Fernando et al v. eBay, Inc. et al

Filing 172


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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 OAKLAND DIVISION 8 9 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 13 Related to: No. C 10-1668 SBA 14 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. 17 18 This is a putative nationwide class action brought by Plaintiffs Moises Zepeda, 19 Michael Spear, Ronya Osman, Brian Pattee, Casey Ching, Denae Zamora, Michael 20 Lavanga and Gary Miller (collectively “Plaintiffs”) against PayPal, Inc., and its parent 21 entity, eBay, Inc., (collectively “Defendants”). Plaintiffs allege that PayPal improperly 22 handled disputed transactions relating to their user accounts by unilaterally placing holds 23 and reserves thereon without explanation. PayPal also is alleged to have failed to provide 24 annual error-resolution notices and monthly account statements in violation of the 25 Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693, et seq. The parties have 26 resolved the above-captioned action on a class-wide basis and entered into a Settlement 27 Agreement, as amended (“the Settlement”), which the Court preliminarily approved in a 28 prior order. 1 The parties are presently before the Court on the following motions: (1) Plaintiffs’ 2 Motion for Final Approval of Amended Class Action Settlement Agreement; (2) Motion for 3 Award of Attorneys’ Fees and Reimbursement for Costs and Service Awards, filed by the 4 Lexington Law Group and Quantum Legal LLC (“Class Counsel Fee Motion”); (3) Motion 5 for Attorneys’ Fees and Reimbursement of Expenses filed by Marina Trubitsky (“Trubitsky 6 Fee Motion”); and (4) Application for Attorney Fees by Local Counsel David Hicks 7 (“Hicks Fee Application”).1 Also before the Court are various objections that the Court has 8 received in response to Notice of the Settlement. 9 This matter came before the Court for a hearing on the above-mentioned matters on 10 February 8, 2017. The parties in this action and related action, Fernando v. PayPal, 11 No. C 10-1668 SBA, appeared through their counsel of record. Attorney Anthony Ferrigno 12 appeared for Objectors Wally Collins and Lucinda Christian (collectively “Collins 13 Objectors”), and Objector Sam Miorelli (“Miorelli”), an attorney, appeared pro se. Having 14 read and considered the papers filed in connection with these matters and upon 15 consideration of the arguments presented at the hearing, the Court hereby GRANTS 16 Plaintiffs’ Motion for Final Approval, GRANTS IN PART the Class Counsel Fee Motion 17 and the Hicks Fee Application, and DENIES the Trubitsky Fee Motion. All objections to 18 final settlement approval are OVERRULED. 19 I. BACKGROUND 20 A. 21 PayPal operates an on-line payment processing service that functions as a third party OVERVIEW 22 intermediary to facilitate payments between buyers and sellers of goods and services sold 23 on-line through commercial websites, such as eBay. As a condition of using PayPal’s 24 service, subscribers must abide by the PayPal User Agreement (“User Agreement”), among 25 other agreements. Third Am. Compl (“TAC”). ¶ 35, Dkt. 291. The User Agreement 26 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. 27 -2- 1 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 3 and/or limiting and/or suspending seller’s accounts and holding the funds in the accounts 4 for up to and in some cases exceeding 180 days.” Id. ¶ 38. Among other things, Restricted 5 Activities are defined to include a breach of the User Agreement or any other agreements 6 with PayPal, selling counterfeit goods, and providing false or inaccurate information. Id. 7 ¶ 39. Plaintiffs are PayPal users who allege that PayPal placed holds on their account funds 8 TAC ¶¶ 10-17. The foregoing policies and practices have given rise to several actions 9 including the instant case, Zepeda v. PayPal, No. 10-2500 SBA, and Fernando v. PayPal, 10 No. 10-1668 SBA.2 The procedural history of these actions is summarized below. 11 12 1. Zepeda v. PayPal On May 12, 2010, Ronya Osman and Brian Pattee filed a complaint in this Court 13 against PayPal and eBay. See Osman v. PayPal, Inc., No. C 10-2046 PVT. A month later 14 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 16 styled as Spear v. PayPal, Inc. and eBay, Inc., No. C 10-2555 PVT. In July 2010, the 17 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 19 Amended Class Action Complaint (“FAC”) on August 13, 2010, which joined the plaintiffs 20 from the Osman and Spear actions, among others. Dkt. 22. 21 The FAC alleged causes of action against PayPal for: (1) breach of contract; 22 (2) breach of fiduciary duty; (3) accounting; (4) violation of California’s Consumers Legal 23 Remedies Act (“CLRA”); (5) violation of California’s Unfair Competition Law (“UCL”), 24 Cal. Bus. & Prof. Code § 17200; and (6) unjust enrichment. The FAC was filed on behalf 25 of a nationwide class defined as “[a]ll PayPal, Inc. account holders whose funds have been 26 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. 27 -3- 1 held by Pay[P]al or whose accounts were closed, suspended, or limited by PayPal,” along 2 with a natural person class defined as “[a]ll natural persons whose funds have been held by 3 Pay[P]al or whose accounts were closed, suspended, or limited by PayPal.” FAC ¶ 57. 4 Mark Todzo of Lexington Law Group LLC and Jeffrey Leon of Quantum Legal LLC 5 (formerly Complex Litigation Group LLC) have served as the principal attorneys 6 representing Plaintiffs and are now Class Counsel. 7 After Plaintiffs filed the FAC, the Honorable Lucy Koh, the judge originally 8 assigned to the action, recused herself and the matter was reassigned to the Honorable 9 Jeremy Fogel. On September 30, 2010, PayPal filed a motion to dismiss the FAC, pursuant 10 to Federal Rule of Civil Procedure 12(b)(6). Dkt. 26. Shortly thereafter, Plaintiffs filed a 11 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 14 and to Appoint Interim Lead, Liaison, and Class Counsel (“2/15/11 Order”) (reported as 15 Zepeda v. PayPal, Inc., 777 F. Supp. 2d 1215, 1220-21 (N.D. Cal. 2011)), Dkt. 49. In the 16 same order, Judge Fogel granted Plaintiffs’ motion for the appointment of lead counsel. 17 Zepeda, 777 F. Supp. 2d at 1223-24. 18 In rejecting Plaintiffs’ tort and contract claims and demand for an accounting, Judge 19 Fogel ruled that: (1) the PayPal User Agreement affords PayPal “sole discretion” to place 20 holds on its users’ accounts, irrespective of whether the user has engaged in restricted 21 activities; and (2) PayPal has no contractual obligation to provide users with an explanation 22 as to why their accounts may have been frozen. Id. at 1219-221. Judge Fogel also rejected 23 the CLRA claim on the ground that Plaintiffs are not “consumers” and therefore lack 24 prudential standing. Id. at 1222. As to the UCL claim, Judge Fogel ruled that the pleadings 25 failed to satisfy the heightened standard for pleading fraudulent conduct under Federal Rule 26 of Civil Procedure 9(b). Id. at 1222-23. Finally, he dismissed the unjust enrichment claim 27 on the ground that the parties’ relationship was governed by an express contract. Id. at 28 1223. -4- 1 While Plaintiffs were given the opportunity to attempt to replead their claims, it 2 became apparent to them that filing a SAC would trigger another motion to dismiss and 3 engender further delay and cost. Mot. for Prelim. Approval at 3, Dkt. 166. In addition, 4 Plaintiffs were concerned that, in light of Judge Fogel’s interpretation of the User 5 Agreement, it would be difficult to cure the deficiencies that resulted in the dismissal of the 6 FAC. Id. For its part, PayPal was receptive to discussing settlement. Id. Thus, instead of 7 amending the pleadings, Plaintiffs commenced settlement discussions with PayPal. Id. 8 2. Fernando v. PayPal and eBay 9 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 11 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 13 Rickel, Ira Gilman, Lacy Reintsma and Shaul Behr as additional party-plaintiffs. Fernando 14 FAC, Dkt. 23. 15 The Fernando FAC alleges that PayPal improperly restricts, freezes or closes 16 customer accounts because of “suspicious activity,” without notice, explanation or 17 responding to the inquiries of affected users. Id. ¶¶ 23-24. The pleadings also aver that 18 PayPal freezes the accounts of affected users, thereby preventing them from cancelling 19 their accounts and recovering their funds. Id. ¶ 25. Such conduct is alleged to violate the 20 EFTA, as well as Section III of the Injunctive Relief portion of the settlement agreement 21 reached in In re PayPal Litigation (Comb v. PayPal, Inc.), Nos. C 02-1227 JF, C 02-2777 22 23 24 25 26 27 28 -5- 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 19 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 22 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 7 Zepeda on October 9, 2012, which joined eBay, and added claims for violations of the 8 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. 16 122; 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 -9- 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 9 matrix where, as here, the party requesting fees “has submitted competent evidence 10 showing market rates in this area (including those awarded by courts).” Rosenfeld v. U.S. 11 Dep’t of Justice, 904 F. Supp. 2d 988, 1003 (N.D. Cal. 2012) (declining to apply the Laffey 12 matrix where the movant submitted competent evidence showing market rates in local 13 area); see also Jacobson v. Persolve, LLC, No. 14-CV-00735-LHK, 2016 WL 7230873, at 14 *6 (N.D. Cal. Dec. 14, 2016) (rejecting Laffey matrix).27 15 4. Perkins’ Objections 16 Perkins asserts that Class Counsel’s ability to recover fees is governed by California 17 Code of Civil Procedure § 1021.5. Citing California authority, Perkins states that § 1021.5 18 “requires a lodestar analysis and does not provide for any recovery based on a percentage 19 of a common fund.” Dkt. 317 at 4. Perkins apparently is unaware that Class Counsel’s fee 20 request is governed by federal law, which expressly confers federal courts with the 21 discretion to determine fee awards in a class action based on either the lodestar method or a 22 percentage of the settlement fund. In re Bluetooth, 654 F.3d at 942. Perkins also claims 23 Class Counsel is “not entitled to any fee multiplier.” Dkt. 317 at 4. This argument is 24 perplexing, given that Class Counsel has not requested application of a multiplier. To the 25 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. 26 - 43 - 1 contrary, the fees requested by Class Counsel under the percentage of the fund approach are 2 less than the lodestar—which is tantamount to a negative multiplier. 3 5. 4 Conclusion To summarize, the Class Counsel Fee Motion and Hicks Fee Application are 5 GRANTED IN PART. Class Counsel is awarded attorneys’ fees in the amount of 6 $800,000, which represents 25% of the Settlement Fund (i.e., $3,200,000 x 25% = 7 $800,000). Hicks is awarded attorneys’ fees in the amount of $34,782, which shall be 8 deducted from the fees awarded to Class Counsel. The Trubitsky Fee Motion is DENIED. 9 D. COSTS 10 Class Counsel requests an award of costs of $38,463.29. See Leon Decl. ¶ 10, Dkt. 11 297-3; Todzo Decl. ¶ 13, Dkt. 297-1. This amount is comprised of $33,625.29 incurred by 12 Quantum Legal LLC and $4,838 incurred by Lexington Law Group. Id. The majority of 13 those Class Counsel’s expenses (i.e., $19,200) are attributable to mediation fees. Todzo 14 Decl. Ex. 3, Dkt. 297-6. The remaining $19,263.29 is attributable to court fees, 15 computerized research costs, mediation fees, photocopying, postage, telephone and 16 facsimile charges and travel expenses. Leon Decl. Ex. 3; Todzo Decl. Ex. 1. 17 Attorneys are entitled “recover as part of the award of attorneys’ fees those out-of- 18 pocket expenses that would normally be charged to a fee paying client.” Harris v. 19 Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994); Alvarado v. Nederend, No. 1:08-CV-01099 20 OWW DL, 2011 WL 1883188, at *10 (E.D. Cal. May 17, 2011) (noting that “filing fees, 21 mediator fees, ground transportation, copy charges, computer research, and database expert 22 fees … are routinely reimbursed in these types of cases”) (citation omitted). Class 23 Counsel’s request for reimbursement of costs in the amount of $38,463.29 is GRANTED. 24 // 25 // 26 // 27 // 28 // - 44 - 1 IV. CONCLUSION 2 For the reasons stated above, 3 IT IS HEREBY ORDERED THAT: 4 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 6 shall have the meaning ascribed to them in the Settlement Agreement. 7 2. The Court has jurisdiction over the subject matter of the Settlement 8 Agreement with respect to all parties to thereto, including all members of the Settlement 9 Class. 10 3. Plaintiffs’ Motion for Final Approval of Amended Class Action Settlement 11 Agreement is GRANTED. The Court finds that the Settlement is fair, adequate, and 12 reasonable and is in the best interest of the Settlement Class. 13 4. Plaintiffs’ Motion for Award of Attorneys’ Fees and Reimbursement for 14 Costs and Service Awards is GRANTED IN PART. Class Counsel is awarded attorneys’ 15 fees in the amount of $800,000, plus costs in the sum of $38,463.29. Plaintiffs Moises 16 Zepeda, Michael Spear, Ronya Osman, Brian Pattee, Casey Ching, Denae Zamora, Michael 17 Lavanga and Gary Miller are each awarded an incentive award in the amount of $50.00. 18 5. The Hicks Fee Application is GRANTED IN PART. Hicks is awarded 19 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. 21 6. The Trubitsky Fee Motion is DENIED. 22 7. Melanie Catanese’s request for a two week extension to file a claim is 23 GRANTED. Epiq shall notify Catenese that the Court has granted her request for 24 extension. 25 8. This Court dismisses the instant action and Fernando v. PayPal, No. 10-1668 26 SBA, with prejudice as to all Settlement Class Members, consistent with the Released 27 Claims identified in the Settlement. Plaintiffs and each Settlement Class Member will be 28 - 45 - 1 deemed to have fully released and forever discharged Defendants in accordance with the 2 Settlement 3 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 6 and the parties, including Class Members, for the purposes of compliance with and 7 performance of the Settlement Agreement. 8 9 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 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 46 -

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