Infante v. Luxottica Retail North America

Filing 12


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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 KATHLEEN INFANTE, as an individual and on behalf of all others similarly situated, 12 13 14 Plaintiffs, NOTICE AND ORDER RE FACTORS TO BE EVALUATED FOR ANY PROPOSED CLASS SETTLEMENT v. LUXOTTICA RETAIL, 15 Defendant. / 16 17 No. C 17-05145 WHA For the guidance of counsel, please review the Procedural Guidance for Class Action 18 Settlements, which is available on the website for the United States District Court for the 19 Northern District of California at 20 In addition, counsel should review the following substantive and timing factors that the 21 undersigned judge will consider in determining whether to grant preliminary and/or final 22 approval to a proposed class settlement. Many of these factors have already been set forth in 23 In re Bluetooth Headset Products Liability Litigation, 654 F.3d 935, 946–47 (9th Cir. 2011), but 24 the following discussion further illustrates the undersigned judge’s consideration of such factors: 25 1. 26 Anyone seeking to represent a class, including a settlement class, must affirmatively meet ADEQUACY OF REPRESENTATION. 27 the Rule 23 standards, including adequacy. It will not be enough for a defendant to stipulate to 28 adequacy of the class representation (because a defendant cannot speak for absent class 1 members). An affirmative showing of adequacy must be made in a sworn record. Any possible 2 shortcomings in a plaintiff’s resume, such as a conflict of interest, a criminal conviction, a prior 3 history of litigiousness, and/or a prior history with counsel, must be disclosed. Adequacy of 4 counsel is not a substitute for adequacy of the representative. 5 2. DUE DILIGENCE. 6 Please remember that when one undertakes to act as a fiduciary on behalf of others (here, 7 the absent class members), one must perform adequate due diligence before acting. This 8 requires the representative and his or her counsel to investigate the strengths and weaknesses of 9 the case, including the best-case dollar amount of claim relief. A quick deal up front may not be fair to absent class members. COST-BENEFIT FOR ABSENT CLASS MEMBERS. 11 For the Northern District of California United States District Court 10 3. 12 In the proposed class settlement, how do the costs of what absent class members will give 13 up compare to the benefits of what they will receive in exchange? If the recovery will be a full 14 recovery, then much less will be required to justify the settlement than for a partial recovery, in 15 which case the discount will have to be justified. The greater the discount, the greater must be 16 the justification. This will require an analysis of the specific proof, such as a synopsis of any 17 conflicting evidence on key fact points. It will also require a final class-wide damage study or a 18 very good substitute, in sworn form. If little discovery has been done to see how strong the 19 claim is, it will be hard to justify a substantial discount on the mere generalized theory of “risks 20 of litigation.” A coupon settlement will rarely be approved. Where there are various subgroups 21 within the class, counsel must justify the plan of allocation of the settlement fund. 22 4. THE RELEASE. 23 The proposed release should be limited only to the claims certified for class treatment. 24 Language releasing claims that “could have been brought” is too vague and overbroad. The 25 specific statutory or common law claims to be released should be spelled out. Class counsel 26 must justify the release as to each claim released, the probability of winning, and its estimated 27 value if fully successful. 28 2 1 Does the proposed class settlement contemplate that claims of absent class members will 2 be released even for those whose class notice is returned as undeliverable? Usually, the Court 3 will not extinguish claims of individuals known to have received no notice or who received no 4 benefit (and/or for whom there is no way to send them a settlement check). Put differently, 5 usually the release must extend only to those who receive money for the release. 6 5. EXPANSION OF THE CLASS. 7 Typically, defendants vigorously oppose class certification and/or argue for a narrow 8 class. In settling, however, defendants often seek to expand the class, either geographically 9 (i.e., nationwide) or claim-wise (including claims not even in the complaint) or person-wise (e.g., multiple new categories). Such expansions will be viewed with suspicion. If an expansion 11 For the Northern District of California United States District Court 10 is to occur it must come with an adequate plaintiff and one with standing to represent the add-on 12 scope and with an amended complaint to include the new claims, not to mention due diligence as 13 to the expanded scope. The settlement dollars must be sufficient to cover the old scope plus the 14 new scope. Personal and subject-matter jurisdiction over the new individuals to be compromised 15 by the class judgment must be shown. 16 6. 17 A proposed class settlement that allows for a reversion of settlement funds to the 18 defendant(s) is a red flag, for it runs the risk of an illusory settlement, especially when combined 19 with a requirement to submit claims that may lead to a shortfall in claim submissions. REVERSION. CLAIM PROCEDURE. 20 7. 21 A settlement that imposes a claim procedure rather than cutting checks to class members 22 for the appropriate amount may (or may not) impose too much of a burden on class members, 23 especially if the claim procedure is onerous, or the period for submitting is too short, or there is a 24 likelihood of class members treating the notice envelope as junk mail. The best approach, when 25 feasible, is to calculate settlement checks from a defendant’s records (plus due diligence 26 performed by counsel) and to send the checks to the class members along with a notice that 27 cashing the checks will be deemed acceptance of the release and all other terms of the 28 settlement. 3 1 8. ATTORNEY’S FEES. 2 To avoid collusive settlements, the Court prefers that all settlements avoid any agreement 3 as to attorney’s fees and leave that to the judge. If the defense insists on an overall cap, then 4 the Court will decide how much will go to the class and how much will go to counsel, just 5 as in common fund cases. Please avoid agreement on any division, tentative or otherwise. 6 A settlement whereby the attorney seems likely to obtain funds out of proportion to the benefit 7 conferred on the class must be justified. 8 9. DWINDLING OR MINIMAL ASSETS? 9 If the defendant is broke or nearly so with no prospect of future rehabilitation, a steeper discount may be warranted. This must be proven. Counsel should normally verify a claim of 11 For the Northern District of California United States District Court 10 poverty via a sworn record, thoroughly vetted. 12 10. TIMING OF PROPOSED SETTLEMENT. 13 The parties shall not discuss settlement as to any class claims prior to class certification. 14 To elaborate, when a class settlement is proposed prior to formal class certification, there is a 15 risk that class claims have been discounted, at least in part, by the risk that class certification 16 might be denied. Absent class members, of course, should be subject to normal discounts for 17 risks of litigation on the merits but they should not be subject to a further discount for a risk of 18 denial of class certification, such as, for example, a denial based on problems with a proposed 19 class representative, including a conflict of interest or a prior criminal conviction. See Howard 20 Erichson, Beware The Settlement Class Action, DAILY JOURNAL (Nov. 24, 2014). This is a main 21 reason the Court prefers to litigate and vet a class certification motion before any class 22 settlement discussions take place. That way, the class certification is a done deal and cannot 23 compromise class claims. Only the risks of litigation on the merits can do so. 24 In order to have a better record to evaluate the foregoing considerations, it is better to 25 develop and to present a proposed compromise after class certification, after diligent discovery 26 on the merits, and after the damage study has been finalized. On the other hand, there will be 27 some cases in which it will be acceptable to conserve resources and to propose a resolution 28 sooner. For example, if the proposal will provide full recovery (or very close to full recovery) 4 1 then there is little need for more due diligence. The poorer the settlement, however, the more 2 justification will be needed and that usually translates to more discovery and more due diligence; 3 otherwise, it is best to let absent class members keep their own claims and fend for themselves 4 rather than foist a poor settlement on them. Particularly when counsel propose to compromise 5 the potential claims of absent class members in a low-percentage recovery, the Court will insist 6 on a detailed explanation of why the case has turned so weak, an explanation that usually must 7 flow from discovery and due diligence, not merely generalized “risks of litigation.” Counsel 8 should remember that merely filing a putative class complaint does not authorize them to 9 extinguish the rights of absent class members. If counsel believe settlement discussions should precede a class certification, a motion for appointment of interim class counsel must first 11 For the Northern District of California United States District Court 10 be made. “[S]ettlement approval that takes place prior to formal class certification requires a 12 higher standard of fairness.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). 13 11. 14 A borderline settlement proposal cannot be justified merely because absent class A RIGHT TO OPT OUT IS NOT A CURE-ALL. 15 members may opt out if they wish. The Court has (and counsel have) an independent, stand- 16 alone duty to assess whether the proposed class settlement is reasonable and adequate. Once the 17 named parties reach a settlement in a purported class action, they are always solidly in favor of 18 their own proposal. There is no advocate to critique the proposal on behalf of absent class 19 members. That is one reason that Rule 23(e) insists that the district court vet all 20 class settlements. 21 12. 22 If the proposed class settlement by itself is not good enough for the named plaintiff, why INCENTIVE PAYMENT. 23 should it be good enough for absent class members similarly situated? Class litigation proceeded 24 well for many decades before the advent of requests for “incentive payments,” which too 25 often are simply ways to make a collusive or poor settlement palatable to the named plaintiff. 26 A request for an incentive payment is a red flag. 27 28 5 1 13. NOTICE TO CLASS MEMBERS. 2 Is the notice in plain English, plain Spanish, and/or plain Chinese (or the appropriate 3 language)? Does it plainly lay out the salient points, which are mainly the foregoing points in 4 this memorandum? Will the method of notice distribution really reach every class member? 5 Will it likely be opened or tossed as junk mail? How can the envelope design enhance the 6 chance of opening? Can mail notice be supplemented by e-mail notice? 7 * * * 8 Counsel will please see from the foregoing that the main focus will be on what is in the 9 best interest of absent class members. Counsel should be mindful of the factors identified in In re Bluetooth, 654 F.3d at 946–47, as well as the fairness considerations detailed in Hanlon, 11 For the Northern District of California United States District Court 10 150 F.3d at 1026. Finally, for an order denying proposed preliminary approval based on many of 12 the foregoing considerations, see Kakani v. Oracle Corp., No. C 06-06493 WHA, 2007 WL 13 1793774 (N.D. Cal. June 19, 2007). 14 15 IT IS SO ORDERED. 16 17 Dated: September 15, 2017. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 6

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