pairs. The administrator anticipates that 4-5% of these claims will be rejected as invalid, leaving approximately 268,570 pairs for which the fund will provide a refund.
Written opt-out requests, objections, and notices of appearance at the fairness hearing were to be submitted by August 15, 2014. Prior to this deadline, the notice administrator received a total of 23 opt-out requests. In addition, three individuals filed objections to the settlement: Madeline Monti Cain, Justin Ference, and Michael Narkin. The plaintiffs ask that I simply overrule these objections—rather than considering the challenges they raise to the proposed settlement—on three grounds: first, because the objectors each have an improper purpose for pursuing his or her objection; second, because none has complied with the requirement in the agreement and communicated in the notice that proof of purchase must be submitted with an objection to establish membership in the class;
It is my role "to distinguish between the meritorious objections and those advanced for improper purposes." Manual for Complex Litigation (Fourth) § 21.643. I am persuaded there are genuine questions as to the status of the objectors as class members. Nonetheless, I have considered the merits of the objectors' assertions to the extent they raise questions that I would ask independently in my own review of the proposed settlement.
Settlement approval requires confirmation that notice was conducted in a reasonable manner, consistent with Fed. R.Civ.P. 23 and due process concerns. Notice of a class action settlement must be "reasonably calculated to reach the absent class members." Reppert v. Marvin Lumber & Cedar Co., 359 F.3d 53, 56 (1st Cir.2004) (quoting Hallman v. Pennsylvania Life Ins. Co., 536 F.Supp. 745, 748-49 (N.D.Ala.1982)). At a minimum, notice must inform class members of "(i) the nature of the action; (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance through an attorney if the member so desires; (v) that the court will exclude from the class any member who requests exclusion; (vi) the time and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members under Rule 23(c)(3)." Fed.R.Civ.P. 23(c)(2).
The putative objectors contend that they were not provided with sufficient information in the notice to assess the proposed settlement and their participation in it adequately. Despite these objections, on independent review I find that the notice program was robust, particularly in its online presence, and implemented as directed in my order authorizing notice. The notice documents issued, including the claim form, class notice, summary settlement notice, and postcard notice, comport with those I approved in the order authorizing notice. The settlement received an unusual amount of coverage beyond the administrator's efforts. Although details would by definition have provided additional instruction regarding the proposed settlement, such detail was not required to be provided in the notice. I find that notice was given to settlement class members by the best means "practicable under the circumstances." Fed.R.Civ.P. 23(c)(2).
Before I may determine whether the class settlement is fair, I must certify the class definitively. The class was preliminarily certified as: "all persons that, during the Class Period, purchased in the United States certain FiveFingers footwear from Vibram and/or its authorized retailers including, without limitation, vibramfivefingers.com."
Certification of a class requires "a rigorous analysis of the prerequisites established by Rule 23" of the Federal Rules of Civil Procedure. Smilow v. Southwestern Bell Mobile Sys., Inc., 323 F.3d 32, 38 (1st Cir.2003) (citing Gen. Tel. Co. of S.W. v. Falcon, 457 U.S. 147, 161,
To obtain class certification, the plaintiffs must establish each of the four elements of Rule 23(a): numerosity, commonality, typicality, and adequacy of representation. Smilow, 323 F.3d at 38 (citing Amchem, 521 U.S. at 614, 117 S.Ct. 2231). They must also satisfy one of the elements of Rule 23(b) "through evidentiary proof." Comcast, 133 S.Ct. at 1432. Here, the plaintiffs seek certification under Rule 23(b)(3).
Under Rule 23(a)(1), the class must be "so numerous that joinder of all members is impracticable." The plaintiffs contend that "millions" of pairs of FiveFingers footwear were sold in the United States by Vibram and its authorized retailers during the relevant period, from March 2008 through May 2014. Even if this is a high estimate, plainly the class is sufficiently numerous for certification purposes. Cf. In re Lupron Mktg. & Sales Practices Litig., 228 F.R.D. 75, 88 (D.Mass.2005) (finding class of "tens if not hundreds of thousands of consumer-purchasers" to be sufficiently numerous). While the class is large, the individual members were unidentifiable by Vibram before notice,
Under Rule 23(a)(2), there must be "questions of law or fact common to the class." This requirement carries a low threshold and "requires only that resolution of the common questions affect all or a substantial number of the class members." Lupron, 228 F.R.D. at 88; see Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011) ("common contention" required for class
The class members would be required to establish several common issues of fact and law to prove the defendants' liability and their entitlement to damages.
There are, of course, likely differences between class members within several of these categories, most importantly with regard to injury. Class members may have purchased different types of FiveFingers footwear for very different purposes, and they may have seen and been influenced (or not influenced at all) by different advertising and assertions by Vibram, although the plaintiffs have demonstrated that at least some of the advertising at issue was national in scope. Nonetheless, the core issues of fact and law in this case regarding alleged misrepresentation of health benefits are common to all class members and present "a need for combined treatment and a benefit to be derived therefrom." Lupron, 228 F.R.D. at 88 (quoting Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 472 (5th Cir.1986)); see Werdebaugh v. Blue Diamond Growers, No. 12-CV-2724, 2014 WL 2191901, at *12 (N.D.Cal. May 23, 2014). As will be discussed more fully below, "[c]hapter 93A. . . provides a cause of action common to all class members against the defendant." M3 Power Razor, 270 F.R.D. at 56.
Under Rule 23(a)(3), "the claims or defenses of the representative parties" must be "typical of the claims or defenses of the class." This element is satisfied "if the claims or defenses of the class and the class representative arise from the same event or pattern or practice and are based on the same legal theory." Lupron, 228 F.R.D. at 89. The claims of the class representative and the class overall must share essential characteristics, but they need not be precisely identical. See Swack v. Credit Suisse First Bos., 230 F.R.D. 250, 260 (D.Mass.2005).
The claims of the class members here arise from the allegedly false and misleading advertising and marketing materials for Vibram's FiveFingers footwear
Under the last required element of Rule 23(a), I must determine that "the representative parties will fairly and adequately protect the interests of the class." Fed. R.Civ.P. 23(a)(4). This requirement, along with those of commonality and typicality, "serve[s] as [a] guidepost[] for determining whether . . . maintenance of a class action is economical and whether the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence." Falcon, 457 U.S. at 157 n. 13, 102 S.Ct. 2364.
This is a two-part requirement. First, the plaintiffs must establish "that the interests of the representative party will not conflict with the interests of any of the class members." Andrews v. Bechtel Power Corp., 780 F.2d 124, 130 (1st Cir. 1985). Second, the plaintiffs must show "that counsel chosen by the representative party is qualified, experienced and able to vigorously conduct the proposed litigation." Id. The First Circuit has noted that this element "is particularly important because of the res judicata implications of a class judgment." Id.
The first prong is addressed in large part by my conclusion that Mass. Gen. Laws ch. 93A provides a serviceable and appropriate cause of action common to all class members. Bezdek's interests align with those of the class as a whole, because all seek redress from the same injury: the purchase of FiveFingers footwear based on Vibram's misrepresentation of its health benefits. Cf. M3 Power Razor, 270 F.R.D. at 55. There are no material differences in potential recovery as the case stands currently, and there appears to be no meaningful conflict between the interests of the class representative and those of the absent class members. In M3 Power Razor, a marketing and sales practice multidistrict litigation matter, I assessed the potential for intraclass conflicts and concluded, "[a]fter extended review of the various legal regimes" potentially applicable in that case, "that, although variations in state law exist, they do not overcome the common factual and legal issues shared by the potential class members." Id. at 60-61. That conclusion is equally applicable to the commonality, predominance, and adequacy of representation issues presented by the class settlement proposed in this case.
The second prong pertains to the qualifications of lead class counsel, Wolf Haldenstein Adler Freeman & Herz LLP. The plaintiffs have submitted significant documentation indicating the firm's experience in complex consumer class action litigation and its efforts in advancing this matter in
Under Rule 23(b)(3), class certification is appropriate if I find "that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."
The predominance requirement is similar to but more demanding than the commonality requirement. See Comcast, 133 S.Ct. at 1432 (citing Amchem, 521 U.S. at 623-24, 117 S.Ct. 2231); Wal-Mart, 131 S.Ct. at 2548. The question is whether the proposed class is "sufficiently cohesive to warrant adjudication by representation." Amchem, 521 U.S. at 623, 117 S.Ct. 2231. This requires identifying "a sufficient constellation of common issues [to] bind [] class members together." Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 (1st Cir.2000). As with the commonality requirement, however, precise alignment of all issues in the litigation is not necessary. See Smilow, 323 F.3d at 39.
The core questions in this case—whether Vibram's advertising was false or misleading, whether its conduct violated the causes of action identified in Bezdek's amended complaint, and whether the class members suffered injury and are entitled to damages as a result of this conduct—are common to all class members. Cf. M3 Power Razor, 270 F.R.D. at 56. There are, of course, potential differences among the class members. Of greatest import are the standards for establishing causation and the calculation of damages. In Comcast, the Supreme Court required that the plaintiffs demonstrate with specificity a class-wide methodology for calculating damages, based on the single theory of liability the district court judge considered to be capable of class-wide proof, in order to obtain class certification. See Comcast, 133 S.Ct. at 1430, 1433. Because the proffered calculation model in Comcast measured damages attributable to both the salient theory and three others the court rejected, the model "[could not] possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 26(b)(3)." Id. at 1433. The Court therefore determined that class certification should have been denied. Id. at 1435. Similarly, in Kelley v. Microsoft Corp., No. C07-0475-MJP, 2009 WL 413509, at *2, *6 (W.D.Wash. Feb. 18, 2009), Judge Pechman decertified a class
In this case, I have narrowed the theory of injury to one of a price premium paid. The plaintiffs have not proffered any fully developed and particularized methodology for calculating damages using this theory and have instead merely recognized the difficulty in identifying such a methodology. The plaintiffs' deflection does not, however, lead me to ignore the Supreme Court's direction in Amchem to review class certification at the settlement stage with greater, not lesser, scrutiny than on a motion for class certification anticipating trial. Settling prior to formal class certification does not permit the parties to avoid these challenges to the certification process.
Nevertheless, although Comcast heightens the evidentiary burden on plaintiffs seeking class certification in certain circumstances, I do not believe it is fatal to the certification sought here. While the plaintiffs have not provided chapter and verse to address the Comcast requirement of presenting a methodology that would allow damages to be calculated with precision on a class-wide basis, they have tendered an acceptable general damages theory. I do not employ a different standard for considering class certification where a settlement agreement has been reached, but I do adopt a common sense approach to the Comcast dimension to the settlement and what it offers.
At trial, class members would be required to prove an injury resulting in economic loss. The class as defined does not limit membership to individuals who relied on the alleged health benefits in purchasing the shoes—indeed, such a provision in the definition would render it subjective and questionable for other reasons. As a result, however, there may be class members who did not rely on the representation of health benefits, or who purchased the footwear for other reasons entirely. Those class members might therefore be said to stand apart from those who relied on the representations in choosing to pay the price for FiveFingers footwear, because they could not establish causation under certain legal theories.
By employing a broad definition of the class that includes individuals who purchased FiveFingers footwear during the relevant time period for any reason (other than resale), the settlement provides relief to the broadest class of individuals to whom relief would potentially be available. As I noted in M3 Power Razor, "the protections provided by . . . Mass. Gen. Laws ch. 93A, § 9, are quite robust and arguably more consumer friendly" than any other state consumer protection provision. M3 Power Razor, 270 F.R.D. at 60. "Chapter 93A does not require [a showing of] reliance." Id. This circumstance effectively eradicates potential intraclass differences. The broadly inclusive claims here therefore do not present challenges as to class-wide calculation of damages. Of those who would be eligible for relief, the calculation of damages would turn on the price premium of the purported health benefits. Cf. Comcast, 133 S.Ct. at 1430 (plaintiff must establish that individual injury resulted from alleged antitrust violation and that the injury was "capable of proof at trial through evidence . . . common to the class rather than individual to its members").
Courts must, of course, exercise caution in certifying a class "when individual stakes are high and disparities among class members great." Amchem, 521 U.S.
This analysis is consistent with that reached in two similar cases. In Arnold v. Fitflop USA, LLC, No. 11-CV-0973W(KSC), 2014 WL 1670133, at *2 (S.D.Cal. Apr. 28, 2014), Judge Whelan certified for settlement purposes a nationwide class of purchasers of certain footwear who presented legal claims of misrepresentation of health benefits in violation of California consumer protection laws based on a price premium theory of injury. Arnold, 2014 WL 1670133 at *2. He concluded that the named plaintiff and all of the class members were "entitled to the same legal remedies premised on the same alleged wrongdoing," that is, "whether Defendant's claim that [the footwear at issue, with its proprietary technology], provided the strengthening and toning benefits, and whether that representation was false or deceptive to the reasonable consumer." Id. at *3.
In another similar case regarding the alleged misrepresentation of health benefits associated with certain footwear in violation of California consumer protection laws on behalf of a nationwide class, Judge Russell noted the potential class certification problems that this case shares and after considering them ruled in favor of settlement. See In re Skechers Toning Shoe Prods. Liability Litig., MDL No. 2308, 2012 WL 3312668, at *5 (W.D.Ky. Aug. 13, 2012). He found that the predominance requirement was satisfied because the issue of "whether Skechers violated the consumer protection laws. . . . through misleading and deceptive sales and marketing practices is a question that is common to all class members," and observed that "[t]he proof that the representative plaintiffs would be required to produce in order to substantiate their allegations would be the same proof required of all class members." Id. He noted that "[w]ithout a determination on these common questions, no class member, proceeding collectively or individually, would be entitled to any recovery." Id.
I conclude that no "[q]uestions of individual [injury and] damage calculations" are present here that would "inevitably overwhelm questions common to the class," and consequently that the predominance requirement is satisfied. Comcast, 133 S.Ct. at 1433.
A class action is a superior means for adjudicating this issue fairly and effectively. Where there are thousands of class members, each of whom have small individual claims that may not be worth pursuing independently, "a class action is the only feasible mechanism for resolving the dispute efficiently," M3 Power Razor, 270 F.R.D. at 56, and is clearly superior to "piecemeal adjudication of numerous separate lawsuits covering the same or substantially similar issues." Swack, 230 F.R.D. at 273. This class action is of that type. It is clear, given the common interests across class members and the class representative, that this class action "would achieve economies of time, effort,
The District of Massachusetts is also the superior forum for this class action. As in M3 Power Razor, a consumer class action against a Massachusetts corporate defendant alleging misrepresentations made in advertising and promotional materials in violation of Chapter 93A, the Massachusetts consumer protection statute, pursued on a consolidated basis in this district "is superior to any other mechanism for adjudicating the case." M3 Power Razor, 270 F.R.D. at 56-57.
Based on the above analysis, I conclude that the plaintiffs have met their burden of establishing compliance with each of the requirements of Rule 23(a) and of Rule 23(b)(3). Accordingly, I certify the class, as defined above, with finality for the purpose of settlement.
Under Federal Rule of Civil Procedure 23(e)(2), a settlement must be "fair, reasonable, and adequate." See Nat'l Ass'n of Chain Drug Stores v. New Eng. Carpenters Health Benefits Fund, 582 F.3d 30, 44 (1st Cir.2009). My role in reviewing the proposed settlement is that of a fiduciary for the absent class members, protecting them from an unjust or unfair settlement. See Lupron, 228 F.R.D. at 93. (citing In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods., 55 F.3d 768, 805 (3d Cir.1995)); see also Amchem, 521 U.S. at 623, 117 S.Ct. 2231.
As the First Circuit has observed, the case law "offers laundry lists of factors" for conducting this inquiry, "most of them intuitively obvious and dependent largely on variables that are hard to quantify." Nat'l Ass'n, 582 F.3d at 44. All speak to the core question of the reasonableness of the settlement in light of the uncertainties of litigation. See Bussie v. Allmerica Fin. Corp., 50 F.Supp.2d 59, 72 (D.Mass.1999) (fairness inquiry involves "studied review of a wide variety of factors" rather than "a single inflexible litmus test"). There is a presumption that a settlement is within the range of reasonableness "[w]hen sufficient discovery has been provided and the parties have bargained at arms-length." City P'ship Co. v. Atlantic Acquisition Ltd. P'ship, 100 F.3d 1041, 1043 (1st Cir.1996); see In re Pharm. Indus. Average Wholesale Price Litig., 588 F.3d 24, 32-33 (1st Cir.2009). This is the threshold required to survive the preliminary review stage. However, more than presumptive fairness is required for final approval, which necessarily entails a "more fully informed examination." M3 Power Razor, 270 F.R.D. at 62.
One list of factors often employed in this district in conducting a final review of a proposed settlement is that provided by the Second Circuit in Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir.1974), overruled on other grounds by Missouri v. Jenkins, 491 U.S. 274, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989). See New Eng. Carpenters Health Benefits Fund v. First DataBank, Inc., 602 F.Supp.2d 277, 281 (D.Mass.2009); In re Relafen Antitrust Litig., 231 F.R.D. 52, 72 (D.Mass.2005); Lupron, 228 F.R.D. at 93-94. These factors include: "(1) the complexity, expense, and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the
Variations on and abbreviations of this list can also be found. See, e.g., In re Tyco Int'l, Ltd. Multidistrict Litig., 535 F.Supp.2d 249, 259 (D.N.H.2007); In re Compact Disc Minimum Advertised Price Antitrust Litig., 216 F.R.D. 197, 206 (D.Me.2003). Bearing in mind these various formulations of the fairness inquiry and the particular circumstances of the case at hand, I will employ (at the risk of adding to the collective laundry basket) my own evaluation of the key considerations as I see them in reviewing the proposed settlement in this case.
I consider first the likely complexity, expense, and duration of the litigation, were this case to proceed to trial, as well as the plaintiffs' likelihood of success on the merits. As for the likely complexity and expense, the plaintiffs have identified meaningful concerns with class certification and would need to litigate these issues more fully in order to proceed to trial. Both parties would conduct further discovery, including extensive expert discovery, followed very likely by a motion for summary judgment and renewed settlement discussions. All of these efforts would extend the litigation and associated costs further, decreasing the net benefit of any damages award obtained at trial.
As for the merits of the plaintiffs' case, the documentary evidence demonstrates that the defendants did indeed promote health benefits associated with wearing FiveFingers footwear and running "barefoot," and the plaintiffs have made plausible allegations that these benefits are not supported by scientific research. These strengths in the plaintiffs' case must confront two sizable hurdles as to injury and damages.
As I discussed in my ruling on the motion to dismiss in the Bezdek action, the alleged injury is one of economic loss: that the plaintiffs would not have purchased the footwear had they known it would not provide the advertised health benefits, or that the footwear was not worth what the plaintiffs paid for it. See Bezdek, 2013 WL 639145, at *4. The loss, using a price premium theory, would be the difference among the value of the FiveFingers footwear with and without the purported health benefits. The plaintiffs would bear the difficult burden of establishing that such a difference in value existed and that there was a causal connection between the decision to purchase the shoes and this loss. See Rule v. Fort Dodge Animal Health, Inc., 604 F.Supp.2d 288, 298-304 (D.Mass.2009) (summarizing the development and state of the injury requirement under Mass. Gen. Laws c. 93A, § 9(1)), aff'd, 607 F.3d 250, 253-54 (1st Cir.2010).
The plaintiffs would also need to provide specific calculations for damages. Class counsel has represented that it could either isolate the value of the challenged benefits or prove the premium the plaintiffs paid for the deceptively advertised health benefits, but has not presented any fully developed proxies helpful in running these calculations or detailed any mechanisms for quantifying the necessary variables other than suggesting that Hedonic regression or conjoint analysis could prove
It is clear, then, that the plaintiffs have some, but not an entire, likelihood of success on the merits, and that pursuing this case to trial would require the plaintiffs to conduct extensive expert discovery (likely at great cost) in order to establish the materiality of the challenged advertising and prove their theory and an adequate calculation for recoverable damages. This added cost of litigation, combined with the risks inherent in pursuing a claim based on a price premium theory of injury, demonstrate palpable uncertainty that a more favorable result could be obtained through litigation. This factor thus weighs in favor of settlement for the benefit of the class overall.
I next consider the value of the settlement to the class members. The key question is whether the relief provided by the settlement is reasonable in relation to the likely outcome were the case to proceed to trial. In assessing the reasonableness of a proposed settlement, "the present value of the damages plaintiffs would likely recover if successful, appropriately discounted for the risk of not prevailing, should be compared with the amount of the proposed settlement." Gen. Motors, 55 F.3d at 806 (quoting Manual for Complex Litigation (Second) § 30.44). Were this case to proceed to trial, the damages under a price premium theory would amount to something less than the market value of the footwear as purchased with its purported health benefits, and the difficulties in proving this amount could prove fatal to meaningful recovery in the case.
The terms of the agreement provided for a refund of up to $94, the average manufacturer's suggested retail price of FiveFingers footwear, per pair of eligible footwear purchased, to class members who submit valid claim forms during the claim period.
It is impossible for me to determine with certainty at this stage what the price premium paid by consumers for the purported health benefits of FiveFingers footwear could be. However, it is not unreasonable to think that the price premium could be in
Settlement is, of course, "a compromise, a yielding of the highest hopes in exchange for certainty and resolution," Gen. Motors, 55 F.3d at 806, and the benefit to both parties is that they will avoid the outcome embodying their worst nightmares after taking the case to trial. The class members' highest hope here is that they could achieve something closer to the price paid for the shoes. Their worst-case scenario, and a plausible one, is that they would receive no damages award at all. The refund provisions of this agreement therefore provide class members with something less favorable than the best outcome, potentially on par with a likely outcome (an amount equivalent to the price premium paid for the purported health benefits), and something more favorable than the worst outcome.
The proposed agreement also provides for injunctive relief in the form of the defendants' discontinuance of aspects of their advertising and marketing campaigns promoting the health benefits of FiveFingers footwear, unless the defendants obtain "competent and reliable scientific evidence to substantiate" such claims as true. The objectors contend that this constitutes an illusory promise of no value to class members, as the defendants are merely promising to make honest representations, as they are required by law to do regardless, and such changes in advertising do not undo the damage that class members may have suffered in relying on previous false advertising by the defendants. In response, the plaintiffs contend that "the veracity of Vibram's advertising was the most hotly contested issue in this litigation" and that this relief prevents the defendants from engaging in precisely the conduct that caused the alleged injury in the first place.
Injunctive relief has been recognized as a meaningful component of a settlement agreement, particularly where it mimics the injunctive relief that the plaintiffs could achieve following trial. See Nilsen v. York Cnty., 382 F.Supp.2d 206, 213 (D.Me.2005). Similar provisions have been included in approved settlement agreements against other footwear providers facing similar allegations of misrepresentation of purported health benefits. See, e.g., Arnold, 2014 WL 1670133, at *6; Skechers Toning Shoe Products Liability Litigation, 2013 WL 2010702, at *3, *10
The reaction of the class to the settlement has been overwhelmingly positive. The settlement produced a far higher claim submission rate than the parties expected, yielding 154,927 claims for 279, 570 pairs, and only 23 opt-outs and 3 objections.
I next consider whether the discovery and other proceedings leading up to the proposed settlement agreement provided the parties with adequate information as to their respective litigation positions in order to act intelligently in negotiations. See M3 Power Razor, 270 F.R.D. at 63; Rolland v. Cellucci, 191 F.R.D. 3, 6 (D.Mass.2000).
Bezdek's complaint was filed in March 2012, and the parties first discussed settlement September of that year.
Following these document disclosures, the defendants served a request for production on the plaintiffs, to which the plaintiffs provided written responses. The parties also both served deposition notices in November and December 2013. At that time, the parties resumed settlement discussions. Between December 6 and December 12, 2013, counsel engaged in significant communication about the possibility of settlement, reaching an agreement in principle on December 12. The parties thereafter successfully sought to stay further discovery, although they had not yet completed written discovery or conducted any depositions.
However, the question is only incidentally answered quantitatively by the number of pages in the documents that were produced or witnesses who were deposed. Rather, the answer must ultimately be a qualitative one: whether the parties conducted sufficient discovery "to make an intelligent judgment about settlement." Hochstadt v. Boston Scientific Corp., 708 F.Supp.2d 95, 107 (D.Mass.2010). Lead class counsel recognizes that my ruling on the defendants' motion to dismiss in February 2013, as well as the production of discovery by the defendants in the months following that ruling, made clear that the plaintiffs faced significant hurdles in pursuing the litigation to trial. Indeed, these hurdles suggested to the plaintiffs that settling prior to class certification and trial might present a better outcome.
I find that the parties had a sufficient understanding of the merits of the case in order to engage in informed negotiations, particularly where plaintiffs' counsel are skilled and experienced in consumer class action litigation, including class actions involving alleged misrepresentation of the health benefits of footwear. See New Eng. Carpenters, 602 F.Supp.2d at 282. Although a significant amount of the attorneys' time in this case was spent on negotiations,
One of the objectors challenges the release provision on the basis that it is not readable by laypeople and includes unnamed parties. "[I]n order to achieve a comprehensive settlement that would prevent relitigation of settled questions at the core of a class action, a court may permit the release of a claim based on the identical factual predicate as that underlying the claims in the settled class action even though the claim was not presented and might not have been presentable in the class action." City P'ship, 100 F.3d at 1044 (quoting TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456, 460 (2d Cir.1982)).
The release in the agreement applies to "Vibram, its parents . . . officers, directors, employees, stockholders, agents, attorneys, administrators, successors, reorganized
I am satisfied that counsel has worked diligently to achieve a favorable settlement agreement for the plaintiffs and the class overall in light of the anticipated challenges of taking this case to trial. I find the agreement to be fair, reasonable, and adequate under Rule 23.
On behalf of all plaintiffs' counsel, lead class counsel has requested attorneys' fees of $937,500, equivalent to 25% of the settlement fund, and reimbursement for actual expenses of $61,674.44.
Attorneys in a certified class action may be awarded reasonable fees and costs, subject to the wide discretion of the trial judge. Fed.R.Civ.P. 23(h). See In re Thirteen Appeals Arising Out of the San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d 295, 305 n. 6 (1st. Cir.1995); Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 518, 523 (1st Cir.1991). Under the common fund doctrine, where attorneys succeed in obtaining a fund that benefits the class, they are entitled to "a reasonable attorney's fee from the [settlement] fund as a whole." Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980) (citations omitted). This is rooted in "the equitable principle that those who have profited from litigation should share its costs." Thirteen Appeals, 56 F.3d at 305 n. 6. Where a settlement agreement contains a clear sailing provision, I engage in somewhat heightened scrutiny to ensure that the request is not the product of collusion. See Stokes v. Saga Int'l Holidays, Ltd., 376 F.Supp.2d 86, 89-90 (D.Mass.2005).
The First Circuit recognizes two methods for calculating attorneys' fees in the class action context. See Thirteen Appeals, 56 F.3d at 307. Under the "percentage of the fund" ("POF") method, counsel may be awarded a reasonable percentage of the common fund. Id. at 305, 307. Within the First Circuit, courts generally award fees "in the range of 20-30%, with 25% as `the benchmark.'" Latorraca
Although the POF method is generally favored in the class action context because it is less burdensome and "better approximates the workings of the marketplace," the First Circuit also recognizes the "lodestar" method for calculating attorneys' fees. Thirteen Appeals, 56 F.3d at 306-07. Under that method, the court "determine[s] the number of hours reasonably expended multiplied by a reasonable hourly rate for attorneys of similar skill within that geographic area." Relafen, 231 F.R.D. at 77; see Spooner v. EEN, Inc., 644 F.3d 62, 68 (1st Cir.2011). This calculation is further "subject to a multiplier or discount for special circumstances, plus reasonable disbursements." Compact Disc, 216 F.R.D. at 215-16. Although the lodestar serves as a base figure, the court may modify it by subtracting hours that are excessive in light of the legal task, not recorded with sufficient specificity as to the tasks performed, or redundant to hours of another lawyer without justification for the need for duplicity. See Walsh v. Boston Univ., 661 F.Supp.2d 91, 105-07 (D.Mass.2009). The lodestar calculation may be used alone or as a check on the appropriateness of a POF calculation. Compact Disc, 216 F.R.D. at 215-16; see Manual for Complex Litigation (Fourth) § 14.122. Here, I have used it as a means to evaluate the reasonableness of a POF-based request.
Regardless of the calculation method employed, the touchstone of the inquiry is reasonableness. See In re Fidelity/Micron Sec. Litig., 167 F.3d 735, 738 (1st Cir.1999). I function in some respects "as a quasi-fiduciary to safeguard the corpus of the fund for the benefit of the plaintiff class" and must therefore weigh the interests of the attorneys in being compensated for their efforts against the interests of the class members. Id. at 736. Although the First Circuit has not recognized a particular set of factors for use in assessing the reasonableness of a fee request, I engage in the same approach that other judges in this circuit have employed when making fairness determinations. See In re Puerto Rican Cabotage Antitrust Litig., 815 F.Supp.2d 448, 458 (D.P.R. 2011); In re TJX Cos. Retail Sec. Breach Litig., 584 F.Supp.2d 395, 401 (D.Mass. 2008); Relafen, 231 F.R.D. at 79; Lupron, 228 F.R.D. at 98; cf. Coutin v. Young & Rubicam P.R., Inc., 124 F.3d 331, 337 n. 3 (1st Cir.1997).
The plaintiffs' request for 25% of the settlement fund in fees falls squarely within what is recognized in this circuit as the range of reasonable POF amounts. See Latorraca, 834 F.Supp.2d at 27-28. Through the fairness hearing, plaintiffs' counsel expended 2,492.25 hours, creating a lodestar of $1,369,393.25. The requested fee therefore represents roughly 68% of the lodestar. My focus in assessing the reasonableness of this request is on whether plaintiffs' counsel have demonstrated that "the fund conferring a benefit on the class resulted from" the efforts of the attorneys. See Thirteen Appeals, 56 F.3d at 307.
Weighing in favor of the requested fee is the skill of the attorneys involved, whom I acknowledge as being nationally known for and greatly experienced in representing plaintiffs in such consumer class action lawsuits. I also credit the efforts that plaintiffs' counsel has made during the course of this litigation. This action began in March 2012 with Plaintiff Bezdek, and has expanded to include other plaintiffs and other counsel over time. The case has involved some significant motion practice, including motions to dismiss in each of the three actions, as well as an attempt at mediation in January 2013. I acknowledge
The relief afforded by the settlement (approximately $8.44 per pair and injunctive relief) is reasonable in relation to the uncertainty of success at trial. The reaction of the class to the settlement has been overwhelmingly positive, as evidenced by the quite high number of claims filed and the quite low number of opt-outs.
Plaintiffs' counsel also requests reimbursement for actual expenses of $61,674.44 incurred during litigation. See Fidelity, 167 F.3d at 736-37. The listed
Finally, I address the request for incentive awards for the plaintiffs. Incentive awards serve to promote class action settlements by encouraging named plaintiffs to participate actively in the litigation in exchange for reimbursement for their pursuits on behalf of the class overall. See Celexa, 2014 WL 4446464, at *9; Lupron, 228 F.R.D. at 98. Class counsel requests that the court approve a total of $6,500 in incentive awards for three plaintiffs: $2,500 for Bezdek, $2,500 for DeFalco, and $1,500 for Safavi. Two of the objectors challenge these incentive awards, asserting that the plaintiffs did not participate substantially in the litigation. According to their own declarations and the representations of class counsel, the three named plaintiffs participated in the investigations leading up to the filing of their respective complaints, reviewed these complaints with counsel prior to filing, discussed the motions to dismiss in their respective cases with counsel, participated in limited discovery by responding to document requests and preparing for depositions, and communicated with counsel regarding the settlement negotiations.
These awards are equivalent to those approved in Compact Disc, 292 F.Supp.2d at 189, where the named plaintiffs engaged at a similar level in the litigation. There, Judge Hornby recognized that the plaintiffs "put forth some effort in pursuit of the class," and while "the bulk of the time in [the] case was spent by the lawyers," a minimal award was appropriate for their willingness to prosecute the case, help in conferring a benefit upon the class, and responsiveness to discovery efforts. Id. (quoting Lachance v. Harrington, 965 F.Supp. 630, 652 (E.D.Pa.1997)).
For the reasons set forth above, I ALLOW the plaintiffs' motion for final approval of the proposed class action settlement, ALLOW the plaintiffs' motion for attorneys' fees, expenses, and service awards, as refined by class counsels' subsequent revision to the requested expenses, and DENY the plaintiffs' motion for discovery of objectors.
