Custom Hair Designs by Sandy, LLC et al v. Central Payment Co., LLC

Filing 344

MEMORANDUM AND ORDER - The Court grants the Unopposed Motion for Settlement, Filing No. 331 , and grants the Unopposed Motion for Attorney Fees, Expenses, and Service Award, Filing No. 333 , and approves Class Counsel's requests for attorne ys' fees of $28,000,000, expenses of $1,209,102.88, and service awards of $15,000 each for the Class Representatives. The Parties and the Settlement Administrator are directed to carry out the Settlement according to its terms . The Court hereby dismisses this action with prejudice as against the named Plaintiffs, all Class members, and Defendant, and the Parties are directed to take the necessary steps to effectuate the terms of the Settlement. The Parties shall bear their own costs except as provided by the Settlement. A separate judgment will be entered. Ordered by Senior Judge Joseph F. Bataillon. (MKR)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
CUSTOM HAIR DESIGNS BY SANDY,
LLC, on behalf of themselves and all others
similarly situated; and SKIP'S PRECISION
WELDING, LLC, on behalf of themselves
and all others similarly situated;

8:17CV310

MEMORANDUM AND ORDER
Plaintiffs,
vs.
CENTRAL PAYMENT CO., LLC,
Defendant.

This matter is before the Court on the unopposed (1) motion for final approval of
class action settlement (Filing No. 331) and (2) motion for attorneys’ fees, expenses,
and service awards (Filing No. 333) filed by Plaintiffs and Class Counsel. The Court
has reviewed all of the filings and evidence related to the settlement agreement and
release (the “Settlement”) (Filing No. 328-2), received comprehensive briefing and
declarations, and conducted a final fairness hearing on August 11, 2022.

Having

considered the written submissions and after oral argument at the hearing, the Court
concludes that the class-action settlement should be approved and the motion for
attorneys’ fees, expenses, and service awards granted.
I.

LAW
Federal Rule of Civil Procedure 23(e) requires judicial approval of class action

settlements. In approving a class settlement, the district court must consider whether it
is fair, reasonable, and adequate. DeBoer v. Mellon Mortgage Co., 64 F. 3d 1171, 1178
(8th Cir. 1995). Courts in this Circuit analyze the following factors to determine whether

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a settlement is fair, reasonable, and adequate:

“the merits of the plaintiff’s case,

weighed against the terms of the settlement; the defendant’s financial condition; the
complexity and expense of further litigation; and the amount of opposition to the
settlement.” Huyer v. Njema, 847 F.3d 934, 939 (8th Cir. 2017); Van Horn v. Trickey,
840 F.2d 604, 607 (8th Cir. 1988). “The most important consideration in the analysis
requires balancing the strength of the [representative] plaintiffs’ case against the value
of the settlement terms to the class.” Marshall v. Nat’l Football League, 787 F.3d 502,
514 (8th Cir. 2015).

A court may also consider procedural fairness to ensure the

settlement is “not the product of fraud or collusion.”

In re Wireless Tel. Fed. Cost

Recovery Fees Litig., 396 F.3d 922, 934 (8th Cir. 2005). The experience and opinion of
counsel on both sides may be considered, as well as whether a settlement resulted
from arm’s-length negotiations, and whether a skilled mediator was involved.

See

Deboer, 64 F.3d at 1178. A court may also consider the settlement’s timing, including
whether discovery proceeded to the point where all parties were fully aware of the
merits, and whether class members were provided with adequate notice and an
opportunity to argue their objections to district court. Id. at 1176.
A thorough judicial review of fee applications is required in all class action
settlements.

In re Diet Drugs, 582 F.3d 524, 537-38 (3d Cir. 2009); Johnson v.

Comerica Mortgage Corp., 83 F.3d 241, 246 (8th Cir. 1996) (noting that the district court
bears the responsibility of scrutinizing attorney fee requests). The Eighth Circuit Court
of Appeals has established factors that a court should examine in determining both the
reasonableness of a lodestar award, and the use of a multiplier to enhance the award.
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974); see also Zoll

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v. E. Allamakee Cmty. Sch. Dist., 588 F.2d 246, 252 (8th Cir. 1978) (explaining that the
Johnson factors apply to determining both upward adjustments and a reasonable hourly
rate). Service awards to representative plaintiffs encourage members of a class to
become class representatives and reward individual efforts taken on behalf of a class.
Cook v. Niedert, 142 F.3d 1004, 1016 (7th Cir. 1998) (awarding incentive award of
$25,000).
II.

BACKGROUND
A. Procedural
Defendant Central Payment Co., LLC (“CPAY”) provides payment processing

services. Plaintiffs are former CPAY customers that allege CPAY engaged in billing
practices that violated 18 U.S.C. § 1962(c) (“RICO”), fraudulently concealed material
facts, breached the covenant of good faith and fair dealing, and breached the Parties’
contracts.

Plaintiffs sought to recover the alleged overcharges on behalf of

themselves and a national class of other merchants.

CPAY denied Plaintiffs’

allegations.
The original complaint was filed on August 21, 2017 and asserted breach of
contract claims.

After CPAY answered and the parties took preliminary discovery,

Plaintiffs amended the complaint to add claims for RICO and fraudulent concealment.
CPAY moved to dismiss these new claims and such motion was denied. Filing No. 87.
Substantial discovery followed, including the production and review of tens-ofthousands of pages of documents, the exchange of three expert reports, and the taking
of six depositions. Plaintiffs thereafter moved for certification of the Class and CPAY
moved for summary judgment and to strike one of Plaintiffs’ experts. On February 11,

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2020, the Court certified the Class, denied summary judgment to CPAY, and denied the
motion to strike. Filing No. 142.
CPAY obtained leave from the Eighth Circuit to appeal the class certification
decision and the case was stayed pending resolution of that appeal. The Eighth Circuit
thereafter affirmed this Court’s class certification decision. Custom Hair Designs by
Sandy, LLC v. Central Payment Co., LLC, 984 F.3d 595 (8th Cir. 2020).

CPAY’s

subsequent requests for en banc review from the Eighth Circuit and certiorari review
from the Supreme Court were also denied.
The Parties thereafter resumed merits discovery, with more than 300,000 pages
of additional documents being produced, 15 additional depositions being taken, and
seven additional expert reports being exchanged. After Plaintiffs provided notice to the
Class in accordance with the plan approved by the Court, the Parties engaged in
voluminous motion practice. CPAY moved to stay the claims of certain Class members
it claimed were contractually bound to arbitrate any disputes and separately moved for
leave to assert arbitration as an affirmative defense. After both motions were denied
(Filing No. 153), CPAY appealed.

Although CPAY was denied a stay pending

resolution of this appeal in this Court, its request for a stay from the Eighth Circuit (as
well as its arbitration appeal) remained unresolved at the time the Settlement was
reached.
CPAY also filed three additional motions: a motion to decertify the Class, a
motion for partial summary judgment on several elements of the Class claims, and a
motion to preclude testimony from one of Plaintiffs’ experts. Plaintiffs, meanwhile, filed
two motions: a motion for summary judgment on all elements of the express breach of

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contract claim except damages, as well as a motion to preclude testimony from one of
CPAY’s experts and limit the testimony of another. All such motions were denied (Filing
No. 297).
The Parties engaged in pre-trial activities, exchanging witness lists, exhibit lists,
deposition designations, motions in limine, and responses and objections thereto.
While in the midst of their trial preparations, the parties participated in mediation on
January 7, 2022, with experienced class-action mediator Hunter Hughes. Despite arm’s
length and contentious negotiations, no settlement was reached. However, the parties
continued to exchange settlement proposals following the mediation and ultimately
reached a memorandum of understanding on the terms of the settlement.
The Settlement was subsequently reduced to a settlement agreement and
release, for which the parties sought preliminary approval. On March 9, 2022, the
Court issued preliminary approval of the proposed settlement, affirmed its earlier
certification of the Class, and instructed that notice of the settlement be distributed to
the class members (Filing No. 329).
On March 14, 2022, the settlement administrator provided notice of the
proposed settlement to the appropriate federal and state authorities, as required by
and in compliance with the Class Action Fairness Act, 28 U.S.C. § 1715(b). Notice
was thereafter distributed to the 185,884 Class members in accordance with the
preliminary approval Order and the Settlement. The motion for final approval of class
action settlement and motion for attorneys’ fees, expenses, and service awards were
filed by Plaintiffs and Class Counsel on May 6, 2022 (Filing No. 331; Filing No 332;

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Filing No. 333; Filing No. 334; Filing No. 335). No objections to the Settlement or to
either of the motions were filed before the June 7, 2022, deadline set by the Court.
B. The Terms of the Settlement
Pursuant to the settlement, CPAY will pay up to $84,000,000 to establish a fund
which will provide cash benefits to the Class members and also cover attorneys’ fees
and expenses, service awards, and notice and administration costs. All of the 185,884
Class members are eligible to receive a cash payment under the Settlement.

The

27,164 Class members that are current customers will automatically be issued cash
payments without the need to submit a claim. The 158,720 Class members that are
former customers are eligible to receive cash payments by filing a simple claim form.
The precise amount of the settlement fund (up to $84,000,000) will depend on
the number of valid claims submitted by former customers but, no matter how many
claims are submitted, CPAY will under no circumstances pay less than $58,800,000.
The amount of each Class member’s payment will be calculated pursuant to the
allocation method attached as Exhibit 1 to the Settlement.
In conjunction with the Settlement, the Class will release CPAY from all claims
that were or could have been raised in this litigation. Class members specifically retain
all rights to challenge invoices sent by CPAY after March 9, 2022. Pursuant to, and as
more fully described in Section X of the Settlement, as of the date Defendant makes its
last contribution to the settlement fund, the releasing parties shall be deemed to have
and, by operation of this final order and judgment shall have, fully and irrevocably
released and forever discharged the released parties from the claims identified in

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paragraph 76 of the Settlement. The release does not affect any right of the Releasing
Parties to contest for any reason any invoice sent by CPAY after March 9, 2022.
In the event funds remain in the settlement fund ninety (90) days after reissued
checks are mailed as contemplated by paragraph 73 of the Settlement, such funds shall
be distributed to Class members that previously cashed their checks if there are
sufficient remaining funds to warrant such a distribution.

If there are not sufficient

remaining funds to warrant such a distribution, they shall be distributed via cy pres to
such recipient(s) as are agreed on by the Parties and submitted to the Court for
approval.
III.

ANALYSIS

A. Adequacy of Notice
Based on the declarations of Peter Sperry of Epiq Systems, Inc. (the appointed
Settlement Administrator) (Filing No. 335-1; 341-1), the Court finds that that the Class
members have been individually notified of the Settlement pursuant to the plan
approved and directed by the Court’s preliminary approval Order, with more than 92%
of these notices being successfully delivered. The Court further finds that the notice
program constituted the best practicable notice of the Settlement to the Class under the
circumstances and fully satisfies the requirements of due process, including Fed. R. Civ.
P. 23(e)(1), Fed. R. Civ. P. 23(c)(2)(B), and 28 U.S.C. § 1715. Accordingly, the Court
has jurisdiction over all class members for purposes of the Settlement.
B. Merits of the Settlement
The Court has reviewed the terms of the Settlement and noted the lack of any
objections from Class members. After consideration of all of the criteria set forth in Fed.

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R. Civ. P. 23(e)(2), as well as those set forth in Van Horn v. Trickey, 840 F.2d 604, 607
(8th Cir. 1988), the Court finds that the Settlement is fair, reasonable, and adequate
under the circumstances of this case and in the best interests of the Class.
The Court specifically finds that the appointed class representatives have
provided outstanding representation of the Class, and treatment of this litigation as a
class action for settlement purposes, with the Class as defined below, is appropriate,
proper, and satisfies the criteria set forth in Federal Rule of Civil Procedure 23(e).
There has been extensive discovery conducted in this litigation, and the Parties and
their counsel were thus well-informed about the relative strengths and weaknesses of
their positions and well-positioned to determine the reasonableness of the Settlement.
The terms of the Settlement provide substantial, direct, and prompt cash payments to
the Class via a methodology that is simple and straightforward.
Class Counsel have zealously represented the Class, are experienced
practitioners with significant experience in class action litigation, and have
recommended approval of the Settlement. The future expense and likely duration of the
litigation, its uncertainty of outcome, and the range of recovery if the litigation were to
proceed support approval of the Settlement.
Importantly, nothing indicates an absence of good faith or independence by
Plaintiffs, Class Counsel, or CPAY in negotiating the Settlement and indeed the
Settlement was reached without collusion or fraud and at arm’s length with the
assistance of an experienced mediator. Lastly, no Class member has objected to the
Settlement and the Settlement treats Class members equitably relative to each other.

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The Court thus hereby finally approves in all respects the Settlement and finds
that the Settlement’s terms for allocating and distributing the settlement fund are in all
respects fair, reasonable, and adequate, and are in the best interests of the Class.
The Court reaffirms its prior certification of the Class, Filing No. 142, consisting
of:
All of CPAY’s customers that, from January 1, 2010, to October 31, 2020
(a) were assessed the TSSNF Fee (a/k/a TSYS Network Fee); (b) were
assessed the PCI Noncompliance Fee; (c) had their contractual credit
card discount rates increased above their contractual rate by CPAY;
and/or (d) had credit card transactions shifted by CPAY from lower-cost
rate tiers to higher-cost rate tiers.
As previously stated, excluded from the Class are Defendant; parents or
subsidiaries of Defendant; any entity in which any Defendant has a controlling interest;
Defendant’s counsel of record; the Court and any employees of the Court; and the legal
representatives, heirs, successors, and assigns of any such excluded party.

Also

excluded are those Class members that properly excluded themselves from the Class.
The Court reaffirms that the Class meets all the requirements of Federal Rule of
Civil Procedure Rule 23(a) and (b)(3), namely that the Class is so numerous that joinder
of all members is impractical; that there are common issues of law and fact; that the
claims of the Class Representatives are typical of absent Class members; that the
Class Representatives and Class Counsel have and will fairly and adequately protect
the interests of the Class; that common issues predominate over any individual issues;
and that a class action is the superior means of adjudicating the controversy.
Plaintiffs Custom Hair Designs by Sandy, LLC and Skip’s Precision Welding, LLC
have adequately represented the Class and are appointed as Class Representatives.

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Wagstaff & Cartmell, LLP and Webb, Klase & Lemond, LLC have adequately
represented the Class and are appointed as Class Counsel.
C. Attorneys’ Fees, Expenses, and Service Awards
1. Attorneys’ Fees
The Court hereby grants to Class Counsel a fee in the amount of $28,000,000,
which the Court finds to be fully supported by the facts, record, and applicable law. This
amount shall be paid from the settlement fund.
The Court finds that the Parties’ agreement with regard to the payment of fees
was not negotiated while they were negotiating the other terms of the Settlement and
that the agreement was not the product of collusion or fraud. In fact, the amount of
attorneys’ fees to be paid was negotiated only after the other terms of the Settlement
had been agreed upon. The agreed-upon fee is warranted as it is reasonable under the
applicable facts and law.
The requested fee is justified under the percentage-of-the-benefit method, which
the Eighth Circuit has recommended be applied to common fund cases such as this
matter. Anderson v. Travelex Ins. Servs., Inc., No. 8:18-cv-362, 2021 WL 4307093, *3
(D. Neb. Sept. 22, 2021) (citing Johnston v. Comerica Mortg. Corp., 83 F.3d 241, 24546 (8th Cir. 1996)).
The fee represents one-third (33.33%) of the $84,000,000 in cash made
available to the Class, which the Court finds to be reasonable and consistent with
awards in similar cases in this Circuit. Huyer v. Buckley, 849 F.3d 395, 399 (8th Cir.
2017) (affirming fee of one-third of $24 million benefit); also, e.g., Caligiuri v. Symantec
Corp., 855 F.3d 860, 865-66 (8th Cir. 2017) (affirming fee of one-third of $60 million

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fund); In re U.S. Bancorp Litig., 291 F.3d 1035, 1038 (8th Cir. 2002) (affirming fee
award of 36% of fund); Lechner v. Mutual of Omaha Ins. Co., No. 8:18cv22, 2021 WL
424421, *2 (D. Neb. Feb. 8, 2021) (granting fee request of one-third and finding it to be
typical in class action litigation) (Bataillon, J.).
In approving the requested fee, the Court has carefully considered the
reasonableness factors listed in Johnson v. Georgia Highway Express, 488 F.2d 714
(5th Cir. 1974), namely:
(1) The time and labor required; (2) The novelty and difficulty of the
questions; (3) The skill requisite to perform the legal service properly; (4)
The preclusion of other employment by the attorney due to acceptance of
the case; (5) The customary fee for similar work in the community; (6)
Whether the fee is fixed or contingent; (7) Time limitations imposed by the
client or the circumstances; (8) The amount involved and the results
obtained; (9) The experience, reputation, and ability of the attorneys; (10)
The undesirability of the case; (11) The nature and length of the
professional relationship with the client; and (12) Awards in similar cases.
See Keil v. Lopez, 862 F.3d 685, 697 (8th Cir. 2017) (“To determine the reasonableness
of a fee award . . ., district courts may consider relevant factors from the twelve factors
listed in Johnson”). The record shows that factors (1) through (6), (8) through (10), and
(12) directly support the requested fee, while factors (7) and (11) are neutral.
2. Expenses
The Court hereby grants to Class Counsel the requested reimbursement of
$1,209,102.88 in litigation expenses they have incurred during the prosecution of this
case. This expense award is fully supported by the Settlement, the facts, the record,
and the applicable law.

E.g., Mills v. Electric Auto-Lite Co., 396 U.S. 375, 391-92

(1970).

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3. Service Awards
The Settlement provides for service awards of $15,000 for each of the two Class
Representatives for their service on behalf of the Class. “Courts often grant service
awards to named plaintiffs in class action suits to ‘promote the public policy of
encouraging individuals to undertake the responsibility of representative lawsuits.’”
Caligiuri v. Symantec Corp., 855 F.3d 860, 867 (8th Cir. 2017) (quotation omitted). The
Court finds that payment of these service awards is warranted and approved in this
case in light of the Class Representatives’ substantial work on behalf of the Class and
the risks they took in bringing suit.
The awarded fees and expenses shall be paid to Class Counsel and the service
awards shall be paid to the Class Representatives in accordance with the terms of the
Settlement.
IT IS THEREFORE ORDERED THAT:
1.

The Court grants the Unopposed Motion for Settlement, Filing No. 331,

and grants the Unopposed Motion for Attorney Fees, Expenses, and Service Award,
Filing No. 333, and approves Class Counsel’s requests for attorneys’ fees of
$28,000,000, expenses of $1,209,102.88, and service awards of $15,000 each for the
Class Representatives.
2.

The Parties and the Settlement Administrator are directed to carry out the

Settlement according to its terms.
3.

The Court hereby dismisses this action with prejudice as against the

named Plaintiffs, all Class members, and Defendant, and the Parties are directed to

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take the necessary steps to effectuate the terms of the Settlement. The Parties shall
bear their own costs except as provided by the Settlement.
4.

No

Class

Representative

or

Class

member,

either

directly,

representatively, or in any other capacity, shall commence, continue, or prosecute any
action or proceeding in any court or tribunal asserting any of the claims that have been
released under the Settlement, and they are hereby permanently enjoined from so
proceeding, including during the pendency of any appeal from this Final Approval Order.
5.

Without affecting the finality of this judgment, the Court retains continuing

and exclusive jurisdiction over all matters relating to the administration, consummation,
enforcement, and interpretation of the Settlement and of this final order and judgment,
to protect and effectuate this final order and judgment, and for any other necessary
purpose. The Class Representatives, Defendant, and each Class member (including
any objectors, though there are none) are hereby deemed to have irrevocably submitted
to the exclusive jurisdiction of this Court, for the purpose of any suit, action, proceeding,
or dispute arising out of or relating to the Settlement, including the exhibits thereto, and
only for such purposes. Without limiting the generality of the foregoing, and without
affecting the finality of this final order and judgment, the Court retains exclusive
jurisdiction over any such suit, action, or proceeding. Solely for purposes of such suit,
action, or proceeding, to the fullest extent they may effectively do so under applicable
law, the Parties hereto are deemed to have irrecoverably waived and agreed not to
assert, by way of motion, as a defense or otherwise, any claim or objection that they are
not subject to the jurisdiction of this Court, or that this Court is, in any way, an improper
venue or an inconvenient forum.

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6.

That the Parties have reached a Settlement and participated in

proceedings related to the Settlement should not be (a) offered or received as evidence
of a presumption, concession, or an admission by any party, (b) offered or received as
evidence of a presumption, concession, or any admission of any liability, fault, or
wrongdoing; provided, however, that reference may be made to the Settlement as may
be necessary to effectuate or enforce its provisions.
7.

In the event that the Settlement does not become effective according to its

terms, this order and final judgment shall be rendered null and void as provided by the
Settlement, shall be vacated, and all orders entered and releases delivered in
connection with the Settlement shall be null and void to the extent provided by and in
accordance with the Settlement.
8.

A separate judgment will be entered.

Dated this 17th day of August, 2022.
BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge

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