MARTINA v. L.A. FITNESS INTERNATIONAL, LLC

Filing 49

OPINION. Signed by Judge William H. Walls on 10/8/13. (gmd, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

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SOPHIA MARTINA, on behalf of herself
and all others similarly situated,
Plaintiff,
v.
L.A. FITNESS INTERNATIONAL, LLC,
Defendant.

OPINION
Civ. No. 2:12-cv-2063 (WHW)

Walls, Senior District Judge
Sophia Martina, individually and on behalf of the putative class she represents, moves for
an Order Granting Final Approval to Class Action Settlement, Awarding Fees and Costs to Class
Counsel and Granting Incentive Award to Plaintiff Martina. Plaintiffs’ motions are granted.
FACTS AND PROCEDURAL BACKGROUND
Ms. Martina filed her initial complaint on March 7, 2012, Docket Entry Number (“D.E.
No.”) 1-1, and her amended complaint on May 10, 2012, D.E. No. 11. The complaint alleges
violations of various New Jersey statutes, both on behalf of her and two putative classes of
consumers: those who canceled memberships with L.A. Fitness health clubs (the “Membership
Agreement Class”) and those who entered into contracts for personal training sessions (the
“Fitness Service Agreement Class”). Am. Compl. at 10-23.
Defendant L.A. Fitness (“Defendant”) moved to dismiss Plaintiffs’ Amended Complaint.
D.E. Nos. 5, 13. This Court denied that motion on September 4, 2012. D.E. No. 19. On April 22,
2013, Plaintiff filed an unopposed motion for preliminary approval of class settlement. D.E. No.

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37. On May 28, 2013, the Court granted preliminary approval, certifying the classes for purposes
of settlement only and issuing instructions to begin notifying class members. D.E. No. 41. On
September 17, 2013, the Court presided over a fairness hearing as required by Federal Rule of
Civil Procedure 23(e). In the interim, no class members objected to the settlement and only one
member opted out; no objections were raised at the fairness hearing. Pls.’ Settl. Br. at 11-12,
D.E. No. 46.
On September 27, 2013, the Eastern District of Pennsylvania approved a final settlement
in an action addressing similar claims by a class of consumers from over a dozen states other
than New Jersey. Mem. re: Approval of Settl. and Attorneys’ Fees at 3-4, Sept. 27, 2013, E.D.
Pa. Do. No. 2:10-cv-2326, D.E. No. 85.
A.

Settlement Agreement

This Court’s opinion granting preliminary approval certified the classes under the
following definitions:
The “Fitness Service Agreement Class” includes all Individuals
who entered into a Fitness Service Agreement in the State of New
Jersey with L.A. Fitness during the Class Period of February 28,
2006 through March 31, 2012.
The “Membership Agreement Class” includes all Individuals who
(a) entered into a Monthly Dues Membership Agreement in the
State of New Jersey with L.A. Fitness during the Class Period of
February 28, 2006 through March 31, 2012, and (b) who paid for
an additional month of dues (in addition to the application of prepaid last month dues) after L.A. Fitness received a Notice of
Cancellation, and (c) the payment of an additional month of dues
was not subsequently refunded.
D.E. No. 41 at 3 ¶ 9. See also Class Action Settlement and Release (the “Settlement”) §§ 1.16,
1.21, D.E. No. 37-3. Defendant has agreed to award members various types of relief which the
parties value in the aggregate at $3.8 million. On top of this amount, Defendant has agreed to pay

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$200,000.00 for attorneys’ fees and costs (an amount equivalent to approximately 5.26% of the
total settlement), along with $11,065.28 to the named plaintiff plus a $3,000 incentive award and
the costs of administering the settlement. Pls.’ Settl. Br. at 17, 29, D.E. No. 46.
B.

Notification of the Class and Forms of Relief

Plaintiff represents in its motion that notice has been successfully delivered to 95.87% of
the Membership Agreement Class and 96.2% of the Fitness Service Agreement Class, either by
mail or email. Pls.’ Settl. Br. at 6. Opt-out notices and objections to the Settlement were required
to be returned by July 23, 2013. Id. at 12. No class members objected to the Settlement and only
one class member opted out of the Fitness Service Agreement class before the deadline. Id. at 7.
The settlement provides four kinds of relief, two to each class. Members of the
Membership Agreement Class automatically received a 45-Day Access Pass (the “45-Day Pass”)
to L.A. Fitness facilities and may also, upon request, receive a payment for monetary damages in
an amount equal to one-third of one month’s dues. Pls.’ Settl. Br. at 6-7; Notice to Membership
Agreement Class at 2, D.E. No. 46-4. Class members had until September 16, 2013 to request
monetary payment and have until September 17, 2014 to activate the 45-Day Pass. Pls.’ Settl. Br.
at 7. As of August 22, 2013—the latest date indicated in Plaintiff’s submission—324 class
members had activated the 45-Day Pass and 617 had requested monetary payment; these 941
class members, assuming no overlap, represent 2.9% of the class. Pls.’ Settl. Br. at 7. Given
Plaintiffs’ estimate that the 45-Day Pass is worth $52.48 and the cash award is worth $11.67,
Pls.’ Settl. Br. at 16, Membership Agreement Class members have so far claimed awards worth
approximately $24,203.91.
Members of the Fitness Service Agreement Class may choose between one of two kinds
of relief, either two free 25-minute personal training sessions or a $100 credit towards a new

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Monthly Dues Membership. Notice to Fitness Service Agreement Class at 2, D.E. No. 46-4.
Class members have until September 17, 2014 to request one or the other relief. Pls.’ Settl. Br. at
7. As of August 22, 2013, 178 class members have requested the training sessions and 262 have
requested the credit. Pls.’ Settl. Br. at 7. These 440 class members represent 1.7% of the class.
Given Plaintiffs’ estimate that each of these forms of relief is worth $100, Pls.’ Settl. Br. at 16,
Fitness Service Agreement Class members have so far claimed awards worth approximately
$44,000. In total, then, members of the two classes have claimed awards worth $68,203.91.
The settlement also provides for a cy pres award, according to which unclaimed funds
will be awarded to Legal Services of New Jersey. Settlement § 5.10. The funds available for this
award are the residual of the cash portion of the award due members of the Membership
Agreement Class who request checks but fail to cash them. Id. As of August 22, 2013, 617 class
members had requested checks, for a total worth approximately $7,200.39. Pls.’ Settl. Br. at 7.
DISCUSSION
I.
A.

CLASS CERTIFICATION
Standard

When certifying a settlement class, courts must follow the general requirements of Rule
23 and, therefore, “a settlement class must satisfy the Rule 23(a) requirements of numerosity,
commonality, typicality, and adequacy of representation and the Rule 23(b) requirements.” In re
Prudential Ins. Co. of Am. Sales Practices Litig. (“Prudential I”), 962 F. Supp. 450, 508 (D.N.J.
1997). Additionally, where, as here, a settlement class is sought to be certified under Rule
23(b)(3), the class must satisfy the Rule’s superiority and predominance requirements.
B.

Discussion

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When the Court granted preliminary approval of the settlement, it approved a preliminary
certification of the Class for the purposes of settlement only and found that certification was
proper under Rule 23(a) and Rule 23(b)(3). D.E. No. 41 at 3-4 ¶ 10. The reasons which the
Eastern District of Pennsylvania found persuasive in the parallel action are even more persuasive
here, as that case considered claims from many states and this case applies only to consumers in
New Jersey. Mem. re: Approval of Settl. and Attorneys’ Fees at 3-4, Sept. 27, 2013, E.D. Pa. Do.
No. 2:10-cv-2326, D.E. No. 85. For the same reasons, the Court finds that class certification for
settlement purposes is appropriate here as well.
II.
A.

ADEQUACY OF THE SETTLEMENT
Standard

The Federal Rules of Civil Procedure require that a district court review settlement and
release of claims in a class action and, “if the proposal would bind class members, the court may
approve it only after a hearing and on finding that it is fair, reasonable, and adequate.” Fed. R.
Civ. P. 23(e)(2). This rule requires a district court to “act[] as a fiduciary, guarding the claims
and rights of the absent class members.” Ehrheart v. Verizon Wireless, 609 F.3d 590, 593 (3d
Cir. 2010). The Third Circuit in Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975) identified nine
factors that bear on this analysis:
(1) the complexity and duration of the ligation;
(2) the reaction of the class to the settlement;
(3) the stage of the proceedings;
(4) the risks of establishing liability;
(5) the risks of establishing damages;
(6) the risks of maintaining a class action;
(7) the ability of the defendants to withstand a greater judgment;
(8) the range of reasonableness of the settlement in light of the best
recovery; and
(9) the range of reasonableness of the settlement in light of all the
attendant risks of litigation.

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In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig. (“GM Trucks”), 55 F.3d
768, 785-86 (3d Cir. 1995) (citing Girsh, 521 F.2d at 157). In addition to the Girsh factors, the
Third Circuit encourages district courts to consider additional factors, such as the probable
outcome of a trial on the merits, the probable outcome of claims by other classes or subclasses
and whether any provisions for attorneys’ fees are reasonable. In re Prudential Ins. Co. Am.
Sales Prac. Litig. Agent Actions (“Prudential II”), 148 F.3d 283, 323 (3d Cir. 1998). Earlier this
year, the Third Circuit added that another important consideration is “the degree of direct benefit
provided to the class,” including “the size of the individual awards compared to claimants’
estimated damages.” In re Baby Products Antitrust Litig., 708 F.3d 163, 174 (3d Cir. 2013)
(citation omitted).
Though a district court must vigorously protect the interests of absent class members, it
also owes deference to a settlement as the negotiated agreement of private parties. As the Third
Circuit recently explained, “[s]ettlements are private contracts reflecting negotiated
compromises. The role of a district court is not to determine whether the settlement is the fairest
possible resolution [but only whether] the compromises reflected in the settlement . . . are fair,
reasonable, and adequate when considered from the perspective of the class as a whole.” Baby
Products, 708 F.3d at 173-74 (citation omitted).
B.

Preliminary Issue: The 45-Day Pass, Personal Training Voucher and
Membership Credit are “Coupons”

In evaluating the adequacy of the settlement, the Court must consider whether the
Settlement’s three types of in-kind compensation are “coupons.” Plaintiff argues that the 45-Day
Pass and personal training vouchers are not coupons. Pls.’ Settl. Br. at 20, n.3. The Court

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disagrees, finding that these two forms of compensation, as well as the $100 membership credit,
are all coupons.1
The Class Action Fairness Act instructs district courts to apply additional scrutiny to
class settlements consisting in whole or in part of “coupons.” 28 U.S.C. § 1712. As the
legislative history reveals, Congress included a “coupon settlement” provision in CAFA to
address the situations in which the interests of class members and class counsel diverge: namely,
the perverse incentive of class counsel to “negotiate settlements under which class members
receive nothing but essentially valueless coupons, while the class counsel receive substantial
attorney’s fees.” In re HP Inkjet Printer Litigation, 716 F.3d 1173, 1178 (9th Cir. 2013) (citing
S. Rep. 109-14, at 29-30 (2005)). Another problem with in-kind compensation is that it may “fail
to disgorge ill-gotten gains from the defendant.” Synfuel Technologies, Inc. v. DHL Express
(USA), Inc., 463 F.3d 646, 653 (7th Cir. 2006) (quoting Christopher R. Leslie, “The Need To
Study Coupon Settlements in Class Action Litigation,” 18 Geo. J. Legal Ethics 1395, 1396-97
(2005)).
First, the court must consider whether the in-kind compensation is a “coupon” at all.
“Coupon” is not well-defined in the statute, and only a handful of cases have analyzed it.
Plaintiff argues that the passes and vouchers are not “coupons” because they provide a complete
benefit, rather than a discount towards a future purchase. Pls.’ Settl. Br. at 20, n.3 (citing Radosti
v. Envision EMI, LLC, 771 F. Supp. 2d 37, 55 (D.D.C. 2010), Browning v. Yahoo! Inc., No.
C04-01463, 2007 WL 4105971 at *16 (N.D. Cal. Nov. 16 2007)). But decisions from other

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The Eastern District of Pennsylvania reached the same conclusion. See Mem. re: Approval of
Settl. and Attorneys’ Fees at 7-9, E.D. Pa. Do. No. 2:10-cv-2326 (Sept. 27, 2013), D.E. No. 85.
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district courts are not binding upon this one. CAFA and Third Circuit precedent require higher
scrutiny of settlements consisting of in-kind compensation.
Ten years before Congress passed CAFA, the Third Circuit in GM Trucks dealt with a
coupon settlement and found it grossly inadequate. General Motors had offered $1,000 coupons
to owners of trucks with allegedly dangerous fuel tanks. 55 F.3d at 807. The court was troubled
that, because the coupons required class members to spend at least $10,000 to enjoy the $1,000
benefit, they functioned not as a benefit to the class but as a “sophisticated GM marketing
program.” Id. Though these were discounts and not vouchers, the court’s analysis reflects
underlying concerns common to all in-kind compensation. As example, the court found the
settlement inadequate in part because it doubted that much of the class would or could take
advantage of the alleged benefit. Id. at 808. The court also found the coupons’ alleged value
misleading. Id. (“Even where class members do manage to use the certificates, we are concerned
about their real value.”). See also Synfuel, 463 F.3d at 654 (finding a settlement inadequate
because the vouchers “share some characteristics of coupons, including forced future business
with the defendant and . . . the likelihood that the full amount of [Defendant’s] gains will not be
disgorged.”).
The $100 credit towards a new membership is clearly a discount and thus a “coupon”
even under Plaintiffs’ own proffered definition: It is a credit which requires class members to
spend money in order to realize the benefit. It may actually generate profit for Defendant by
bringing in new customers, thus functioning as a “sophisticated [L.A. Fitness] marketing
program.”
The 45-Day Pass and personal training voucher, though they offer a complete product,
are nonetheless exactly the type of in-kind compensation covered by the “coupon settlement”

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provisions of CAFA. Though they are vouchers and not discounts, they “share some
characteristics of coupons, including forced future business with the defendant.” Synfuel, 463
F.3d at 654. That is especially cause for concern here because members of the Membership
Agreement Class are, by definition, people who no longer wish to do business with Defendant.
The Court finds that the 45-Day pass, the personal training voucher and the $100
membership credit are all “coupons” under CAFA.
C.

Discussion

To determine whether the proposed Settlement is fair, reasonable and adequate, the Court
considers the nine factors from Girsh v. Jepson.
i.

Girsh Factor 1: The complexity and duration of the ligation

This factor is “intended to capture ‘the probable costs, in both time and money, of
continued litigation.’” GM Trucks, 55 F.3d at 811. This factor may favor settlement where seeing
a claim through to trial would require, for example, “additional discovery, extensive pretrial
motions addressing complex factual and legal questions, and ultimately a complicated, lengthy
trial.” In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 536 (3d Cir. 2004).
The case at issue is not very complex. There is only one Defendant involved and the
claims are straightforward. The scope is narrow, since it involves only New Jersey consumers.
Yet a trial—especially a class action trial—is always an expensive affair. Because the Settlement
provides substantial and immediate benefits for the Class, as opposed to the expense and
uncertainty of continued litigation, this factor weighs in favor of approving the Settlement.
ii.

Girsh Factor 2: The reaction of the class to the settlement

The second Girsh factor “is perhaps the most significant factor to be weighed in
considering [the settlement’s] adequacy.” In re Schering-Plough/Merck Merger Litig., No. 09-

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cv-1099, 2010 WL 1257722 at *9 (D.N.J. Mar. 26, 2010) (quotation and citation omitted).
Typically, courts analyze this factor by counting the number of objectors and weighing the
vociferousness of their objections. Prudential II, 148 F.3d at 318 (finding reaction favorable
where, of 8 million class members, 19,000 opted out and 300 objected). In addition, courts
frequently consider not only how many class members object but also how many come forward
to claim the proffered relief. See GM Trucks, 55 F.3d at 812 (warning that the assumption that
“silence constitutes tacit consent to the agreement” may not always be appropriate); In re
Cendant Corp. Litigation, 264 F.3d 201, 234 (3d Cir. 2001) (120,000 claims were filed); In re
Pet Food Products Liab. Litig., 629 F.3d 333, 351 (3d Cir. 2010) (9,357 claims filed); In re
Philips/Magnavox Television Litig., No. 09-3072, 2012 WL 1677244 (D.N.J. May 14, 2012)
(10% of the class downloaded claim forms); Lenahan v. Sears, Roebuck & Co., No. 02-0045,
2006 WL 2085282 (D.N.J. July 24, 2006) aff’d, 266 F. App’x 114 (3d Cir. 2008) (46% of the
class filed claims); In re Am. Family Enterprises, 256 B.R. 377, 418 (D.N.J. 2000) (“Over
143,000 persons filed claims”). This Court has found no case that prohibits district courts from
considering participation in this way.
Here, class members are not enthusiastic about the Settlement. Though there have been
no objections and only one opt out, fewer than three percent of the class has stepped forward to
claim relief. This cancels out the lack of objections, so this factor weighs neither for nor against
approval of the Settlement.
iii.

Girsh Factor 3: The stage of the proceedings

This factor requires the Court to examine the level of case development that transpired
before settlement. The aim of this factor is to ensure that class counsel has an “adequate

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appreciation of the merits of the case before negotiating” a settlement. Prudential II, 148 F.3d at
319 (quoting GM Trucks, 55 F.3d at 813).
The parties exchanged initial disclosures and arrived at the Settlement after negotiation
before a retired federal judge. Pls.’ Settl. Br. at 3; Wolf Decl. at 7 ¶ 25, D.E. No. 46-1. The Court
finds that all parties have an “adequate appreciation of the merits of the case.” This factor weighs
in favor of the Settlement.
iv.

Girsh Factors 4 and 5: The risks of establishing liability and damages

Under the fourth and fifth Girsh factors, the Court must consider the risk of establishing
liability at trial in order to balance the parties’ relative likelihood of success against the
immediate benefits derived from a settlement. See Prudential II, 148 F.3d at 319. These factors
are weighed against the best and worst possible outcomes for plaintiffs. See In re Cendant, 264
F.3d at 237-39. To the extent that establishing damages is contingent upon liability, many of the
same risks will be present in each analysis.
Plaintiffs survived the initial hurdle of Defendant’s motion to dismiss. D.E. No. 20.
Though this surely improved Plaintiffs’ chances, both parties at the Fairness Hearing claimed to
have greater than 50 percent confidence of prevailing at trial. While surely those claims involved
some puffery, they underscore the considerable uncertainty that inheres in an aggregate matter
like this one. Weighing these risks of litigation against the definite and immediate resolution of
these claims, this factor weighs in favor of approving the Settlement.
v.

Girsh Factor 6: The risks of maintaining a class action

“Because a district court retains the authority to decertify or modify a class at any time
during the litigation if it proves to be unmanageable, the specter of decertification makes
settlement an appealing alternative.” O’Brien v. Brain Research Labs, LLC, Civ. No. 12-cv-204,

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2012 WL 3242365 at *18 (D.N.J. Aug. 9, 2012) (quoting Warfarin, 391 F.3d at 537) (quotation
marks omitted). In other words, continuing litigation sometimes presents plaintiffs with the risk
of losing class certification and any substantial trial award, so a settlement which provides
immediate and definite relief is preferable to the prospect of receiving no relief at all.
The putative class here is relatively easy to maintain. All putative class members live in a
single state and they all signed the same form contract or contracts. Granted, certification would
be contested—Defendant represented at the fairness hearing its plan to challenge class treatment
with an argument that class members had individualized understandings of the meanings of the
contracts they signed. Nonetheless, this class is easier to certify than most.
At this juncture, free of future vagaries, it is in the interests of both sides to come to this
settlement. And so this factor weighs in favor of settlement.
vi.

Girsh Factor 7: The ability of the defendants to withstand a greater judgment

This factor considers “whether the defendants could withstand a judgment for an amount
significantly greater than the [s]ettlement.” In re Cendant, 264 F.3d at 240. For example, if a
larger judgment would tip the defendant into bankruptcy, a court will find this factor to support
the settlement to allow the defendant to continue to exist. Id.
The Court’s determination that the Settlement’s compensation consists largely of
“coupons” is significant here because Defendant’s actual exposure is nowhere near the alleged
$3.8 million value of the Settlement. In fact, this Settlement impacts Defendant hardly at all. So
far, class members have claimed awards worth $68,203.91. But even if every class member
claimed her benefit, $3.8 million is a gross exaggeration of the cost to Defendant for two
reasons.

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First, the cash value of the Settlement is vanishingly small. As of August 22, 2013, only
617 class members had requested cash payouts, reflecting a cost to Defendant of about $7,000.
Pls.’ Settl. Br. at 6-7. Even if the remaining 20,852 consumers in the Membership Agreement
Class requested their checks for $11.67 before the September 16, 2013 deadline—an unlikely
prospect—this only amounts to $250,000. The small size of Defendant’s cash exposure is
particularly troubling since the Settlement’s cy pres award comes not from the alleged $3.8
million common fund, but only from that portion of the $250,000 which is requested but not
cashed. Settlement §§ 5.9-10, D.E. No. 46-3.
Second, the $3.8 million figure is misleading because it is based solely on the value to
class members. The seventh Girsh factor and CAFA require this Court to consider not only the
benefit to the class but also the cost to Defendant. The parties’ suggested values of $52.48 for the
45-Day pass and $100 each for the personal training sessions and gym membership credit may
be appropriate for consumers, but the costs to Defendant are much lower. Defendant already has
health clubs operating in New Jersey; given these sunk costs, the marginal cost of a few hundred
extra visits by holders of the 45-Day Passes is close to zero.
Defendant could surely withstand a greater judgment. This factor weighs against
approval of the Settlement.
vii.

Girsh Factors 8 and 9: The range of reasonableness of the settlement in light
of the best recovery and all the attendant risks of litigation

The last two Girsh factors go to the settlement’s adequacy, namely, “whether the
settlement represents a good value for a weak case or a poor value for a strong case.” Warfarin,
391 F.3d at 538. One way to gauge the adequacy of the settlement is to consider the relief which
Plaintiffs initially requested in the complaint. GM Trucks, 55 F.3d at 810. Earlier this year, the
Third Circuit added that another important consideration is “the degree of direct benefit provided
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to the class,” including “the size of the individual awards compared to claimants’ estimated
damages.” In re Baby Products Antitrust Litig., 708 F.3d at 174.
Here, Plaintiffs requested declaratory relief that Defendant had broken various state laws;
injunctive relief prohibiting future violations of those laws; and damages, refunds and interest.
Am. Compl. ¶¶ a-j, D.E. No. 11. The “coupon” issue is also relevant here, as the Court compares
the relief requested to the relief received.
Plaintiffs did not secure declaratory relief. Plaintiffs received its intended injunctive relief
in the sense that Defendant has changed its cancellation policy. But Defendant did so in 2010
following a separate class action in California—it is also a condition of the settlement in the
Eastern District of Pennsylvania, Settlement § 3.4, E.D. Pa. Do. No. 2:10-cv-02326, D.E. 78-3.
So that relief is not relevant here.
Nonetheless, Plaintiffs’ damages under the Settlement fall within the range of
reasonableness. The harm each claimant allegedly suffered was small: for the Membership
Agreement Class, a reasonable measure of damages is the $30 incurred for an extra month’s
dues. In light of that figure, a transferable 45-Day Pass plus a small cash award is sufficient. For
the Fitness Services Agreement Class, the likely damages are more difficult to calculate, except
to the extent that the alleged violations of the New Jersey Retail Installment Sales Act could total
$65. See Am. Compl. Third Count, ¶¶ 89-100. That makes the $100 relief appropriate.
This settlement is a good value. Though the Settlement will not come close to its alleged
$3.8 million value, it nonetheless falls within the range of reasonableness and is fair enough.
These factors weigh in favor of approval.

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viii.

Prudential Factors

The Third Circuit has suggested that a district court may want to consider additional
factors when evaluating a settlement, including probable outcome of a trial on the merits, the
probable outcome of claims by other classes and whether any provisions for attorneys’ fees are
reasonable, among others. Prudential II, 148 F.3d at 323.
Last week, the Eastern District of Pennsylvania affirmed a settlement in the parallel
action affecting class members in other states. Mem. re: Approval of Settl. and Attorneys’ Fees,
E.D. Pa. Do. No. 2:10-cv-2326 (Sept. 27, 2013), D.E. No. 85. The settlement there has terms
substantively similar to this one. Id. §§ 3.1-2. In addition, as discussed later, the provisions for
attorneys’ fees are reasonable.
This factor weighs in favor of approval.
ix.

Conclusion

Considering the Girsh factors, the Court finds that the Settlement “represents a good
value.” GM Trucks, 55 F.3d at 806. Two of the factors weigh against approving the Settlement:
reaction of the class and ability of the Defendant to withstand a greater judgment. Though the
parties’ claimed value for the Settlement of $3.8 million is inflated and misleading—based, as it
is, on a faulty assumption that 100% of class members will claim their relief—the Settlement is
fair enough, especially given the risks of litigation.
III.

ATTORNEYS’ FEES

Plaintiffs request final approval of the $200,000.00 in attorneys’ fees and expenses
negotiated under the Settlement, which Defendant has agreed to pay over and above the amount
it has set aside for relief to the class. Plaintiffs’ counsel argues that these fees are reasonable and
amount to just 5.2% of the Settlement fund. Pls.’ Settl. Br. at 21.

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The Third Circuit has established two methods for evaluating the award of attorneys’
fees: (1) the lodestar approach, and (2) the percentage of the recovery approach. GM Trucks, 55
F.3d at 820–21; see Prudential II, 148 F.3d at 333. The Third Circuit has emphasized that “[t]he
percentage of recovery method is generally favored in common fund cases because it allows
courts to award fees from the fund ‘in a manner that rewards counsel for success and penalizes it
for failure.’” In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 300 (3d Cir. 2005) (quoting
Prudential II, 148 F.3d at 333). As awards increase in size, the percentage awarded to counsel
should decline. In re Cendant, 232 F. Supp. 2d at 337. Factors a district court should consider
when evaluating attorneys’ fees include the size of the fund created and the number of persons
benefitted, objections by class members, counsel’s skill and efficiency, the complexity and
duration of the litigation, the risk of nonpayment, the amount of time counsel spent on the case
and awards in similar cases. Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir.
2000).
The Settlement is worth as much as $3.8 million and benefits as many as 46,000 New
Jersey consumers. Counsel, who have substantial class action experience, secured this result
quickly and efficiently, after less than two years of litigation. Unfortunately, class members have
claimed cash and coupons worth only $68,000, creating a distasteful scenario where the fee
awarded to counsel ($200,000) exceeds the value of the relief which class members have claimed
by a factor of three. But that blame must ultimately lie with the duly notified class members.
Counsel’s labors have been fruitful and their request is modest, so it is granted.
The Third Circuit suggests that district courts “cross-check” a percentage-of-recovery
award against the lodestar amount. In re Rite Aid, 396 F.3d at 300. The cross-check is
particularly important here because a strict reading of CAFA would compel the Court to deny

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counsel’s fee request, based as it is on the total value of the Settlement fund and not only on
those coupons that have been redeemed. 28 U.S.C. § 1712(a). Thus a lodestar calculation may be
appropriate because the “expected relief has a small enough monetary value that a percentage-ofrecovery method would provide inadequate compensation.” Prudential II, 148 F.3d at 333.
Counsel has estimated its relevant lodestar at $161,615.50, or 389 hours at an average
rate of $415 per hour. Pls.’ Settl. Br. at 22; Pls.’ Settl. Br. Ex. I at 83, D.E. 46-6. Counsel’s
request for $200,000 thus reflects a multiplier of 1.2, below the multiplier range of 1.35 to 2.99
which the Third Circuit has said is reasonable. In re Cendant PRIDES, 243 F.3d at 742.
The award of attorneys’ fees and expenses is approved.
IV.

THE INCENTIVE AWARD

It is perfectly appropriate to compensate a named plaintiff in a class action. See, e.g.,
Chemi v. Champion Mortgage, No. 2:05-cv-1238, 2009 WL 1470429 at *13 (D.N.J. May 26,
2009) (“Numerous courts have recognized the authority to award compensation to named
plaintiffs in class action litigation”) (citation omitted). The settlement provides for an award to
Plaintiff Martina of $11,065.28. Pls.’ Settl. Br. at 29. This sum will resolve charges from
Martina’s credit card company. Id. She will also receive a $3,000 incentive award. Id. The Court
finds this award to be reasonable in light of the time that the lead Plaintiff invested in the matter.

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NOT FOR PUBLICATION
CONCLUSION
When considered under the various factors discussed, the evidence presented by Plaintiffs
weighs in favor of final approval of the Settlement. The Court grants Plaintiffs’ request for final
approval of the Settlement and counsel’s request for attorneys’ fees and costs.

Date: October 8, 2013
s/ William H. Walls
United States Senior District Judge

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