Kalin v. Apple, Inc.
Filing
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NOTICE REGARDING FACTORS TO BE EVALUATED FOR ANY PROPOSED CLASS SETTLEMENT. Signed by Judge Alsup on 1/6/2014. (whalc3, COURT STAFF) (Filed on 1/6/2014)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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TAYLOR KALIN,
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For the Northern District of California
United States District Court
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Plaintiff,
Defendant.
APPLE INC.,
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NOTICE REGARDING
FACTORS TO BE EVALUATED
FOR ANY PROPOSED CLASS
SETTLEMENT
v.
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No. C 13-04727 WHA
For the guidance of counsel, please keep in mind the following factors that will typically
be considered in determining whether to grant preliminary approval to a class settlement:
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1.
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Is the plaintiff an adequate representative with standing? Is plaintiff motivated to and
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qualified to act on behalf of those he or she seeks to represent? Are there shortcomings in the
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plaintiff that would be advanced to defeat a class certification motion? What is the litigation
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history, criminal history, and relationship to plaintiff’s counsel? In an employment case, how
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long did the plaintiff work for the employer? The opinion of the lead plaintiff as to the fairness
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of the settlement to absent class members must be provided to the Court, along with an opinion
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by counsel. Adequacy of counsel is not a substitute for adequacy of the representative.
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ADEQUACY OF REPRESENTATION.
If a settlement proposal is made prior to formal class certification, there is a risk that the
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class claims have been discounted, at least in part, by the risk that class certification will be
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denied. All counsel should explain whether this risk was discussed and/or considered in the
negotiations and, if so, why the rights of non-parties should be prejudiced merely because the
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particular “representative” (or his or her counsel) might be deemed inadequate or other
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requirements of Rule 23 might be unsatisfied.
DUE DILIGENCE.
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2.
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Has class counsel performed due diligence (discovery and investigation) to learn the
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strength and best-case dollar amount of the class claim, including preparation of a final expert
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class damage report? Please remember that when one undertakes to act as a fiduciary on
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behalf of others (here, the proposed class), one must always perform adequate due diligence
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before acting.
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COST-BENEFIT FOR ABSENT CLASS MEMBERS.
In the proposed settlement, what will absent class members give up versus what will they
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For the Northern District of California
United States District Court
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3.
receive in exchange, i.e., a cost-benefit analysis? If the recovery will be a full recovery, then
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much less will be required to justify the settlement than for a partial recovery, in which case the
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discount will have to be justified. This will require an analysis of the specific proof, such as a
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synopsis of any conflicting evidence on key fact points. It will also require a final class-wide
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damage study or a very good substitute, in sworn form. If little discovery has been done to see
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how strong the claim is, it will be hard to justify a discount on the mere generalized theory of
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“risks of litigation.” A coupon settlement will rarely be approved. Where there are various
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subgroups within the class, what will be the plan of allocation of the settlement fund and why?
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4.
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The release should be limited only to the claims certified for class treatment. Language
THE RELEASE.
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releasing claims that “could have been brought” is too vague. The specific statutory or common
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law claims to be released should be spelled out. Class counsel must justify the release as to each
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claim released, the probability of winning, and its estimated value if fully successful. Does the
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settlement contemplate that claims of absent class members will be released even for those
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whose class notice is returned as undeliverable? Usually, the Court will not extinguish claims of
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individuals known to have received no notice or whom received no benefit (and/or for whom
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there is no way to send them a settlement check). Put differently, usually the release must
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extend only to those who receive money for the release.
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5.
EXPANSION OF THE CLASS.
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Typically, defendants vigorously oppose class certification and/or argue for a narrow
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class. In settling, however, defendants often seek to expand the class, either geographically
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(i.e., nationwide) or claim-wise (including claims not in the complaint) or person-wise
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(e.g., multiple new categories). Such expansions will be viewed with suspicion. If an expansion
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is to occur it must come with an adequate plaintiff and one with standing to represent the add-on
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scope and with an amended complaint, not to mention due diligence as to the expanded scope.
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The settlement dollars must be sufficient to cover the old scope plus the new scope. Personal
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and subject-matter jurisdiction over the new individuals to be compromised by the class
judgment must be shown.
REVERSIONS.
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For the Northern District of California
United States District Court
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6.
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A settlement that allows for a reversion of settlement funds to the defendant(s) is a red
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flag, for it runs the risk of an illusory settlement, especially when combined with a requirement
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to submit claims that may lead to a shortfall in claim submissions.
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7.
CLAIM PROCEDURE.
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A settlement that imposes a claim procedure rather than cutting checks to class members
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for the appropriate amount may impose too much of a burden on class members, especially if the
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claim procedure is onerous, or the period for submitting is too short, or there is a likelihood of
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class members treating the notice envelope as junk mail. The best approach is to calculate
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settlement checks from defendant’s records (plus due diligence performed by counsel) and to
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send the checks to the class members along with a notice that cashing the checks will be deemed
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acceptance of the release and all other terms of the settlement.
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8.
ATTORNEY’S FEES.
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To avoid collusive settlements, the Court prefers that all settlements avoid any agreement
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as to attorney’s fees and leave that to the judge. If the defense insists on an overall cap, then the
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Court will decide how much will go to the class and how much will go to counsel, just as in
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common fund cases. Please avoid agreement on any division, tentative or otherwise.
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A settlement whereby the attorney seems likely to obtain funds out of proportion to the benefit
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conferred on the class must be justified.
DWINDLING OR MINIMAL ASSETS?
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If the defendant is broke or nearly so with no prospect of future rehabilitation, a steeper
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discount may be warranted. This must be proven. Counsel should normally verify a claim of
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poverty via a sworn record, thoroughly vetted.
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10.
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In order to have a better record to evaluate the foregoing considerations, it is better to
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TIMING OF PROPOSED SETTLEMENT.
develop and to present a proposed compromise after class certification, after diligent discovery
on the merits, and after the damage study has been finalized. On the other hand, there will be
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For the Northern District of California
United States District Court
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some cases in which it will be acceptable to conserve resources and to propose a resolution
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sooner. For example, if the proposal will provide full recovery (or very close to full recovery)
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then there is little need for due diligence. The poorer the settlement, the more justification will
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be needed and that usually translates to more discovery and due diligence; otherwise, it is best to
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let non-parties fend for themselves rather than foist a poor settlement on them. Particularly when
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counsel proposes to compromise the potential claims of others in a low-percentage recovery, the
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Court will insist on detailed explanation of why the case has turned so weak, an explanation that
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usually must flow from discovery and due diligence, not merely generalized “risks of litigation.”
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Counsel should remember that merely filing a putative class complaint does not authorize them
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to compromise the rights of absent parties. If counsel believe settlement discussions should
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precede a class certification, a motion for appointment of interim class counsel must first
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be made.
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A RIGHT TO OPT OUT IS NOT A CURE-ALL.
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A borderline settlement cannot be justified merely because class members may opt out if
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they wish. The Court has an independent duty to assess whether it is reasonable and adequate.
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Once the named parties reach a settlement in a purported class action, they are always solidly in
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favor of their own proposal. There is no advocate to critique the proposal on behalf of absent
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class members. That is one reason that Rule 23(e) insists that the district court vet all
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class settlements.
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12.
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If the proposed settlement by itself is not good enough for the named plaintiff, why
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should it be good enough for absent class members similarly situated? Class litigation proceeded
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well for many decades before the advent of requests for “incentive payments,” which too
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often are simply ways to make a collusive or poor settlement palatable to the named plaintiff.
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A request for an incentive payment is a red flag.
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NOTICE TO CLASS MEMBERS.
Is the notice in plain English, plain Spanish, and/or plain Chinese (or the appropriate
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For the Northern District of California
United States District Court
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13.
INCENTIVE PAYMENTS.
language)? Does it plainly lay out the salient points, which are mainly the foregoing points in
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this memorandum? Will the method of notice distribution really reach every class member?
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Will it likely be opened or tossed as junk mail? How can the envelope design enhance the
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chance of opening? Can notice be supplemented by e-mail notice?
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Counsel should be mindful of the factors identified in Hanlon v. Chrysler Corp.,
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150 F.3d 1011, 1026 (9th Cir. 1998). Finally, for an order denying proposed preliminary
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approval, see Kakani v. Oracle Corp., No. C 06-06493 WHA, 2007 WL 1793774 (N.D. Cal.
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June 19, 2007).
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IT IS SO ORDERED.
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Dated: January 6, 2014.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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