Clay et al v. Cytosport, Inc.

Filing 245

ORDER (1) Granting 240 Plaintiff's motion for final approval of Class Action Settlement; (2) Granting 239 Plaintiffs' motion for Attorneys' fees, expenses, and incentive awards; and (3) Final order of dismissal. Signed by Judge M. James Lorenz on 10/29/2020. (jpp)

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UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF CALIFORNIA
CHAYLA CLAY, ERICA
Case No.: 3:15-cv-00165-L-DHB
EHRLICHMAN, LOGAN REICHERT,
and CHRIS ROMAN, individually and on
behalf of all others similarly situated,
ORDER (1) GRANTING
PLAINTIFFS’ MOTION FOR FINAL
Plaintiffs,
APPROVAL OF CLASS ACTION
v.
SETTLEMENT; (2) GRANTING
PLAINTIFFS’ MOTION FOR
CYTOSPORT, INC., a California
ATTORNEYS’ FEES, EXPENSES,
corporation,
AND INCENTIVE AWARDS; AND (3)
FINAL ORDER OF DISMISSAL
Defendant.
[Docs. No. 239, 240]

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Case No.: 3:15-cv-00165

Pending before the Court are Plaintiffs’ Motion for Final Approval of Class

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Action Settlement (doc. no. 240) and Plaintiffs’ Motion for Attorneys’ Fees,

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Expenses, and Incentive Award (doc. no. 239). The Court has received no opposition

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or objection to the motions. The motions were heard at the Final Approval Hearing on

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October 29, 2020, notice of the Final Approval Hearing having been duly given in

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accordance with the Order Granting Plaintiffs’ Renewed Motion for Preliminary

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Approval of Class Action Settlement (doc. no. 235, “Preliminary Approval Order”).

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Having considered all matters submitted at the Final Approval Hearing and otherwise,

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based on the findings and conclusions in the Preliminary Approval Order, which are

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incorporated by reference herein, and for the reasons stated below, the motions are

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granted.

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Factual and Procedural Background

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Defendant manufactures and markets the Muscle Milk branded protein shakes

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sold in powder and liquid forms (“Powder Products” and “Shake Products”). During

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the class period, Defendant labeled its Powder Products with a number of claims,

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including claims that they contained a specific amount of “lean protein” and that they

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contained “lean lipids.” Plaintiffs alleged that the “lean” claims were misleading and

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illegal under federal law and that the products contained less protein than stated on the

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product labels. Plaintiffs also challenged L-Glutamine statements on product labels;

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however, this claim was not certified for class treatment and Plaintiffs are no longer

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pursuing it.

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On behalf of a national class, Plaintiffs asserted causes of action for violation of

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California Unfair Competition Law and False Advertising Law. Plaintiffs also

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claimed, on behalf of classes of purchasers in California, Michigan, and Florida, that

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the advertisements violated their respective state’s consumer protection statutes,

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warranty laws, and the Magnuson–Moss Warranty Act.

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Case No.: 3:15-cv-00165

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The case was heavily contested. Defendants moved to dismiss and filed a

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motion for judgment on the pleadings. The motion to dismiss was denied and the

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motion for judgment on the pleadings was granted in part.

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The parties engaged in extensive discovery, including voluminous document

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discovery, discovery of Defendant’s sales data, several depositions, including

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depositions of each Plaintiff, and expert discovery.

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Defendant moved for summary judgment, and Plaintiffs moved for class

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certification. Defendant’s opposition to class certification included Daubert

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challenges to Plaintiffs’ experts. Both motions were granted in part and denied in

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part. The summary judgment motion was granted with respect to Plaintiffs’ claims

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alleging breach of express warranty, violation of the Magnuson–Moss Warranty Act,

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and violation of some provisions of the Michigan Consumer Protection Act. The

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Court certified a nationwide class for violations of California Unfair Competition and

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False Advertising laws as to certain products, as well as California, Florida and

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Michigan subclasses for violations of their respective consumer protections laws.

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Defendant petitioned the Ninth Circuit for interlocutory appeal of the class

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certification order under Rule 23(f). The petition was granted and the parties were

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preparing to brief the appeal when they settled the case.

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The summary judgment and class certification rulings spurred further settlement

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discussions. The parties had previously tried at least twice, but were unsuccessful in

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settling. After the motion rulings, they engaged a private mediator and, over time,

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agreed on a settlement. The settlement was reached after nearly four years of

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litigation.

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Proposed Settlement Terms

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Defendant will contribute $12 million to a non-reversionary Settlement Fund to

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be paid to Class Members after payment of Class Counsel’s attorneys’ fees, costs,

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litigation expenses, and class representatives’ incentive awards. The net Settlement

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Fund available for distribution will be, approximately, at least $7.8 mil. In addition,
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Defendant will separately pay the costs of notice and claims administration, which is

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estimated to cost approximately $500,000. The monetary benefit of the settlement is

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approximately 9-30% of the total estimated damages if Plaintiffs prevailed at trial.

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The Settlement Fund is to be distributed to the Settlement Class by check on a

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claims-made basis, according to the number of Shake and Powder Products purchased

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during the Class Period. To receive a cash payment, Class Members must file a

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timely claim. For Shake Products, Class Members with proof of purchase may submit

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claims for $1 per purchased shake, with no limit on the number of shakes that may be

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claimed. For Powder Products, Class Members with proof of purchase may submit

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claims for $3 or $5 for each purchase, depending on the product size. In either

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instance, Class Members with no proof of purchase may submit claims capped at $25.

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If the funds claimed are less than the net Settlement Fund, each Class Member

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receives a pro rata share of any remaining funds.

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In addition to the cash payment, Defendant has removed the challenged “lean”

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references from Powder Product labels, and has agreed to review its manufacturing to

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minimize variability of the protein content in their Shake Products.

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Preliminary approval of the settlement was initially denied because Plaintiffs

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amended the class definitions after the class certification order. As amended, the

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classes could potentially include businesses in addition to consumers, which would

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exceed the scope of the class certification order. The Class Members’ release of

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claims was too broadly stated. There was an inadequate explanation of the class

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notice program. The procedures for objections and exclusions as described in the

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proposed notice were too onerous.

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The parties amended the settlement agreement to address these issues. The
Court approved the amended settlement agreement on a preliminary basis.

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Class Notice

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The class notice was disseminated through targeted online ads, in print (Sports

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Illustrated and People), press releases, and sponsored notice on two class action
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websites. The Claim Administrator created a dedicated website with a toll-free line

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where class members could access the full-length notice, other information about the

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case, as well as the claim and exclusion forms. Class members were able to file their

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claims and requests for exclusion on the website. Collectively, the notice program is

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estimated to have reached approximately 79% of the class of approximately 3 million

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members with an average frequency of approximately 3.4 views per person.

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Claims and Exclusions

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167,394 claims were filed, which constitutes a response rate of approximately

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5.6% of the class. It is not unusual to see a low participation rate in a consumer class

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action. See Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1130 (9th Cir. 2017).

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Because the total claims do not exhaust the net Settlement Fund, the class members

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will receive an additional pro-rata distribution increasing their individual claims by

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approximately 40%. This will result in an average individual class member payment

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of approximately $47, which is more than expected recovery if Plaintiffs prevailed at

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trial. No objections to the settlement were received. 227 members (approx. 0.0076%

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of the class) requested exclusion.

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Conclusions and Order

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1.

The Amended Settlement Agreement and Release dated January 28,

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2020, including the definitions of words and terms contained therein and exhibits

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attached thereto (doc. no. 232-8, the “Settlement Agreement”), and the terms of the

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Preliminary Approval Order are incorporated herein by reference.

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2.

This Court has jurisdiction over the subject matter of the Litigation and

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over the Parties, including all members of the following Settlement Classes certified

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for settlement purposes in this Court’s Preliminary Approval Order:

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The Shake Class: All consumers in the United States (including its states,

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districts or territories) who purchased Cytosport Whey Isolate Protein Drink; Monster

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Milk: Protein Power Shake; Genuine Muscle Milk: Protein Nutrition Shake; and

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Muscle Milk Pro Series 40: Mega Protein Shake from January 23, 2011 to the date of
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entry of the Preliminary Approval Order. For members of the Michigan subclass only,

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the starting date of the class period will be January 23, 2009. Excluded from the

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Settlement Class are Defendant and any affiliate or subsidiary of Defendant, and any

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entities in which Defendant has a controlling interest, as well as all persons who

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validly exclude themselves from the Settlement Class.

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The Powder Class: All consumers in the United States (including its states,

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districts, or territories) who purchased Muscle Milk: Lean Muscle Protein Powder;

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Muscle Milk Light: Lean Muscle Protein Powder; Muscle Milk Naturals: Nature’s

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Ultimate Lean Muscle Protein; Muscle Milk Gainer; High Protein Gainer Powder

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Drink Mix; Muscle Milk Pro Series 50: Lean Muscle Mega Protein Powder; and

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Monster Milk: Lean Muscle Protein Supplement that had the phrase “lean lipids,”

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“lean protein,” “lean muscle protein,” or “new leaner formula” on the label from

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January 23, 2011 to December 31, 2018. Excluded from the Settlement Class are

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Defendant and any affiliate or subsidiary of Defendant, and any entities in which

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Defendant has a controlling interest, as well as all persons who validly exclude

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themselves from the Settlement Class.

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3.

The Court hereby finds that the Class Representatives and Class Counsel

have adequately represented the Settlement Classes. See Fed. R. Civ. P. 23(e)(2)(A).
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The Court hereby finds that the Settlement Agreement is the product of

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arm’s-length settlement negotiations between the Plaintiffs and Class Counsel, and

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Defendant and its counsel. See Fed. R. Civ. P. 23(e)(2)(B).

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5.

The Court hereby finds and concludes that Class Notice was disseminated

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to the Settlement Class Members in accordance with the terms set forth in Section 8 of

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the Settlement Agreement, and that Class Notice and its dissemination were in

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compliance with the Preliminary Approval Order.

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6.

The Court further finds and concludes that the Class Notice and claims

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submission procedures as reported to the Court in the Declaration of Steven Weisbrot,

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Claims Administrator and attached exhibits (docs. no. 240-3 through 15) satisfy Rule
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23 of the Federal Rules of Civil Procedure and the requirements of due process, were

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the best notice practicable under the circumstances, provided individual notice to all

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Settlement Class Members who could be identified through reasonable effort, and

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support the Court’s exercise of jurisdiction over the Settlement Classes as

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contemplated in the Settlement Agreement and this Order. See Fed. R. Civ. P. 24

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23(e)(2)(C)(ii).

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7.

This Court finds and concludes that the notice provided by the Claims

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Administrator to the appropriate State and federal officials pursuant to 28 U.S.C. §

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1715 satisfied the requirements of that statute.

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8.

A total of 227 Settlement Class Members submitted timely and proper

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Requests for Exclusion, as reported in the declaration of the Claims Administrator

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(docs. no. 240-3 through 5). The Court orders that each of the individuals listed by the

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Claims Administrator as having submitted a valid Request for Exclusion is excluded

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from the Settlement Classes. Those individuals will not be bound by the Settlement

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Agreement, and neither will they be entitled to any of its benefits.

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9.

No Settlement Class Members submitted timely and proper Objections to

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the Settlement Agreement. Plaintiffs faced serious risks both on the merits of their

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claims and on the ability to try this matter on a class basis. The relief provided to the

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Settlement Classes pursuant to the Settlement Agreement is adequate, given the costs,

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risks, and delay of trial and appeal, and taking into consideration the attorney’s fees

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awarded below. See Fed. R. Civ. P. 23(e)(2)(C)(i), (iii).

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10.

Class Counsel request attorneys’ fees in the sum of $3,883,682.34, costs

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and litigation expenses in the sum of $265,902.66, and Class Representatives’

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incentive awards totaling $40,000.

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The request for attorneys’ fees represents 31.14% of the Settlement benefit to

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the Settlement Classes and exceeds the 25% benchmark for reasonable attorneys’ fees

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in common fund settlements such as this. See In re Bluetooth Headset Prod. Liability

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Litig., 654 F.3d 935, 942-43 (9th Cir. 2011). The benchmark may be adjusted for
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special circumstances such as, for example, the results achieved, litigation risk, the

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skill required and quality of the work, the risk of nonpayment of fees in contingency

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cases. See Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1048-50 (9th Cir. 2002). For

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the reasons stated in Class Counsel’s brief, which reasons this Court adopts herein,

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Class Counsel made a sufficient showing to support an upward adjustment of the

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benchmark percentage. (See doc. no. 239-1 at 6-15.)

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The Court also looks to the lodestar method to cross check the reasonableness

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of requested fees. See In re Google Referrer Header Privacy Litig., 869 F.3d 737, 748

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(9th Cir. 2017). Class Counsel spent 5,532.6 hours on this case, which the Court finds

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reasonable in light of the procedural history, including extensive discovery, expert

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discovery, opposition to a motions to dismiss, for judgment on the pleadings and

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summary judgment, defense against Daubert challenges to their experts, motion for

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class certification, interlocutory appeal, and extensive settlement negotiations. In light

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of the complexity of this action, the Court also finds reasonable the average hourly

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rate of $502.67. Based on the foregoing, the lodestar is $2,781,066. Class Counsel’s

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request applies a 1.4 multiplier to the lodestar. As with the benchmark percentage, the

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lodestar can be adjusted based on the circumstances of each case in light of the Kerr

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factors. See Bluetooth, 654 F.3d at 942 n.7 (quoting Kerr v. Screen Extras Guild, Inc.,

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526 F.3d 67, 70 (9th Cir. 1975)). Because "[m]any of these factors are subsumed

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within the calculation of hours reasonably expended at a reasonable rate[, . . .] the

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Kerr factors only warrant a departure from the lodestar in rare and exceptional cases."

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Id. (internal quotation marks and citations omitted). Other Kerr factors track

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considerations for departure from the benchmark, such as difficulty of the issues,

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requisite skill, “undesirability” of the case, experience, reputation and ability of

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counsel, and results achieved for the class. Cf. Bluetooth, 654 F.3d at 942 n.7 &

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Vizcaino, 290 F.3d at 1048-50. Foremost among them are the results achieved for the

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class. Bluetooth, 654 F.3d at 942. For the reasons stated with regard to the

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adjustment of the benchmark and for excellent results achieved for the Settlement
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Classes, the Court finds that the request for $3,883,682.34 in attorneys’ fees is

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reasonable under the circumstances of this case.

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Class Counsel also request $265,902.66 for costs and litigation expenses,

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including expert fees. Upon review of the itemized summary (see doc. no. 239-2), the

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Court finds the request reasonable.

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Class Representatives request incentive awards of $10,000 each. Incentive

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awards "are discretionary and are intended to compensate class representatives for

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work done on behalf of the class, [and] to make up for financial or reputational risk

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undertaken in bringing the action . . .." Rodriguez v. West Publ'g Corp., 563 F.3d 948,

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958-59 (9th Cir. 2009). The amount of the award should be related to the actual

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service or value the class representative provides to the class. See id. at 960.

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Although incentive awards are "fairly typical in class actions," id. at 958, they "should

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not become routine practice," lest the representatives be "tempted to accept

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suboptimal settlements at the expense of the class members whose interests they are

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appointed to guard." Radcliffe v. Experian Information Solutions Inc., 715 F.3d 1157,

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1163 (9th Cir. 2013) (internal quotation marks and citations omitted). Although the

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requested awards are on the “high end” (doc. no. 239-1 at 24), the Court finds them

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appropriate in this case. All Class Representatives were deposed in connection with

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the summary judgment and class certification motions, some of them in a particularly

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intrusive and contentious manner. Class Representatives also responded to written

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discovery and were otherwise actively involved in the prosecution of this case for the

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last five years.

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For the foregoing reasons, the Court approves Class Counsel’s application for

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$3,883,682.34 in attorneys’ fees, $265,902.66 in costs and litigation expenses, and a

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$10,000 incentive award to each Settlement Class Representative.

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The Court finally approves the Settlement and finds it fair, reasonable,

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and adequate as to all Settlement Class Members in accordance with Rule 23 of the

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Federal Rules of Civil Procedure and directs its consummation pursuant to the terms

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and conditions of the Settlement Agreement.

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12.

This Court dismisses, with prejudice, without costs to any party, except as

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expressly provided for in the Settlement Agreement, the Litigation, as defined in the

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Settlement Agreement.

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13.

Upon Final Approval (including, without limitation, the exhaustion of

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any judicial review, or requests for judicial review, from this Order), the Plaintiffs and

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each and every one of the Settlement Class Members unconditionally, fully, and

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finally releases and forever discharges the Released Parties from the Released Claims

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as provided in the Settlement Agreement.
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Each and every Settlement Class Member, and any person actually or

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purportedly acting on behalf of any Settlement Class Member(s), is hereby

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permanently barred and enjoined from commencing, instituting, continuing, pursuing,

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maintaining, prosecuting, or enforcing any Released Claims (including, without

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limitation, in any individual, class or putative class, representative or other action or

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proceeding), directly or indirectly, in any judicial, administrative, arbitral, or other

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forum, against the Released Parties. This permanent bar and injunction are necessary

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to protect and effectuate the Settlement Agreement, this Order, and this Court’s

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authority to effectuate the Settlement Agreement, and is ordered in aid of this Court’s

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jurisdiction and to protect its judgments.

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The Settlement Agreement (including, without limitation, its exhibits),

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and any and all negotiations, documents, and discussions associated with it, shall not

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be deemed or construed to be an admission or evidence of any violation of any statute,

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law, rule, regulation or principle of common law or equity, of any liability or

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wrongdoing, by Defendant, or of the truth of any of the claims asserted by Plaintiffs in

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the Litigation, and evidence relating to the Settlement Agreement shall not be

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discoverable or used, directly or indirectly, in any way, whether in the Litigation or in

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any other action or proceeding, except for purposes of enforcing the terms and
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conditions of the Settlement Agreement, the Preliminary Approval Order, or this

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Order.

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If for any reason the Settlement terminates or Final Approval, as defined

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in the Settlement Agreement, does not occur, then certification of the Settlement

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Classes shall be deemed vacated. In such an event, the certification of the Settlement

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Classes for settlement purposes shall not be considered as a factor in connection with

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any subsequent class certification issues, and the Parties shall return to the status quo

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ante in the Litigation, without prejudice to the right of any of the Parties to assert any

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right or position that could have been asserted if the Settlement had never been

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reached or proposed to the Court.

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17.

The parties agree that in the event that any provision of the Settlement or

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this Order is asserted by Defendant as a defense in whole or in part to any Claim, or

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otherwise asserted (including, without limitation, as a basis for a stay) in any other

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suit, action, or proceeding brought by a Settlement Class Member or any person

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actually or purportedly acting on behalf of any Settlement Class Member(s), that suit,

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action or other proceeding shall be immediately stayed and enjoined until this Court or

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the court or tribunal in which the claim is pending has determined any issues related to

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such defense or assertion. Solely for purposes of such suit, action, or other proceeding,

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to the fullest extent they may effectively do so under applicable law, the Parties

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irrevocably waive and agree not to assert, by way of motion, as a defense or otherwise,

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any claim or objection to the jurisdiction of the Court, or that the Court is, in any way,

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an improper venue or an inconvenient forum. These provisions are necessary to

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protect the Settlement Agreement, this Order and this Court’s authority to effectuate

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the Settlement and are ordered in aid of this Court’s jurisdiction and to protect its

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judgment.

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By incorporating by reference the terms of the Settlement Agreement

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(doc. no. 232-8) herein, the Court determines that this Order complies with Federal

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Rule of Civil Procedure 65(d)(1).

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IT IS SO ORDERED.

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Dated: October 29, 2020

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Case No.: 3:15-cv-00165