McDonough v. Toys "R" Us, Inc.
834 F. Supp. 2d 329
E.D. Pa.2011Background
- Five-year antitrust class action between consumer plaintiffs, Babies 'R' Us, and manufacturers over alleged RPM restraints.
- Judge certified eight Settlement Subclasses and consolidated related Elliott case for settlement purposes.
- Court preliminarily approved settlement and published notice; final fairness hearing held July 6, 2011.
- Ten objections were filed; main issues concerned fees, expenses, and allocation; some objections to notice were asserted.
- Court approved final settlement, allocation plan, encouraged cy pres if excess funds exist, and awarded fees, expenses, and incentives.
- Amended orders: fees 33 1/3% of settlement, expenses $2,229,775.60, named-plaintiff incentives $2,500 each.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fairness of the settlement under Girsh/Prudential | Settlement favorable under Girsh factors. | Objections insist settlement too small and process flawed. | Settlement approved as fair, reasonable, and adequate. |
| Reasonableness of attorneys’ fees and expenses | Fees appropriate given fund size and results; lodestar cross-check supports it. | Fees are excessive and should be lower. | Fees awarded at 33 1/3% of settlement plus expenses. |
| Allocation plan and cy pres provisions | Allocation fairly reflects subclass damages; cy pres used only for excess funds. | Allocation lacks transparency; cy pres distribution controversial. | Allocation order approved; cy pres provisions upheld under the plan. |
| Incentive awards to named plaintiffs | Incentives appropriate to compensate named plaintiffs for services and risks. | Incentives should be lower or more limited. | Incentive awards of $2,500 per named plaintiff approved. |
Key Cases Cited
- Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975) (nine-factor test for settlement fairness)
- In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998) (prudential considerations expand Girsh factors)
- In re Pet Food Prods. Liab. Litig., 629 F.3d 333 (3d Cir. 2010) (case addressing fee developments and Prudential factors)
- In re Rite Aid Corp. Sec. Litig., 396 F.3d 294 (3d Cir. 2005) (lodestar cross-check and fee framework in common fund cases)
- In re Corel Corp. Sec. Litig., 293 F.Supp.2d 484 (E.D. Pa. 2003) (benchmark fee ranges in complex securities/class actions)