Fernando et al v. eBay, Inc. et al

Filing 172

ORDER RE MOTION FOR FINAL APPROVAL AND MOTIONS FOR ATTORNEYS FEES AND SERVICE AWARDS. Signed by Judge Saundra B Armstrong on 3/24/17. (dtmS, COURT STAFF) (Filed on 3/24/2017)

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UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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OAKLAND DIVISION
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MOISES ZEPEDA, MICHAEL SPEAR,
10 RONYA OSMAN, BRIAN PATTEE,
CASEY CHING, DENAE ZAMORA,
11 MICHAEL LAVANGA, and GARY
MILLER, on behalf of themselves and all others
12 similarly situated,

Case No: C 10-2500 SBA

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Related to:
No. C 10-1668 SBA

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Plaintiffs,
v.

ORDER RE MOTION FOR FINAL
APPROVAL AND MOTIONS FOR
ATTORNEYS’ FEES AND
SERVICE AWARDS

Dkt. 295, 296, 297, 340

15 PAYPAL, INC., E-BAY INC., and DOES 1
through 10, inclusive,
16
Defendants.
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This is a putative nationwide class action brought by Plaintiffs Moises Zepeda,

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Michael Spear, Ronya Osman, Brian Pattee, Casey Ching, Denae Zamora, Michael

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Lavanga and Gary Miller (collectively “Plaintiffs”) against PayPal, Inc., and its parent

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entity, eBay, Inc., (collectively “Defendants”). Plaintiffs allege that PayPal improperly

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handled disputed transactions relating to their user accounts by unilaterally placing holds

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and reserves thereon without explanation. PayPal also is alleged to have failed to provide

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annual error-resolution notices and monthly account statements in violation of the

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Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693, et seq. The parties have

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resolved the above-captioned action on a class-wide basis and entered into a Settlement

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Agreement, as amended (“the Settlement”), which the Court preliminarily approved in a

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prior order.

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The parties are presently before the Court on the following motions: (1) Plaintiffs’

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Motion for Final Approval of Amended Class Action Settlement Agreement; (2) Motion for

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Award of Attorneys’ Fees and Reimbursement for Costs and Service Awards, filed by the

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Lexington Law Group and Quantum Legal LLC (“Class Counsel Fee Motion”); (3) Motion

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for Attorneys’ Fees and Reimbursement of Expenses filed by Marina Trubitsky (“Trubitsky

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Fee Motion”); and (4) Application for Attorney Fees by Local Counsel David Hicks

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(“Hicks Fee Application”).1 Also before the Court are various objections that the Court has

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received in response to Notice of the Settlement.

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This matter came before the Court for a hearing on the above-mentioned matters on

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February 8, 2017. The parties in this action and related action, Fernando v. PayPal,

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No. C 10-1668 SBA, appeared through their counsel of record. Attorney Anthony Ferrigno

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appeared for Objectors Wally Collins and Lucinda Christian (collectively “Collins

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Objectors”), and Objector Sam Miorelli (“Miorelli”), an attorney, appeared pro se. Having

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read and considered the papers filed in connection with these matters and upon

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consideration of the arguments presented at the hearing, the Court hereby GRANTS

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Plaintiffs’ Motion for Final Approval, GRANTS IN PART the Class Counsel Fee Motion

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and the Hicks Fee Application, and DENIES the Trubitsky Fee Motion. All objections to

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final settlement approval are OVERRULED.

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I.

BACKGROUND

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A.

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PayPal operates an on-line payment processing service that functions as a third party

OVERVIEW

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intermediary to facilitate payments between buyers and sellers of goods and services sold

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on-line through commercial websites, such as eBay. As a condition of using PayPal’s

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service, subscribers must abide by the PayPal User Agreement (“User Agreement”), among

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other agreements. Third Am. Compl (“TAC”). ¶ 35, Dkt. 291. The User Agreement

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1

Marina Trubitsky (“Trubitsky”) and David Hicks (“Hicks”) are counsel of record
in the related action, Fernando v. PayPal, No. C 10-1668 SBA, and are permitted under the
28 terms of the Settlement to submit an application for attorneys’ fees.
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-2-

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provides that upon a breach of its terms—such as by engaging in defined “Restricted

2

Activities”—PayPal “may hold funds in a seller’s account by placing reserves on accounts

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and/or limiting and/or suspending seller’s accounts and holding the funds in the accounts

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for up to and in some cases exceeding 180 days.” Id. ¶ 38. Among other things, Restricted

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Activities are defined to include a breach of the User Agreement or any other agreements

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with PayPal, selling counterfeit goods, and providing false or inaccurate information. Id.

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¶ 39. Plaintiffs are PayPal users who allege that PayPal placed holds on their account funds

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TAC ¶¶ 10-17. The foregoing policies and practices have given rise to several actions

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including the instant case, Zepeda v. PayPal, No. 10-2500 SBA, and Fernando v. PayPal,

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No. 10-1668 SBA.2 The procedural history of these actions is summarized below.

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12

1.

Zepeda v. PayPal

On May 12, 2010, Ronya Osman and Brian Pattee filed a complaint in this Court

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against PayPal and eBay. See Osman v. PayPal, Inc., No. C 10-2046 PVT. A month later

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on June 7, 2010, Moises Zepeda (“Zepeda”) filed the instant action against PayPal. Two

15

days thereafter, Michael Spear filed a third complaint against PayPal and eBay in the matter

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styled as Spear v. PayPal, Inc. and eBay, Inc., No. C 10-2555 PVT. In July 2010, the

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plaintiffs in Osman and Spear voluntarily dismissed their respective actions under Federal

18

Rule of Civil Procedure 41(a), without prejudice. In their place, Zepeda filed a First

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Amended Class Action Complaint (“FAC”) on August 13, 2010, which joined the plaintiffs

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from the Osman and Spear actions, among others. Dkt. 22.

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The FAC alleged causes of action against PayPal for: (1) breach of contract;

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(2) breach of fiduciary duty; (3) accounting; (4) violation of California’s Consumers Legal

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Remedies Act (“CLRA”); (5) violation of California’s Unfair Competition Law (“UCL”),

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Cal. Bus. & Prof. Code § 17200; and (6) unjust enrichment. The FAC was filed on behalf

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of a nationwide class defined as “[a]ll PayPal, Inc. account holders whose funds have been

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2

The Court deemed Fernando to be a “related action” under Civil Local Rule 3-12,
though the actions have not been consolidated under Federal Rule of Civil Procedure 42.
28 Dkt. 61.
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held by Pay[P]al or whose accounts were closed, suspended, or limited by PayPal,” along

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with a natural person class defined as “[a]ll natural persons whose funds have been held by

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Pay[P]al or whose accounts were closed, suspended, or limited by PayPal.” FAC ¶ 57.

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Mark Todzo of Lexington Law Group LLC and Jeffrey Leon of Quantum Legal LLC

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(formerly Complex Litigation Group LLC) have served as the principal attorneys

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representing Plaintiffs and are now Class Counsel.

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After Plaintiffs filed the FAC, the Honorable Lucy Koh, the judge originally

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assigned to the action, recused herself and the matter was reassigned to the Honorable

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Jeremy Fogel. On September 30, 2010, PayPal filed a motion to dismiss the FAC, pursuant

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to Federal Rule of Civil Procedure 12(b)(6). Dkt. 26. Shortly thereafter, Plaintiffs filed a

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motion for the appointment of lead counsel. Dkt. 28. On February 15, 2011, Judge Fogel

12

granted PayPal’s motion and dismissed all claims with leave to file a Second Amended

13

Complaint (“SAC”) within thirty days. See 2/15/11 Order Granting Motions to Dismiss

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and to Appoint Interim Lead, Liaison, and Class Counsel (“2/15/11 Order”) (reported as

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Zepeda v. PayPal, Inc., 777 F. Supp. 2d 1215, 1220-21 (N.D. Cal. 2011)), Dkt. 49. In the

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same order, Judge Fogel granted Plaintiffs’ motion for the appointment of lead counsel.

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Zepeda, 777 F. Supp. 2d at 1223-24.

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In rejecting Plaintiffs’ tort and contract claims and demand for an accounting, Judge

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Fogel ruled that: (1) the PayPal User Agreement affords PayPal “sole discretion” to place

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holds on its users’ accounts, irrespective of whether the user has engaged in restricted

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activities; and (2) PayPal has no contractual obligation to provide users with an explanation

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as to why their accounts may have been frozen. Id. at 1219-221. Judge Fogel also rejected

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the CLRA claim on the ground that Plaintiffs are not “consumers” and therefore lack

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prudential standing. Id. at 1222. As to the UCL claim, Judge Fogel ruled that the pleadings

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failed to satisfy the heightened standard for pleading fraudulent conduct under Federal Rule

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of Civil Procedure 9(b). Id. at 1222-23. Finally, he dismissed the unjust enrichment claim

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on the ground that the parties’ relationship was governed by an express contract. Id. at

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1223.
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While Plaintiffs were given the opportunity to attempt to replead their claims, it

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became apparent to them that filing a SAC would trigger another motion to dismiss and

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engender further delay and cost. Mot. for Prelim. Approval at 3, Dkt. 166. In addition,

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Plaintiffs were concerned that, in light of Judge Fogel’s interpretation of the User

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Agreement, it would be difficult to cure the deficiencies that resulted in the dismissal of the

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FAC. Id. For its part, PayPal was receptive to discussing settlement. Id. Thus, instead of

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amending the pleadings, Plaintiffs commenced settlement discussions with PayPal. Id.

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2.

Fernando v. PayPal and eBay

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On April 19, 2010, Devinda Fernando and Vadim Tsigel, represented by New York

10

attorney Trubitsky and local counsel Hicks, filed the Fernando putative class action against

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PayPal and eBay. On March 22, 2011, the plaintiffs filed a First Amended Class Action

12

Complaint (“Fernando FAC”), which, inter alia, joined Michail Zinger, Amy Rickel, Fred

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Rickel, Ira Gilman, Lacy Reintsma and Shaul Behr as additional party-plaintiffs. Fernando

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FAC, Dkt. 23.

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The Fernando FAC alleges that PayPal improperly restricts, freezes or closes

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customer accounts because of “suspicious activity,” without notice, explanation or

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responding to the inquiries of affected users. Id. ¶¶ 23-24. The pleadings also aver that

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PayPal freezes the accounts of affected users, thereby preventing them from cancelling

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their accounts and recovering their funds. Id. ¶ 25. Such conduct is alleged to violate the

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EFTA, as well as Section III of the Injunctive Relief portion of the settlement agreement

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reached in In re PayPal Litigation (Comb v. PayPal, Inc.), Nos. C 02-1227 JF, C 02-2777

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1

JF. Id. ¶¶ 25-2 3 The Fernando FAC alleges si claims fo (1) viola
26.
C
ix
or:
ation of the EFTA;

2

(2) violation of the Comb settlement agreement (3) conve
b
t
t;
ersion; (4) m
money had a
and

3

rece
eived; (5) unjust enrich
u
hment; and (6) neglige
ence. Ferna
ando, Dkt. 1 Although PayPal
1.
h

4

filed a motion to dismiss the FAC, th motion w taken o calendar to facilitate settlement
he
was
off
e

5

disc
cussions. Id Dkt. 26, 52.
d.,

6

B.

7

1.
1

8
9

SETTLEMEN NEGOTI
NT
IATIONS
The Original Settlement
S
a)

Zepeda

Followi the dism
ing
missal of the FAC by J
e
Judge Fogel in Zepeda, PayPal shared
l

10

deta
ailed and co
onfidential information concernin its hold a reserve practices w the
n
ng
and
with

11

Plai
intiffs’ coun
nsel. Dkt. 166 at 9. The parties t
T
thereafter en
ngaged in s
settlement n
negotiations
s

12

ove the course of several months reg
er
e
l
garding the underlying claims and facts. Mo for
e
g
ot.

13

Prelim. Approval at 5, Dk 112. The parties th participa in a me
kt.
hen
ated
ediation wh took
hich

14

plac on or abo May 11, 2011, sup
ce
out
pervised by mediator R
Randall Wul of Dispu
lff
ute

15

Res
solution. Id Those discussions and the ensu
d.
a
uing mediat
tion resulted in the firs settlemen
d
st
nt

16

in this action. Id.; 2/24/14 Order at 4, Dkt. 205 .
4
4

17

According to the original Sett
o
tlement Agr
reement, “th primary focus of th
the
he

18

sett
tlement is th impleme
he
entation (or maintenanc of busin practic
ce)
ness
ces” with re
espect to

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Pay
yPal’s policies and prac
ctices regar
rding “hold “reserve and “lim
ds,”
es”
mitations,” a those
as

20

term are used by PayPal. Settlemen Agt. § 3.3 Dkt. 166
ms
d
.
nt
3,
6-1. To that end, PayPa agreed to
t
al
o

21

provide prospe
ective injun
nctive relief to a Settlem Class defined as “all current and
f
ment
t

22
23
24
25
26
27
28

3

Comb was a class action bro
b
ought on be
ehalf of a class defined as “[a]ll Pe
d
ersons who
ope
ened a PayP account during the period from October 1 1999 thro
Pal
m
1,
ough Januar 31,
ry
200 which alleged that PayPal rou
04,”
a
t
utinely “fro
oze” custom accounts flagged as
mer
s
s
“su
uspicious,” without just
w
tification or explanatio Comb, Dkt. 234 at 6-7. The p
r
on.
t
parties
eve
entually ente
ered into a settlement agreement t provide both inju
a
that
ed
unctive relief and a
sett
tlement fund in the am
mount of $9.25 million. Id., Dkt. 2
249. The inj
junctive rel portion
lief
of the settleme was inte
t
ent
ended “to im
mplement th requirem
he
ments of the [EFTA] . . . and to
add
dress the operating prac
ctices which led to wid
h
despread co
omplaints by users of t PayPal
the
syst
tem.” Id., Dkt. 247 at 7. On Nov
D
vember 2, 2
2004, Judge Fogel final approve the class
lly
ed
sett
tlement in Comb and entered a Fin Judgme and Ord of Dismi
C
e
nal
ent
der
issal with P
Prejudice.
Id.
-6-

1

form users of PayPal wh had an active PayP account b
mer
o
ho
a
Pal
between Ap 19, 200 and the
pril
06

2

date of entry of the Prelim
e
o
minary Approval Order Id. § 1.2 Defend
r.”
26.
dants agreed to pay
d

3

$1,4
425,000 int a Settlem Fund, from which $712,500 i attorneys fees, and $5,000 in
to
ment
f
h
in
s’

4

ince
entive awar for each of the eigh class repr
rds
h
ht
resentatives were to be deducted. Id. § 1.24.
s
e
.

5

The remainder of the Sett
e
r
tlement Fun was to be contribute as a cy p award t the
nd
e
ed
pres
to

6

Electronic Frontier Found
dation (“EF
FF”). Id. § 3
3.7. No part of the Sett
t
tlement Fun was
nd

7

designated for a monetary distributio to the Cl
y
on
lass.

8
9

b)

Fernand
do

On Dec
cember 20, 2011, the parties in the Fernando action part
2
p
e
ticipated in a separate

10

med
diation befo the Hon
ore
norable Elle James (R
en
Ret.), which resulted in a global se
h
n
ettlement of
f

11

both actions. Given the overlapping claims of b
h
G
o
g
both lawsui the parti decided to merge
its,
ies

12

the settlements in Zepeda and Fernan in orde to avoid c
s
a
ndo
er
confusing se
erial notice to the
es

13

Cla
ass. Mot. fo Prelim. Approval at 5-6. The S
or
A
Settlement T
Term Sheet4 indicated that
t

14

Plai
intiffs in Ze
epeda were to file a Se
econd Amen
nded Comp
plaint that jo
oined eBay as a party-

15

def
fendant, and joined the named plai
d
intiffs from Fernando and incorpo
m
orated their claims.
r

16

Hic Decl. Ex E, Dkt. 295-2 at 1. In addition, Defendant agreed to contribute an
cks
x.
2
I
,
ts
o
e

17

add
ditional $425,000 to the global set
e
ttlement fun in order to settle the Fernando action, and
nd
e
d

18

that Trubitsky and Hicks (collectivel “Fernand counsel” could sub
t
ly
do
”)
bmit a fee ap
pplication

19

seek
king up to 50% of the additional settlement f
5
s
funds (i.e., $212,500). Id.

20
21

2.
2

Trub
bitsky’s Di
isruptive C
Conduct

In January 2012, Trubitsky in
T
nformed the other parti that cert of
e
ies
tain

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the Fernando plaintiffs no longer des
p
o
sired to part
ticipate in t global settlement, a
the
and

23

dem
manded the opportunity to negotia individu settleme with Pa
y
ate
ual
ents
ayPal and eB
Bay.

24

3/29/12 Case Mgt. Conf. Stmt. (“3/2
M
29/12 CMC Stmt.”) at 6 Dkt. 80 Moon De in
6-7,
0;
ecl.

25

Sup of Def.’s Opp’n to Intervenors Mot to In
pp.
s’
ntervene and for a Stay of Proceed
d
y
dings ¶¶ 2-

26

5 (“
“Moon Dec
cl.”), Dkt. 99
9-1. Trubit
tsky reiterat these de
ted
emands at t Case Ma
the
anagement

27
4

28

The Settlement Term Sheet was signed by Trubits and Hic on behal of the
T
d
sky
cks
lf
Fer
rnando plain
ntiffs and co
ounsel for PayPal and eBay. Id.
P
-7-

1

Conference held on April 19, 2012, and insisted that the global settlement could not move

2

forward. 4/19/12 Minute Order, Dkt. 84. The Court indicated that any party who did not

3

desire to be bound by the settlement was free to opt out and file a separate action. Id.

4

Counsel representing Plaintiffs in Zepeda, in turn, indicated their intention to proceed with

5

the settlement and file a motion for preliminary approval. Stipulation, Dkt. 89.

6

Consistent with the terms of their original settlement, Plaintiffs filed a SAC in

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Zepeda on October 9, 2012, which joined eBay, and added claims for violations of the

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EFTA and the Comb settlement, which had been alleged in the Fernando pleadings.

9

However, the SAC did not join any of the Fernando plaintiffs as party-plaintiffs. On

10

October 18, 2012, Plaintiffs in this action filed their initial motion for preliminary approval.

11

Dkt. 112.

12

Apparently as a result of the Zepeda plaintiffs’ decision to move forward with the

13

settlement without including the Fernando plaintiffs, Trubitsky began a series of actions

14

ostensibly intended to derail the Zepeda settlement. Pls.’ Opp’n to Mot. to Extend

15

Deadline to File Mot. for Prelim. Approval at 2-3, Dkt. 88 at 2-3; 11/27/12 Order at 2, Dkt.

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122; 2/24/14 Order at 5. Among other things, Trubitsky commenced a new lawsuit against

17

eBay, styled as Dunkel, et al. v. eBay, Inc., No. C 12-1452 EJD, and moved for an order

18

permitting the Dunkel plaintiffs to intervene in the Zepeda action. Id. In addition,

19

Trubitsky separately sought to take control of the Zepeda action by resurrecting her

20

dormant motions to consolidate Zepeda and Fernando, to be appointed lead counsel, and

21

have those motions heard prior to Plaintiffs’ motion for preliminary approval. See

22

Fernando, Dkt. 79, 51.5 The Court denied all motions without prejudice. 11/27/12 Order,

23

Dkt. 122. Finding that it was in the best interest of all parties to resolve their differences

24

and reach a global settlement, the Court instead referred the parties to Magistrate Judge

25

Nathanael Cousins for a joint, mandatory settlement conference relating to Zepeda,

26
5

The Fernando plaintiffs originally filed their Motion to Consolidate Case and
Appoint Lead Counsel on October 3, 2011. Fernando, Dkt. 40. However, in light of their
pending settlement, the parties in Fernando stipulated to vacate the hearing on that motion,
28 as well as Defendants’ pending motion to dismiss the Fernando FAC. Fernando, Dkt. 51.
27

-8-

1

Fernando and Dunkel. Id. at 4. Judge Edward Davila, who was presiding over the Dunkel

2

action, also referred his case to Judge Cousins for the settlement conference.

3

The global settlement conference was originally scheduled for January 17, 2013, but

4

was reset to February 7, 2013. Fernando, Dkt. 84, 88. On February 7, 2013, counsel in

5

Zepeda, Fernando and Dunkel appeared, though none of the Fernando plaintiffs attended

6

the settlement conference, as required. Id., Dkt. 95. Judge Cousins continued the matter to

7

the next day for further settlement discussions. Id. Trubitsky and her clients, however,

8

failed to appear for the second day of the settlement conference and no settlement was

9

reached in Fernando. 2/8/13 Minute Order, Dkt. 133. Accordingly, Judge Cousins issued

10

an order to show cause (“OSC”) directing Trubitsky and the Fernando plaintiffs to show

11

cause why that action should not be dismissed, civil sanctions should not be imposed, a

12

payment of expenses to the other participants in the settlement conference should not be

13

awarded, and/or the pro hac vice admission of Trubitsky should not be revoked. Order to

14

Show Cause, Dkt. 135; Fernando, Dkt. 100.6 The Fernando action was stayed until Judge

15

Cousins later vacated the OSC. Fernando, Dkt. 158 at 9, 169.7

16

C.

17
18

MOTIONS FOR PRELIMINARY APPROVAL
1.

Original Settlement

Following the unsuccessful global settlement conference before Judge Cousins, the

19

Zepeda plaintiffs filed a renewed motion for preliminary approval, based principally on the

20

settlement they had previously reached with PayPal and eBay in May and December 2011.

21

Dkt. 166. On February 24, 2014, the Court denied Plaintiffs’ motion on the grounds that

22
6

Around this time period, the Court was inundated with numerous, albeit
unsuccessful, attempts by attorney Garrett Skelly to intervene and assume control over the
Zepeda and Fernando actions. Skelly claimed to represent three Fernando plaintiffs—Amy
24 and Fred Rickel, and Lacy Reintsma—as well as two non-party putative class members,
Burgess and Caleb Reintsma. The incessant, frivolous motion practice and interference by
25 Skelly led to further delays in resolving this action. Dkt. 122, 125, 129, 147, 151, 157, 163,
165, 196, 197, 202.
23

26
7

In a brief order, Judge Cousins found that Trubitsky’s absence was not willful, and
that in light of Judge Davila’s dismissal of the Dunkel action and the Court’s preliminary
approval of the Zepeda settlement, no further action on the OSC was necessary. Fernando,
28 Dkt. 169.
27

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1

the settlement release was overbroad and the Se
s
d
ettlement di not provi monetar relief for
id
ide
ry
r

2

the class. 2/24
4/14 Order at 11-12. The Court g
a
T
granted the p
parties leav to resubm a
ve
mit

3

renewed motio for prelim
on
minary appr
roval within thirty day Id. at 12 The parti
n
ys.
2.
ies

4

sub
bsequently requested, and the Cou granted, several con
r
a
urt
ntinuances o that dead
of
dline in

5

ord to facilitate addition settleme discussions. 7/2/14 Order, Dk 234.
der
nal
ent
4
kt.

6

2.
2

7

Revi
ised Settlem
ment
a)

Terms

8

The par
rties particip
pated in two full-day m
o
mediations on March 2 2014, an June 9,
24,
nd

9

201 before Magistrate Judge Edwa Infante (
14,
M
J
ard
(ret.) of JAM which eventually led to an
MS,
y

10

Am
mendment to Settlemen Agreemen which re
o
nt
nt,
evised certa of the te
ain
erms of the original

11

Sett
tlement. To
odzo Decl. in Supp. of Mot. for P
f
Prelim. App
proval ¶ 3, D 275-1. PayPal
Dkt.

12

aga agreed to provide th injunctiv relief from the original settlement. But un
ain
o
he
ve
m
nlike its

13

prio version, the revised Settlement created a $
or
t
$3,200,000 settlement fund to pro
ovide two

14

form of mone
ms
etary relief to the class members w had a h
t
who
hold placed on their ac
ccount:

15

(1) a Basic Cla
aim, which is a guaran
nteed payme based on the amoun and length of a hold
ent
n
nt
d

16

or reserve; and (2) an Alte
r
d
ernate Claim which co
m,
ompensates for busine damages subject to
s
ess
s,
o

17

proof of such damages by Claims Cl membe
d
y
lass
ers. Am. Settlement A §§ 1.2, 1.3, Dkt.
Agt.

18

235
5-1. The pa
ayments for Basic Claims are equa to two-th
r
al
hirds of the average am
mount of

19

inte
erest at market rates8 th would have accrued on the fun subject to a hold o reserve,
hat
h
nds
or

20

sub
bject to a $3 floor and rounded to the nearest $1 or $10, as follows:
r
t

21
22
23
24
25
26
27
28

8

In July 2014, Plaintiffs retained Corner
y
rstone Research, a consulting firm to
m,
eva
aluate the am
mount of in
nterest that would have accrued on accounts s
w
e
n
subject to a hold or
rese
erve. McCa Decl. ¶ 2, Dkt. 340
abe
0-3. Corner
rstone evalu
uated over 180 transac
ctions
involving over 10 million unique acc
r
n
counts durin the time period from July 27, 2
ng
e
m
2006, and
arch 20, 201 Id. Base on an annualized m
14.
ed
money marke interest r of 3.65% in 2007,
et
rate
%
Ma
Cor
rnerstone co
oncluded th $100 hel for 50 da would h
hat
ld
ays
have yielded $0.50 inte
d
erest. Id.
¶ 5. Applying that formu across th board, Co
.
ula
he
ornerstone estimated th aggregat amount
he
te
of interest acro all accou during the aforem
i
oss
unts
g
mentioned ti period to be $3,00
ime
09,839.84.
Id. ¶ 6.
- 10 -

1
2
3
4

LENGTH OF
HOLD/RESERVE
1-30 days
31-90 days
91-150 days
Over 150 days

HOLD/RESERVE
UNDER $1,000
$3.00
$3.00
$3.00
$14.00

HOLD/RESERVE UP
TO $1,000
$3.00
$5.00
$10.00
$25.00

HOLD/RESERVE
OVER $10,000
$3.00
$150.00
$100.00
$440.00

5

Alternate Claims will be paid in full, subject to proof, up to an individual cap of $2,000 per

6

claim. Id. § 5.1. If the total of Alternate Claims (including administration expenses

7

associated with those claims) exceeds $800,000, the Alternate Claims payments will be

8

reduced on a pro-rata basis. Id. § 5.5.

9

Of the $3,200,000 Settlement Fund, at least $1,840,000 will be available to pay

10

Basic Claims. Id. § 4.4. If the Settlement Fund is not exhausted by the payment of Basic

11

Claims, attorneys’ fees and administrative costs, then up to an additional $200,000 from the

12

Settlement Fund may be used to pay Alternate Claims. Id. §§ 4.5, 5.4. If the additional

13

$200,000 is insufficient to cover all Alternate Claims, Defendants will pay an additional

14

$800,000 to accommodate those claims. Id. § 5.5. Any leftover funds from uncashed

15

settlement checks will be distributed on a cy pres basis to the EFF, a non-profit

16

organization that works to defend civil liberties in the digital world, including the rights of

17

users of commercial websites, such as PayPal. Id. § 4.7. Notably, the Settlement provides

18

for the upward proration of payments to Claims Class members to ensure that the maximum

19

possible relief goes to Settlement Class Members rather than a cy pres recipient, and that

20

the only funds that need to be distributed on a cy pres basis are funds from uncashed

21

settlement checks. Id. § 5.4.

22

Consistent with the above, the Settlement creates two Settlement Classes: A Claims

23

Class and an Injunctive Relief Class. The Claims Class is comprised of “all current and

24

former users of PayPal in the United States who: (1) had an active PayPal account between

25

April 19, 2006 and the date of entry of the Preliminary Approval Order; and (2) had a hold

26

or reserve placed on the account and/or the account was closed or suspended by PayPal.”

27

Id. § 1.6. The Claims Class is intended to address claims for damages allegedly resulting

28
- 11 -

1

from either a hold or a res
m
h
serve on fun held in a PayPal ac
nds
ccount, or d to the suspension
due

2

or closure of a PayPal acc
c
count. Id. §§ 1.6, 1.7.
§

3

The Inju
unctive Rel Class is defined as “all curren and former users of PayPal in
lief
s
s
nt

4

the United States who had an active PayPal acc
d
count betwe April 19 2006 and the date of
een
9,
d
f

5

entr of the Pr
ry
reliminary Approval Order.” Id. § 1.19. The Injunctive Relief Cla is
A
O
e
e
ass

6

inte
ended prima
arily to add
dress claims that are no based on damages th arise fro a
ot
hat
om

7

violation of the settlemen in Comb and related violations of the EFTA includin PayPal’s
e
nt
a
A,
ng

8

alle
eged failure to provide annual erro
or-resolutio notices an monthly account st
on
and
y
tatements.

9

Id. §§ 1.19, 1.2
20.

10
11

b)

Second Motion for Preliminar Approva
M
ry
al

Plaintif filed a se
ffs
econd motio for prelim
on
minary app
proval based on the rev
d
vised

12

sett
tlement, wh the Cou denied on March 25 2015. Dkt. 264. Th Court fou that
hich
urt
o
5,
he
und

13

whi the revis settleme agreeme resolved many of t concern that result in the
ile
sed
ent
ent
d
the
ns
ted

14

reje
ection of the prior agre
e
eement, two obvious de
o
eficiencies remained. First, the C
Court

15

que
estioned wh
hether it was appropriat to allege, much less settle, claim based on alleged
s
te
s
ms

16

violations of th Comb se
he
ettlement. Since the ju
S
udgment in that action specified th any
hat

17

disp
t
putes conce
erning the agreement must be litig
a
m
gated in that case, the C
Court found that this
d

18

acti was not the proper forum to address or re
ion
t
elease any c
claims arisi from tha
ing
at

19

sett
tlement. Id. at 11. Se
econd, the Court noted that, altho
C
d
ough the issu was raised in the
ue

20

ord denying the first mo
der
otion for preliminary a
approval, th parties sti had not e
he
ill
explained

21

why both settle
y
ement class include persons wh have bee PayPal ac
ses
ho
en
ccountholders since

22

200 even tho
06,
ough the pra
actices at is
ssue alleged began in 2008. Id. at 12.
dly
n

23
24
25

3.
3

Ame
endment to the Revise Settlement
o
ed
a)

Terms

Followi the deni of Plaint
ing
ial
tiffs’ secon d motion fo prelimina approva the
or
ary
al,

26

part agreed upon amen
ties
ndments to the settleme agreeme
t
ent
ent. Todzo Decl. ¶ 6 & Ex. 1

27

(Am
mendment to Settlemen Agreeme
t
nt
ent), Dkt. 27
75-1, 275-2 To addre the Cour
2.
ess
rt’s

28

con
ncerns, the parties agreed that Plai
p
intiffs woul file a TA that omit any claim based on
ld
AC
ts
ms
n
- 12 -

1

the alleged bre
each of the Comb Settl
C
lement. Todzo Decl. E 1 ¶ 5, D 275-2. The
Ex.
Dkt.

2

sett
tlement rele
ease has cor
rresponding been mo
gly
odified to el
liminate any reference to the
y
e

3

Com Settlem
mb
ment. Id. ¶¶ 1, 2. With regard to th issue per
he
rtaining to t Class Period, the
the

4

part continu to propo that the Class Perio for both of the prop
ties
ued
ose
od
posed settlement

5

clas should run from April 19, 20 which i four year prior to th filing of the
sses
A
006,
is
rs
he

6

Com
mplaint in the Fernand Action on April 19, 2010. TAC ¶ 59. Imp
t
do
n
C
portantly, th
hey

7

exp
plained that this Class Period is ap
P
ppropriate b
because Plai
intiffs claim include a
ms
allegations

8

based on the closing or su
uspending of accounts and claims arising fro PayPal’s handling
o
s
om
s

9

of buyers’ acco
b
ounts, and these activities occurre both befo and afte 2008. To that end,
t
ed
fore
er
o

10

the proposed TAC adds allegations that PayPal began enga
T
a
t
aging in the disputed p
e
practices

11

prio to 2006. Id. ¶ 39.
or

12

b)

Third Motion for P
M
Preliminary Approval
y

13

Based on the above amendme
o
ents, Plainti filed a t
iffs
third motion for prelim
n
minary

14

app
proval on Se
eptember 9, 2015. Dkt 275. In c
,
t.
connection w said re
with
equest, Plaintiffs

15

sou
ught: (1) pro
ovisional ce
ertification of the two p
o
proposed Se
ettlement C
Classes (i.e., the Claims
,
s

16

Cla and the Injunctive Relief Class (2) the a
ass
I
R
s);
appointment of (a) the Complex L
t
Litigation

17

Gro (b) Lex
oup,
xington Law Group, (c Farmer, J
w
c)
Jaffe, Weiss
sing, Edwar Fistos &
rds,

18

Leh
herman, P.L and (d) Seeger Weis LLP, as C
L.,
S
ss
Class Coun
nsel; (3) app
proval of th proposed
he

19

Cla Notice; and (4) and the schedu
ass
a
d
uling of a fin approva hearing. Proposed O
nal
al
Order, Dkt.

20

275
5-8. Non-pa Regina Burgess (“Burgess” acting pr se, filed an Objectio to
arty
ald
”),
ro
on

21

Preliminary Ap
pproval of Settlement Motion and Demand O
d
Opt-Out if P
Proposed Settlement

22

in Approved. Dkt. 277.
A

23

On Nov
vember 5, 2015, the Co granted Plaintiffs’ motion for preliminar
2
ourt
d
’
r
ry

24

app
proval. Dkt 281. In it Order, the Court con
t.
ts
e
nditionally c
certified a p
proposed Se
ettlement

25

Cla comprise of a Clai Class and an Injun
ass
ed
ims
a
nctive Relie Class, pur
ef
rsuant to Fe
ederal Rule

26

of Civil Proced
C
dure 23(a) and (b)(2) & (3). The Injunctive Relief Clas is defined as: “All
a
ss
d

27

d
curr and for
rent
rmer users of PayPal in the United States wh had an ac
o
n
ho
ctive PayPa account
al

28

betw
ween April 19, 2006 and the date of entry of the Prelim
a
f
minary Appr
roval Order.” The
- 13 -

1

Claims Class is defined as: “All current and former users of PayPal in the United States

2

who: (1) had an active PayPal account between April 19, 2006 and the date of entry of the

3

Preliminary Approval Order; and (2) had a hold or reserve placed on the account and/or the

4

account was closed or suspended by PayPal. Excluded from the Claims Class are judicial

5

officers presiding over this action and the members of their immediate families and judicial

6

staff.”

7

The Court appointed Plaintiffs Moises Zepeda, Michael Spear, Ronya Osman, Brian

8

Pattee, Casey Ching, Denae Zamora, Michael Lavanga and Gary Miller as class

9

representatives pursuant to Rule 23 of the Federal Rules of Civil Procedure. Only Jeffrey

10

A. Leon of Quantum Legal LLC and Mark N. Todzo and Howard Hirsch of Lexington Law

11

Group were appointed as counsel for the Settlement Class. Epiq Systems (“Epiq”) was

12

appointed as claims administrator, and deemed responsible for performing the duties

13

described in the Amended Settlement Agreement. The preliminary approval order

14

approved, as to form and content, the proposed form of notice to the class via email notice,

15

postcard notice, an Internet notice program and a settlement website including a long-form

16

notice. 10/5/15 Order Granting Pls.’ Motion for Prelim. Approval of Am. Class Action

17

Settlement Agt. at 14-15, Dkt. 281. Following preliminary approval, notice of the

18

Settlement was served on the Class Members. Marr Decl. ¶¶ 4-14, Dkt. 340-2; Leon Decl.

19

¶ 4, Dkt. 340-1. Per the terms of the Settlement, PayPal provided email notice to

20

approximately 100 million PayPal customers, including approximately 10.5 million Claims

21

Class members. Mot. for Final Approval at 10, Dkt. 340.

22

D.

23

On January 29, 2016, the Court approved the final approval schedule proposed by

FINAL APPROVAL SCHEDULE AND PROCESS

24

the parties. Dkt. 285, 290. On the same day, Plaintiffs filed their TAC, as contemplated by

25

the Settlement. Dkt. 291. In March 2016, Class Counsel and Fernando counsel filed their

26

respective motions for attorneys’ fees in anticipation of the fairness hearing then scheduled

27

for July 13, 2016. Dkt. 295, 296, 297. Shortly before the date set for the fairness hearing,

28

however, the parties notified the Court that some members of the Settlement Class may not
- 14 -

1

have received notice in accordance with the Court’s scheduling Order. Stipulation, Dkt.

2

325. Thus, at the parties’ request, the Court vacated and reset the fairness hearing and

3

extended the deadlines governing notice and for the submission of claim forms, opt-out

4

requests and objections to the Settlement. 7/6/16 Order, Dkt. 329; see also Wilson Decl.

5

¶ 2-4 & Exs. A & B, Dkt. 350.9

6

As of November 4, 2016, the claims administrator has received 392,191 claims,

7

comprised of 379,720 Basic Claims and 12,448 Alternate Claims submitted electronically,

8

and 23 paper claims by mail. Marr Decl. ¶ 8. Epiq has received a total of 75 opt-outs. Id.

9

¶ 7. In response to Notice of the proposed Settlement, the Court has received a total of 10

10

objections from: (1) Miorelli; (2) Collins Objectors; (3) Tammy Perkins (“Perkins”);

11

(4) Larry A. Guess (“Guess”); (5) Glenn Greene (“Greene”); (6) Paul Leach (“Leach”);

12

(7) Frank Phillips (“Phillips”); (8) Steve Schroeder (“Schroeder”); and (9) Carmen DeBellis

13

(“DeBellis”). Dkt. 292, 293, 294, 303, 315, 317, 333, 337, 338, 339.

14

Miorelli is an out of state attorney and a professional objector. See In re: Target

15

Corp. Customer Data Sec. Breach Litig., No. MDL142522PAMJJK, 2016 WL 4942081, at

16

*1 (D. Minn. Jan. 29, 2016). Collins Objectors are represented by the attorneys who are

17

suing PayPal and eBay in a competing state court class action styled as, Chen v. eBay, Inc.,

18

Alameda Cty. Super. Ct., No RG 15780778. Perkins is represented by attorney Matthew

19

Kurilich, a professional objector. The remaining Objectors submitted pro se objections.10

20
9

Notice to the Settlement Class was effectuated in accordance with the Court’s
preliminary approval order. See Wilson Decl. ¶¶ 2-4, and Exs. A & B. Distribution of the
Class Notice constituted the best notice practicable under the circumstances, and fully
22 satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure and the
requirements of due process.
21

23

10

24
25
26
27
28

Burgess previously filed a pro se objection to Plaintiffs’ motion for preliminary
approval. The Court found that certain of his objections had already been addressed, while
the remaining objections were more appropriately raised in connection with the motion for
final approval. 11/5/15 Order at 9, Dkt. 281. Since he did not renew his objections, the
Court finds Burgess has waived his right to assert any. On October 16, 2016, Melanie
Catanese (“Catanese”) filed an objection, claiming that she did not receive Notice of the
Settlement until after the October 14, 2016 deadline had passed. Dkt. 339. However,
Catanese’s objection is, in fact, not an objection. Rather, she requests leave to file a late
claim. Plaintiffs do not address her request. Finding no opposition, the Court grants
Catanese additional time to file her claim.
- 15 -

1

E.

2

On November 14, 2016, Plaintiffs filed a Motion for Final Approval of Amended

MOTION FOR FINAL APPROVAL AND FEE MOTIONS

3

Class Action Settlement. In their motion, Plaintiffs seek an order (1) conferring final

4

approval of the Settlement Agreement and Amendment to Settlement Agreement, see Dkt.

5

No. 275-2; and (2) confirming certification of the Settlement Class as defined therein. In

6

addition, Plaintiffs’ motion responds to each of the objections to the Settlement.

7

Separately, in their companion Motion for Award of Attorneys’ Fees, and Reimbursement

8

for Costs and Service Awards, Plaintiffs seek payment of: (1) $902,000 in attorneys’ fees;

9

(2) $38,000 in costs; and (3) incentive (service) awards in the amount of $20,000 ($2,500

10

for each of the named plaintiffs in Zepeda). Fernando counsel filed separate fee motions

11

requesting payment of $212,500.

12

The hearing on the aforementioned motions took place on February 7, 2017. Mark

13

Todzo and Jeffrey Leon appeared on behalf of the Zepeda Plaintiffs; David Hicks and

14

Christine Tour-Sarkissian (“Tour-Sarkissian”)—specially appearing for Trubitsky—

15

appeared on behalf of the Fernando Plaintiffs; Julia Strickland and David Moon appeared

16

by telephone for Defendants eBay and Paypal; Anthony Ferrigno appeared for Collins

17

Objectors; and Objector Miorelli appeared pro se. At the conclusion of the hearing, the

18

Court took all matters under advisement.11

19

II.

FINAL APPROVAL

20

A.

21

The Ninth Circuit maintains “a strong judicial policy” that favors class action

22

settlements. Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015). Nonetheless, the Court

23

may finally approve of a class settlement “only after a hearing and on finding that it is fair,

24

reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). To assess the fairness of a settlement,

25

courts are to consider the eight “Churchill factors,” including:

LEGAL STANDARD

26
27
11

28

At the hearing, the parties confirmed that in the event the Court finally approves
the Settlement, both the instant action and Fernando should be dismissed.
- 16 -

1
2
3
4

(1) the strength of the plaintiff’s case; (2) the risk, expense,
complexity, and likely duration of further litigation; (3) the risk
of maintaining class action status throughout the trial; (4) the
amount offered in settlement; (5) the extent of discovery
completed and the stage of the proceedings; (6) the experience
and view of counsel; (7) the presence of a governmental
participant; and (8) the reaction of the class members of the
proposed settlement.

5
6

In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 944 (9th Cir. 2015) (quoting

7

Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)). “Additionally,

8

when (as here) the settlement takes place before formal class certification, settlement

9

approval requires a ‘higher standard of fairness.’” Lane v. Facebook, Inc., 696 F.3d 811,

10

819 (9th Cir. 2012) (citation omitted). The rationale for the heightened standard is to

11

ensure that “class representatives and their counsel have [not] sacrificed the interests of

12

absent class members for their own benefit.” Id.

13

Courts must examine “the settlement taken as a whole, rather than the individual

14

component parts” for fairness. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir.

15

1998). The Court may approve or reject the settlement and cannot “delete, modify or

16

substitute certain provisions” of the settlement. Id. “The proposed settlement is not to be

17

judged against a hypothetical or speculative measure of what might have been achieved by

18

the negotiators.” Officers for Justice v. Civil Serv. Comm’n of San Francisco, 688 F.2d

19

615, 624 (9th Cir. 1982). Rather, “the court’s intrusion upon what is otherwise a private

20

consensual agreement negotiated between the parties to a lawsuit must be limited to the

21

extent necessary to reach a reasoned judgment that the agreement is not the product of

22

fraud or overreaching by, or collusion between, the negotiating parties, and that the

23

settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” Id. To that

24

end, the Court should consider whether there are any objections to the proposed settlement

25

and, if so, the nature of those objections. Ko v. Natura Pet Prod., Inc., No. C 09-02619

26

SBA, 2012 WL 3945541, at *6 (N.D. Cal. Sept. 10, 2012). If objections are filed, the

27

district court is to evaluate whether they suggest serious reasons why the settlement

28

proposal might be unfair. Id.
- 17 -

1

B.

2
3

ANALYSIS OF FACTORS
1.

Strength of Plaintiffs’ Case

The first factor to consider is the strength of Plaintiffs’ case. Such an evaluation

4

entails “objectively” considering “the strengths and weaknesses inherent in the litigation

5

and the impact of those considerations on the parties’ decisions to reach [a settlement].”

6

Adoma v. Univ. of Phoenix, Inc., 913 F. Supp. 2d 964, 975 (E.D. Cal. 2012). In situations

7

where a case is not particularly strong, a settlement is preferable. See In re M.L. Stern

8

Overtime Litig., No. 07CV118 BTM (JMA), 2009 WL 3272872, at *2 (S.D. Cal. Oct. 9,

9

2009) (“the diminished strength of Plaintiff’s case favors settlement approval.”). In

10

assessing the strength of a case, a court need not “reach any ultimate conclusions on the

11

contested issues of fact and law which underlie the merits of the dispute, for it is the very

12

uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that

13

induce consensual settlements.” Officers for Justice, 688 F.2d at 625.

14

Here, the substantive merits of Plaintiffs’ claims appear to be weak. As discussed,

15

the Court previously granted Defendants’ motion to dismiss and dismissed all claims

16

alleged in the FAC. Dkt. 49. Similarly, the claims later asserted by Plaintiffs that have not

17

yet been subject to motion practice, i.e., violation of the Comb settlement and the EFTA,

18

are not likely to fare any better.12 With regard to the Comb settlement, the Court, in its

19

March 25, 2015 Order, pointed out that the Judgment entered in that action specifically

20

retained jurisdiction over any dispute over the enforcement of that settlement, including any

21

claim that PayPal has not fulfilled its obligations under that agreement. Dkt. 264 at 11

22

(citing Comb, Dkt. 309 ¶ 14). As such, the instant action is not the proper vehicle to assert

23

violations of the Comb settlement. Id.

24
25

The Court also questions the likelihood of success on Plaintiffs’ claim that PayPal
violated EFTA’s disclosure and error correction requirements (which is alleged as the Ninth

26
12

As noted, in connection with the original version of the settlement reached in
December 2011, Plaintiffs incorporated the claims from the Fernando action that PayPal’s
28 practices violate the Comb settlement and the EFTA.
27

- 18 -

1

claim for relief in the TAC). The EFTA was enacted “to provide a basic framework

2

establishing the rights, liabilities, and responsibilities of participants in electronic fund and

3

remittance transfer systems.” 15 U.S.C. § 1693(b). But those obligations only apply to a

4

“financial institution”, which PayPal arguably is not.13 C.f., Friedman v. 24 Hour Fitness

5

USA, Inc., 580 F. Supp. 2d 985, 996 (C.D. Cal. 2008) (ruling that an operator of fitness

6

centers that receives credit card payments is not a financial institution and characterizing

7

plaintiffs’ claim as “frivolous”). Moreover, Plaintiffs’ claims appear to be largely

8

predicated upon commercial transactions, which are outside the ambit of the EFTA. See

9

Ironforge.com v. Paychex, Inc., 747 F. Supp. 2d 384, 402 (W.D.N.Y. 2010) (“Accordingly,

10

the EFTA does not apply to accounts that are used primarily or solely for commercial

11

purposes.”) (internal quotations and citation omitted); see also 15 U.S.C. § 1693a(2)

12

(specifying that accounts subject to the EFTA must be “established primarily for personal,

13

family, or household purposes.”). Although the Court need not definitively conclude

14

whether or not Plaintiffs would ultimately prevail on their EFTA claim, it suffices to say

15

that the merits of such claim are, at best, uncertain. See Officers for Justice, 688 F.2d at

16

625.

17
18

In sum, the Court finds that the facial weakness of Plaintiffs’ claims militates in
favor of settlement.

19

2.

20
21

Risk, Expense, Complexity and Likely Duration of Further
Litigation

The strength of the claims alleged (or lack thereof) should be balanced against the

22

risk, expense, and complexity of their case, as well as the likely duration of further

23

litigation. See In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000), as

24

amended (June 19, 2000). Here, Plaintiffs admittedly face substantial risks and are likely to

25

incur significant expense in the event they choose to proceed further with the litigation.

26
13

The EFTA defines a financial institution as a “State or National bank, a State or
Federal savings and loan association, a mutual savings bank, a State or Federal credit
union, or any other person who, directly or indirectly, holds an account belonging to a
28 consumer.” 15 U.S.C. § 1693a(9).
27

- 19 -

1

Absent a settlement, Plaintiffs would be required to seek and obtain an order certifying the

2

class, which may prove difficult in light of the complexity of the claims presented and the

3

number of class members. In addition, the parties would likely be required to engage in

4

significant fact and expert discovery germane to the merits of the claims and damages.

5

Given the tenuousness of Plaintiffs’ claims, coupled with the risk, expense, complexity and

6

the likely extended duration of further litigation, the Court finds that this factor weigh in

7

favor of approving the settlement. See Rodriguez v. W. Publ’g Co., 563 F.3d 948, 966 (9th

8

Cir. 2009) (recognizing that difficulties and risks in litigating weigh in favor of approving a

9

class settlement).

10

3.

The Risk of Maintaining Class Action Status Throughout the Trial

11

The third factor for the Court’s consideration involves evaluating the risk of

12

maintaining class certification if the litigation were to proceed. Plaintiffs have not

13

previously sought to certify the class in this matter – and it is an open question as to

14

whether, absent a settlement, any class would, in fact, be certified in this action.

15

Defendants’ position is that PayPal’s imposition of account holds and reserves results from

16

the operation of its proprietary fraud monitoring program. As a result, each Plaintiff

17

arguably would be required to individually prove that the hold or reserve which PayPal

18

placed on his or her account was not justified based on activities which were in

19

contravention of the terms of service. Comcast Corp. v. Behrend, – U.S. –, –, 133 S.Ct.

20

1426, 1433 (2013); see also Sweet v. Pfizer, 232 F.R.D. 360, 365 (C.D. Cal. 2005)

21

(denying class certification based on allegations that the drug manufacturer inadequately

22

warned consumers about the side-effects based on lack of typicality and the presence of too

23

many individualized issues). Individualized proof would also be necessitated by the fact

24

that different Plaintiffs may be affected differently, depending on the Terms of Service then

25

in effect. While Plaintiffs claim they have responses to these arguments, there is no

26

question that maintaining this case as a class action through trial would be highly uncertain.

27

The grant or denial of class certification would result in interlocutory appeals, and involve

28

the expenditure of significant time and expense. In contrast, a settlement delivers certain
- 20 -

1

and concrete benefits now – on a cla
d
b
w
asswide basi – withou the necess of prov
is
ut
sity
ving and

2

mai
intaining a certified cla
ass. See, e. Noll v. eBay, 309 F
.g.,
F.R.D. 593, 606-607 (N Cal.
N.D.

3

201
15).

4
5
6

4.
4

The Amount Offered in S
O
Settlement
a)

Sufficien of Mon
ncy
netary Relief
ef

The Set
ttlement pro
ovides for in
njunctive re
elief to addr the Pay
dress
yPal practic
ces

7

und
derlying this action alo with a $3,200,000 settlement fund, of wh at least
s
ong
$
hich
t

8

$1,840,000 will be availa to pay the Basic C
able
t
Claims of Cl
laims Class members w
whose

9

accounts were subject to holds or res
h
serves and l interest income. T Settlem
lost
t
The
ment, as

10

ame
ended, also creates a se
eparate fun of $800,0 for Alte
nd
000
ernate Claim from wh class
ms
hich

11

mem
mbers can pursue spec
p
cific, individ claims for damag to their b
dual
s
ges
businesses u
upon

12

presentation of proper doc
f
cumentation.

13

Miorell and Collin Objector argue tha the Settlem provid insuffic
li
ns
rs
at
ment
des
cient

14

mon
netary relie Howeve “[i]t is well-settled l that a c
ef.
er,
w
law
cash settlem amount
ment
ting to only
y

15

a fr
raction of th potential recovery does not per se render t settleme inadequ or
he
d
r
the
ent
uate

16

unf
fair.” Officers for Justi 688 F.2 at 628. R
ice,
2d
Rather, cou evaluati the amo
urts
ing
ount offered
d

17

in settlement for fairness must consid the settl
s
f
der
lement as a “complete package ta
e
aken as a

18

who rather than the ind
ole,
t
dividual com
mponent par
arts[.]” Id. a 628. In t instant c
at
the
case, the

19

part
ties’ matrix for claims payments is based on a reasonab assessme of the ti value
x
i
n
ble
ent
ime

20

of funds tempo
f
orarily placed on hold— it takes into accou the amo
—as
unt
ount involve as well
ed

21

as the duration of the hold See McC
t
n
d.
Cabe Decl. ¶¶ 2-6. Th Court fin that the approach
he
nds

22

und
dertaken by the parties in negotiat
ting the mon
netary com
mponent of th Settleme coupled
he
ent,
d

23

with the injunc
h
ctive relief provided, is fair, reaso
p
s
onable and a
adequate.

24

Separat
tely, Miorel faults Pla
lli
aintiffs for n calculat
not
ting the ma
aximum potential

25

reco
overy on th claims or taking in account Defendants exposure to punitive damages.
heir
o
nto
s’
e

26

Sett
ting aside Miorelli’s fa
M
ailure to cite any relevant decision authorit to suppor his
nal
ty
rt

27

pos
sition, he ign
nores that “the very es
“
ssence of a s
settlement i comprom
is
mise, ‘a yiel
lding of

28

absolutes and an abandon
a
ning of high hopes.’” Officers for Justice, 688 F.2d 6
hest
,
625
- 21 -

1

(citations omitted). It is for that very reason that the Ninth Circuit has rejected Miorelli’s

2

argument. Rodriguez, 563 F.3d at 965 (“We are not persuaded otherwise by Objectors’

3

further submission that the court should have specifically weighed the merits of the class’s

4

case against the settlement amount and quantified the expected value of fully litigating the

5

matter.”); accord Koumoulis v. LPL Fin. Corp., No. 09CV1973-DMS BLM, 2010 WL

6

4868044, at *2 (S.D. Cal. Nov. 19, 2010) (“Although Class Counsel did not indicate what

7

the maximum potentially recoverable amount would be if the instant case was to proceed to

8

trial, the Court is able to assess the reasonableness of the amount offered in settlement

9

without such a comparison point.”). Miorelli’s ancillary contention that Plaintiffs should

10

have taken into account Defendants’ potential exposure to punitive damages has likewise

11

been rejected by this Circuit. See Rodriguez, 563 F.3d at 965.

12

Miorelli next complains that the Basic Claims payment matrix “only looks at the

13

longest hold, not the cumulative sum of moneys held and days held.” Dkt. 333 at 8. The

14

parties structured the payouts on a per hold basis based on the core allegation by Plaintiffs

15

that PayPal does not disclose its hold policy. Dkt. 340 at 23. In other words, after

16

experiencing a first hold, the user would be aware of PayPal’s policy. As such, the parties

17

concluded that a user should not be able to recover for more than one hold. Id. In any

18

event, the mere possibility that the claims matrix could have been structured differently or

19

better does not demonstrate that the Settlement is not fair, reasonable or adequate. See

20

Linney, 151 F.3d at 1242 (noting that fairness of a proposed settlement “is not to be judged

21

against a hypothetical or speculative measure of what might have been achieved by the

22

negotiators.”); In re TD Ameritrade Account Holder Litig., No. C 07-2852 SBA, 2011 WL

23

4079226, at *9 (N.D. Cal. Sept. 13, 2011) (“The fundamental flaw in Mr. Elvey’s argument

24

is that it ignores that the Settlement is a compromise, which balances the possible recovery

25

against the risks inherent in litigating further. The possibility that the Settlement does not

26

provide for a payout to every conceivable accountholder who in some way may have been

27

affected by the data breach does not establish that the Settlement is unfair or

28

unreasonable.”). In any event, even if Miorelli’s criticisms of the Settlement had merit—
- 22 -

1

whi they cle
ich
early do not
t—they fail to account for the wea
akness of P
Plaintiffs’ cl
laims and

2

the risk of mai
intaining this litigation going forw
n
ward. See O
Officers for Justice, 68 F.2d at
r
88

3

628
8.

4

Finally, Collins Ob
,
bjectors ass that the monetary c
sert
component of the Settl
lement is

5

insu
ufficient to cover all po
otential clas claims. I particula they posi that a sett
ss
In
ar,
it
tlement

6

fun of $243 million wou be neces
nd
m
uld
ssary to pay each of th 81 million class mem
y
he
n
mbers’

7

clai of $3. The flaw in this argume is that it ignores th approxim
im
T
ent
t
hat
mately 90 percent of

8

the Settlement Class mem
t
mbers are no Claims C
ot
Class memb and ther
bers
refore are n entitled
not

9

to submit a cla for dam
s
aim
mages (and are thus sub
a
bject to a su
ubstantially narrower release of

10

clai
ims). More
eover, the parties calcu
ulated the am
mount nece
essary for th Settlement Fund by
he

11

taki into acc
ing
count the un
niverse of accounts tha were subj to a res
a
at
ject
serve or hol during
ld

12

the relevant tim period. Plaintiffs’ retained ex
me
xpert analyz those ac
zed
ccounts and
d

13

dete
ermined tha the aggre
at
egate amoun of interes on all hol was app
nt
st
lds
proximately $3
y

14

million—not $243 million as specula by Col
$
n
ated
llins Object
tors. See M
McCabe Dec ¶ 6.
cl.

15

As an ancillary ma
a
atter, Collin Objectors argue that the Class C
ns
s
t
Counsel int
tentionally

16

set the claim value at $3 in the hopes that such a ostensib small am
v
i
s
an
bly
mount would
d

17

disc
courage cla members from subm
ass
s
mitting claim No evi
ms.
idence has b
been presen to
nted

18

sup
pport this as
ssertion. In addition, Class Couns explaine at oral ar
C
sel
ed
rgument tha the base
at

19

figu was inte
ure
ended to inc
crease the number of c
n
claims. Bas on Plain
sed
ntiffs’ expe
ert’s

20

calc
culations, th actual “loss” of inte
he
erest for eac hold is ar
ch
round $0.03 Since it was
3.

21

unlikely that any class me
ember woul file a clai for such a negligible amount, they
ld
im
h

22

dec
cided to incr
rease the minimum pay
m
yout to $3.0 with the goal of en
00,
e
ncouraging m
more

23

clai
ims. Indeed Collins Objectors’ speculation regarding C
d,
O
s
Class Counsel’s intent to dissuade
e

24

the filing of claims is beli by the fact that clo se to 400,00 claims h
ied
f
00
have been fi by
iled

25

Cla
aims Class members. Marr Decl. ¶ 8.
m
M

26
27
28

b)

Sufficien of Injun
ncy
nctive Relie
ef

With re
egard to the injunctive relief afford under t Settleme Miorelli asserts
ded
the
ent,
that it is “illuso
t
ory” becaus PayPal im
se
mplemented the chang to its bu
d
ges
usiness prac
ctices before
e
- 23 -

1

it was legally required to do so. Dkt. 333 at 10-11. However, PayPal implemented those

2

changes as a direct result of the tentative settlement reached with Plaintiffs. That PayPal

3

implemented those changes prior to final approval of the Settlement is, in fact, an additional

4

benefit to the Settlement Class members, and does not suggest any deficiency in the relief

5

afforded under the Settlement. Moreover, the Settlement will make the injunctive relief

6

both binding and enforceable, ensuring that Defendants maintain such practices until two

7

years following the date of the Preliminary Approval Order. Dkt. 275-2, p. 59, § 4.2; 281.

8

In the absence of the Settlement, Defendants would be free to cease providing such relief to

9

its users.

10

During oral argument, Miorelli cited the Ninth Circuit’s recent decision in Koby v.

11

ARS National Services, Inc., No. 13-56964, 2017 WL 359670 (9th Cir. Jan. 25, 2017) for

12

the proposition that injunctive relief voluntarily provided to the class by a defendant is not

13

considered of “value” to the Class. Koby is distinguishable. In that case, the defendant

14

voluntarily changed its voicemail message over a year before the parties settled their

15

dispute. On appeal, the Ninth Circuit held that because such a change was not made

16

“because of any court- or settlement-imposed obligation,” noting that “[t]he injunction does

17

not obligate [defendant] to do anything it was not already doing.” Id. at *6. In contrast, the

18

injunctive relief afforded in this action was formulated “because of” the settlement

19

agreement reached by the parties. The fact that Defendants opted to implement the changes

20

prior to the Court’s preliminary or final approval of the Settlement does not alter the fact

21

that the Settlement itself was the catalyst for the change.

22

Collins Objectors claim that the Settlement is meaningless because it does not

23

prohibit PayPal from imposing holds or reserves or require PayPal to disclose the reason

24

that a hold has been imposed. Dkt. 316 at 18-19. The stated purpose of PayPal’s

25

hold/reserve policy is to protect buyers and sellers in instances where there may be

26

fraudulent practices or other improprieties involved in the transaction. Aside from their

27

opinion that such a practice should be prohibited, Collins Objectors provide no legal

28

analysis or authority to support their assertion. But even if they had done so, the mere fact
- 24 -

1

that the Settlement does not eliminate PayPal’s hold/reserve practice or compel PayPal to

2

explain the reason for a hold does not ipso facto demonstrate that the Settlement,

3

particularly the provisions for injunctive relief, are not fair, reasonable or adequate.

4

5.

Stage of the Proceedings

5

The stage of the proceedings, including the amount of discovery completed, is

6

germane to the fairness, reasonableness, and adequacy of a settlement. See In re Mego, 213

7

F.3d at 459. Although this case has been pending for an extended period of time, no formal

8

discovery has been conducted due to the parties’ protracted efforts to reach a settlement.

9

Nonetheless, the parties informally exchanged information and documents in connection

10
11

with the three prior mediations conducted in this action.
Collins Objectors contend that the lack of discovery weighs against approving the

12

Settlement. The Court disagrees. “In the context of class action settlements, ‘formal

13

discovery is not a necessary ticket to the bargaining table’ where the parties have sufficient

14

information to make an informed decision about settlement.” Linney v. Cellular Alaska

15

P’ship, 151 F.3d 1234, 1239 (9th Cir. 1998) (citation omitted). As discussed, the record

16

shows that the parties informally exchanged information, and there is no evidence to

17

suggest that Plaintiffs were inadequately prepared for the mediations or settlement

18

discussions. In addition, based on the numerous briefs that have been filed in this action,

19

the Court is persuaded that “[Plaintiffs’] counsel had a good grasp on the merits of their

20

case before settlement talks began.” Rodriguez, 563 F.3d at 967.14 This factor therefore

21

weighs in favor of the Settlement.

22

6.

The Experience and Views of Class Counsel Support Approval

23

In considering the adequacy of the terms of a settlement, the trial court considers the

24

judgment of experienced counsel for the parties. See In re Omnivision Techs., Inc., 559 F.

25

Supp. 2d 1036, 1043 (N.D. Cal. 2008) (“The recommendations of plaintiffs’ counsel should

26
14

Moreover, since the challenges facing Plaintiffs’ claims are primarily legal in
nature, it is unlikely that bearing the burden and expense of engaging in discovery would
28 have impacted the Settlement.
27

- 25 -

1

be given a presumption of reasonableness.”) (internal citation and quotation marks

2

omitted). This reliance is predicated on the fact that “[p]arties represented by competent

3

counsel are better positioned than courts to produce a settlement that fairly reflects each

4

party's expected outcome in the litigation.” In re Pac. Enters. Sec. Litig., 47 F.3d 373, 378

5

(9th Cir. 1995).

6

Class Counsel—Lexington Law Group and Quantum Legal LLC—opine that in light

7

of the risks associated with further prosecution of the action, the Settlement constitutes a

8

reasonable recovery that confers a substantial benefit on Settlement Class members. Given

9

that Class Counsel have significant experience prosecuting class actions and handling

10
11

complex litigation, the Court accords weight to their opinion.
Collins Objectors assert that Class Counsel could not have vigorously represented

12

the Class, since this action has involved little motion practice or discovery.15 But it is

13

incorrect and naive to equate vigorous representation with the number of motions filed in

14

an action. Although it is true that the action involved one motion to dismiss, Judge Fogel

15

made it abundantly clear in his ruling that the claims alleged in this case—and the basic

16

premise underlying them—were unlikely to succeed. In view of the Court’s patent

17

skepticism of the action, it would have been far from prudent to invest significant resources

18

in discovery, when it was apparent that the challenges facing Plaintiffs were legal in nature.

19

It was for that reason that Class Counsel sagely decided to focus their time and effort on

20

reaching a settlement with Defendants. That aside, Collins Objectors completely ignore

21

that Class Counsel’s prosecution of this action has resulted in numerous substantive rulings

22
23
15

24
25
26
27
28

Much of Collins Objectors’ challenge to the adequacy of the Settlement is
predicated on the notion that the claims alleged in Chen—a class action lawsuit their
attorneys are prosecuting in state court—are superior to those alleged in this action. That
argument misses the mark. For purposes of Rule 23(e), the task facing this Court is to
evaluate whether the Settlement is fair, reasonable and adequate. Thus, whether or not the
causes of action alleged in Chen are superior or whether the plaintiffs’ counsel in that case
are doing a better job simply is not germane to the Court’s analysis. That aside, the Court
questions the veracity of Collins Objectors’ claim, given that they failed to disclose that on
January 17, 2017, the state superior court granted eBay’s demurrer to Collins’ First
Amended Complaint, dismissing all claims. Pls.’ Req. for Jud. Notice, Ex. 1, Dkt. 349-1.
- 26 -

1

by the Court. The suggestion made by Collins Objectors that Class Counsel have not

2

adequately represented the Class is wholly without merit.

3

Equally misplaced is Collins Objectors’ reliance on Campbell v. eBay, Inc., et al.,

4

No. C 13-2632 HSG, a putative class action filed against PayPal and eBay by the same

5

counsel representing the plaintiffs in the Chen action. The pleadings in that action sought

6

to challenge various business practices engaged in by the defendants, including the

7

allegedly unnecessary and arbitrary placement of holds and reserves on funds of its users.

8

Collins Objectors’ point to Judge Gonzales-Rogers’ August 14, 2014, ruling on the

9

defendants’ motion to dismiss the Third Amended Complaint. Campbell, Dkt. 66. In

10

particular, they attempt to make much of the Court’s finding that “Plaintiff’s allegations

11

concerning holds on funds implemented in an arbitrary manner is sufficient to state a claim

12

[for breach of fiduciary duty].” Id. at 5-6.

13

Collins Objectors assert that the fact that their breach of fiduciary claim survived

14

dismissal in the Campbell action, while Class Counsel’s similar claim in this action was

15

dismissed, illustrates the “legal malpractice” of Class Counsel. Dkt. 345 at 10. This

16

contention has no merit. Judge Fogel rejected Plaintiffs’ breach of fiduciary claim on the

17

ground that the conduct on which said claim was predicated was permitted under the User

18

Agreement. This Court agrees with that assessment. The fact that another judge in a

19

different action may have reached a different conclusion while addressing a similar issue,

20

without more, is not probative of Class Counsel’s competence. In any event, Collins

21

Objectors fail to disclose that the judge in Campbell granted the defendants’ motion to

22

dismiss under Rule 41(b), based on the fact that over the two and one-half year period the

23

case was pending, the plaintiff completely failed to respond to discovery requests, failed to

24

serve her Rule 26(a)(1) initial disclosures, failed to make herself available for deposition,

25

and failed to appear at a scheduled case management conference. Id., Dkt. 121, 139. In

26

view of such conduct, Collins Objectors complaints regarding Class Counsel ring hollow.

27

Accordingly, this factor weighs in favor of approving the Settlement.

28
- 27 -

1
2
3
4
5

7.

The Presence of a Government Participant

No governmental entity participated in this matter; this factor, therefore, is irrelevant
to the Court’s analysis.
8.

The Reaction of Class Members

The Ninth Circuit has held that the number of class members who object to a

6

proposed settlement is a factor to be considered. Mandujano v. Basic Vegetable Prods.

7

Inc., 541 F.2d 832, 837 (9th Cir. 1976). Here, email notice was served on approximately

8

100 million PayPal customers, including approximately 10.5 million Claims Class

9

members. See Wilson Decl. ¶¶ 2-4. In response, close to 400,000 claims have been filed.

10

Marr Decl. ¶ 8. Yet, only eleven class members filed objections and 75 have opted out. Id.

11

These numbers indicate that the notice process has been remarkably successful—and the

12

Settlement Class’s reaction to the Settlement has been overwhelmingly positive. Given the

13

relatively small number of objections and opt-outs, the Court finds that the reaction of the

14

class to the settlement is positive, which favors approving the Settlement. See Rodriguez,

15

563 F.3d at 967 (“The court had discretion to find a favorable reaction to the settlement

16

among class members given that, of 376,301 putative class members to whom notice of the

17

settlement had been sent, 52,000 submitted claims forms and only fifty-four submitted

18

objections.”); In re AT & T Mobility Wireless Data Servs. Sales Tax Litig., 789 F. Supp. 2d

19

935, 965 (N.D. Ill. 2011) (finding that approval of settlement was warranted where “[o]nly

20

235 out of over 32 million Class Members have opted out, which is less than 0.01%,” and

21

where “Class Members … filed only 10 objections with specific arguments,” which was “a

22

remarkably low level of opposition….”).

23

Collins Objectors dispute that the reaction of the Settlement Class has been positive.

24

Dkt. 345 at 4. They point out that only 2.8% of Claims Class members submitted a claim,

25

which they insist shows that the Settlement was not well-received by class members. Id.

26

However, the indisputably low number of objections and opt-outs, standing alone, presents

27

a sufficient basis upon which a court may conclude that the reaction to settlement by the

28

class has been favorable. E.g., Churchill Vill., 361 F.3d at 577 (holding that the district
- 28 -

1

court properly weighed the reactions of members of the proposed settlement class by taking

2

into account that there were 45 objections and 500 opt-outs in relation to the approximately

3

90,000 notified class members). Even so, taking into account the response rate, the Court

4

finds that, on balance, the reaction of the Settlement Class is favorable. E.g., Moore v.

5

Verizon Commc’ns Inc., No. C 09-1823 SBA, 2013 WL 4610764, at *8 (N.D. Cal. Aug.

6

28, 2013) (approving class action settlement with 3% claim rate).

7

9.

Whether the Settlement Was the Product of Collusion

8

Because the parties negotiated and reached a settlement prior to formal certification

9

of the class, the Court has a heightened responsibility to ensure that the settlement was not

10

the product of collusion. In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 947-48

11

(9th Cir. 2011). Here, each version of the Settlement, including the final version of the

12

Settlement, as amended, resulted from negotiations overseen by independent and

13

experienced mediators—two of whom are former judges. This fact weighs in favor of a

14

finding of non-collusion. See id. at 948 (holding that the use of a “neutral mediator” is “a

15

factor weighing in favor of a finding of non-collusiveness”).

16

Miorelli argues that the parties’ collusiveness is demonstrated by the fact that the

17

Court failed to preliminarily approve the two prior settlement proposals. Dkt. 333 at 10.

18

Nonsense. The mere fact that the Court found deficiencies in the prior settlement proposals

19

is not probative of whether the parties engaged in collusive behavior in connection with the

20

prior or instant Settlement. To the contrary, the fact that the parties revised the settlement

21

in a manner that adequately addressed the Court’s concerns with respect to the prior

22

settlement proposal suggests the opposite. The Court therefore rejects Miorelli’s

23

unsupported assertion that the Settlement was the product of collusion between the parties.

24

//

25

//

26

//

27

//

28

//
- 29 -

1
2
3
4

10.

On balance, the Court concludes that the relevant Churchill factors weigh in favor of
a finding that the settlement is fair, reasonable and adequate.16
C.

5
6

Conclusion

OBJECTIONS
1.

Miorelli

Miorelli contends that: (1) the Settlement’s monetary relief is inadequate; (2) the

7

Settlement is the result of “collusion” between Class Counsel and Defendants; (3) the

8

Settlement’s injunctive relief is “illusory”; and (4) the attorneys’ fees sought by Class

9

Counsel are improperly calculated. Dkt. 33. The first three objections have been addressed

10

in the Court’s analysis of the Churchill factors, while the fourth objection will be addressed

11

in the section below pertaining to the motions for attorneys’ fees. For the reasons stated in

12

each of those sections, Miorelli’s objections to the Settlement are OVERRULED.

13

2.

Collins Objectors

14

Collins Objectors contend that: (1) the Settlement does not provide sufficient relief

15

to the Class; (2) certification of an injunctive relief class and claims class is improper; and

16

(3) Class Counsel are inadequate because no formal discovery was conducted.17 Dkt. 316.

17

The first and third objections are discussed above in the context of the Churchill factors,

18

while the second objection is discussed below. For the reasons stated in each of those

19

sections, all objections are OVERRULED.

20
16

No objections have been interposed regarding the designation of EFF as the cy
pres recipient, and the Court finds that EFF satisfies the requirements for approval set forth
in Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012) (holding that there must be “a
22 driving nexus between the plaintiff class and the cy pres beneficiaries” and that the cy pres
award must be “guided by (1) the objectives of the underlying statute(s) and (2) the
23 interests of the silent class members,... and must not benefit a group too remote from the
plaintiff class”).
21

24

17

On January 27, 2017, Collins Objectors filed a “Reply to the Opposition of Class
Counsel to the Objections of Class Members Walley Collins and Lucindia Christian to
Settlement Agreement Pending Final Approval in this Court.” Dkt. 345. That brief is not
26 authorized under the scheduling order governing Plaintiffs’ motion for final approval. Dkt.
329. To the extent that Collins Objectors believed they were permitted to respond to
27 Plaintiffs’ “motion,” such a response would have been due long ago on November 28,
2016. Civ. L.R. 7-3(a). Notwithstanding this flagrant violation, the Court, in the interest of
28 expediting resolution of the instant motions, will consider Collins Objectors’ reply.
25

- 30 -

1

Collins Objectors argue that the SAC seeks monetary relief that is not incidental to

2

the requested injunctive relief such that certification of a Rule 23(b)(2) injunctive relief

3

class was inappropriate. Dkt. 316 at 22-23. Claims for monetary relief may not be certified

4

under (b)(2) where “the monetary relief is not incidental to the injunctive or declaratory

5

relief.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 360 (2011). The error in this

6

argument is that it neglects to consider that the Court may properly certify Plaintiffs claim

7

for injunctive relief under (b)(2) and their claim for monetary relief under (b)(3). See Ebert

8

v. Gen. Mills, Inc., 823 F.3d 472, 480 (8th Cir. 2016) (“The use of ... hybrid certification,

9

insulating the (b)(2) class from the money-damages portion of the case, is an available

10

approach that is gaining ground in class action suits.”); Eubanks v. Billington, 110 F.3d 87,

11

96 (D.C. Cir. 1997) (noting that when a “(b)(2) class seeks monetary and injunctive relief,”

12

the court can certify “a (b)(2) class as to the claims for declaratory or injunctive relief, and

13

a (b)(3) class as to the claims for monetary relief”); Ellis v. Costco Wholesale Corp., 285

14

F.R.D. 492, 535-544 (N.D. Cal. 2012) (certifying injunctive relief class under 23(b)(2) and

15

monetary relief class under 23(b)(3)).

16

Collins Objectors’ reliance on Linney v. Cellular Alaska Partnership, 151 F.3d 1234,

17

1240 (9th Cir. 2003), is misplaced. In that case, a single class, which included both claims

18

for monetary relief and claims for injunctive relief, was certified under Rule 23(b)(2) on a

19

non-opt out basis. In cases where both monetary and injunctive claims are certified on a

20

non-opt out basis under Rule 23(b)(2), the court held that due process proscribes the case

21

from being “wholly or predominately for money judgments.” Id. In contrast, here, there

22

are no due process concerns because, unlike Linney, class members with claims for

23

monetary relief have been given an opportunity to opt out of the Claims Class.

24

Accordingly, the Court finds no merit to Collins Objectors’ concerns regarding the Court’s

25

certification of a Settlement Class.

26
27
28

3.

Perkins

Perkins argues that the Settlement should be rejected because: (1) the release
improperly includes parens patriae claims; (2) the definitions of the classes in the
- 31 -

1

Sett
tlement do not specific
cally exclud Defendan and (3) the attorne fees so
de
ants;
)
eys’
ought are

2

too high. Dkt. 317. The first two ob
.
bjections are discussed below, wh the third objection
e
d
hile
d

3

is addressed in the section pertaining to the mot
a
n
n
g
tions for att
torneys’ fee For the reasons
es.

4

stat in each of those sec
ted
ctions, Perk objectio to the S
kins
ons
Settlement a OVERR
are
RULED.

5
6

a)

Parens Patriae Claims
P

Under the parens patriae doct
t
p
trine, the St may bri an actio to protect its “quasitate
ing
on
-

7

sov
vereign inter in the health and well-being-b
rest
h
w
both physic and econ
cal
nomic-of its residents
s

8

in general.” Alfred L. Sn
g
A
napp & Son, Inc. v. Pue Rico, e rel., Bare 458 U.S. 592, 607
erto
ex
ez,

9

(1982) (interna quotation and citati omitted For purp
al
ns
ion
d).
poses of sta
anding to br
ring a

10

parens patriae claim, the State must meet the requirements for Article III standin and
S
m
s
e
ng

11

“art
ticulate an interest apa from the interests of particular private par
i
art
f
rties, i.e., th State
he

12

must be more than a nom
t
minal party.” Id.
”

13

Perkins contends th the Sett
s
hat
tlement rele
ease is unfa to Settlem Class members to
air
ment
o

14

the extent it releases paren patriae claims held by the Stat Dkt. 317 at 2.18 Ho
ns
c
te.
7
owever, the

15

Sett
tlement doe not requi the State to release any parens patriae claims—nor w
es
ire
e
would such

16

an interpretatio of the Se
i
on
ettlement make any log
m
gical sense. The only claims bein released
.
ng

17

are those held by class me
embers. Se In re Am Inv’rs Lif Ins. Co. A
ee
m.
fe
Annuity Mk & Sales
ktg.
s

18

Pra
actices Litig 263 F.R.D 226, 241 (E.D. Pa. 2009). Sin class me
g.,
D.
1
nce
embers do n possess
not

19

the State’s par
rens patriae powers, it is axiomatic that they cannot rele
i
c
ease such claims.

20

Rat
ther, the Set
ttlement on specifies that class m
nly
s
members re
elease their individual claims,

21

whi includes their right to recover in a subseq
ich
s
t
r
quent paren patriae ac
ns
ction if one is brought

22

by the State. The Court th
t
T
herefore rej
jects Perkin contenti that the release is im
ns’
ion
mproper.

23
24
25

b)

Exclusio of Defen
on
ndants

Perkins next comp
s
plains that th Settleme is “unfai and unrea
he
ent
ir
asonable” b not
by
precluding Defendants or their representatives f
r
from submi
itting a claim under the
m
e

26
18

The Settlement defines “Re
S
d
eleased Clai
ims” as including claim that hav been “or
ms
ve
cou be assert in any individual, class, privat attorney general, rep
uld
ted
c
ate
presentative parens
e,
28 patr
riae or any other capac ….” Se
city
ettlement § 1.29.
27

- 32 -

1

Settlement. Dkt. 317 at 3. Since Defendants are funding the Settlement, it is unlikely that

2

either of them will submit a claim. As for Defendants’ representative and employees,

3

Perkins cites no authority or reasoned argument demonstrating why the failure to exclude

4

them renders the Settlement unfair.

5
6

4.

Guess

Guess, acting pro se, states that a hold was placed on his account after the close of

7

the Claims Class Period on November 5, 2015. Dkt. No. 292. He contends that the Claims

8

Class should not be limited to any particular time period and should instead include all

9

PayPal members who at any time in the past or the future had or have a hold or reserve

10

placed on their accounts. Id. Since the hold Guess complains of was imposed outside the

11

Class Period, he is not a member of the Claims Class and has no standing to object. See In

12

re Equity Funding Corp. of Am. Sec. Litig., 603 F.2d 1353, 1360-61 (9th Cir. 1979) (an

13

objector who is not a class member “lacks standing to object”).

14

Standing issues aside, the substance of Guess’ objection lacks merit. The Court has

15

previously determined that the Class Period is appropriately tailored to the scope of

16

Plaintiffs’ claims in the Third Amended Complaint, which are constrained by the four-year

17

statute of limitations running from the filing of the Fernando action on April 19, 2010. Dkt.

18

No. 281. Moreover, terminating the Claims Class period on the date of the Court’s

19

preliminary approval order is reasonable and necessary in order to allow the claims

20

administration process to take place prior to final approval. The Class Period simply cannot

21

extend indefinitely into the future.19 Guess’s objections to the Settlement are

22

OVERRULED.

23

5.

Other Objections

24

Objectors Greene, Phillips, Leach, Schroeder and DeBellis submitted pro se

25

objections to the Settlement. Dkt. 293, 294, 303, 317, 337, 338, 339. Their objections are

26
19

Guess should be aware that because he is not covered by the Settlement, he
likewise is not releasing any claims thereunder and has the option of seeking relief based on
28 the hold. See Settlement Agt ¶¶ 1.29 & 7.1.
27

- 33 -

1

entirely conclusory and lack citations to legal authority or evidence. They also fail to

2

identify any specific flaws in the Settlement that render it unfair, inadequate or

3

unreasonable.

4

Greene and Phillips do not address any particular term in the Settlement, and instead

5

appear to assert more generalized grievances with PayPal and/or class action litigation.

6

Dkt. 303, 337.

7

Phillips likewise fails to identify any particular issue regarding the Settlement, but

8

instead appears to question whether a hold was placed on his PayPal account. Dkt. No.

9

315.

10

Schroeder and DeBellis express frustration with holds that were allegedly placed on

11

their PayPal accounts, and make vague complaints that the relief provided by the

12

Settlement is insufficient. Dkt. 294, 315. However, both fail to identify any specific reason

13

they believe the Settlement’s terms do not adequately compensate class members,

14

especially considering the significant risk they would receive nothing if the case went to

15

trial.

16

The objections filed by Greene, Phillips, Leach, Schroeder and DeBellis are

17

OVERRULED.

18

D.

19

In its Order Granting Plaintiffs’ Motion for Preliminary Approval of Amended Class

CERTIFICATION OF SETTLEMENT CLASS

20

Action Settlement Agreement, Dkt. 281, the Court carefully considered whether Plaintiffs

21

satisfied the Rule 23(a) and (b)(2) and (3) requirements. Dkt. 281 at 9-14. “Because the

22

Settlement Class has not changed, the Court sees no reason to revisit the analysis of Rule

23

23.” G. F. v. Contra Costa Cty., No. 13-CV-03667-MEJ, 2015 WL 7571789, at *11 (N.D.

24

Cal. Nov. 25, 2015) (N.D. Cal. Nov. 25, 2015) (internal quotation marks and citation

25

omitted).

26

//

27

//

28

//
- 34 -

1

III.

ATTORNEYS’ FEES, COSTS AND SERVICE AWARDS

2

A.

3

The Settlement authorizes Class Counsel to request an award of attorneys’ fees,

BACKGROUND

4

costs and service awards (also referred to as “incentive awards”) for each of the eight

5

named plaintiffs in Zepeda “in an amount of up to 30% of the Settlement Fund … with all

6

amounts paid exclusively from the Settlement Fund.” Settlement Agt. §§ 6.1, 1.34. Based

7

on a Settlement Fund of $3,200,000, the maximum amount that can be awarded for

8

attorneys’ fees, costs and incentive awards collectively is $960,000. The Settlement also

9

authorizes plaintiffs’ counsel in the Fernando action (namely Trubitsky and local counsel

10

Hicks) to file separate fee and cost applications for an aggregate amount of up to $212,500.

11

Id.20 Any sums awarded to the Fernando counsel are to be “paid out of the total award of

12

fees and costs awarded to Class Counsel.” Id. The Settlement specifies that the amount of

13

fees, costs and incentive awards is at the discretion of the Court “and the amount of any

14

award is not a condition of [the] Settlement.” Id. § 6.2.

15

A total of three fee applications have been submitted for the Court’s consideration.

16

Dkt. 295, 296, 297. Class Counsel seeks payment of $902,000 in attorneys’ fees, costs in

17

the amount of $38,463.29, and incentive (service) awards totaling $20,000 ($2,500 for each

18

of the named plaintiffs in Zepeda) for a grand total of $960,000—the maximum amount

19

that can be awarded under the Settlement. See Settlement Agt. § 6.1. Trubitsky, ostensibly

20

on behalf of herself and Hicks, seeks recovery of $212,500 in attorneys’ fees, also the

21

maximum amount permitted under the Settlement. See id.21 Due to his acrimonious

22
20

The original global settlement reached in December 2011 specified that
Defendants would contribute an additional $425,000 to the Settlement Fund established in
the May 2011 settlement in Zepeda. Hicks Decl. Ex. D, Dkt. 295-2 at 18. The settlement
24 term sheet also indicated that Fernando counsel could seek recovery of up to 50% of the
additional settlement (i.e., $212,500). Id. at 19. Due to Trubitsky’s refusal to honor the
25 December 2011 settlement, it was never reduced to a formal settlement agreement.
23

26

21

At the hearing on the instant motions, Hicks stated that Trubitsky filed her fee
motion with his name on the caption without his prior knowledge or consent. See also
27 Hicks Decl. ¶ 14 (“The Court may not be aware that on occasion [Trubitsky] filed
documents bearing my name without my advance knowledge, review and consent, though
28 that was clearly by agreement to serve as local counsel.”)
- 35 -

1

relationship with Trubitsky, Hicks filed a separate fee application. The Court analyzes

2

these requests below, beginning first with Class Counsel’s request for an incentive award

3

for each of the eight Class Representatives in the Zepeda action.

4

B.

5

“Incentive awards are fairly typical in class action cases,” Rodriquez, 563 F.3d at

INCENTIVE AWARDS

6

958-59, but the decision to approve and the amount of such awards are matters within the

7

court’s discretion, Mego, 213 F.3d at 463. Generally speaking, incentive awards are meant

8

to “compensate class representatives for work done on behalf of the class, to make up for

9

financial or reputational risk undertaken in bringing the action, and, sometimes to recognize

10

their willingness to act as a private attorney general.” Rodriquez, 564 F.3d at 958-59. In

11

assessing an incentive award request, the court must consider “the actions the plaintiff has

12

taken to protect the interests of the class, the degree to which the class has benefitted from

13

those actions ... [and] the amount of time and effort the plaintiff expended in pursuing the

14

litigation.” Staton v. Boeing Co., 327 F.3d 928, 977 (9th Cir. 2003). The Ninth Circuit has

15

emphasized that “district courts must be vigilant in scrutinizing all incentive awards.”

16

Radcliffe v. Experian Info. Solutions, Inc., 715 F.3d 1157, 1165 (9th Cir. 2013) (internal

17

quotation marks and citation omitted).

18

Plaintiffs seek an incentive award in the amount of $2,500 for each of the eight

19

named Class Representatives. Although the Court, in its Order granting preliminary

20

approval of the Settlement, specifically instructed Plaintiffs to “include a discussion based

21

on [Staton]” with their motion for incentive awards, Dkt. 281 at 9, no such analysis or

22

supporting evidence has been provided. Instead, Plaintiffs merely state that “Plaintiffs

23

consulted with Class Counsel throughout the six year history of this case, made themselves

24

available as needed, provided factual background to assist in the development of the case,

25

reviewed pleadings and correspondence in the case, and evaluated the settlement papers

26

and terms.” Dkt. 297 at 26. This generic, unsupported assertion could be made in any class

27

action. That aside, the proposed $2,500 incentive award is otherwise wholly

28

disproportionate relative to the recovery of other class members, which is estimated to be
- 36 -

1

approximately $3 per claimant. Dkt. 344 at 4. For these reasons, the Court finds that a

2

$50, as opposed to a $2,500 incentive award, is reasonable and appropriate. E.g. Russell v.

3

United States, No. C 09-03239 WHA, 2013 WL 3988778, at *4-5 (N.D. Cal. Aug. 2, 2013)

4

(reducing requests for $5,000 and $2,000 incentive awards to $200 and $100, respectively,

5

where each class member was likely to receive approximately $36). Accordingly,

6

Plaintiffs’ request for an incentive award is GRANTED in the amount of $50 per Plaintiff.

7

C.

8

In cases such as this where the settlement of a class action creates a common fund,

9

the Court has discretion to award attorneys’ fees using either (1) the “lodestar” method or

ATTORNEYS’ FEES

10

(2) the “percentage of the fund” approach. Vizcaino v. Microsoft Corp., 290 F.3d 1043,

11

1047 (9th Cir. 2002). Under the lodestar method, the lodestar amount is calculated by

12

multiplying the number of hours reasonably expended by counsel by a reasonable hourly

13

rate. Hanlon, 150 F.3d at 1029. “The ‘lodestar method’ is appropriate in class actions

14

brought under fee-shifting statutes (such as federal civil rights, securities, antitrust,

15

copyright, and patent acts), where the relief sought—and obtained—is often primarily

16

injunctive in nature and thus not easily monetized, but where the legislature has authorized

17

the award of fees to ensure compensation for counsel undertaking socially beneficial

18

litigation.” In re Bluetooth Headset, 654 F.3d at 941. Under the percentage of the fund

19

method, the attorneys’ fees are calculated as a percentage of the common fund established

20

by the settlement. Id. This approach is permissible in common fund settlements “[b]ecause

21

the benefit to the class is easily quantified in common-fund settlements….” Id. In this

22

Circuit, 25% is the “benchmark” for a reasonable fee award, though a court may depart

23

from the benchmark where “special circumstances” are present. Id. at 942.

24

To assess whether a fee request is reasonable, the Court may consider a number of

25

factors, including, without limitation: (1) the results achieved; (2) the risk of litigation;

26

(3) the skill required and the quality of work; (4) the contingent nature of the fee and the

27

financial burden carried by the plaintiffs; and (5) awards made in similar cases. Vizcaino,

28

290 F.3d at 1048-50. “The overall result and benefit to the class from the litigation is the
- 37 -

1

most critical factor in granting a fee award.” In re Omnivision Techs., Inc., 559 F. Supp. 2d

2

1036, 1046 (N.D. Cal. 2008). Courts applying the percentage method should use the

3

lodestar method as a cross-check to determine the fairness of the award. See Vizcaino, 290

4

F.3d at 1050. However, regardless of the methodology employed, the Court must ensure

5

that the fee award is reasonable. In re Mercury Interactive Sec. Litig., 618 F.3d 988, 992

6

(9th Cir. 2010).

7

1.

8
9

Amount of Fees to be Awarded

Class Counsel’s request for $902,000 in fees correlates to approximately 28% of the
Settlement Fund, which is above the 25% benchmark. Weighing the relevant factors, the

10

Court finds that a benchmark fee, as opposed to the requested enhanced fee, is appropriate.

11

As a threshold matter, Class Counsel achieved a reasonable settlement on behalf of class

12

members. The settlement amount and matrix for the payment of claims were based on an

13

analysis of the amount of interest that would have accrued on accounts subject to holds

14

during the Class Period. McCabe Decl. ¶ 2. Though certain Objectors assert that the

15

settlement is too low, they fail to support their arguments with any evidence or meaningful

16

analysis. Objectors also fail to consider the risks facing the Class in the absence of a

17

settlement, which are especially significant considering the questionable merit of Plaintiffs’

18

claims and the risk that no class would be certified. While the results achieved by Class

19

Counsel may not be sufficiently exceptional to warrant an enhanced fee, they are more than

20

adequate to support a benchmark fee award.

21

The remaining factors also militate in favor a Class Counsel fee award. First, for the

22

same reasons just mentioned, Class Counsel assumed substantial risk in representing the

23

Class.

24

Second, Class Counsel have consistently demonstrated both skill and expertise in

25

their pursuit of this case. Class Counsel specialize in consumer class actions, and have

26

served as counsel for classes of plaintiffs in a variety of substantive areas. Leon Decl. ¶ 2,

27

Dkt. 297-3; Todzo Decl., ¶¶ 2, 6-12, Dkt. 297-1. Such expertise proved particularly

28

beneficial in this action, in view of the substantive and procedural complexities involved in
- 38 -

1

litigation and the protracted settlement process. Given the contentious nature of the action,

2

the Court finds that the result achieved in this matter would have been unlikely if entrusted

3

to counsel of lesser experience or capability.

4

Third, Class Counsel represented Plaintiffs on a contingency basis and thus bore the

5

financial burden of pursuing the litigation for an extended period of time. See Vizcaino,

6

290 F.3d at 1050 (noting that the burdens imposed on counsel by taking the case on a

7

contingency basis were shown by the extended length duration of the lawsuit, the

8

significant cost, and the fact that plaintiff’s counsel had to forego other work).

9

Finally, fee awards in other consumer class actions support the conclusion that a fee

10

award based on 25% of the Settlement Fund is reasonable and appropriate. See Ko, 2012

11

WL 3945541, at *14.

12

Finally, the reasonableness of the fee award is supported by a lodestar cross-check

13

analysis.22 The Court therefore concludes that a fee award based on 25% of the Settlement

14

is consistent with the Ninth Circuit’s benchmark and is supported by the facts of this case.

15

2.

Allocation of Fees

16

The next issue before the Court concerns the allocation of fees between Class

17

Counsel and Fernando counsel. The salient question in determining whether a fee award is

18

appropriate is whether the work performed by counsel “‘was both useful and of a type

19

ordinarily necessary to advance the ... litigation.’” Armstrong v. Davis, 318 F.3d 965, 971

20

(9th Cir. 2003) (quoting in part Webb v. Bd. of Educ., 471 U.S. 234, 243 (1985))

21

(alterations in orig.); e.g., Fischel v. Equitable Life Assur. Soc’y of U.S., 307 F.3d 997,

22

1006 (9th Cir. 2002) (“When counsel recover a common fund which confers a ‘substantial

23

benefit’ upon a class of beneficiaries, they are entitled to recover their attorney’s fees from

24

the fund.”); Victor v. Argent Classic Convertible Arbitrage Fund L.P., 623 F.3d 82, 87 (2d

25

Cir. 2010) (holding that district court has discretion to award attorneys’ fees to co-counsel

26

whose work “confer[s] substantial benefits on the class”).

27
22

28

The lodestar for Class Counsel’s work in this case is $1,015,233.50, which
exceeds the amount of fees to be awarded under the percentage of the fund approach.
- 39 -

1

With regard to Class Counsel, the Court finds that they have comported themselves

2

professionally and in a manner that proved useful for and advanced the interests of the

3

Class. Despite the ongoing efforts of Trubitsky and various putative interveners to

4

undermine their efforts to consummate a global settlement, Class Counsel persevered and

5

participated in several multi-day mediations to finally reach a settlement acceptable to the

6

Court. In the face of these impediments, coupled with the Court’s rejection of prior

7

iterations of the Settlement, Class Counsel remained steadfast in their attempts to pursue

8

settlement in this action. Ultimately, Class Counsel conferred a substantial benefit upon the

9

Class by securing a settlement in an action where the substantive merit and the ability to

10

obtain and maintain class certification remain questionable. The Court therefore finds that

11

Class Counsel have persuasively demonstrated that they should be awarded attorneys’ fees

12

in this action.

13

The Court is not so sanguine as to Fernando counsel. The Settlement now before the

14

Court was negotiated without either Trubitsky or Hicks’ participation and was never signed

15

by either of them or any of the Fernando plaintiffs. Todzo Decl. in Supp. of Class Pls.’

16

Opp’n to Mot for Attorneys’ Fees and Reimbursement of Costs by Fernando Counsel ¶ 2,

17

Dkt. 301-1. It is true that Fernando counsel were instrumental in securing Defendants’

18

agreement in December 2011 to pay an additional $425,000 into the Settlement Fund to

19

resolve the Fernando plaintiffs’ claims. Yet, Trubitsky almost immediately reneged on that

20

agreement—instead demanding individual settlements for certain of her clients. See, e.g.,

21

Moon Decl. ¶¶ 2-5; 3/29/12 CMC Stmt. at 6-7; 11/27/12 Order at 2. In addition, once it

22

became clear that the parties in Zepeda were intending to pursue a global resolution

23

irrespective of her involvement, Trubitsky embarked on a course of action directed at

24

disrupting the settlement by, among other things, engaging in unnecessary motion practice

25

and initiating a new lawsuit. See id.23 These actions resulted in additional delay and

26
23

In addition, Hicks reports that Trubitsky ignored his advice and repeatedly refused
to communicate with his or the class representatives. See Hicks Decl. in Supp. of Appl. for
28 Fees by Attorney David Hicks ¶¶ 14-15, Dkt. 295-2.
27

- 40 -

1

litigation costs—all to the detriment of the Class. Thus, as to Trubitsky, the Court finds

2

that she is not deserving of attorneys’ fees or costs on the ground that her actions, on

3

balance, did not provide a substantial benefit to the Class.24

4

The matter of Hicks’ fee request presents a closer question. There is no allegation or

5

evidence that Hicks was directly responsible for Trubitsky’s decision to renege on the

6

settlement or impede the Zepeda plaintiffs’ efforts to obtain judicial approval of the global

7

settlement. To the contrary, the record shows that Trubitsky inappropriately took actions,

8

such as filing the Dunkel action and listing Hicks as co-counsel, without his knowledge or

9

consent. At the same time, Hicks cannot completely absolve himself of Trubitsky’s

10

actions. To the extent that Hicks believed that Trubitsky’s conduct was detrimental to their

11

clients or to the Class, or was inconsistent with the obligations imposed on pro hac vice

12

counsel, it was incumbent upon him to notify the Court that she was in violation of the rules

13

of professional conduct applicable to pro hac vice counsel. See Civ. N.D. Cal. Civ. L.R.

14

11-4. Yet, there is no indication that Hicks endeavored to seek judicial intervention to

15

address her actions or was able to ameliorate the impact of her misconduct.

16

The above notwithstanding, there is no evidence that Hicks, unlike Trubitsky, took

17

any actions that were detrimental to the Fernando plaintiffs or the Class. To the contrary,

18

he provided a substantial benefit to the Class by helping negotiate an additional $425,000

19

for the Settlement Fund. The Court therefore finds that it is fair and reasonable to award

20

fees to Hicks for the services he performed up to and including the mediation in December

21

2011. The billing records submitted by Hicks reveal that he performed 52.7 hours of work

22

during that time period. See Hicks Decl. Ex. B, Dkt. 295-3 at 3-29. Based on a generous

23
24
24

Trubitsky’s deficient representation of the Class also is underscored by the fact
that she failed to appear for the fairness hearing. Instead, the evening before the hearing,
Trubitsky requested attorney Tour-Sarkissian to “specially appear” in her stead. Tour26 Sarkissian, who is not counsel of record or otherwise involved in Fernando or Zepeda,
acknowledged that she was generally unaware of the facts and history of the actions and
27 only had the opportunity to review a limited portion of the present motion papers. As such,
through no fault of her own, Tour-Sarkissian could not meaningfully participate in the
28 hearing.
25

- 41 -

1

hourly rate of $660.00 per hour, the lodestar for Hicks’ services amounts to $34,782. Said

2

amount shall be awarded to Hicks as attorneys’ fees.

3
4

3.

Miorelli’s Objections

Miorelli contends that the Class Counsel should only be awarded the 25% of the “net

5

value” of the Settlement Fund after subtracting the notice costs, litigation costs and

6

incentive awards. Dkt No. 333 at 13-17. However, there is no bright-line rule requiring

7

that a court calculate a fee award based on a net settlement fund. See In re Online DVD-

8

Rental Antitrust Litig., 779 F.3d 934, 953 (9th Cir. 2015) (“[W]hether to base an attorneys’

9

fee award on either net or gross recovery should not make a difference so long as the end

10
11

result is reasonable.”).
Miorelli next argues that the lack of biographical information for all attorneys who

12

appear on the billing statements submitted to the Court make it “impossible” to ascertain

13

whether the lodestar is reasonable. Dkt. 333 at 16. No authority is cited to support

14

Miorelli’s contention that the presentation of attorney biographies or resumes is a

15

prerequisite to a fee request in a class action settlement. That aside, Class Counsel have

16

submitted uncontroverted declarations substantiating the qualifications of the primary

17

billers, the hours worked on the case, and that their hourly rates are commensurate with the

18

prevailing rates in the San Francisco Bay Area. See Todzo Decl. ¶¶ 7-12, Dkt. No. 297-1;

19

Leon Decl. ¶¶ 2, 6-9, Dkt. 297-3.25 Although Class Counsel did not submit biographical

20

for every legal professional who billed time to this case, see Dkt. 333 at 16 & n.3, the lack

21

of such information is inapt, given that the amounts billed by those individuals was

22

negligible.26 The Court therefore finds that Class Counsel has provided sufficient

23

information to perform a lodestar cross-check.

24
25

Each of those attorneys attended well-known law schools, such as Hastings
College of the Law and Boalt Hall School of Law. Todzo Decl. ¶¶ 8-9. Lead attorneys
Mark Todzo and Jeffrey Leon have practiced law for over twenty-two and twenty-four
26 years, respectively, and have worked on numerous class actions. Id. ¶ 8; Leon Decl. ¶ 8.
25

27

26

For instance, Miorelli complains that Class Counsel did not submit a resume for
Abigail Blodgett, who billed 0.2 hours (12 minutes) at $400, which amounts to $80 in fees.
28 Dkt. 333 at 16 n.3.
- 42 -

1

Finally, Miorelli contends that the Court should apply the District of Columbia’s

2

“Laffey matrix” to determine Class Counsel’s hourly rate. Dkt. No. 333 at 16-17. “[T]he

3

Laffey matrix is an inflation-adjusted grid of hourly rates for lawyers of varying levels of

4

experience in Washington, D.C.” Prison Legal News v. Schwarzenegger, 608 F.3d 446,

5

454 (9th Cir. 2010). But as the Ninth Circuit in Prison Legal News has explained, “just

6

because the Laffey matrix has been accepted in the District of Columbia does not mean that

7

it is a sound basis for determining rates elsewhere, let alone in a legal market 3,000 miles

8

away.” Id. Accordingly, this Court has previously “decline[d]” an invitation to use the

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matrix where, as here, the party requesting fees “has submitted competent evidence

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showing market rates in this area (including those awarded by courts).” Rosenfeld v. U.S.

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Dep’t of Justice, 904 F. Supp. 2d 988, 1003 (N.D. Cal. 2012) (declining to apply the Laffey

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matrix where the movant submitted competent evidence showing market rates in local

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area); see also Jacobson v. Persolve, LLC, No. 14-CV-00735-LHK, 2016 WL 7230873, at

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*6 (N.D. Cal. Dec. 14, 2016) (rejecting Laffey matrix).27

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4.

Perkins’ Objections

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Perkins asserts that Class Counsel’s ability to recover fees is governed by California

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Code of Civil Procedure § 1021.5. Citing California authority, Perkins states that § 1021.5

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“requires a lodestar analysis and does not provide for any recovery based on a percentage

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of a common fund.” Dkt. 317 at 4. Perkins apparently is unaware that Class Counsel’s fee

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request is governed by federal law, which expressly confers federal courts with the

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discretion to determine fee awards in a class action based on either the lodestar method or a

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percentage of the settlement fund. In re Bluetooth, 654 F.3d at 942. Perkins also claims

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Class Counsel is “not entitled to any fee multiplier.” Dkt. 317 at 4. This argument is

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perplexing, given that Class Counsel has not requested application of a multiplier. To the

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27

Miorelli also contends that the incentive awards are disproportionately high to the
recovery of class members. See Dkt. 333 at 11. Miorelli’s analysis is unhelpful because it
27 ignores the Ninth Circuit’s decision in Staton, which articulates the standard for evaluating
incentive award requests. That aside, his concerns are moot, as the Court has
28 independently lowered the incentive awards.
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contrary, the fees requested by Class Counsel under the percentage of the fund approach are

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less than the lodestar—which is tantamount to a negative multiplier.

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5.

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Conclusion

To summarize, the Class Counsel Fee Motion and Hicks Fee Application are

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GRANTED IN PART. Class Counsel is awarded attorneys’ fees in the amount of

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$800,000, which represents 25% of the Settlement Fund (i.e., $3,200,000 x 25% =

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$800,000). Hicks is awarded attorneys’ fees in the amount of $34,782, which shall be

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deducted from the fees awarded to Class Counsel. The Trubitsky Fee Motion is DENIED.

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D.

COSTS

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Class Counsel requests an award of costs of $38,463.29. See Leon Decl. ¶ 10, Dkt.

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297-3; Todzo Decl. ¶ 13, Dkt. 297-1. This amount is comprised of $33,625.29 incurred by

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Quantum Legal LLC and $4,838 incurred by Lexington Law Group. Id. The majority of

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those Class Counsel’s expenses (i.e., $19,200) are attributable to mediation fees. Todzo

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Decl. Ex. 3, Dkt. 297-6. The remaining $19,263.29 is attributable to court fees,

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computerized research costs, mediation fees, photocopying, postage, telephone and

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facsimile charges and travel expenses. Leon Decl. Ex. 3; Todzo Decl. Ex. 1.

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Attorneys are entitled “recover as part of the award of attorneys’ fees those out-of-

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pocket expenses that would normally be charged to a fee paying client.” Harris v.

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Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994); Alvarado v. Nederend, No. 1:08-CV-01099

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OWW DL, 2011 WL 1883188, at *10 (E.D. Cal. May 17, 2011) (noting that “filing fees,

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mediator fees, ground transportation, copy charges, computer research, and database expert

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fees … are routinely reimbursed in these types of cases”) (citation omitted). Class

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Counsel’s request for reimbursement of costs in the amount of $38,463.29 is GRANTED.

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//

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//

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//

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//

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//
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IV.

CONCLUSION

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For the reasons stated above,

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IT IS HEREBY ORDERED THAT:

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1.

The definitions and provisions of the Settlement Agreement are hereby

5

incorporated as though fully set forth herein. For purposes of this Order, capitalized terms

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shall have the meaning ascribed to them in the Settlement Agreement.

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2.

The Court has jurisdiction over the subject matter of the Settlement

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Agreement with respect to all parties to thereto, including all members of the Settlement

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Class.

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3.

Plaintiffs’ Motion for Final Approval of Amended Class Action Settlement

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Agreement is GRANTED. The Court finds that the Settlement is fair, adequate, and

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reasonable and is in the best interest of the Settlement Class.

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4.

Plaintiffs’ Motion for Award of Attorneys’ Fees and Reimbursement for

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Costs and Service Awards is GRANTED IN PART. Class Counsel is awarded attorneys’

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fees in the amount of $800,000, plus costs in the sum of $38,463.29. Plaintiffs Moises

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Zepeda, Michael Spear, Ronya Osman, Brian Pattee, Casey Ching, Denae Zamora, Michael

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Lavanga and Gary Miller are each awarded an incentive award in the amount of $50.00.

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5.

The Hicks Fee Application is GRANTED IN PART. Hicks is awarded

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attorneys’ fees in the amount of $34,782, with said amount to be paid out of the total award

20

of fees and costs awarded to Class Counsel.

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6.

The Trubitsky Fee Motion is DENIED.

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7.

Melanie Catanese’s request for a two week extension to file a claim is

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GRANTED. Epiq shall notify Catenese that the Court has granted her request for

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extension.

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8.

This Court dismisses the instant action and Fernando v. PayPal, No. 10-1668

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SBA, with prejudice as to all Settlement Class Members, consistent with the Released

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Claims identified in the Settlement. Plaintiffs and each Settlement Class Member will be

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1

deemed to have fully released and forever discharged Defendants in accordance with the

2

Settlement

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4
5

9.

Pursuant to Federal Rule of Civil Procedure 58, judgment shall be entered in

accordance with this Order and the terms of the Settlement.
10.

The Court shall retain exclusive and continuing jurisdiction over this action

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and the parties, including Class Members, for the purposes of compliance with and

7

performance of the Settlement Agreement.

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10
11

11.

This Order shall be filed in Case Nos. C 10-2500 SBA and C 10-1668 SBA,

and both files shall be closed and all pending matters therein shall be terminated.
IT IS SO ORDERED.
Dated: 3/24/17

______________________________
SAUNDRA BROWN ARMSTRONG
Senior United States District Judge

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