MIRAKAY et al v. DAKOTA GROWERS PASTA COMPANY, INC. et al
Filing
80
OPINION. Signed by Judge Joel A. Pisano on 10/20/2014. (jjc)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
JOSEPH MIRAKAY, LOUIS MESSINA,
:
MICHAEL ELEFTERAKIS & JOHN
:
GEMBINSKI, on behalf of themselves and others :
similarly situated,
:
:
Plaintiffs,
:
:
v.
:
:
DAKOTA GROWERS PASTA COMPANY, INC., :
GLENCORE XSTRATA, and VITERRA, INC.,
:
:
Defendants.
:
:
:
Civil Action No. 13-cv-4429 (JAP)
OPINION
PISANO, District Judge
Presently before the Court are three (3) motions: (1) a motion for final settlement approval
of the settlement in this class action by Joseph Mirakay, Louis Messina, Michael Elefterakis, and
John Gembinski, on behalf of themselves and others similarly situated (collectively “Plaintiffs”)
[docket #65]; (2) Plaintiffs’ motion for attorneys’ fees and reimbursement of litigation expenses
[docket #66]; and (3) a motion for leave to file a sur-reply brief by Nanette Forte-Gerst, Chrissie
Greatrex, Emily Greatrex, George Greatrex, William Polouze, and Keith Rothman (collectively
“the Objectors”) [docket #76]. The Objectors filed various objections to the settlement agreement
[docket #45-47, #49-52, #58, #60-62, and #64], to which Plaintiffs and Defendant, Dakota
Growers Pasta Company, Inc. (“Defendant”) responded [docket #67 and #72].
The Court
considered the papers filed by the parties and the arguments set forth at the fairness hearing on
September 24, 2014. For the reasons that follow, this Court GRANTS Plaintiffs’ motion for final
settlement approval [docket #65], GRANTS Plaintiffs’ motion for attorneys’ fees and
1
reimbursement of litigation expenses [docket #66], and DENIES the Objectors motion for leave
to file a sur-reply brief as it is now moot [docket #76].
I.
BACKGROUND
On July 22, 2013, Plaintiffs filed the instant action bringing claims on behalf of a
nationwide class under the New Jersey Consumer Fraud Act (“NJFCA”), N.J.S.A. §§ 56:8-1, et
seq., and for breach of contract, breach of express and implied warranty, as well as claims under
various state statutes (“the Complaint”) [docket #1]1. The Complaint alleges that Defendant
deceptively markets, advertises, and sells Defendant’s Dreamfields pasta product (“Dreamfields”)
as a healthy alternative to traditional pasta, that it has a lower glycemic index than traditional pasta,
and that it contains only five (5) grams of digestible carbohydrates. In October 2013, Plaintiffs
served Defendant with requests for production of documents, interrogatories, requests for
admission, notice of deposition, and two third-party deposition notices. Throughout the discovery
process, Plaintiffs developed an understanding of the strengths and weaknesses of their claims, as
well as the viability of the defenses set forth by Defendant. As such, while engaging in discovery,
the parties agreed to mediate this dispute with the Honorable Garret E. Brown, Jr. (Ret.), and prior
to the mediation, engaged in additional discovery surrounding issues of pricing, sales volume, sales
distribution and marketing.
On December 10, 2013, the parties and Plaintiff Jesse Weiss from the Minnesota Action
engaged in a lengthy and contentious in-person mediation. See Declaration of Hon. Garrett E.
Brown (Ret.). This mediation session resulted in the settlement agreement which forms the basis
of the instant motions before this Court. Under the terms of the settlement, the parties agreed that
Defendant would pay $5,000,000, inclusive of notice and administration costs, for distribution to
1
Similarly, on July 19, 2013, Jesse Weiss filed a Complaint making substantially the same allegations in the United
States District Court of Minnesota (the “Minnesota Action”).
2
class members who submit a valid claim form. See Settlement Agreement, at ¶ 4(A). Further, the
settlement agreement provides that class members who purchased Dreamfields on-line will
automatically receive $1.99 for each box purchased during the class period. There is no limit on
the number of boxes purchased on-line for which class members may be reimbursed; however,
class members who purchased Dreamfields in a store may submit a claim for reimbursement of
$1.99 per box for up to fifteen (15) boxes.
In addition to the monetary aspects of the settlement, Defendant also agreed to injunctive
provisions which remove the advertising at issue. Id. at ¶ 5. Defendant agreed to remove, for a
period of one (1) year from the date of the final judgment and order, all statements from
Dreamfields packaging claiming the pasta has: (1) a lower glycemic index than traditional pastas;
(2) the ability to reduce spikes in blood glucose levels; and (3) only five (5) grams of digestible
carbohydrates. In exchange for the cash settlement amount and injunctive relief, the parties agreed
to provide each other with full, mutual releases. Id. at ¶¶ 8-9. Defendant also agreed to separately
pay attorneys’ fees and expenses of $2,900,000 (“fee award”), such that this amount will not be
deducted from the cash settlement awarded to class members. Id. at ¶ 6. Additionally, to the
extent that the amount of claims submitted does not exhaust the total available settlement funds,
then each class members’ recovery will be adjusted upwards by as much as 50% and any residual
funds will not revert to Defendant but rather, will be donated on a cy pres basis to the American
Diabetes Association, which has agreed to communicate the terms of the settlement to its members.
Id. at ¶ 4(C). Finally, Defendant agreed to pay the proposed class representatives, Jesse Weiss
from the Minnesota action, Joseph Mirakay, Louis Messina, Michael Elefterakis and John
Gembinski an aggregate incentive award of $20,000 collectively for their efforts in this litigation
and the risks they assumed.
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On April 15, 2014, Plaintiffs moved before this Court for preliminary settlement approval
[docket #38].
On May 9, 2014, this Court entered a preliminary approval Order which
conditionally certified the proposed settlement class, appointed the class representatives and class
counsel, and set a fairness hearing to be held on September 24, 2014, at 10:00 a.m. to determine
whether: (1) final settlement approval should be granted; (2) the class counsels application for
attorneys’ fees and expenses should be granted and in what amount; and (3) the request for an
incentive award to the class representatives should be granted and in what amount [docket #43].
The preliminary approval Order also directed the parties and settlement administrator to begin the
notice plan on or before July 1, 2014, and to complete it within sixty (60) days. Further, the Order
required any person objecting to the settlement to do so in writing by September 1, 2014, stating,
among other things, the specific grounds for the objection.
On July 1, 2014, the claims administrator sent notice via email directly to 333,041
settlement class members who previously had signed up with Defendant to receive coupons and
recipes for Dreamfields pasta, and 5,581 customers who purchased Dreamfields pasta on-line from
Defendant. See Declaration of Shannon R. Wheatman, Ph.D., at ¶ 14, Ex. C. The administrator
sent a reminder notice to these email addresses on August 19, 2014. Id. at ¶ 15. The administrator
also caused notice to be published in periodicals selected specifically by demographic profiles that
most closely matched those of Dreamfields pasta purchasers, including Better Homes & Gardens,
Cooking Light, People, Health, and American Profile. Id. at ¶¶ 16-22. Approximately 325 million
internet impressions, including banner advertisements on the following online networks for a four
(4)-week period: Advertising.com Network, AOL Media Network, Facebook.com, Specific Media
Network, and Xaxis were also delivered by the administrator. Id. at ¶ 23. Targeted banner
advertisements delivered an additional 25 million impressions. Id. at ¶¶ 23-24. The administrator
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then conducted a robust claims stimulation campaign that included: (1) a national press release to
over 5,000 news outlets; (2) social posts on Twitter; (3) targeted sponsored news feeds on
Facebook and Twitter; (4) posting information on the Promoted Stories network; (5) Keysearch
advertising; and (6) notice disseminated twice by the American Diabetes Association via a monthly
newsletter to its more than 200,000 members. Id. at ¶ 30. Plaintiffs demonstrated calculations
revealing that notice via these vehicles reached 80% of the potential class members approximately
three (3) times. Id. at ¶ 25.
As stated above, the Court received several objections prior to the fairness hearing, a
majority of which appeared to be boilerplate in nature and nearly identical in content. In any event,
the objections primarily focused on the settlement being “unfair and unreasonable” because it did
not “provide best notice to all persons who may have purchased Dreamfields pasta.” Specifically,
the Objectors contend that the notice should have been posted on Defendant’s website, product
boxes, posted in supermarkets and drug stores, and communicated to groups such as heart
associations and diabetic associations. Ironically, however, the Objectors also contend that “the
settlement is flawed because many people who did not purchase Dreamfields pasta can submit
fraudulent claim forms.” The Objectors also believe the settlement to be inadequate because of
the amount the cy pres recipient may receive, the injunctive provisions only last for (1) year, and
the attorneys’ fees are allegedly unreasonable. Plaintiffs responded to these objections and the
Court heard from both parties, the Objectors’ attorney, and the Objectors themselves at the fairness
hearing and reserved decision on the instant motions.
II.
DISCUSSION
a. Legal Standard
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Final approval of a class action settlement involves two (2) fundamental inquiries. First,
the Court must determine whether a class can be certified under Rule 23(a) and if at least one (1)
prong of Rule 23(b) has been satisfied. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 620,
117 S. Ct. 2231, 2248, 138 L. Ed. 2d 689 (1997). Second, the Court must determine whether the
proposed settlement is “fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2); In re Warfarin
Sodium Antitrust Litig., 391 F.3d 516, 534 (3d Cir. 2004). In determining whether to grant
approval, the Third Circuit Court of Appeals has noted that there is an “overriding public interest
in settling class action litigation, and it should therefore be encouraged.” Warfarin Sodium, 391
F.3d at 535. However, “where settlement negotiations precede class certification, and approval
for settlement and certification are sought simultaneously, [the Third Circuit] require[s] district
courts to be even ‘more scrupulous than usual’ when examining the fairness of the proposed
settlement. Id. at 534 (quoting In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Products Liab.
Litig., 55 F.3d 768, 805 (3d Cir. 1995)).
b. Analysis
i. Class Certification
Rule 23 has two primary components in determining whether a class can be certified. First,
the party seeking class certification must first establish that the four (4) requirements of Rule 23(a)
have been met – namely: “(1) numerosity (a class [so large] that joinder of all members is
impracticable); (2) commonality (questions of law or fact common to the class); (3) typicality
(named parties’ claims or defenses are typical . . . of the class); and (4) adequate representation
(representatives will fairly and adequately protect the interests of the class).” Warfarin Sodium,
391 F.3d at 527 (internal quotations omitted) (citing Amchem, 521 U.S. at 613)). Second, the
Court must find that the class fits within one (1) of the three (3) categories of class actions set forth
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in Rule 23(b). In re Cmty. Bank of N. Virginia, 418 F.3d 277, 302 (3d Cir. 2005). In the present
matter, Plaintiffs seek certification under Rule 23(b)(3), which is “the customary vehicle for
damage actions.” Id. As such, the “Court must determine that common questions of law or fact
predominate and that the class action mechanism is the superior method for adjudicating the case.”
Id. In making the class certification analysis, the Court may take the proposed settlement into
consideration. In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283,
308 (3d Cir. 1998) (citation omitted).
Indeed, “[w]hether trial would present intractable
management problems . . . is not a consideration when settlement-only certification is requested,
for the proposal is that there be no trial.” Amchem, 521 U.S. at 620.
a. Rule 23(a) Factors
Here, Plaintiffs have met the Rule 23(a) factors. It is clear that Plaintiffs meet the
numerosity requirement because during the class period, Dakota Growers sold millions of boxes
of Dreamfields pasta annually in the United States. In re Prudential Ins. Co. of Am. Sales Practices
Litig., 962 F. Supp. 450, 510 (D.N.J. 1997) aff'd sub nom. In re Prudential Ins. Co. Am. Sales
Practice Litig. Agent Actions, 148 F.3d 283 (3d Cir. 1998) (“To meet the numerosity requirement,
class representatives must demonstrate only that ‘common sense’ suggests that it would be difficult
or inconvenient to join all class members.”) (citation omitted). Even assuming that individual
class members bought multiple boxes, the number of class members still exceeds that which would
be necessary to satisfy the numerosity requirement. See Stewart v. Abraham, 275 F.3d 220, 22627 (3d Cir. 2001) (“No minimum number of plaintiffs is required to maintain a suit as a class
action, but generally if the named plaintiff demonstrates that the potential number of plaintiffs
exceeds 40, the first prong of Rule 23(a) has been met.”) (citing 5 James Wm. Moore et al., Moore's
Federal Practice § 23.22[3][a] (Matthew Bender 3d ed.1999)).
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Next, the settlement class members share many common issues of law and fact.
Specifically, all class members were subjected to the same advertised claims relating to
Dreamfield’s nutritional quality and were damaged by having paid a price premium for a product
that allegedly lacked its claimed benefits. As such, questions of law and fact such as: whether
Defendant misrepresented or omitted material facts in connection with the promotion, marketing,
advertising, packaging, labeling and sale of Dreamfields pasta; whether Defendant represented
that Dreamfields pasta has characteristics, benefits, uses, or qualities that it does not actually have;
whether Defendant’s acts and practices in connection with the product violated deceptive trade
practice statutes; and whether Defendant’s conduct injured members of the class, are common to
all settlement class members. As such, commonality is satisfied. See Warfarin Sodium, 391 F.3d
at 527-28 (“Rule 23(a)(2)’s commonality element requires that the proposed class members share
at least one question of fact or law in common with each other.”); see also, Baby Neal v. Casey,
43 F.3d 48, 56 (3d Cir. 1994) (“Because the [commonality] requirement may be satisfied by a
single common issue, it is easily met. . . .”).
Similarly, Plaintiffs have demonstrated that the typicality requirement has been satisfied.
The class members all purchased Dreamfields pasta with the alleged misrepresentations on its label
and were exposed to Defendant’s uniform advertising, marketing and promotional campaign.
Compl., at ¶ 11. In considering typicality, the Court must determine whether “the named plaintiffs’
individual circumstances are markedly different or . . . the legal theory upon which the claims are
based differs from that upon which the claims of other class members will perforce be based.”
Johnston v. HBO Film Mgmt., Inc., 265 F.3d 178, 184 (3d Cir. 2001) (quoting Eisenberg v.
Gagnon, 766 F.2d 770, 786 (3d Cir.1985)). Typicality does not require that all class members
share identical claims, rather, so long as “the claims of the named plaintiffs and putative class
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members involve the same conduct by the defendant, typicality is usually established regardless
of factual differences.” Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 184
(3d Cir. 2001), as amended (Oct. 16, 2001) (citation omitted). Here, because the claims of
Plaintiffs and the settlement class members “all arise from the alleged misrepresentations by
[Defendant],” the typicality requirement is met. Johnston, 265 F.3d at 185; see also, Warfarin
Sodium, 391 F.3d at 532 (“[T]he claims of the representative plaintiffs arise from the same alleged
wrongful conduct on the part of [the defendant], specifically the alleged misrepresentation and
deception . . . . Accordingly, the District Court did not abuse its discretion in finding that Rule 23’s
typicality requirement was satisfied.”).
Last, Plaintiffs have satisfied the adequacy component of Rule 23(a). This requirement
involves a two (2) part inquiry intended to ensure that the absentees’ interests are fully pursued:
(1) the named plaintiffs’ interests must be sufficiently aligned with the interests of the absentees,
and (2) the plaintiffs’ counsel must be qualified to represent the class. In re Gen. Motors Corp.
Pick-Up Truck Fuel Tank Products Liab. Litig., 55 F.3d 768, 800 (3d Cir. 1995). As for the first
step, the Court must determine whether “the representatives’ interests conflict with those of the
class.” Johnston, 265 F.3d at 185. The Court is not aware of any conflict between the proposed
class representatives and the class. Indeed, Plaintiffs are typical consumers who purchased
Dreamfields pasta during the class period and share the same interests as other class members in
seeking to stop the allegedly deceptive advertising of the product and to recover for deceived class
members. As for the second step, the class is represented by Goldman Scarlato, Karon & Penny,
P.C., Federman & Sherwood, Zaremba Brownell & Brown, PLLC and Branham Law, LLP, law
firms with national reputations in class action complex litigation fields. See Motion for Settlement,
at Ex. 6 [docket #38]. Further, with regard to negotiating the settlement, Judge Brown stated in
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his declaration that “[a]ll parties were well prepared and represented by highly experienced
counsel.” Declaration of Hon. Garrett E. Brown (Ret.), at ¶ 13. Plaintiffs’ counsel has given this
Court no reason to doubt its professional qualifications and adequacy in representing this class.
Accordingly, Plaintiffs have sufficiently established all four (4) elements of Rule 23(a).
b. Rule 23(b)(3)
As stated above, Plaintiffs seek certification under Rule 23(b)(3), which is “the customary
vehicle for damage actions.” In re Cmty. Bank of N. Virginia, 418 F.3d 277, 302 (3d Cir. 2005).
Rule 23(b)(3) provides that:
A class action may be maintained if Rule 23(a) is satisfied and if:
. . . the court finds that the questions of law or fact common to class
members predominate over any questions affecting only individual
members, and that a class action is superior to other available
methods for fairly and efficiently adjudicating the controversy. The
matters pertinent to these findings include:
(A) the class members' interests in individually controlling the
prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the
controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the
litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23. As such, the primary criteria that the Court must evaluate in light of these
pertinent factors are predominance and superiority. Amchem 521 U.S. at 615. As the Supreme
Court explained in Amchem, “[p]redominance is a test readily met in certain cases alleging
consumer or securities fraud.” Id. at 625. Further, in a settlement-only class action, “the court
certifying the class need not examine issues of manageability” and therefore, predominance is not
a high standard. Cmty. Bank, 418 F.3d at 306. The Third Circuit also recently affirmed the
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principles that inform the predominance analysis when considering certification of a settlement
class:
From our case law, we can distill at least three guideposts that direct
the predominance inquiry: first, that commonality is informed by the
defendant's conduct as to all class members and any resulting
injuries common to all class members; second, that variations in
state law do not necessarily defeat predominance; and third, that
concerns regarding variations in state law largely dissipate when a
court is considering the certification of a settlement class.
Sullivan v. DB Investments, Inc., 667 F.3d 273, 297 (3d Cir. 2011).
Here, Plaintiffs have alleged claims on behalf of a nationwide class for breach of warranty
and unjust enrichment and various state subclasses under certain state consumer protection
statutes. Importantly, however, Plaintiffs are seeking certification of a settlement-only class; as
such, the existence of any individual inquiry does not necessarily preclude class action treatment
where all class members face the necessity of proving the same fraudulent scheme. See Cmty.
Bank, 418 F.3d at 307; see also Prudential, 148 F.3d at 315 (“. . . [P]resence of individual questions
does not per se rule out a finding of predominance. In particular, the ‘presence of individual
questions as to the reliance of each investor does not mean that the common questions of law and
fact do not predominate.’” (quoting Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir.1985)). The
core overriding questions in this case relate to Defendant’s labels, marketing, and advertising,
which contain uniform and nationally disseminated messages, and whether those representations
violated the law. Thus, the predominance factor is satisfied.
Rule 23(b)(3) also requires a finding that “a class action [be] superior to other available
methods for the fair and efficient adjudication of the controversy.” As such, this inquiry requires
the Court to “balance, in terms of fairness and efficiency, the merits of a class action against those
of alternative available methods of adjudication.” Danvers Motor Co. v. Ford Motor Co., 543 F.3d
11
141, 149 (3d Cir. 2008) (citation omitted). The following factors are relevant to the superiority
requirement:
(1) the interest of individual members of the class in controlling the
prosecution of the action, (2) the extent of litigation commenced
elsewhere by class members, (3) the desirability of concentrating
claims in a given forum, and (4) the management difficulties likely
to be encountered in pursuing the class action.
Id. Here, there is a large number of potential class members; however, individual members have
little interest in controlling the prosecution of the action because each consumer has a very small
claim in relation to the cost of prosecuting a lawsuit. See Warfarin Sodium, 391 F.3d at 534. This
is also evidenced by the fact that only one (1) other litigation was commenced elsewhere against
Defendant. Further, it is highly desirable to concentrate the claims in a given forum, because if
this were not the case, thousands of individual trials would impose a massive burden on Court’s
resources. Last, the manageability factor is irrelevant because “the proposal is that there be no
trial.” Amchem, 521 U.S. at 620. As such, Rule 23(b)(3) is also satisfied and the class may be
certified here for purposes of settlement.
ii. Settlement Approval
In order to properly determine whether a settlement is fair, reasonable, and adequate, and
thus subject to approval by the Court, the Third Circuit has identified nine (9) factors to be
considered:
(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 judgment; (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
to a possible recovery in light of all the attendant risks of litigation.
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Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975).
The first Girsh factor “captures the probable costs, in both time and money, of continued
litigation.” In re Cendant Corp. Litig., 264 F.3d 201, 233 (3d Cir. 2001). Here, this factor favors
settlement because continuing litigation through trial would require additional discovery,
extensive pretrial motions addressing factual and legal questions, and ultimately a complicated and
lengthy trial. The case would also require vast expert analysis of the nutritional qualities of
Dreamfields as well as the consumer impact of Defendant’s representations regarding the
product’s purported nutritional attributes, which would involve substantial expenses. Given the
prospect of this litigation, and engendering enormous time and monetary expenditure if it were to
go forward, this factor weighs strongly in favor of settlement approval.
The second Girsh factor “attempts to gauge whether members of the class support the
settlement.” Prudential, 148 F.3d at 318. Here, of the 61,340 claims received as of September 9,
2014, only seven (7) class members have requested exclusion from the class. See Declaration of
April Hyduck Regarding Dissemination of the Notice and Receipt of Requests for Exclusion and
Objections to Date and Claims Filed to Date (“Hyduk Dec.”), at ¶¶ 17, 20. Having heard the
objections made, the Court is unimpressed with the Objectors argument that there was somehow
insufficient notice yet also the potential for fraudulent claims, as these arguments are entirely
contradictory. Further, under Girsh, such a small number of negative responses compared to the
high number of claims filed favors approval of a class action settlement agreement. Bell Atl. Corp.
v. Bolger, 2 F.3d 1304, 1314 n. 15 (3d Cir. 1993) (noting that silence is a “tacit consent” to
settlement). As of the date of Plaintiffs’ motion, only twelve (12) objections to the settlement had
been filed, Id. at ¶ 18, and the number of objectors from the class is a strong indication of the
reaction of the class which favors settlement here. Cendant, 264 F.3d at 235 (“The vast disparity
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between the number of potential class members who received notice of the Settlement and the
number of objectors creates a strong presumption that this factor weighs in favor of the
Settlement.”).
The third Girsh factor “captures the degree of case development that class counsel [had]
accomplished prior to settlement. Through this lens, courts can determine whether counsel had an
adequate appreciation of the merits of the case before negotiating.” Id.; see also GM Trucks, 55
F.3d at 813. This inquiry necessarily has two (2) inquiries – factual and legal – and the discovery
considered by the Court may include “informal” discovery received from the defendant, thirdparties and experts. See, e.g., GM Trucks, 55 F.3d at 813 (considering expert testimony and other
evidence from parallel state court proceedings). Here, while the case is in a relatively early stage
of litigation, Plaintiffs have conducted extensive research and discovery into Defendant’s
advertising of Dreamfields as well as retained experts in the field. Plaintiffs’ counsel spent months
diligently investigating the factual and legal basis for the claims asserted in the Complaint, and
also reviewed Defendant’s public filings, patent application, advertising and websites, as well as
numerous blog posts, articles and scientific studies regarding Dreamfields pasta and human
glycemic responses to ingestion of certain foods. Plaintiffs’ counsel also interviewed several
bloggers, authors, and scientists regarding the claims alleged in the complaint and spoke to several
experts regarding economic, scientific and consumer behavior issues relevant to the case.
Plaintiffs’ counsel also spent significant time obtaining, reviewing and analyzing documents and
consulting with experts, as well as conducting confirmatory discovery, including interviewing key
personnel at Dreamfields responsible for the creation of the product, quality control and testing.
Moreover, class counsel have extensive experience in litigating cases of this type which favors
their understanding of the legal merits and pitfalls in connection therewith. As such, the Court is
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confident that counsel had an adequate appreciation of the merits of the case before negotiating
settlement.
The fourth Girsh factor asks the Court to evaluate the risks of establishing liability by
“examin[ing] what the potential rewards (or downside) of litigation might have been had class
counsel elected to litigate the claims rather than settle them.” GM Trucks, 55 F.3d at 319. While
Plaintiffs have alleged numerous facts against Defendant, they also recognize the uncertainties of
litigation and as stated above, the fact that this case would likely end up being a battle of experts
which contains inherent risks in establishing liability. Also, despite the Court finding that class
certification is proper for purposes of this settlement, Plaintiffs would incur risks in class
certification should the litigation continue. In settling the claims, Plaintiffs had to account for
these risks and in light of them, the settlement provides substantial monetary and injunctive
benefits, and does so imminently without the delay of protracted litigation. Further, by settling the
claims, thousands of potential class members are being notified now of the alleged deception by
Dreamfields as opposed to years down the line subsequent to a lengthy litigation. As such, the
settlement value achieved in the face of the risks surrounding continued litigation weighs heavily
in favor of settlement.
The fifth Girsh factor “attempts to measure the expected value of litigating the action rather
than settling it at the current time.” Cendant, 264 F.3d at 238. The Court looks at the potential
damage award if the case were taken to trial against the benefits of immediate settlement.
Prudential, 148 F.3d at 319. As mentioned previously, continued litigation here will present risks
on both liability and class certification. Further, the liability issues would likely turn on the fact
finders’ assessment of each parties’ expert witnesses, and the settlement class members might also
have difficulty at trial establishing that they were damaged and to what extent. As such, the cash
15
value and injunctive relief achieved in the settlement weighs in favor of final approval. See
Cendant, 264 F.3d at 239 (where the Third Circuit analyzed that there was no compelling reason
to think that “a jury confronted with competing expert opinions” would accept the plaintiff’s
damages theory rather than that of defendant, and thus the risk in establishing damages weighed
in favor of approval of the settlement).
In considering the sixth Girsh factor, because the prospects for obtaining certification have
a great impact on the range of recovery one can expect to reap from the class action, GM Trucks,
55 F.3d at 817, the Court must measure the likelihood of obtaining and maintaining a certified
class if the action were to proceed to trial. Girsh, 521 F.2d at 157. Issues such as manageability
that are not a concern in a settlement-only class such as here, would likely pose formidable
challenges to certification of a litigation class. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d
305, 309 (3d Cir. 2008). Similarly, differences in state law that often complicate the certification
of a nationwide class, see e.g., In re LifeUSA Holding Inc., 242 F.3d 136, 147 n.11 (3d Cir. 2001),
are “irrelevant to certification of a settlement class,” but would likely pose an issue if the case were
to proceed to trial. Warfarin Sodium, 391 F.3d at 529. Given the value of the product at issue, if
a class could not be certified here for settlement purposes, it would likely leave few, if any, class
members with both the resources and financial incentive to pursue claims on their own behalf,
with the practical result of no recovery by anyone. See Carnegie v. Household Int'l, Inc., 376 F.3d
656, 661 (7th Cir. 2004) (“The realistic alternative to a class action is not 17 million individual
suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.” (emphasis in original)).
The proposed settlement provides a remedy now to all class members, rather than risking an
uncertain result after years of expensive litigation. Accordingly, this factor strongly supports final
approval. See Warfarin Sodium, 391 F.3d at 537 (“. . . [While C]oncerns about the manageability
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of a multistate class of consumers … did not pose a problem for the certification of a settlement
class, there is a significant risk that such a class would create intractable management problems if
it were to become a litigation class, and therefore be decertified. . . . [This] significant risk that the
class would be decertified if litigation proceeded weighs in favor of settlement.”).
The seventh Girsh factor considers “whether the defendant[ ] could withstand a judgment
for an amount significantly greater than the Settlement.” Cendant, 264 F.3d at 240. Importantly,
however, the inquiry is not whether the Defendant’s resources exceed the settlement amount, but
whether class members are likely entitled to a greater amount under the theories of liability that
existed at the time the settlement was reached. Warfarin Sodium, 391 F.3d at 538 (“. . . [T]he fact
that [defendant] could afford to pay more does not mean that it is obligated to pay any more than
what the consumer and … class members are entitled to under the theories of liability that existed
at the time the settlement was reached. Here, the District Court concluded that [defendant’s] ability
to pay a higher amount was irrelevant to determining the fairness of the settlement. We see no
error here.”). Here, settlement class members can receive virtually 100% of their damages per
purchase, for up to fifteen (15) purchases, as well as injunctive relief to consumers in the form of
a label change. Additionally, the settlement amount benefits the proposed class without accounting
for any of the class counsels’ fees or costs. In considering the fact that many putative class
members who submitted claim forms for up to fifteen (15) boxes would likely have difficulty
proving more than that number of purchases, the relief and efficiencies achieved through
settlement weight in favor of final approval.
The last two (2) Girsh factors are usually considered together. They ask “whether the
settlement is reasonable in light of the best possible recovery and the risks the parties would face
if the case went to trial.” Prudential, 148 F.3d at 322; see also Warfarin Sodium, 391 F.3d at 538
17
(court should consider “whether the settlement represents a good value for a weak case or a poor
value for a strong case.”). The Court must also “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.” GM Trucks, 55 F.3d at 806. Here,
the likelihood that a greater result could be achieved at trial is remote as the settlement affords
injunctive relief by correcting the labeling as well as substantial monetary relief. Given the
inherent risks discussed above in litigating a damages class in this case and the risk of certifying a
litigation class, the settlement benefits are highly significant. As such, the final two (2) Girsh
factors weigh in favor of settlement approval.
In addition to the Girsh factors, Rules 23(c)(2)(B) and 23(e) requires the Court to ensure
that all class members who would be bound by a class settlement are provided the best notice
practicable in order to protect the rights of absent members of the class. See In re Insurance
Brokerage Antitrust Litig., MDL No. 1663, 2012 WL 1071240, at *13 (D.N.J. Mar. 30, 2012)
(“[P]roper notice must meet the requirements of [Rules] 23(c)(2)(B) and 23(e).”). Sufficient notice
is that which is “reasonably calculated, under all the circumstances, to apprise interested parties of
the pendency of the action and afford them an opportunity to present their objections.” Mullane v.
Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 657, 94 L. Ed. 865 (1950).
Rule 23(c)(2)(B) requires that notice “inform class members of (1) the nature of the action; (2) the
definition of the class certified; (3) the class claims, issues, or defenses; (4) the class member’s
right to retain an attorney; (5) the class member’s right to exclusion; (6) the time and manner for
requesting exclusion; and (7) the binding effect of a class judgment on class members under Rule
23(c)(3).” Fed. R. Civ. P. 23(c)(2)(B)(i)-(vii). Rule 23(e) notice must contain a summary of the
litigation sufficient to “apprise interested parties of the pendency of the settlement proposed and
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to afford them an opportunity to present their objections.” In re Prudential Ins. Co. of Am. Sales
Practices Litig., 177 F.R.D. 216, 231 (D.N.J. 1997) (citing Mullane, 339 U.S. at 314).
Here, the notice program initially approved by the Court on May 9, 2014, was fully
implemented. As set forth above, the claims administrator sent two (2) email notices directly to
338,622 potential class members and published notice in Better Homes & Gardens, Cooking Light,
People, Health, Good Housekeeping, and American Profile.
Declaration of Shannon R.
Wheatman, Ph.D., at ¶¶ 14 and 21. Notice was also twice disseminated by the American Diabetes
Association’s newsletter distributed to over 234,000 recipients. Id. at ¶ 30. In addition to print
advertisements and website postings, notice was posted on the dedicated settlement website
established by the claims administration. Hyduk Decl., at ¶¶ 10-11. Such website contains the
settlement agreement, information relating to filing a claim, opting out of the settlement, objecting
to the settlement, deadlines relating to the settlement, frequently asked questions, and other
relevant information. Id. As of September 9, 2014, this website had been visited approximately
213,311 times. Id. at ¶ 12. This notice program has fully informed members of their rights and
benefits under the settlement, and all required information has been fully and clearly presented to
class members. Accordingly, this widespread and comprehensive campaign provides sufficient
notice under the circumstances, satisfying both due process and Rule 23 and the settlement is
therefore approved by this Court.
iii.
Attorneys’ Fees
Plaintiffs have also moved for: (1) an award of attorneys’ fees in the amount of
$2,900,0002, plus any interest accrued, which is inclusive of litigation costs and expenses in the
This amount was negotiated during the parties’ mediation and is to be paid directly by the Defendant. The award
will be paid separate and apart from the settlement funds and therefore will not reduce the amount awarded to class
members.
2
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amount of $43,046.70; and (2) an incentive award in the total amount of $20,000 to the named
Plaintiffs and Ms. Weiss from the Minnesota action for their time expended and oversight provided
in connection with this litigation. In ruling on a motion for approval of attorneys’ fees, a District
Court must act as a fiduciary for the class. In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 307 (3d
Cir. 2005), as amended (Feb. 25, 2005). However, where the “money paid to attorneys is entirely
independent of money awarded to the class, the Court’s fiduciary role in overseeing the award is
greatly reduced, because there is no potential conflict of interest between attorneys and class
members.” Rossi v. Proctor & Gamble Co., 2013 WL 5523098 (D.N.J. Oct. 3, 2013), appeal
dismissed (Mar. 21, 2014). Although the settlement here is not strictly a common fund because
the fees were separately negotiated and will be paid apart from money awarded to the class, courts
apply many of the same principles as are applied when analyzing a common fund. In re Gen.
Motors Corp. Pick-Up Truck Fuel Tank Products Liab. Litig., 55 F.3d 768, 821 (3d Cir. 1995)
(“Courts have relied on ‘common fund’ principles and the inherent management powers of the
court to award fees to lead counsel in cases that do not actually generate a common fund.”). As
such, the Court will analyze common fund factors to determine the reasonableness of the fees
requested herein.
“Courts may award attorneys' fees in common fund cases under either the ‘lodestar’ method
or the ‘percentage of the fund’ method.” Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96,
121 (2d Cir. 2005) (citation omitted). “The lodestar method multiplies hours reasonably expended
against a reasonable hourly rate.” Id. (internal citation omitted). The Third Circuit has noted,
however, that the “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.” Rite Aid, 396 F.3d at 300 (citation omitted). In any event, regardless
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of which method the Court chooses, the Third Circuit has “suggested it is sensible for a court to
use a second method of fee approval to cross-check its initial fee calculation.” Id.
Here, pursuant to the percentage-of-recovery method, the requested attorneys’ fees are
reasonable. As an initial matter, the requested attorneys’ fees are separate and apart from the
settlement award, but even if they were added together to form the common fund, Plaintiffs’
requested fee award would be approximately 36.8% of the mere cash value of the fund. Attorneys’
fees in the 30% range are not uncommonly awarded in the Third Circuit, and courts in this Circuit
have awarded fees of more than 30%. See, e.g., Rowe v. E.I. Dupont de Nemours & Co., 2011
WL 3837106, at *22 (D.N.J. Aug. 26, 2011) (finding award of 33.33% to be reasonable in case
establishing $8.3 million settlement fund); Milliron v. T-Mobile USA, Inc., 2009 WL 3345762, at
*8 (D.N.J. Sept. 10, 2009), as amended (Sept. 14, 2009), aff'd, 423 F. App'x 131 (3d Cir. 2011)
(awarding 33.33% of $13.5 million). Further, the Court cannot simply overlook the injunctive
relief also being afforded Plaintiffs when determining whether the percentage is reasonable.
Indeed, Plaintiffs’ expert, Dr. Thomas J. Maronick, calculated the value of the injunctive relief to
be $15,494,775, which was determined by the actual difference between the price premium paid
by consumers for Dreamfields pasta, and the price consumers are willing to pay for non-premium
pasta. See Declaration of Dr. Thomas J. Maronick. When adding the value of the injunctive relief,
the settlement value results in a total of $23,394,775 and Plaintiffs’ requested attorneys’ fee,
including litigation expenses, of $2,900,000 is less than 12% of the total settlement value, which
is below amounts routinely approved in class action settlements.
Moreover, the requested fees as against the settlement value meet the Gunter factors.
Typically, Courts analyze Gunter factors when the attorneys’ fee comes from the same source as
the settlement, Milliron, 2009 WL 3345762, at *9 (In common fund cases of the type presented
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here-where attorneys' fees and the Class recovery come from the same source and the fees are
based on a percentage of the Class settlement-the Third Circuit has set forth a multi-factor analysis
[in Gunter v. Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000)] to help analyze whether or
not the percentage award is reasonable”); however, as noted above, that is not the case here. In
any event, the Court is to analyze the reasonableness of the attorneys’ fees requested herein in the
same fashion as a common fund. As such, the Court must consider factors including:
(1) the size of the fund created and the number of persons benefited;
(2) the presence or absence of substantial objections by members of
the class to the settlement terms and/or 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; and (7) the awards in similar cases.
Id. (quoting Gunter, 223 F.3d at 195 n.1). However, these factors “need not be applied in a
formulaic way … and in certain cases, one factor may outweigh the rest.” Rite Aid, 396 F.3d at
301.
The first Gunter factor for determining a fee’s reasonableness is the “size of the fund
created and the number of persons benefitted.” Gunter, 223 F.3d at 195 n.1. As previously
mentioned, the settlement generated a $5,000,000 cash fund to be shared by the class, and a
significant number of persons are going to benefit from this. Further, an even broader spectrum
of persons, whether class members or not, will benefit from the injunctive provisions of the
settlement. These facts support approval of the requested fee. Similarly, the second Gunter factor
– the presence or absence of substantial objections by class members to the settlement or attorneys’
fee request – also supports the requested fee award in this case. As of the date of Plaintiffs’ motion
for fees, only twelve (12) objections to the settlement had been received and as this Court
mentioned previously, most of which were identical in nature. Compared to the vast number of
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claims submitted, the slight number of objections weighs heavily in favor of the requested fees.
Third, the Court must analyze the skill and efficiency of the attorneys involved. As discussed in
the Girsh analysis, counsels’ experience allowed them to identify the complex issues involved in
the case to formulate an efficient strategy in obtaining the proposed settlement, and the Court has
no reason to doubt the skill and efficiency of the attorneys involved. The fourth Gunter factor
involves the “complexity, expense and likely duration of the litigation.” Id. Again, as stated
several times throughout this Opinion, were this litigation to go forward, Plaintiffs would face
hurdles with regard to class certification, would need significant expert analysis, and would likely
result in an extremely lengthy litigation. As such, in considering the magnitude and complexity
of this case, the fourth factor weighs in favor of awarding the requested fee.
The Third Circuit has identified the “risks of non-payment or non-recovery” as the fifth
factor to be considered in determining a reasonable award of attorneys’ fees. Id. These risks
include the “risks of establishing liability.” Rite Aid, 396 F.3d at 304. As set forth above, liability
in this case is not certain and accordingly, Plaintiffs’ counsel would be at a risk of non-recovery.
In the meantime, Plaintiffs’ counsel has assumed the risk associated with pursuing this case,
advocated for Plaintiffs and the class members, and obtained a substantial settlement. As such,
this factor supports the fairness and reasonableness of the requested fee. Next, the amount of time
devoted to the case by Plaintiffs’ counsel is the sixth factor a court considers in determining the
reasonableness of a fee request. Gunter, 223 F.3d at 195 n.1. As mentioned previously, Plaintiffs’
counsel spent months investigating the factual and legal basis for the claims asserted in the
Complaint, reviewed Defendant’s public filings, detailed patent application, advertising and
websites, as well as numerous blog posts, articles and scientific studies regarding Dreamfields
pasta and human glycemic responses to ingestion of certain foods. Plaintiffs’ counsel also
23
interviewed several bloggers, authors, and scientists regarding the claims alleged in the Complaint
and spoke to several experts regarding economic, scientific and consumer behavior issues relevant
to the case. They also reviewed and analyzed documents, prepared for and participated in the
mediation, conducted discovery, and interviewed key personnel at Dreamfields pasta. All of this
work resulted in a total of 2,016.70 hours of attorney and other professional support time
prosecuting this case. The time spent was seemingly necessary to produce the settlement achieved
and justifies the requested fee. The final Gunter factor requires the Court to compare the award to
awards in similar cases. As the Court has already indicated, a fee of 30% or more is not uncommon
in class action cases. The requested fee is comparable to fees typically awarded in analogous cases
and is fair and reasonable in relation to the settlement amount, particularly when the value of the
injunctive relief is taken into consideration. Accordingly, all of the Gunter factors weigh in favor
of the reasonableness of the requested fee.
Moreover, the requested fees suffice under the lodestar cross-check. “The lodestar crosscheck calculation need entail neither mathematical precision nor bean-counting” and “district
courts may rely on summaries submitted by attorneys and need not review actual billing records.”
Rite Aid, 396 F.3d at 300. In cases of this nature, fees representing multiples above the lodestar
are sometimes awarded to reflect the contingency fee risk, the quality of the result achieved, the
complexity of the issues, the skill of the attorneys and other relevant factors. Id. at 305-06. Indeed,
the “multiplier need not fall within any pre-defined range,” Id. at 307, and in complex contingent
litigation, multipliers over 2 may be awarded.
Here, counsel have collectively spent a total of 2,016.70 hours of attorney and other
professional support time prosecuting this case through September 9, 2014. The rates billed by
counsel range from $350.00 to $850.00 per hour. See Declaration of William B. Federman, at ¶
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4; Declaration of John Zaremba, at ¶ 4; Declaration of Brian D. Penny, at ¶ 4; Declaration of
Charles W. Branham, at ¶ 5. Counsels’ total lodestar, derived by multiplying counsels’ combined
total hours by each firm’s current hourly rates is $1,180,156.25, such that the requested fee of
$2,900,000, inclusive of litigation expenses, represents approximately 2.45 times the lodestar
amount. Given that the “Third Circuit has noted that ‘[m]ultiples ranging from one to four are
frequently awarded in common fund cases where the lodestar method is applied’ [and] [i]n fact …
the Third Circuit approved a lodestar multiplier of 2.99 in a case it described as ‘relatively simple
in terms of proof’ in which ‘discovery was virtually nonexistent[,]’” Milliron, 2009 WL 3345762,
at *14 (quoting In re Prudential, 148 F.3d at 341; and In re Cendant Corp. PRIDES Litig., 243
F.3d 722, 735 (3d Cir. 2001)), a 2.45 multiplier here is well within the range of reasonableness.
Last, Plaintiffs’ requested fee amount includes $43,046.70 in litigation expenses, and
Plaintiffs also seek an additional $20,000 incentive award for the named Plaintiffs and Ms. Weiss.
According to Plaintiffs, the requested expenses relate principally to retention of highly regarded
and experienced experts and mediation services. “Counsel in common fund cases [are] entitled to
reimbursement of expenses that were adequately documented and reasonably and appropriately
incurred in the prosecution of the case.” In re Cendant Corp., Derivative Action Litig., 232 F.
Supp. 2d 327, 343 (D.N.J. 2002) (citations omitted). The declarations submitted on behalf of
Plaintiffs’ counsel detail the expenses and in light of the amount of work that has gone into the
matter thus far, this Court has no reason to doubt that these expenses were reasonably and
appropriately incurred. See In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503,
525 (E.D.N.Y. 2003) aff'd sub nom. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d
Cir. 2005) (noting that it is common practice to grant expense requests where the “lion's share of
25
these expenses reflects the costs of experts and consultants, litigation and trial support services,
document imaging and copying, deposition costs, online legal research, and travel expenses.”).
Moreover, as for the requested incentive award, courts “award such costs and expenses
both to reimburse the named plaintiffs for expenses incurred through their involvement with the
action and lost wages, as well as to provide an incentive for such plaintiffs to remain involved in
the litigation and to incur such expenses in the first place.” Hicks v. Stanley, 2005 WL 2757792,
at *10 (S.D.N.Y. Oct. 24, 2005). The individual Plaintiffs herein as well as Ms. Weiss from the
Minnesota action have been actively involved in this matter and fully committed to pursuing their
claims. In participating in this action, these Plaintiffs have helped investigate the claims, reviewed
and approved pleadings, maintained regular telephonic and email communications with counsel
regarding strategy and developments in the case, reviewed and commented on submissions to the
Court and mediator, reviewed and approved the retention of experts, and participated in mediation
and settlement discussions on behalf of the class. See generally, Declaration of Jesse Weiss;
Declaration of Joseph Mirakay; Declaration of Louis Messina; Declaration of Michael
Elefterakis; Declaration of John Gembinski. These are precisely the types of activities that courts
have found proper to support reimbursement and accordingly, the Court grants this request.
III.
CONCLUSION
For the foregoing reasons, Plaintiffs’ final motion for settlement approval [docket #65] is
GRANTED; Plaintiffs’ motion for attorneys’ fees and reimbursement of litigation expenses
[docket #66] is GRANTED; and the Objectors motion for leave to file a sur-reply brief [docket
#76] is DENIED, as it is now moot. An appropriate Order accompanies this Opinion.
Date: October 20, 2014
/s/ Joel A. Pisano
JOEL A. PISANO
United States District Judge
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