Nicklos Ciolino v. Theodore Frank
2013 U.S. App. LEXIS 9744
| 9th Cir. | 2013Background
- Objectors appeal district court final approval of a class action settlement between HP and a nationwide class of HP inkjet printer purchasers (Sept 6, 2001–Sept 1, 2010).
- Settlement provides up to $5 million in e-credits (coupons) redeemable for printers and supplies, plus disclosures and injunctive relief, with administration costs capped around $950,000 and attorneys’ fees up to $2.9 million.
- E-credits expire six months after issuance, are non-transferable, cannot be combined with other discounts, and coupons do not issue until after all appeals are resolved.
- District court approved the settlement and awarded $1.5 million in attorneys’ fees (lodestar) plus $596,990.70 in costs; class certified nationwide for settlement.
- Objectors contend the settlement is tainted by tacit collusion and challenge the fee award under CAFA, asserting fees tied to coupons were not properly calculated by coupon redemption value.
- The court held that the fee award violated CAFA § 1712 and reversed and remanded for proceedings consistent with CAFA requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA § 1712 requires coupon-based fees to be based on coupon redemption value | Schratwieser argues fees tied to coupons should reflect redemption value. | HP argues lodestar can be used for mixed coupon and injunctive relief. | Yes; fees must be based on coupon redemption value when attributable to coupons. |
| Whether § 1712(a) applies when fees are based on lodestar rather than percentage of coupons | Objectors contend majority misreads (a) to force percentage-based fees only. | HP and district court properly used lodestar where recovery includes non-coupon relief. | § 1712(a) governs percentage-based fees; lodestar permissible under (b) in coupon settlements. |
| Whether § 1712(b) allows lodestar fees for coupon settlements with mixed relief | Objectors contend lodestar not permitted for coupon pursuits when coupons are present. | Majority construes (b) as permitting lodestar in coupon settlements generally. | LOSTAR is authorized under § 1712(b) for coupon settlements. |
| Whether § 1712(c) requires separate calculations for coupon and non-coupon relief in mixed settlements | Objectors argue the court must separate coupon value and non-coupon value to compute fees. | Majority holds two calculations are required: coupon value under (a) and lodestar under (b). | § 1712(c) requires two calculations when both coupon and non-coupon relief exist. |
| Whether the district court abused its discretion by not first calculating coupon redemption value before awarding fees | Objectors assert error in using a rough $1.5M value without redeemable coupon valuation. | District court cross-checked lodestar against settlement value; value uncertain but reasonable. | Yes; district court abused discretion by not first calculating coupon redemption value under § 1712(a). |
Key Cases Cited
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (class action fee reasonableness; outcome governs entire settlement)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (fees cross-check against settlement benefit; lodestar permitted)
- Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003) (guidance on attorney’s fees in common fund settlements and results obtained)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (most critical factor is degree of success in fee awards)
- In re Mercury Interactive Corp. Secs. Litig., 618 F.3d 988 (9th Cir. 2010) (lodestar adjustments and fee reasonableness in complex actions)