Josue Romero v. Provide Commerce, Inc.
906 F.3d 747
| 9th Cir. | 2018Background
- Plaintiffs sued Provide Commerce and Regent Group alleging consumers were enrolled in a paid rewards program without consent, were charged fees, and did not receive promised discounts.
- The parties settled: $12.5 million cash fund (≈$3.5M for refunds/administration after fees/costs), $20 transferable website credit emailed to each class member (≈1.3M members), and cy pres distribution of leftover cash to three San Diego universities.
- Class counsel sought $8.7 million in fees; district court initially approved the settlement and fee, valuing the settlement at $38M (including full face value of all $20 credits).
- Objector appealed, and the Ninth Circuit remanded in light of In re Online DVD regarding CAFA coupon treatment; on remand the district court again declined to treat the $20 credits as "coupons" and reinstated the $8.7M fee.
- The Ninth Circuit held the district court erred: the $20 credits are coupons under CAFA, so the fee award must be recalculated accounting for coupon redemption value; the court affirmed the cy pres distribution to the selected universities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the $20 credits are "coupons" under CAFA | Credits functioned as coupon relief requiring fee limits under § 1712 because credits have limited merchant universe, blackout dates, expiry, and require reengagement with defendant | Credits are not coupons (analogous to Walmart gift cards in In re Online DVD) because class members value and want the credits and they match the injury | Credits are coupons under CAFA; district court erred by not applying CAFA factors and by relying on similarity-to-injury rationale |
| Whether CAFA requires fee calculation using coupon redemption value (percentage-of-recovery) | Fees attributable to coupons must be based on redeemed value, so full-face valuation inflates fees | Full settlement value (including credits) can support percentage or lodestar cross-check | Fee award vacated; must be recalculated treating credits as coupons and accounting for redemption rate when using percentage-of-recovery; lodestar may be used only if it does not rely on full face value of coupons |
| Whether the district court improperly used a lodestar multiplier tied to coupon face value | Tying the lodestar multiplier to the inflated percentage-of-recovery (which included full coupon face value) violates § 1712(b) and In re HP | Lodestar cross-check and multiplier were reasonable given hours and results | District court erred by reverse-engineering multiplier from settlement value that included full coupon face value; lodestar-based award must not be informed by unadjusted coupon value |
| Appropriateness and recipients of cy pres distribution | Objector: remaining ≈$3M should be redistributed to class (claimants/non-claimants) or different recipients; concern over geographic and alumni ties | Parties: cy pres to universities aligns with internet privacy/data security focus and will benefit class interests; pro rata to non-claimants would yield de minimis recoveries | Cy pres distribution to the three universities was not an abuse of discretion; geographic concentration and alumni links did not render the awards improper |
Key Cases Cited
- In re Online DVD-Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015) (sets multi-factor test for when settlement credits/gift cards qualify as CAFA "coupons")
- In re HP Inkjet Printer Litig., 716 F.3d 1173 (9th Cir. 2013) (CAFA requires redemption-value accounting for coupon relief; lodestar permissible for non-coupon portion)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (percentage-of-recovery benchmark and lodestar cross-check principles for class-fee awards)
- In re Southwest Airlines Voucher Litig., 799 F.3d 701 (7th Cir. 2015) (vouchers issued to replace invalidated benefits are still coupons under CAFA; equivalence to injury speaks to fairness, not coupon status)
- Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011) (cy pres recipients must have substantial nexus to class interests and the underlying claims)
- Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012) (de minimis rule: tiny per-class-member recovery supports cy pres over pro rata distribution)
- Rodriguez v. West Publ’g Corp., 563 F.3d 948 (9th Cir. 2009) (vacating fees while affirming overall settlement approval is appropriate when settlement does not depend on fee amount)