Kardonick v. JP Morgan Chase & Co. et al
Filing
467
Notice of Supplemental Authority in Support of Chase's Motion for a Show Cause Order by Chase Bank USA, N.A. (Attachments: # 1 Exhibit A)(Campbell, Dennis)
Case 2:10cv-03213BMS Document 139
PHed 11120/12 Page 1 of 30
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
EDWARD T. ESSLINGER, et a!.,
Plaintiffs,
:
CIVIL ACTION
:
No. 10-32 13
v.
HSBC BANK NEVADA, N.A. and
HSBC CARD SERVICES, INC.,
Defendants.
MEMORANDUM
Schiller, J.
November 19, 2012
The parties in this nationwide class action involving individuals who enrolled in debt
cancellation and debt suspension products offered by HSBC entities have resolved their dispute. On
February 22, 2012, the Court granted preliminary approval of the settlement. Following a fairness
hearing on October 1, 2012, the parties now seek final certification of the Class, approval of the
settlement, attorneys’ fees, and incentive awards. For the following reasons, the Court certifies the
Class, approves the settlement, grants incentive awards, and awards attorneys’ fees and costs to Class
counsel as laid out below.
1.
BACKGROUND
A.
Facts
Defendants offer debt cancellation and debt suspension products (hereafter Plan” or
“Plans”). Defendants market these Plans as services that, under specific circumstances such as
unemployment or temporary disability, suspend or cancel the required minimum monthly payments
due on the credit card accounts associated with the Plans and excuse the cardholders from paying
the monthly interest charges and Plans’ fees for a limited period of time. (Second Am. Compl. ¶
Case 2:i0-cv03213BMS Document 139
Ped 11/20/12 Page 2 of 30
4, 43.) The cost of a Plan is a monthly fee ofSl.35 for every $100 of a cardholder’s month-ending
credit card balance. (Id.
¶ 55.) On average, cardholders paid less than $200 for the Plans. (Mern. of
Law in Supp. of Mot. for Final Approval of Class Action Settlement and Plan of Allocation [Mem.
inSupp.] at 17.)
Plaintiffs argue that Defendants illegally: (1) enrolled cardholders in Plans without their
consent; (2) offered and marketed the Plans in a deceptive and unfhir manner; and (3) administered
claims under the Plans in a deceptive and unfair manner. (Second Am. Compl.
¶ 3.) The
Second
Amended Complaint outlines ten causes of action, including: breach of contract and fraudulent
inducement; unconscionability; violations of the Truth in Lending Act; violations of various state
deceptive trade practices statutes; common law fraud; and unjust enrichment. (Id.
B.
¶J
184-259.)
Procedural History
On July 2, 2010, Plaintiffs filed a class-action complaint against HSBC Bank USA Inc. and
HSBC Card Services, Inc. Plaintiffs filed a First Amended Class Action Complaint on September
16, 2010. On January 27, 2012, Plaintiffs filed a Second Amended Complaint, adding additional
parties, including HSBC Finance Corporation (all relevant HSBC-related entities are collectively
referred to hereafter as “HSBC”).
Defendants HSBC Bank Nevada, N.A. and HSBC Card Services, Inc. tiled a motion to
dismiss on November 19, 2010. However, before the motion was fully briefed, the Court suspended
the case to allow the parties to participate in settlement efforts. The parties filed a Notice of
Settlement in July 2011. On January 27, 2012, Plaintiffs submitted a Motion for Preliminary
Approval of Class Action Settlement. On February 22, 2012, following a preliminary approval
hearing, the Court issued an order conditionally certifying the settlement class, preliminarily
Case 2:10cv03213.-BMS Document 139
EHed 11/20112 Page 3 of 30
approving the class action settlement, and approving the notice plan. On October 1, 2012, the Court
conducted a final approval hearing.
C.
Settlement Agreement
In the Settlement Agreement, the parties agree to settle six class actions filed against HSBC
in 2010 and 2011 relating to the Plans.’ The Settlement Agreement defines the Class as “All persons
in the United States who were enrolled in or billed for HSBC debt cancellation and debt suspension
products.
.
.
between July 2, 2004 and” the date of preliminary approval of the settlement, February
22. 2012. (PIs.’ Mot. for Prelim. Approval of Class Action Settlement and Mem. of Law in SUpp.
of Mot. [Mot. for Prelim. Approval] Attach. [Settlement Agreement] at 6.)
Pursuant to the terms ofthe Settlement Agreement, HSBC agrees to pay $23.5 million, which
will be used to pay settlement costs and claims by Class members. (Id. at 10.) A Class member who
has not previously received a full refund or benefits, who enrolled in a Plan for twelve months or
less, and who affirms that he was enrolled without his consent, may claim a settlement award of $30.
(Id. at ii.) A Class member who submitted a claim for benefits under a Plan but believes that his
claim was improperly denied may claim a settlement award of $60. (Id.) All other Class members
who did not previously receive refunds and who affirm that they are dissatisfied with any aspect of
a Plan may claim a settlement award of$l5. (Id.) In the event that the Class member awards exceed
or are less than the balance remaining in the settlement fund, the award amounts will be reduced or
in addition to the Esslinger case before this Court. the Settlement Agreement applies to:
Co/ron v. HSBC Bank Nevada, NA., era!.. Civ. A. No. 11-3742 (C.D. Cal. tiled Apr. 29. 201 1):
Sainuels v. HSBC Bank Nevada, NA., et al.. Civ. A. No. 11-548 (N.D. 111. filed Jan. 25. 2011 )
McAlisterv. HSBCBankNevada, MA., Civ. A. No. 10-5831 (W.D. Wash. filed Nov. 14, 2010);
McKinney v. HSBC Card Servs., Inc., et a!., Civ. A. No. 10-786 (S.D. Ill, filed Oct. 12, 2010);
Rizera v. HSBC Bank Nevada, NA., et at., Civ, A. No. 10-3375 (D.N.J. filed July 2, 2010) (the
“Actions”). (Settlement Agreement at 1.)
3
Case 2:10-cv-03213-BMS Document 139 Ffled 11/20112 Page 4 of 30
increased on a pro rata basis. (Id. at 12.) However, no Class member will receive more than $150.
(hi.) Any amount remaining after payment of settlement costs and claims will be distributed as a cy
pies award to charities mutually agreed upon by the settling parties and approved by the Court. (Id.)
As a condition of the settlement, the Class members agree to release HSBC from “any and
all rights, duties, [andj obligations.
Payment Protection product.
.
.
.
.
that arise out of, relate to, or are in connection with any HSBC
or that arise out of or relate in any way to the administration of the
Settlement.” (Id. at 16-17.)
II.
CLASS CERTIFICATION
A.
Nunierosity, Commonality, Typicality, Adequacy of Representation
Although this Court granted preliminary approval of the Settlement Agreement, there must
still be a final determination as to whether to certify the class and grant final approval of the
Settlement Agreement. See In re Gen. Motors Corp. Pick- Up Truck Fuel Tank Prods. Liab. Litig.,
55 F.3d 768, 797 (3d Cir. 1995). Federal Rule of Civil Procedure 23(a) mandates that four threshold
requirements be met for a class to be certified: (1) the class must be so numerous that joinder of all
members is impracticable; (2) there must be questions of law or fact common to the class; (3) the
claims or defenses of the representative parties must be typical of the claims or defenses of the class;
and (4) the representative parties must fairly and adequately protect the interests of the class. Fed.
R. Civ. P. 23(a);
see a/so
In re Lif USA Holding Inc., 242 F.3d 136, 143 (3d Cir. 2001). These
requirements are referred to as nurnerosity, commonality, typicality, and adequacy ofrepresentation.
1.
.Vl4merosit’
The first requirement for a class action is that the class is so numerous that joinder of all
4
Case 2:10-cv-03213-BMS
Document 139
SHed 11/20/12 Page 5 of 30
members is impracticable.” Fed, R. Civ. P. 23(a)(l). While no magic number guarantees that the
numerosity requirement is satisfied, a class of more than forty is generally considered sufficient.
Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001). HSBC, based on a search of its record,
reported over sixteen million Class members, a number which makes joinder impracticable. (See
Mem. in Supp. at 38-39; Dccl. of John L. Rindler in Supp. of Final Approval of Class Action
Settlement [Rindler DecI.]; Aff of Christopher M. Walsh, Esq. Regarding Dissemination of Notice
to Class [Walsh Aff].) Accordingly, the numerosity requirement is satisfied.
2.
C’omm onaiitv
The commonality requirement is met when “the named plaintiffs share at least one question
of fact or law with the grievances of the prospective class.” In re Schering Plough Corp. ERISA
Litig., 589 F.3d 585, 597 (3d Cir. 2009). This “does not require identical claims or facts among class
member[s].”Marcusv. BMWofN. Anz., 687 F.3d583, 597 (3dCir. 2012). Rather, “forpurposes of
Rule 23(a)(2), even a single common question will do.” Id.
The commonality requirement is easily met here. All Class members’ claims stem from
participation in HSBC Plans during a discrete time period. Their claims turn on whether HSBC
marketed and administered these Plans in an unfair maimer and all members’ claims are subject to
some of the same defenses, such as whether the claims against HSBC are preempted. Because the
named Plaintiffs share multiple questions of fact or law with the other Class members, commonality
is present.
3.
Thpicality
The typicality requirement examines “whether the named plaintiffs individual circumstances
are markedly different [from those of unnamed class members] or... the legal theory upon which
Case 2:10-cv-03213-BMS Document 139
Filed 11/20/12
Page 6 of 30
the claims are based differs from that upon which the claims of other class members will perforce
be based.” Eisenberg v. Gagnon. 766 F.2d 770, 786 (3d Cir. 1985) see also Baby Neal v. (lisev, 43
F.3d 48, 57-58 (3d Cir. 1994). “The heart of this requirement is that the plaintiff and each member
of the represented group have an interest in prevailing on similar legal claims.” Seidman v. Am.
Mobile Sys., Inc., 157 F.R.D. 354, 360 (E.D. Pa. 1994). “If a plaintiffs claim arises from the same
event, practice or course of conduct that gives rise[1 to the claims of the class members, factual
differences will not render that claim atypical if it is based on the same legal theory as the claims of
the class.” Marcus, 687 F.3d at 598.
As explained above, all of the Class members, including the named Plaintiffs, object to
HSBC’s marketing and administering of the Plans. The claims are predicated on HSBC’s
standardized marketing and business practices, which were applied in a uniform manner to all
cardholders, and standardized language in the Plans’ terms and conditions. (Mem. in Supp. at 41-42.)
The legal theories for all Class members, that HSBC marketed and administered the credit Plans in
a deceptive way, will be the same. Therefore the typicality requirement is met. See In re Cmty Bank
ofN. Va., 418 F.3d 277, 303 (3d Cir. 2005) (“Cases challenging the same unlawful conduct which
affects both the named plaintiffs and the putative class usually satisfy the typicality requirement
irrespective of the varying fact patterns underlying the individual claims.”).
4.
Adequacy of representation
This requirement ensures that the named plaintiffs fairly and adequately protect the interests
of the class. Fed. R. Civ. P. 23(a)(4). The court must be satisfied that: (1) plaintiffs’ attorneys are
qualified, experienced, and generally able to conduct the litigation: and (2) the interests of the named
class representatives are not antagonistic to other class members. See In re Warfiirin Sodium
6
Case 2:10cv-03213BMS
Document 139
F1ed 11/20/12 Page 7 of 30
AntitrustLitig., 391 F.3d 516, 532 (3d Cir. 2004); Ge,i. Motors, 55 F.3d at 800-01.
In determining whether class counsel is qualified to represent the class, the court considers:
(I) the work counsel has done in identifying or investigating potential claims in the action; (2)
counsel’s experience in handling class actions, other complex litigation, and the types of claims
asserted in the action; (3) counsel’s knowledge of the applicable law; and (4) the resources that
counsel will commit to representing the class. Fed. R. Civ. P. 23(g)(l)(A); see also Cmty. Bank of
N. Va., 622 F.3d at 292. The Court believes that Class Counsel possesses the skill, experience, and
qualifications necessary to conduct this litigation. For example, Class Counsel negotiated settlements
with over ten credit card companies regarding similar payment protection plans, which resulted in
Class Counsel having extensive experience with the operation of the Plans and types of claims
asserted in this action. (See Mot. for Prelim. Approval at 17; id. Ex. 3 [Class Counsel
Qualifications].) In addition to the firms’ relevant experience, the individual attorneys of record also
boast an impressive set of qualifications and pertinent class action litigation experience. (See Class
Counsel Qualifications.) Similarly, Class Counsel performed substantial work and expended great
resources becoming familiar with the specific facts and claims at issue here, including researching
and drafting the complaints, reviewing informal discovery provided by HSBC, examining applicable
federal and state law, and participating in multiple mediation sessions. (See Mot. for Prelim.
Approval at 24; Mem. in Supp. at 25.)
As to the adequacy of the Class representatives, nothing in the record suggests to the Court
that the named Plaintiffs acted in conflict with the Class or failed to vigorously pursue the claims
of all Class members. The interests of the Class representatives and Class members are aligned; both
assert the same legal claims and theories and seek similar relief stemming from similar conduct by
7
Case 2:10-cv-03213-BMS
Document 139
Filed 11120112 Page 8 of 30
the same credit card provider. The Court has no reason to believe that any conflicts of interest exist.
B.
Rule 23(b)
In addition to meeting the four requirements of Rule 23(a), a proposed class must also qualify
under one of the three sub-parts of Rule 23(b). Warfirin, 391 F.3d at 527. Here, Plaintiffs seek to
maintain this class action under Rule 23(b)(3), which allows for a class action to proceed if
“questions of law or fact common to class members predominate over any questions affecting only
individual members, and [j a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).
1.
Common questions of law orJäct predominate
“Predominance is normally satisfied when plaintiffs have alleged a common course of
conduct on the part of the defendant.” In re Janney Montgomery Scott LLC Fin. Consult. Litig., Civ.
A. No. 06-3202, 2009 WL 2137224, at *5 (E.D. Pa. July 16, 2009). As is the case here,
“[pjredominance is a test readily met in certain cases alleging consumer or securities fraud
Ameheni Prods., Inc. v. Windsor, 521 U.k. 591, 625 (1997). Plaintiffs have alleged a common course
of conduct here based on HSBC ‘s actions in connection with its Plans. The dominant question of law
is whether H5BC’s actions, and its statements about and administration of the Plans, constitute
deceptive or unlawful acts. Any other questions of law or fact would be merely tangential to this
common, prevailing question. Therefore, this requirement is met.
2.
Class action is superior to other methods
According to Rule 23, the matters to consider in evaluating superiority are: (1) class
members’ interests in individually controlling the prosecution of separate actions; (2) the extent and
nature of any litigation concerning the controversy already begun: (3) the desirability of
8
Case 2:10-cv-03213-BMS Document 139
Filed 11/20/12 Page 9 of 30
concentrating the litigation of the claims in a particular forum; and (4) the likely difficulties in
managing a class action. Fed. R. Civ. P. 23(b)(3). These factors favor maintenance of a class action
in this case. With over sixteen million potential Class members, it would be inefficient and costly
to maintain separate lawsuits against Defendants based on similar factual predicates and legal
theories. Many of the individual claims would also involve relatively small recoveries by the
cardholders, with the average Class member having paid less than $200 to participate in a Plan. (See
Mem. in Supp. at 17.) Likewise, this settlement would dispose of six similar class actions filed
throughout the country, promoting efficiency and saving the courts extensive resources. This Court
is an appropriate forum, as it possesses subject matter jurisdiction over the claims and personal
jurisdiction over the parties. The last factor, manageability, need not be considered since the
settlement will avoid trial. See Arnchem, 521 U.S. at 593 (“Whether trial would present intractable
management problems, see Rule 23(b)(3)(D), is not a consideration when settlement-only
certification is requested, for the proposal is that there be no trial.”). Accordingly, the superiority
requirements are met.
C.
Notice to the Class
Class members must “have certain due process protections in order to be bound by a class
settlement agreement.” In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141, 145 (3d Cir. 2005). In
order to satisfy the due process requirements, Class members must receive “the best notice
practicable under the circumstances. including individual notice to all members who can be
identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B).
Here, the notice program included individual notice in the form oE (1) statement notice
delivered to current HSBC cardmembers in their periodic billing statement: (2) email notice
9
Case 2:i0-cv-03213-BMS Document 139 Filed 11/20/12
Page 10 of 30
provided to current HSBC cardmembers who elected to receive communications from HSBC by
email; and (3) postcard notice mailed to Class members who were current cardmembers but did not
receive statement notice or email notice, or Class members who were no longer cardmembers.
(Settlement Agreement at 8-9; Walsh Aff.
¶J 5,
10, 13; Rindler Decl.
¶J
3-4.) These notices
contained detailed information about the Settlement Agreement, as required by Federal Rule of Civil
Procedure 23(c)(2)(B), including but not limited to: (I) the nature of the action, including the claims
made against HSBC; (2) a definition of the Class; (3) the total settlement amount and the individual
claims that each Class member would be entitled to; (4) the rights of the Class members, including
the rights to opt out, object, file a claim, and appear at the fairness hearing; (5) the binding effect of
ajudgment on Class members; and (6) places where Class members could obtain more information,
including a website and toll-free number. (See Walsh Aff. Ex. A [Notice Sent]; Mot. for Prelim.
Approval Ex. H [Prelim. Full Notice].)
HSBC reviewed its reasonably accessible account records in order to identify Class members.
(See Rindler Deci. ¶J 3-5.) As a result of the notice program, individual statement notices were sent
to over four million Class members, individual email notices were sent to over two million Class
members, and postcards were sent to over sixteen million Class members through first-class mail.
(Rindler Dccl.
¶J 3-4;
Walsh Aff.
¶
10.) Tn addition to individual notice, a notice was published in
USA Today on June 20. 2012. (Walsh Aff. ¶ 13.)
Considering the extensive individual notice, combined with the widespread published notice,
the Court finds that the notice was sufficient to satisfy the requirements oCRule 23 and due process.
See ZimmerPaperProds., Inc.
i’.
Berger&Montague, P. C., 758 F.2d 86, 91 (3dCir. 1985) (“[F]irst
class mail and publication regularly have been deemed adequate under the stricter notice
10
Case 2:i0cv-03213BMS
requirements
III.
Document 139
Fied 11120/12
Page 11 of 30
of Rule 23(c)(2).”).
FAIRNESS OF THE SETTLEMENT
A federal class action maybe settled only with the approval of a court. Fed. R. Civ. P. 23(e).
“[T]he district court acts as a fiduciary who must serve as a guardian of the rights of absent class
members... [Tjhe court cannot accept a settlement that the proponents have not shown to be fair,
.
reasonable and adequate.” Gen. Motors, 55 F.3d at 785. However, “[t]he decision of whether to
approve a proposed settlement of a class action is left to the sound discretion of the district court.”
Girsh v. Jepson, 521 F.2d 153, 156 (3d Cir. 1975); see a/so Walsh v. Great Ati. & Pac. Tea Co., Inc.,
726 F.2d 956, 965 (3d Cir. 1983). The law looks favorably upon class action settlements to conserve
scarce judicial resources. Gen. Motors, 55 F.3d at 784.
The decision of whether a settlement is fair, reasonable, and adequate is guided by the ninefactor test enunciated in Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975). The Girsh test directs the
court to examine: (1) the complexity, expense, and likely duration of the litigation; (2) the reaction
of the class to the settlement; (3) the stage of the proceedings and the amount of discovery
completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks
of maintaining the class action through the trial; (7) the ability of the defendants to withstand a
greater settlement; (8) the range of reasonableness of the settlement fund in light of the best possible
recovery: and (9) the range of reasonableness of the settlement fund in light of all the attendant risks
of litigation. Girsh, 521 F2d at 157.
A.
Complexity, Expense, and Duration of Litigation
This factor “captures the probable
costs,
in both
11
time
and money, of continued litigation.”
Case 2:10-cv-03213-BMS Document 139 FHed 11/20/12
Page 12 of 30
Waifririn. 391 F.3d at 535-36. This case was filed over two years ago and encompasses a class period
stretching back to 2004. The class is composed of over sixteen million HSBC cardholders, which
would result in expensive and time-consuming discovery for both parties if the settlement is not
approved. Likewise, this case raises complex legal issues, as evidenced in HSBC’s November 19,
2010 motion to dismiss, including defenses related to causation and preemption. Absent the
settlement, this case could result in significant expenditures on both sides in responding to the
pending motion to dismiss, completing discovery, litigating any summary judgment motions, and
preparing for a potentially enormous trial with various expert and Class member witnesses.
Accordingly, this factor favors settlement.
B.
Reaction of the Class to the Settlement
This factor gauges whether the class supports the settlement. Id. at 536. Silence from the
class is generally presumed to indicate agreement with the settlement terms. Ge,i. Motors, 55 F.3d
at 812.
Following extensive notice, both general and individual, there were only twelve objections
to the settlement filed by Class members, including two that were untimely. (Defs.’ Br. in Resp. to
Objections and Conditionally in Supp. of Final Approval of Class Action Settlement [Defs.’ Br.] at
1.) In addition to the objections received from Class members, the Attorneys General of Hawaii,
Mississippi. and West Virginia (collectively referred to as the “AGs”) also filed “objections” to the
settlement. (Id. at 2 n.1.) However, because the AGs are not Class members, they do not have
standing to object to the settlement. See Fed. R. Civ. P. 23(e)(5) (“Any class member may object
2
2
Acknowledging that the AGs are not Class members, “Plaintiffs do not purport to
release the AGs’ claims against HSBC.” (Mem. in Supp. at 17 n.9.) Because they are not Class
members, the AGs may continue to bring claims belonging to their respective states, such as state
12
Case 2:10-cv-03213-8MS Document 139 PHed 11/20/12 Page 13 of 30
to the proposal if it requires court approval under this subdivision (e).
. . .“)
(emphasis added); In
re Sunrise Secs. Litig., 131 F.R.D. 450, 459 (E.D. Pa. 1990) (“As a general rule, only class members
have standing to object to a proposed class settlement.”).
The Court considered all objections properly made by Class members, and concludes that the
issues raised in those objections fail to provide a valid reason for rejecting the settlement. The most
common complaint was that the settlement amount was insufficient to compensate the individual
objector for his or her estimated losses. While the Court is sympathetic to the objectors’ individual
experiences, a settlement is, by its nature, a compromise. Considering the legal and factual obstacles
that Plaintiffs must surmount to prove their claims, the Class members face a serious risk of
recovering nothing without the settlement. Likewise, the fact that the objectors represent a fraction
of one percent of the overall Class strongly favors settlement. See Bell Ati. Corp. v. Boiger, 2 F.3d
1304, 1313 (3d Cir. 1993) (“Less than 30 of approximately 1.1 million shareholders objected. This
is an infinitesimal number.”); Stoetzner v. US. Steel Coip., 897 F.2d 115, 118-19 (3d Cir. 1990)
(concluding that twenty-nine objectors from a class of 281 “strongly favors the Settlement”).
criminal and regulatory actions. However, the AGs are precluded from bringing claims “in a de
facto or de jure representative capacity on behalf of the plaintiffs” in this class action, because
doing so would allow Class members to double recover. See In re Baldwin United Corp., 770
F.2d 328, 341 (2d Cir. 1985): çf EEOCv. US. Steel Corp., 921 F.2d 489, 496-97 (3d Cir. 1990)
(Private litigation in which the EEOC is not a party cannot preclude the EEOC from
maintaining its own action because private litigants are not vested with the authority- to represent
the EEOC. But when the EEOC seeks to represent grievants by attempting to obtain private
benefits on their behalL the doctrine of representative claim preclusion must be applied.”). Class
members were adequately represented and given an opportunity to opt out of the settlement.
Allowing the Class members to recover under both this settlement and future AG-driven
litigations on the basis of the same facts would run counter to well-established class action
principles and would discourage settlements, which are strongly favored. Wirfizrin. 391 F.3d at
535 (“[Tjhere is an overriding public interest in settling class action litigation, and it should
therefore be encouraged.”).
.
.
Case 2:i0cv-03213BMS
C.
Document 139 Eed 11/20/12 Page 14 of 30
The Stage of the Proceedings and the Amount of Discovery Completed
The third Girsh factor considers the current stage of the proceedings and the lawyers’
knowledge of the strengths and weaknesses of their case. “Through this lens, courts can determine
whether counsel had an adequate appreciation of the merits of the case before negotiating.” Geii.
Motors, 55 F.3d at 813; see also In re Cendant €orp. Litig.. 264 F.3d 201.235 (3d Cir. 2001) (“This
factor captures the degree of case development that class counsel have accomplished prior to
settlement. Through this lens, courts can determine whether counsel had an adequate appreciation
of the merits of the case before negotiating.”).
Class Counsel had ample time and opportunity to assess the merits of this case before it
sought settlement approval. Although no formal discovery occurred in this case, the parties agreed
to voluntarily exchange information, which aided Class Counsel in assessing the merits of the case.
For example, HSBC provided Class Counsel with thousands of pages of documentation concerning
the marketing, selling, and processing of the Plans. (Defs.’ Br. at 3; Mem. in Supp. at 25.) Class
Counsel also interviewed HSBC representatives to obtain information regarding the Plans. (Mem.
in Supp. at 25.) In addition to investigating and researching the legal claims and defenses in this case,
Class Counsel also has experience in negotiating other similar payment protection plan class actions,
which would bolster Class Counsel’s ability to adequately appreciate the merits of this case. (See Id.
at 26; Class Counsel Qualifications). Class Counsel also conducted discovery in one of the other six
class actions against HSBC for payment protection products, which contributed to Class Counsel’s
familiarity with the claims and products at issue here. (See Mem. in Supp. at 25.)
When analyzing this Girsh factor, courts also examine whether the settlement resulted from
arms-length negotiations. See
In
re Corel Corp. Sec. Litig.. 293 F. Supp. 2d 484, 491 (E.D. Pa.
14
Case 2:10-cv-03213-BMS
Document 139
F!ed 11120112
Page 15 of 30
2003). When the settlement results from arm’s-length negotiations, the court will “afford[]
considerable weight to the views of experienced counsel regarding the merits of the settlement.”
Mc.4larnen v. Swift Transp. Co., Inc.. Civ. A. No. 09-1737, 2010 WL 365823, at *8 (E.D. Pa. Jan.
29, 2010); see also Corel Coip. Sec. Litig., 293 F. Supp. 2d at 491 (Courts generally recognize that
a proposed class action settlement is presumptively valid where, as in this case, the parties engaged
in arm’s length negotiations after meaningful discovery.”); In re Geiz. Instrument Sec. Litig., 209 F.
Supp. 2d 423, 431 (E.D. Pa. 2001) (“Significant weight should be attributed to the belief of
experienced counsel that the settlement is in the best interests of the class.”). Settlement discussions
included experienced counsel participating in three mediation sessions before a respected and
impartial mediator. (Decl. of Jonathan B. Marks ¶ 14.) The settling parties provided the mediator
with extensive written submissions, including exhibits and case law. (Id.
¶J 10-1 1.) With the aid of
the mediator, the parties were able to discuss and analyze key issues of the case. (Id.
¶J 15-16,
19.)
The mediator concluded, after his involved discussions with counsel, that the settlement was a
compromise that reflected ‘the Parties’ assessment of the perceived relative strengths and
weaknesses of their positions, and the risks inherent in continued litigation.” (Id.
¶ 22.) The Court
finds that the settlement was a result of arm’s-length negotiations.
Although Plaintiffs received no formal discovery in this particular case, the informal
discovery, Class Counsel’s relevant litigation experience, discovery in a related matter, and the
parties’ arm’s-length discussions all favor approving the settlement. See Cenclant Corp. Litig., 264
F. 3d at 236 (affirming district court’s order approving settlement even though “Lead Counsel mainly
engaged in only informal discovery’ in re Schering-PloiighiMerck Merger Litig., Civ. A. No. 091099, 2010 WL 1257722, at *10 (D.N.J. Mar. 26. 2010) (finding that informal discovery, including
15
Case 2:10-cv03213BMS
Document 139
FHed 11/20/12
Page 16 of 30
discovery from parallel proceedings, favored settlement).
D.
The Risks of Establishing Liability and Damages
“By evaluating the risks of establishing liability, the district court can examine what the
potential rewards (or downside) of litigation might have been had class counsel elected to litigate
the claims rather than settle them.” Ge,,. Motors, 55 F.3d at 814. Because this factor requires the
court “to balance the likelihood of success and the potential damage award if the case were taken to
trial against the benefits of an immediate settlement,” the more risks that Plaintiffs may face during
litigation the stronger this factor favors approving a settlement. See In re Prudential Ins. Co. A,iz.
Sales Practice Litig. Agent Actions, 148 F.3d 283, 319 (3d Cir. 1998). Tn examining this factor, the
court may “give credence to the estimation of the probability of success proffered by class counsel,
who are experienced with the underlying case, and the possible defenses which maybe raised to their
causes of action.” Lachance v. Harrington, 965 F. Supp. 630, 638 (E.D. Pa. 1997).
Plaintiffs admit that they face difficult factual and legal hurdles in this litigation if the
settlement is not approved. (Mem. in Supp. at 27.) For example, Defendants argue that Plaintiffs’
claims are preempted by federal law. Plaintiffs concede that at least two courts have found that
regulations implemented by the Office of the Comptroller of the Currency relating to payment
protection issues preempt state law causes of action that are similar to those advanced in this action.
(See id.) In addition to its preemption defense. HSBC also claims to have strong defenses to
Plaintiffs’ claims on the merits, including documentary evidence refuting Plaintiffs’ claims that
lISBC enrolled cardmembers in the Plans without their consent. (Defs.’ Br. at 9-10.)
The risk of establishing damages is often considered in conjunction with the risk of
establishing liability. See Lena/ian v. Sears, Roebuck & Co., Civ. A. No. 02-45. 2006 WL 2085282.
16
Case 2:10cv03213BMS Document 139 FUed 11/20/12 Page 17 of 30
at * 14 (D.N.J. July 24, 2006). Plaintiffs may face considerable hurdles proving the exact damages
for a Class with over sixteen million participants. Likewise, HSBC asserts that it would vigorously
challenge Plaintiffs’ ability to show a causal nexus between HSBC’s alleged wrongdoing and the
losses sustained by Class members. (Defs.’ Br. at 10.) With victory for the Class by no means
assured, the Court finds that the risks of establishing liability and damages weigh heavily in favor
of approving the proposed settlement.
E.
The Risks of Maintaining the Class Action Through Trial
A court may decertify or modify a class at any time during the litigation should the class
prove to be unmanageable. See Linerboard Antitrust Litig., 321 F. Supp. 2d 619, 631 (E.D. Pa.
2004). HSBC argues that certification could be challenged on the basis that individual issues
predominate common issues. For example, different Class members enrolled in the Plans by different
means, such as by telephone, through mail solicitations, or even allegedly without their consent.
(Defs.’ Br. at 11 .) Therefore, the alleged false statements or specific unfair conduct may vary across
the Class. There are also variations in whether Class members filed claims for benefits under the
Plans, whether those claims were denied, what each Class member paid for enrollment, and how
long each Class member was enrolled. The large size of the Class may also serve as a threat to
maintaining certification, with the possibility that the Class might become unwieldy in the future.
The risk of decertification is a real possibility here, and thus this factor weighs in favor of approving
the proposed settlement.
F.
The Ability of the Settling Defendants to Withstand a Greater Judgment
This factor requires the Court to evaluate whether the Defendants “could withstand a
judgment for an amount significantly greater than the Settlement.” Cendant Corp. Litig., 264 F.3d
17
Case 2:i0cv-03213-BMS Document 139 Fiied 11120/12 Page 18 of 30
at 240. HSBC, as a multinational bank with offices in over 88 countries and territories, could
conceivably withstand a greater judgment. (See Second Am. Compl.
¶
37.) However, the mere
possibility that HSBC could withstand a greaterjudgment does not prevent the Court from approving
the settlement. See Sullivan v. DB Invs., Inc., 667 F.3d 273, 323 (3d Cir. 2011) (“{W]e agree that,
in any class action against a large corporation, the defendant entity is likely to be able to withstand
a more substantial judgment, and, against the weight of the remaining factors, this fact alone does
not undermine the reasonableness of the instant settlement.”); Warfririn, 391 F.3d 516, 538 (3d Cir.
2004) (“[T]he fact that DuPont could afford to pay more does not mean that it is obligated to pay any
more than what the
.
.
.
class members are entitled to
.
.
.
Here, the District Court concluded that
DuPont’s ability to pay a higher amount was irrelevant to determining the fairness of the settlement.
We see no error here.”)
G.
The Range of Reasonableness of the Settlement Fund in Light of the Best
Possible Recovery and in Light of the Attendant Risks of Litigation
The last two Girsh factors assess “the present value of the damages plaintiffs would likely
recover if successful, appropriately discounted for the risk of not prevailing.
.
compared with the
amount of the proposed settlement.” Prudential, 148 F.3d at 322. In conjunction, these two factors
ask “whether the settlement represents a good value for a weak case or a poor value for a strong
case.” Wi,frwin, 391 F.3d at 538. “Notably, in conducting the analysis, the court must guard against
demanding too large a settlement based on its view of the merits of the litigation: after all, settlement
is a compromise, a yielding of the highest hopes in exchange for certainty and resolution.” Sullivan,
667 F.3d at 324.
The settlement provides for S23.5 million to be distributed to the Class, less attorneys’ fees
18
Case 2:10—cv--03213-BMS Document 139 Fied 11/20/12 Page 19 of 30
and other expenses. Although Plaintiffs do not set forth an exact estimation of the damages they
would likely recover if successful (other than to assert that the average cardholder spent less than
S200 on the Plans), Plaintiffs discuss the obstacles that must be surmounted before any damages may
be awarded. (See Mem. in Supp. at 27-30.) Such legal roadblocks, including HSBC’s preemption
argument, its allegations that causation cannot be established, and its claims that it possesses
documentary evidence that will negate Plaintiffs’ claims, evidence a risk that the Class could recover
a substantially reduced judgment—if any at all. Similarly, the size of the Class and the differing
circumstances of each Class member would make damages estimation, and recovery, even more
difficult. Therefore, while the exact maximum possible recovery may be unclear, the extensive risks
of litigation are not. Because the likelihood of success is deeply in question, these last factors weigh
in favor of settlement.
H.
Prudential Factors
In addition to considering the Girsh factors, courts in the Third Circuit also consider the
following factors outlined in Prudential:
[T]he maturity of the underlying substantive issues, as measured by
experience in adjudicating individual actions, the development of
scientific knowledge, the extent of discovery on the merits, and other
factors that bear on the ability to assess the probable outcome of a
trial on the merits of liability and individual damages; the existence
and probable outcome of claims by other classes and subclasses; the
comparison between the results achieved by the settlement for
individual class or subclass members and the results achieved—or
likely to be achieved—for other claimants; whether class or subclass
members are accorded the right to opt out of the settlement; whether
any provisions for attorneys’ fees are reasonable; and whether the
procedure for processing individual claims under the settlement is fair
and reasonable.
See Prudential, 148 F.3d at 323. The Court concludes that none of the Prudential factors weighs
19
Case 2:i0cv-03213BMS
Document 139
EHed 11/20/12 Page 20 of 30
against approval and three of the factors weigh in favor of settlement: (1) whether class or subclass
members are accorded the right to opt out of the settlement; (2) whether any provisions for attorneys’
fees are reasonable; and (3) whether the procedure for processing individual claims under the
settlement is fair and reasonable .A 11 Class members were given the opportunity to opt out of the
settlement. As discussed in further detail below, the attorneys’ fees sought by Class Counsel are
reasonable in light of the time and research required in this complicated matter. Lastly, the procedure
for processing individual claims under the settlement is fair and reasonable, with clear and concise
claim forms made available to all reasonably identifiable Class members. (See Mot. for Prelim.
Approval Ex. G [Claim Form].)
I.
Summary of Factors
In sum, all of the Girsh and Prudential factors are neutral or weigh in favor of settlement,
with the exception of whether Defendants could withstand a greaterjudgment. This Court believes
that the settlement represents a fair compromise between two parties seeking to end litigation whose
outcome is murky and uncertain. The settlement, as a product of lengthy negotiation and mediation
between experienced attorneys who vigorously represented their clients’ interests, will therefore be
approved.
IV.
ATTORNEYS’ FEES
A.
Overview
Under the Federal Rules of Civil Procedure, [iJn a certified class action, the court may
award reasonable attorney’s fees and nontaxable costs that are authorized by law or by the parties’
agreement.” Fed. R. Civ. P. 23(h). This Court must conduct a “thorough judicial review” of Class
20
Case 2:10-cv-03213-BMS
Document 139 PUed 11/20/12 Page 21 of 30
Counsel’s request for attorneys’ fees. See Prudential, 148 F.3d at 333; Ge,i. Motors, 55 F3d at 819.
Courts in this Circuit employ one of two methods for calculating attorneys’ fees in the class
action context. The percentage-of-recovery method awards class counsel a fixed portion of the
settlement fund, and is generally used in common fund cases. Diet Drugs, 582 F.3d at 540. Under
this method, courts determine an appropriate fee for class counsel by examining the size of the
settlement fund, any objections to the fee request, counsel’s skill and efficiency, the complexity of
the litigation and the amount of time counsel spent on it, the risk of nonpayment, and awards in
similar cases. See Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.l (3d Cir. 2000).
The lodestar method, normally applied in statutory fee shifting cases, multiplies the number
of hours counsel reasonably worked by a reasonable hourly rate. See Lake
i
First Nationwide Bank,
900 F. Supp. 726, 734 (E.D. Pa, 1995). Because this is a common fund case, the Court will employ
the percentage-of-recovery method to determine the amount of attorneys’ fees it will award Class
Counsel. As suggested by the Third Circuit, the Court will then apply a lodestar cross-check to
ensure the reasonableness of the award. See Gunter, 223 F.3d at 195 n. 1.
B.
Application of the Percentage-of-Recovery Method
Class Counsel requests $7,654,041.84 million in attorneys’ fees and $100,958.16 in costs.
(Class Counsel’s Appl. for Att’ys’ Fees and Costs [Att’y’s Fees] at 16.) Applying the percentage-of
recovery method. the Court will award reasonable attorneys’ fees in the amount of 30% of the
settlement amount, or S7,050.000. and will award Plaintiffs’ counsel all costs accrued.
In determining a reasonable percentage fee award, the Third Circuit requires the district court
to consider ten factors: (1) the size of the fund created and the number of beneficiaries; (2) the
presence or absence of substantial objections by members of the class to the settlement terms andor
21
Case 2:10cv-03213BMS Document 139 ENed 11/20/12 Page 22 of 30
fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity
and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time devoted to the case
by plaintiffs’ counsel; (7) awards in similar cases; (8) the value of benefits attributable to the efforts
of class counsel relative to the efforts of other groups, such as government agencies conducting
investigations; (9) the percentage fee that would have been negotiated had the case been subject to
a private contingent fee arrangement at the time counsel was retained; and (10) any innovative
settlement terms. Diet Drugs, 582 F.3d at 541. These factors should not “be applied in a rigid,
formulaic manner, but rather a court must weigh them in light of the facts and circumstances of each
case.” Moore v, Comcast Corp., Civ. A. No. 08-773, 2011 WL 238821, at *4 (E.D. Pa. Jan. 24,
2011).
1.
The size of the fund and the number of benefIciaries
The Settlement Agreement establishes a common fund of $23.5 million and notice has been
disseminated to over sixteen million Class members. The Third Circuit has held that, in some
instances, a large settlement award warrants a decrease in the percentage of the fund the attorneys
can recover for fees. See Sullivan, 667 F.3d at 331 n.64. However, “there is no rule that a district
court must apply a declining percentage reduction in every settlement involving a sizable fund.” Id.
The fact-intensive analysis of the aforementioned ten factors “must trump all other considerations.”
Id. Ultimately, based on a comprehensive analysis of the factors, the Court finds that a 30% fee, a
reduction from Class Counsel’s requested percentage of approximately 33%, is a fair recovery
considering the size of the fund and number of beneficiaries. See In re Processed Egg Prods.
Antitrust Litig., Civ. A. No. 08-2002. 2012 WL 5467530, at *3 (E.D. Pa. Nov. 9,2012) (approving
a 30% fee award for a $25 million settlement).
Case 2:10-cv03213-BMS Document 139 Red 11/20/12 Page 23 of 30
2.
The presence or absence of substantial objections by Class membeic
Of the twelve Class members who objected to the settlement, only four objected specifically
to the attorneys’ fees requested. (See Maye Moody Objection to Settlement Agreement, July 9, 2012,
ECF No. 79; Todd Spann Objection to Settlement Agreement, Aug. 8,2012, ECF No. 95; Jose Perez
Jr. Objection to Settlement Agreement, Aug. 13, 2012, ECF No. 97; Sherry Shahin Objection to
Settlement Agreement, Aug. 14, 2012, ECF No. 98.) The minuscule number of objections weighs
in favor of this award of attorneys’ fees. See In re Rite Aid C’orp. Sec. Litig., 396 F.3d 294, 305 (3d
Cir. 2005) (two objectors out of 300,000 class members supports approval of the requested fees).
3.
The skill and effIciency of the attorneys involved
As discussed more extensively above, Class Counsel is highly experienced, having
successfully litigated and settled several other litigations involving plans similar to those at issue in
this case. (See Att’ys’ Fees at 7; Class Counsel Qualifications.) Such experience contributed to Class
Counsel’s knowledge of the structure and operation of these types of plans, which in turn reduced
the number of billable hours. (See Att’ys’ Fees at 7.) Similarly, such relevant experience contributed
to Class Counsel’s ability to effectively settle this litigation. (See id.)
The Court’s belief that Class Counsel was skillful and efficient is also echoed by the
mediator, who worked with the parties for months to negotiate the settlement. The impartial mediator
affirmed that “each of the Parties is represented by experienced and competent counsel, willing, if
necessary. to litigate the matter to conclusion” and that “counsel for each Party were effective
advocates for their clients and effective participants in the effort to reach a settlement that fairly
valued the risks and opportunities of each Party.” (Dccl. of Jonathan B. Marks ¶J 18, 20.) Therefore,
this factor weighs in favor of the award of attorneys’ fees.
23
Case 2:10-cv-03213-BMS
4.
Document 139
Filed 11/20/12
Page 24 of 30
The complexity and duration oft/ic litigation
Class Counsel spent more than 7,000 hours litigating the relevant six class actions governed
by the Settlement Agreement over more than two years. (See Att’ys’ Fees at 9.) Class Counsel
participated in numerous court hearings and mediation sessions, and submitted many well-researched
and thorough filings. Likewise, these cases involve complex and novel issues, including numerous
defenses raised and the effect the Settlement Agreement would have on non-party Attorneys General.
The complexity and duration of the litigations weigh in favor of this attorneys’ fees award.
5.
The risk 0/nonpayment
This factor allows courts to award higher attorneys’ fees for riskier litigations. See Chakejian
v. Equi/iix In/ö. Servs., LLC, 275 F.R.D. 201, 219 (E.D. Pa. 2011) As the Court discussed in Part
III.D, the risk of nonpayment borne by Plaintiffs’ counsel, whose fee is contingent on a favorable
outcome, was substantial. Two particular risks that could have contributed to nonpayment are
Defendants’ argument that Plaintiffs’ claims were preempted and the difficulty that Plaintiffs could
have faced in maintaining class certification. Counsel, in litigating the case, shouldered a significant
risk that after thousands of hours and years of work they would be left empty-handed. For these
reasons, this factor strongly weighs in favor of the Court’s award of attorneys’ fees.
6.
The amount of time devoted to the case by Class Counsel
As of July 17, 2012 when the petition for attorneys’ fees was filed, Plaintiffs’ counsel had
spent over two years and 7,474 hours litigating the six relevant class actions. This included
researching and filing the complaints, participating in multiple mediation sessions, petitioning the
Court for preliminary approval. researching Defendants’ motion to dismiss, and other preparatory
work. After July, counsel expended additional hours researching and drafting the motion for final
24
Case 2:10-cv-03213-BMS Document 139 Filed 11120/12 Page 25 of 30
approval, preparing for and attending the fairness hearing, and researching and responding to the
Court’s request for further briefing following the fairness hearing. Such considerable time, which
was reasonably spent by Plaintiffs’ counsel to prepare for these large and complex class actions,
weighs in favor of a 30% attorneys’ fees award.
7.
The awards in similar cases
In the Third Circuit, fee awards in common fund cases generally range from 19% to 45% of
the fund. See Bredhenner v. Liberty Travel, Inc., Civ. A. Nos. 09-905, 09-1248, 09-4587, 2011 WL
1344745, at *21 (D.N.J. Apr. 8, 2011). In fact, the Third Circuit has relied on studies that
demonstrated that an average percentage fee recovery in large class action settlements is
approximately 30%. See Sullivan, 667 F.3d at 333. Thus, a fee award of 30% of the total settlement
here is reasonable and in keeping with similar precedent. See McGee v. Cont ‘1 Tire N. Am., Inc., Civ.
A. No. 06-6234, 2009 WL 539893, at *16 (D.N.J. Mar. 4,2009) (approving a 22%-31% fee award
in a consumer fraud class action): In re LinerboardAntitrustLitig., Civ. A. Nos. 98-5055, 99-1000,
99-1341, 2004 WL 1221350, at *14 (E.D. Pa. June 2,2004) (citing a Federal Judicial Center study
that found that in federal class actions the median attorneys’ fee awards was between 27% and 30%).
8.
The value of benejits attributable to Class Counsel
As discussed above, Class Counsel’s relevant experience, especially brokering settlements
in cases involving similar payment protection plans, allowed it to more effectively and efficiently
litigate this case. There is no contention, by objectors or othenvise, that the settlement could be
attributed to work done by other groups, such as government agencies.
9.
Fee that would have been negotiated in contingent fee
arrangement
In private contingency fee cases, lawyers routinely negotiate agreements for between 30%
25
Case 2:10-cv-03213-BMS Document 139
FHed 11/20/12
Page 26 of 30
and 40% percent of the recovery. See In re Ins. Brokerage Antitrust Litig., 282 F.R.D. 92. 123
(D.N.J. 2012); In relkon Office Solutions, Inc. Sec. Litig., 194 F.R.D. 166, 194 (E.D. Pa. 2000). The
Court’s award is squarely within this range.
10.
Any innovative terms ofsettlement
The Settlement Agreement does not contain any particularly innovative terms. Therefore, this
factor neither weighs against nor for the proposed fee request. See McDonough v. Toys “R” Us, Inc.,
834 F. Supp. 2d 329, 345 (E.D. Pa. 2011) (“In the absence of any innovative terms, this factor neither
weighs in favor or against the proposed fee request.”); In re Merck & Co Vytorin ERJSA Litig., Civ.
A. No. 08-285, 2010 WL 547613, at *12 (D.N.J. Feb. 9, 2010).
C.
Lodestar Cross-check
“The lodestar crosscheck is intended to gauge the reasonableness of the attorneys’ fee award
as a whole.” Milliron v. T-Mobile, USA, Inc., 423 F. App’x 131, 136 (3d Cir. 2011). In performing
the lodestar cross-check, the court multiplies “the number of hours reasonably worked on a client’s
case by a reasonable hourly billing rate for such services based on the given geographical area, the
nature of the services provided, and the experience of the attorneys.” Rite Aid, 396 F.3d at 305. The
Court may then apply a multiplier to “account for the contingent nature or risk involved in a
particular case and the quality of the attorneys’ work.” Id. at 305-06. If the multiplier that must be
used in order to obtain the result reached by application of the percentage-of-recovery method “is
too great, the court should reconsider its calculation under the percentage-of-recovery method.” Id.
at 306. However, because the cross-check is not the primary analysis in common fund cases, it does
not require “mathematical precision [Jor bean-counting.” Id. In evaluating the hours reasonably spent
on the case. the Court does not have to “review actual billing records” but can “rel[vj on summaries
26
Case 2:10cv03213BMS Document 139 FHed 11/20/12 Page 27 of 30
submitted by the attorneys.” See id.
In its motion for attorneys’ fees and costs, Class Counsel claims that, between filing the first
complaint in 2010, and July 2012 when it filed the motion for fees and costs, it billed 7,474 hours.
(Att’ys’ Fees at 9.) The Court believes that these hours are reasonable in light of the length of the
proceedings, their complexity, and the extensive work completed. For example, in the Esslinger
case, Class Counsel researched and wrote three complaints, prepared for and participated in multiple
mediation sessions, conducted informal discovery which consisted of reviewing thousands of
documents and interviewing two witnesses, coordinated with Defendants to write a settlement
agreement, and drafted motions for preliminary settlement approval. (See id. at 9-11.) Class Counsel
also spent additional time after July2012 preparing for final approval of the Settlement Agreement,
the fairness hearing, and subsequent briefing requested by the Court. On the basis of the extensive
work done by counsel throughout a two-year period, the Court finds 7,474 hours to be reasonable.
Class Counsel calculates the lodestar to be $4,138,129.35, which would make the hourly
billable rate applied approximately $554. (See id. at 14.) Tn assessing whether the hourly billable rate
is reasonable, courts should apply “blended billing rates that approximate the fee structure of all the
attorneys who worked on the matter.” Rite Aid, 396 F.3d at 306. The hourly rate should be
reasonable in light of “the given geographical area, the nature of the services provided, and the
experience of the attorneys.” Id. at 305. The Third Circuit has favorably considered the fee schedule
established by Community Legal Services when evaluating the reasonableness of a lawyer’s hourly
rate. See Maldonado v. Houstoun. 256 F.3d 181, 187 (3d Cir. 2001). Although the hourly billable
rate requested is higher than that suggested by Community Legal Services, which offers a range of
S360 to S460 for attorneys with 25 or more years experience, the Court believes that a higher hourly
77
Case 2:10-cv03213-BMS
Document 139 EHed 11/20/12 Page 28 of 30
billable rate is acceptable in light of the extensive experience that Class Counsel collectively shares
and the complex legal services it provided. See C’hakejian, 275 F,R.D. at 217 (determining that rates
between $485 and $700 are reasonable); Reibstein v. Rite Aid (oip., 761 F. Supp. 2d 241. 260 (E.D.
Pa. 2011) (rates between $175 and $650 are reasonable): Serrano v. Sterling Testing Svs., Inc., 711
F. Supp. 2d 402, 422 (E.D. Pa. 2010) (rates between $290 and $650 are “within the range charged
by attorneys with comparable experience levels for consumer class action litigation”). Likewise, if
the Court were to take into account the additional hours expended by counsel after July 2012, the
hourly rate used to reach Plaintiffs’ lodestar would be greatly reduced and likely fall within the range
suggested by Community Legal Services.
Using a lodestar of $4,138,129.35, the Court’s award of $7,050,000 in attorneys’ fees yields
an acceptable multiplier of 1 73 This multiplier is acceptable for two reasons. First, the multiplier
falls within the range of acceptable multipliers approved by the Third Circuit. Prudential, 148 F.3d
at 341 (noting that multipliers from one to four are reasonable and frequently awarded in common
fund cases); see also AT&TCorp.,455 F.3d 160, 173 (3d Cir. 2006) (finding that 1.28 and 2.99 were
acceptable multipliers). Second, although multipliers are discretionary, the circumstances ofthis case
warrant the use of a multiplier. See Prudential, 148 F.3d at 340-41 (explaining that a multiplier is
not required but that it “may reflect the risks of nonrecovery facing counsel, may serve as an
incentive for counsel to undertake socially beneficial litigation, or may reward counsel for an
extraordinary result”). The Court applies the multiplier in this case because of the high risk of non
Even using a heavily reduced blended hourly billable rate of S250. to account for the
fact that Class Counsel likely used lawyers and personnel with varying experience and billable
rates, the lodestar in this case would be S 1.868.500. The resulting multiplier. 3.77. is still within
the range of acceptable multipliers laid out by the Third Circuit. See Prudential. 148 F.3d at 341.
28
Case 2:10-cv-03213-BMS Document 139 Fed 11/20/12 Page 29 of 30
recovery shouldered by PlaintitTs’ counsel, who worked on a contingency basis, for more than two
years. For the aforementioned reasons, and based on the lodestar cross-check, the Court’s award of
$7,050,000 in attorneys’ fees is reasonable.
V.
SERVICE AWARDS FOR CLASS REPRESENTATIVES
The Court also approves the requested $3,500 service awards for the Class representatives.
Approving service, or incentive, awards is common, especially when the settlement establishes a
common fund. See Sullivan, 667 F.3d at 333 n.65. “The purpose of these payments is to compensate
named plaintiffs for the services they provided and the risks they incurred during the course of class
action litigation, and to reward the public service of contributing to the enforcement of mandatory
laws.” Id.
A service award is appropriate here because of the work done and risks undertaken by the
Class representatives. For example, the success of the Complaint, and likely the settlement, depended
on the named Plaintiffs spending significant time searching their personal bank records for pertinent
documents regarding enrollment in and administration of the Plans. (See Att’ys’ Fees at 15.) The
Class representatives also publicly disclosed personal information during this litigation, including
their names, addresses, any disabilities, and details of their credit card accounts with Defendants.
(See Second Am. Compl.
¶J
20-31, 64-170.) For these reasons, the Court approves an incentive
award of $3,500 to be paid from the settlement fund to each Class representative.
VI.
CYPRES AWARD
The settlement provides that “[ajny balance remaining in the Settlement Fund
29
.
.
.
shall be
Case 2:10cv032i3BMS Document 139 Fi’ed 11120/12 Page 30 of 30
donated cvpres to charities mutually agreed upon by the Settling Parties and approved by the Court.”
(Settlement Agreement at 12.) The Court withholds judgment on approving the cypres award until
after it receives submissions outlining the suggested cypres charities and the amount ofthe proposed
donation.
VII.
CONCLUSION
For the reasons stated above, the Court grants final certification of the Class, holds that the
settlement is fair, adequate, and reasonable, awards Plaintiffs’ counsel $7,050,000 in attorneys’ fees,
and $100,958.16 in costs, and awards Class representatives service awards of $3,500 each. An Order
consistent with this Memorandum will be docketed separately.
30
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?