VINCENT L. BRICCETTI, District Judge.
Plaintiffs Tanya Mayhew, Tanveer Alibhai, and Tara Festa bring this action, on behalf of themselves and members of a purported nationwide class, asserting claims of (i) deceptive business practices in violation New York General Business Law ("GBL") § 349; (ii) false advertising in violation of GBL § 350; (iii) unlawful, unfair, and fraudulent business practices in violation of California's Unfair Competition Law; (iv) violation of California's False Advertising Law; (v) violation of Florida's Deceptive and Unfair Trade Practices Act; (vi) breach of New York's warranty laws; (vii) violation of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301,
Now pending before the Court are two motions.
First, plaintiffs seek an order (i) granting preliminary approval of the parties' amended settlement agreement; (ii) approving the form and manner of notice to the settlement class; (iii) directing notice to the settlement class; (iv) enjoining the prosecution of litigation asserting any claims released in the settlement agreement; and (v) scheduling a final fairness hearing for the consideration and approval of the settlement. (Doc. #99).
Second, Tarina Skeen, Cheyenne Blanusa, Malissa Brown, Natalie Vidal, and Christina Timmermeier, named plaintiffs in a separate class action pending in this district,
For the following reasons, plaintiffs' motion is GRANTED, and proposed intervenors' motion is DENIED.
The Court has subject matter jurisdiction under 28 U.S.C. § 1332(d)(2).
This putative class action was commenced by plaintiffs Mayhew, Alibhai, and Festa, on behalf of themselves and others similarly situated.
Plaintiffs purchased household cleaning and baby care products sold by defendants under the trade mark "Babyganics." According to plaintiffs, the name Babyganics is intended to convey to consumers that defendants' products are organic, although the products in fact contain synthetic ingredients. Further, plaintiffs allege defendants' Babyganics sunscreens are labeled "mineral-based," but in fact contain non-mineral, chemical compounds. In addition, plaintiffs allege defendants' Babyganics products are marketed as "natural," despite the inclusion of synthetic ingredients.
Plaintiffs allege consumers paid a premium for Babyganics products in reliance on defendants' claims that the products were organic, mineral-based, or natural, and were injured in the amount of the purchase price or premium paid.
Before commencing this action, plaintiffs' counsel sent a demand letter and proposed complaint to defendant KAS Direct, LLC ("KAS"). The parties corresponded for several months regarding potential settlement of plaintiffs' claims, and on August 10, 2016, attended a mediation with David Rotman, Esq., of Gregorio, Haldeman & Rotman. The parties were unable to agree, and plaintiffs filed the initial complaint in this action on September 7, 2016.
On March 30, 2017, after exchanging discovery, including defendants' sales figures, product lines, internal testing information, and consumer surveys, the parties attended a second mediation, this time with Michael Young, Esq., of JAMS in New York. The parties did not agree to a settlement, but continued negotiating after the mediation. Following approximately twelve weeks of continued discussions, the parties reached an agreement on relief for the class, after which they agreed to attorneys' fees as well as monetary awards for the named plaintiffs.
On August 4, 2017, plaintiffs filed an amended complaint (Doc. #37) and a motion for preliminary approval of the settlement. (Doc. #38).
Subsequently, three groups of proposed intervenors moved to intervene: (i) Skeen, Blanusa, Brown, Vidal, and Timmermeier (the "Tear Free Intervenors") moved on August 11, 2017; (ii) David Machlan moved on August 18, 2017; and (iii) Laura Carroll, Katharine Exo, Armand Ryden, and Katharine Shaffer (the "SPF Intervenors") moved on August 25, 2017.
On October 5, 2017, the parties attended a third mediation with Mr. Young of JAMS. Counsel for the proposed intervenors were invited to attend, but only Machlan's counsel did. Afterward, the parties advised the Court they intended to amend their motion for preliminary approval of the settlement agreement to address the proposed intervenors' claims.
Plaintiffs filed the instant motion for preliminary approval on November 21, 2017, and only the Tear Free Intervenors have renewed their motion to intervene.
As noted above, the Tear Free Intervenors are named plaintiffs in
The complaint in
On November 7, 2017, proceedings in
The proposed amended settlement (the "Agreement") is on behalf of a class of all persons or entities in the United States who made retail purchases of any Babyganics product marketed and sold in the United States between September 7, 2010, and the date the Court enters preliminary approval.
The Agreement provides for a settlement fund of $2,215,000. Class members are entitled to receive a 100% refund for any Babyganics products for which they have proof of purchase, and a partial refund for up to eight Babyganics products for which they do not have proof of purchase. Refunds are subject to pro rata upward or downward adjustment, depending on the number of claims filed.
In addition, the Agreement provides for changes to the labeling and advertising of Babyganics products. First, for as long as defendants' products are marketed as Babyganics, the front label of the products will include a statement referring consumers to the back label for a list of which ingredients are organic and which are not. Second, the front label of Babyganics products will not include the word "natural." Third, defendants will maintain a product page on their website explaining that sunscreens marketed as "mineral-based" also include chemical ingredients, and will include a reference to the website on the back label of all sunscreen products. Fourth, defendants will conduct batch testing of all "SPF 50+" sunscreens to ensure active ingredient levels match or exceed those expressed on the package, and will report the results of such tests to plaintiffs' counsel. Fifth, certain Babyganics products labeled "tear free" will include a back label indicating that the products should not be applied directly to the eye, that eyes should be flushed with water if the product is applied directly to the eye, and that the product should be kept out of reach of children absent adult supervision. Finally, defendants will not use the statement "Plant-Based Ingredients" on the label of its pre-moistened wipe products unless the wipe substrates are made with material derived entirely from plants or the package lists the ingredients of the wipe substrate.
The Agreement also provides that the following will be paid out of the settlement fund: (i) $3,500 service awards to each of the named plaintiffs; (ii) up to $416,475.50 to the settlement administrator for notice and claim administration expenses; and (iii) up to $733,333.33 in attorneys' fees.
In addition, with the exception of personal injury claims, the Agreement purports to release the following:
(Wiener Decl. Ex. 1: Agreement ¶ 32). In addition, the Agreement specifically releases the claims asserted by proposed intervenor Machlan in
Tear Free Intervenors assert they are entitled to intervene as of right because have an interest in the action that may be impaired if the settlement is preliminarily approved, and they are not adequately represented. The Tear Fear Intervenors also assert permissive intervention is appropriate.
The Court disagrees.
With regard to intervention as of right, Fed. R. Civ. P. 24(a)(2) provides:
Proposed intervenors under this Rule "must (1) timely file an application, (2) show an interest in the action, (3) demonstrate that the interest may be impaired by the disposition of the action, and (4) show that the interest is not protected adequately by the parties to the action."
The Tear Free Intervenors made retail purchases of Babyganics products marketed and sold in the United States between September 7, 2010, and the present date.
With regard to permissive intervention, Fed. R. Civ. P. 24(b)(2) provides that on timely motion the Court may permit anyone to intervene who has a claim or defense that shares with the main action a common question of law or fact. The Court must consider whether permissive intervention "will unduly delay or prejudice the adjudication of the rights" of the existing parties. Fed. R. Civ. P. 24(b)(3).
Here, there is no doubt the proposed intervention would unduly delay and prejudice the rights of the existing parties, as intervention would undermine the "protracted, extensive, and hard-fought settlement negotiations" which took place with the assistance of experienced, retained mediators and counsel over the course of fourteen months. (Weiner Decl. ¶ 13);
Under these circumstances, the Court concludes it would be inefficient and unjust to grant the Tear Fear Intervenors' motion.
Accordingly, the motion to intervene is denied.
Plaintiffs ask the Court to preliminarily certify for settlement purposes putative classes pursuant to Rule 23(a) and Rules 23(b)(2) and 23(b)(3).
Defendants do not oppose certification.
The Court may conditionally certify a class for settlement purposes, but must "ensure that the requirements of Rule 23(a) and (b) have been met."
Thus, before the Court can certify the classes, plaintiffs must satisfy the four elements of Rule 23(a): numerosity, commonality, typicality, and adequacy of representation. Fed. R. Civ. P. 23(a);
Rule 23(a)(1) requires the Court find "the class is so numerous that joinder of all members is impracticable." Courts in this Circuit have found this requirement met by a class consisting of forty or more members.
Rule 23(a)(2) requires a showing of "questions of law or fact common to the class." "The commonality requirement is met if plaintiffs' grievances share a common question of law or of fact."
Although the specific Babyganics products purchased by members of the proposed class vary, plaintiffs assert the common issues in this case are whether defendants engaged in fraudulent, unfair, unlawful, and deceptive business practices, whether a reasonable consumer would rely on or be deceived by defendants' business practices, and whether plaintiffs are entitled to nationwide injunctive relief. The Court agrees that these issues of law and fact are common to all proposed class members.
Rule 23(a)(3) requires that "each class member's claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant's liability."
Plaintiffs and the proposed class members purchased Babyganics products bearing the same allegedly false and deceptive representations. While there are numerous products at issue, named plaintiffs' claims are not unique to a particular product. Therefore, the Court preliminarily finds that the typicality requirement is met.
Finally, under Rule 23(a)(4), the Court must examine whether named plaintiffs' interests "are antagonistic" to that of the other members of the class.
Plaintiffs maintain named plaintiffs have no conflicts of interest with the class members and the interests of named plaintiffs are commensurate with those of the class members. The Court does not foresee a conflict between named plaintiffs and the remainder of the class. Further, in light of the representations concerning the experience and capability of plaintiffs' counsel, the Court concludes counsel are able to protect the interests all members of the class properly. Therefore, the Court preliminarily finds named plaintiffs and their chosen counsel can adequately represent the interests of the class members.
Rule 23(b)(2) permits class certification when the party against whom relief is sought "has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole."
The proposed class meets this standard, as the representations on defendants' Babyganics products are displayed equally to all putative class members. Moreover, plaintiffs do not seek monetary relief under Rule 23(b)(2), only through the separately certified Rule 23(b)(3) class, with the concomitant procedural protections for absent members.
Plaintiffs also seek to certify a class under Rule 23(b)(3), which requires that the Court find "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." As the Second Circuit has stated, "[c]lass-wide issues predominate if resolution of some of the legal or factual questions that qualify each class member's case as a genuine controversy can be achieved through generalized proof, and if these particular issues are more substantial than the issues subject only to individualized proof."
Here, issues of proof regarding whether defendants' product labeling was false and misleading and would have deceived a reasonable consumer are common to all members of the class, and predominate over any issues any individual class member may have. In addition, it appears the prosecution of this case as a class action would uphold the Court's interest in a fair and efficient adjudication better than a joint action among the putative class would.
In light of the foregoing, the Court preliminarily finds the proposed classes meet the requirements of Rules 23(a) and 23(b). For purposes of this settlement, the Court preliminarily certifies a nationwide class of Babyganics purchasers seeking injunctive relief under Rule 23(b)(2), and a nationwide class of Babyganics seeking damages under Rule 23(b)(3). In addition, the Court appoints named plaintiffs Tanya Mayhew, Tanveer Alibhai, and Tara Festa as class representatives and appoints Cuneo Gilbert & LaDuca, LLP, The Sultzer Law Group PC, and Halunen Law as class counsel.
Unlike settlements in other types of cases, settlements in class actions and putative class actions must be approved by the Court.
While the Court need not go so far as to conduct a trial on the merits, the Court must nonetheless make "findings of fact and conclusions of law whenever the propriety of the settlement is seriously in dispute."
Review of a proposed class action settlement involves a two-step process: preliminary approval and a subsequent "fairness hearing." The Court first reviews the proposed terms of the settlement and makes a preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms.
Here, plaintiffs maintain the Agreement reflects good faith, arm's-length negotiations which took place over many months among parties represented by experienced counsel with expertise in these types of cases. Therefore, the Court believes the settlement is the result of serious, informed, and non-collusive negotiations. The Court need not perform a full fairness analysis at this time because it will be done in connection with the fairness hearing.
The Court notes, however, that it has questions regarding the Agreement that the parties should be prepared to address prior to final approval. First, "the Court questions the amount of the award to named plaintiffs stemming from their service as class representatives compared to the damages awarded to the class members individually."
Second, plaintiffs assert the settlement fund represents a significant portion of the total potential damages in this case based on a price premium theory of damages. However, plaintiffs have given the Court very limited information from which to analyze the range of reasonableness of the settlement fund in light of the best possible recovery, and in light of the attendant risks of litigation.
Nevertheless, the Court is comfortable granting preliminary approval now and addressing these concerns at the fairness hearing.
The Tear Free Intervenors contend the Agreement's release is overbroad.
The Court disagrees.
"[T]o 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 . . . even though the claim was not presented and might not have been presentable in the class action."
First, the Tear Free Intervenors' claims in
Second, the released claims are adequately represented in this action. "Adequate representation of a particular claim is established mainly by showing an alignment of interests between class members."
Accordingly, the proposed release is not overbroad.
Having preliminarily approved the Agreement, the Court "must direct notice in a reasonable manner to all class members who would be bound by the proposal." Fed. R. Civ. P. 23(e)(1). The standards for notice under Rules 23(b)(2) and (b)(3) differ.
For Rule 23(b)(2) classes, "the court may direct appropriate notice to the class." Fed. R. Civ. P. 23(c)(2)(A). For Rule 23(b)(3) classes, the Court must provide:
Fed. R. Civ. P. 23(c)(2)(B).
The notice "must be of such nature as reasonably to convey the required information . . . and it must afford a reasonable time for those interested to make their appearance."
Here, the parties will mail or email notice and the claim form to all class members for whom defendants have contact information. (Agreement § V, ¶ 2). In addition, plaintiffs will publish notice through internet banner advertisements during a four week desktop and mobile advertising campaign, as well as four one-quarter page advertisements in the California regional edition of
In connection with their motion, plaintiffs provide the declaration of Steven Weisbrot, Esq., a principal at the firm Angeion Group, LLC, which will serve as the notice and settlement administrator in this case. (Doc. #101, Ex. F: Weisbrot Decl.) According to Mr. Weisbrot, he has been responsible for the design and implementation of hundreds of class action administration plans, has taught courses on class action claims administration, and has given testimony to the Judicial Conference Committee on Rules of Practice and Procedure on the role of direct mail, email, and digital media in due process notice. Mr. Weisbrot states that the internet banner advertisement campaign will be responsive to search terms relevant to "baby wipes, baby products, baby care products, detergents, sanitizers, baby lotion, [and] diapers," and will target users who are currently browsing or recently browsed categories "such as parenting, toddlers, baby care, [and] organic products." (Weisbrot Decl. ¶ 18). According to Mr. Weisbrot, the internet banner advertising campaign will reach seventy percent of the proposed class members at least three times each. (
Accordingly, the Court approves of the manner of notice proposed by the parties as it is reasonable and the best practicable option for confirming the class members receive notice.
However, the Court agrees with the Tear Free Intervenors that certain aspects of the proposed notice are inadequate. The first page of the long form notices states: "A proposed nationwide Settlement has been reached in a class action lawsuit involving Babyganics Products. The Settlement resolves litigation over whether the Defendants allegedly violated state laws regarding the marketing and sale of certain Babyganics Products." (Weiner Decl. Ex. B). The word "certain" might lead a consumer to question whether a given product is covered by the Agreement, when in fact all Babyganics products marketed and sold in the United States are covered. Thus, the first page of the long form notice should be modified to state: "A proposed nationwide Settlement has been reached in a class action lawsuit involving Babyganics Products. The Settlement resolves litigation over whether the Defendants allegedly violated state laws regarding the marketing and sale of Babyganic Products in the United States."
In addition, the second bullet point in the "Basic Information" provided in the long form notice states:
The Court agrees with the Tear Free Intervenors that burying the claims not specifically raised in the complaint in this action may cause confusion. Accordingly, the second bullet in the "Basic Information" provided in the long form notice should be modified as follows:
Assuming these changes are made, the Court approves the proposed notice as it contains all the necessary information, including the nature of the lawsuit, the class, the settlement terms, and the options available to the members of the class. Fed. R. Civ. P. 23(c)(2)(B). By July 10, `, plaintiffs' counsel shall confirm to the Court in writing that these changes have been or will be made.
Until otherwise ordered by the Court, all proceedings in this action, other than proceedings necessary to carry out or enforce the terms and conditions of the Agreement and this Order, are stayed pending the fairness hearing. In addition, settlement class members are enjoined from commencing or prosecuting, either directly, indirectly, representatively or in any other capacity, any released claims.
Angeion Group, LLC, is appointed Claims Administrator to help implement the terms of the Agreement. By no later than July 31, 2018, the parties shall mail or email notice and the claim form to all class members for whom defendants have contact information. Also, by no later than July 31, 2018, the Claims Administrator shall cause the Notice Program to commence as described in the Weisbrot declaration. Specifically, the Claims Administrator shall establish a website that will inform settlement class members of the terms of the Agreement, their rights, dates, and deadlines, and related information. The website shall include materials agreed upon by the parties and as further ordered by the Court. Further, by no later than July 31, 2018, the Claims Administrator shall also establish a toll-free telephone number that will provide settlement-related information to settlement class members. The Claims Administrator shall disseminate any remaining notice, as stated in the Agreement and the Weisbrot declaration.
The Court sets the following schedule for the fairness hearing and the actions which must precede it:
Plaintiffs' motion is GRANTED. The Court conditionally certifies classes under Rules 23(b)(2) and 23(b)(3) for settlement purposes, approves the parties' proposed notice and method of notification (subject to the required changes noted in Part V
Proposed intervenors' motion is DENIED.
The Court will conduct a fairness hearing on November 14, 2018, at 10:30 a.m.
The Clerk is instructed to terminate the motions. (Docs. ##99, 113).
SO ORDERED.