In re Polyurethane Foam Antitrust Litigation
Introduction
The Class of Indirect Purchaser Plaintiffs (“IPPs”) moves for final approval of nine class action settlement agreements listed in the following table. Further, Class Counsel for the IPPs moves for an award of attorney fees, reimbursement of expenses, and incentive awards for representative plaintiffs (Doc. 1908).
Procedural Background
Plaintiffs in this multidistrict antitrust litigation asserted claims that numerous dominant firms in the flexible polyurethane foam market engaged in a decade-long conspiracy to fix, raise, and maintain the price of foam products. Plaintiffs bringing these claims included: (1) direct purchasers — that is, businesses that purchased foam directly from Defendants and incorporated that foam into consumer products, such as furniture, mattresses, or carpet underlay; and (2) indirect purchasers — that is, individuals and businesses that purchased these foam-containing consumer products.
This Court previously certified both a class of Direct Purchaser Plaintiffs (“DPPs”) and also a class of Indirect Purchaser Plaintiffs (“IPPs”) (Doc. 1102 (redacted version at Doc. 1408); Docs. 1115 & 1117). This Court recently granted final approval to DPP settlement agreements, and also granted in part the fee petition filed by Class Counsel for the DPPs (Doc. 1971).
The IPP class now moves for final approval of these settlement agreements (Doc. 1988). In addition, Class Counsel submits a fee application, seeking: (1) an award of attorney fees in the amount of $45,375,000, which is 30% of the nine class-wide settlements totaling $151,250,000; (2) reimbursement of $5,115,811.72 in expenses; and (3) a total of $200,000 in incentive awards payable to the Class Representatives (Doc. 1908 at 1-2,18).
This Court received objections to the settlements and/or the fee application from the following class members:
1. Chris Andrews (pro sé) Doc. 1920 & 1928
2. Jill Cannata Doc. 1950
3. Melissa Holyoak and John Tabin by the Center for Class Action Fairness (“CCAF”) Doc. 1960
4. Sean Cochran Doc. 1964
5. Michael Narkin (pro sé) Doc. 1965
6. Jennifer Hinojosa (pro sé) Doc. 1967
7. Patrick Sweeney (pro sé) Doc. 1968
Class Counsel were directed by this Court to answer questions (Docs. 1973 & 1997) as part of a final fairness hearing, at which time this Court heard argument from IPP Class Counsel and two objectors — Andrews and CCAF. In addition, this Court heard from the IPP Claims Administrator, Eric Miller who, after the hearing, submitted a Declaration elaborating upon some of his comments at the hearing (Doc. 2010).
Based upon all this available information, along with this Court’s five-year oversight of this MDL, this Court is prepared to clear the final hurdle in these cases.
The Settlement Agreements
Before addressing the merits of the IPPs’ motions and objections, this Court summarizes the nine settlement agreements and the current claims status. These agreements have a total potential value of $151,250,000. Of this amount, (a) Defendants have already deposited $85 million into escrow accounts; (b) Hickory Springs and Woodbridge will deposit another $3.5 million within 15 days of final approval by this Court; (c) Future Foam, . Hickory Springs, and Woodbridge will deposit another $10 million over the next two years; (d) Carpenter will deposit another $43.5 million once all appellate rights are exhausted; and (e) another $9.25 million may eventually become payable, contingent upon whether Hickory Springs and Future Foam succeed in separate litigation against Dow Chemical scheduled to go to trial in mid- to late-2016.
Regarding payments to class members, the claim form is designed so that a class member will participate in all nine settlements, unless the class member affirmatively chooses to be excluded from a particular settlement agreement. Each of the settlement agreements provide for the following allocations and weightings:
• First, each settlement agreement allocates the settlement funds as follows: 36.93% to bedding claims, 30.70% to carpet padding claims, and 32.37% to furniture claims. These percentages represent the proportional volume of commerce that each product category bears to the total volume of polyurethane foam products.
• Second, each class member’s claim is “weighted” as follows: bedding claims at 80% of purchase price, carpet padding claims at 90% of purchase price, and furniture claims at 75% of purchase price. These percentages reflect roughly the proportion of the product that is made up of foam (that is, carpet padding contains proportionally more foam overall than does bedding, so the purchase price of carpet pad- ' ding is weighted higher than the purchase price for bedding, for purposes of claim-valuation).
• Third, bedding claims are paid pro rata from the bedding sub-fund, carpet claims from the carpet sub-fund, and furniture claims from the furniture sub-fund. If any sub-fund is not fully paid out — which, in light of the claim submission statistics cited below, is extremely unlikely — it pours over into the other sub-funds. Further, if there is any money left over after all distributions are made, then the remainder goes to cy pres beneficiaries approved by this Court. Any cy pres remainder is forecast to be very small.
Claims to Date
The deadline for class members to submit claims is February 29, 2016. The Claims Administrator reports the following statistics as of December 23, 2015:
Total Claims Received: $27,473 million
From Individuals: $26,402 million
From Businesses: $ 1,071 million
Total Gross Claim Amount: $456.9 million
Carpet Claims: $ 93 million
Bedding Claims: $151.6 million
Furniture Claims: $212.3 million
The Claims Administrator believes these figures are likely to increase substantially,
These figures reveal the total value of claims made so far ($456.9 million) already exceeds the total value of potential settlement funds ($151.25 million), and also that the value of claims made for each category (carpet, bedding, and furniture) exceed, respectively, the total value of potential settlement funds for each category. This suggests every sub-fund will be fully paid out — there will not be any “pour-over” from one sub-fund to another.
These figures reflect that claimants will definitely not receive full reimbursement for their claims. Rather, claimants will receive some percentage of their claims, paid on a pro rata basis. Given the Claims Administrator’s statistics to date, it appears very likely claimants will ultimately receive less than 20% (maybe less than 10%) of their claim value.
Legal Standards for Approval of the Settlement Agreements
Federal Civil Rule 23(e) mandates that “[t]he claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court’s approval.” To certify a class for settlement, a court must first consider whether the proposed class meets the requirements of Rule 23(a) & (b). See Amchem Prods., Inc. v. Windsor,
This Court has already addressed the propriety of class certification and the adequacy of notice. Specifically, in 2014, this Court issued a lengthy decision concluding the IPPs met the requirements for class certification under Rule 23(a) and (b)(3) (see Docs. 1102, 1408, & 1117). The Sixth Circuit denied a petition for interlocutory review (see Doc. 1345). For all the reasons stated previously, this Court concludes the IPP settlement class — which is defined the same as the IPP litigation class — also satisfies the Rule 23 requirements of commonality, typicality, adequacy, numerosity, predominance, and superiority.
Further, this Court earlier approved the plan of notice and the claim forms, concluding they “satisfy Federal Civil Rule 23(e) and due process” (see Doc. 1861 at 2). The Claims Administrator undertook “broad paid-media notice involving print and Internet vehicles, including... [c]on-sumer magazines; [a] newspaper supplement; [t]rade magazines; Internet banner and text ads on multiple networks, including social media and targeted websites; and [a] news release” (see Doc. 1751-12 at
The analysis still remaining for this Court is whether the nine proposed class action settlements are “fair, reasonable, and adequate.” Federal Civil Rule 23(e)(2). To conduct this analysis, courts within the Sixth Circuit refer to a list of seven factors identified in UAW v. General Motors Corp.,
This Court will assess these factors two different ways, first setting out general assessments before addressing specific concerns raised by the objectors. Finally, because the question of attorney fees is especially important when determining the fairness of a class action settlement, this Court will analyze that issue separately.
The UAW/ Vassalle Factors
Risk of Fraud or Collusion
In this case, there is no evidence to remove the “presumption that the class representatives and counsel handled their responsibilities with the independent vigor that the adversarial process demands.” UAW,
Complexity, Expense, and Likely Duration of the Litigation
The complexity, expense, and likely additional duration of this litigation clearly favor voluntary settlement of the class claims rather than continued fighting. Class Counsel invested substantial attorney time and litigation expenses, in the
Moreover, the IPPs’ case involved multiple defendants and a lengthy Class Period, requiring Plaintiffs to discover facts against each Defendant; prepare for a trial where they would have to address and overcome each Defendant-specific argument; and prove to a jury that the alleged conspiracy extended over the entire decade-long conspiracy period. In light of ongoing litigation risks, this factor weighs heavily in favor of approving the nine settlements.
Amount of Discovery Engaged in by the Parties
Before entering settlement discussions, Class Counsel received document productions from Defendants and third parties totaling nearly 4 million pages, and participated in more than 150 fact and expert witness depositions. Class Counsel also reviewed expert reports from nearly a dozen defense expert witnesses, and were repeatedly called upon to defend the opinions of IPPs’ own damages expert, Dr. Lamb, at deposition, in briefing, and at hearings. “All of this discovery matters for settlement purposes because it provides [both IPPs] and the settling Defendants with a clear picture of the relative merits of claims and defenses. The parties entered into these settlements with full view of the evidentiary record to assess the class claims.” (Doc. 1971 at 7 (approving settlements with DPPs)). Cf. Olden v. Gardner,
In sum, the lengthy and thorough discovery undertaken by IPPs, together with their testing (through summary judgment and Daubert motions) of the strength of the facts discovered, supplied IPPs with a clear picture of what their class claims were worth. Accordingly, this factor weighs in favor of final approval.
Likelihood of Success on the Merits
“The most important of the factors to be considered in reviewing a settlement is the probability of success on the merits. The likelihood of success, in turn, provides a gauge from which the benefits of the settlement must be measured.” In re Gen. Tire & Rubber Co. Sec. Litig.,
At trial, Defendants would have attacked the IPPs from many angles. Each Defendant would have worked to separate itself from the crowd of co-defendants, contesting proof of conspiratorial agreement and antitrust impact. At a more fundamental level, IPPs had to develop a persuasive, coherent explanation, understandable by lay jurors, that (1) “connected the dots” to show conspiracy through use of e-mail, fax, phone conversations, and the use of price increase announcements (“PIA”) over a ten-year-plus Class Period; and (2) illustrated the fact and
In light of these trial challenges, the benefit of the settlements is substantial. The total potential settlement amount of $151.25 million equates to more than 54% of the total, uncapped class damages estimated by Dr. Lamb using chemical manufacturer cost data, and 87% of the total estimated class damages using this data if pass-through is capped at 100% of the direct purchaser overcharge. Class Counsel states the $151.25 million total settlement amount is the fourth largest antitrust recovery obtained by an indirect purchaser class in the United States.
Given the real possibility that IPPs could have received much less — even zero — from a jury at trial or following an appeal, this factor also weighs in favor of approval.
Opinions of Class Counsel and Class Representatives
This Court easily credits the opinion of Class Counsel that the settlements do provide fair, reasonable, and adequate compensation for a release of the class claims. Class Counsel has extensive experience litigating class actions, including leadership roles in similarly large antitrust cases. See, e.g., Glickenhaus & Co. v. Household Int’l, Inc.,
In sum, this Court has no reason to second-guess Class Counsel’s conclusion that these settlements are in the best interest of the IPP class.
Reaction of Absent Class Members
The size of the class of IPPs in this case is enormous; indeed, in a brief submitted to the Supreme Court, defense counsel characterized this case as “likely the largest class action ever certified.” Petition for Writ of Certiorari at 2, Carpenter Co. v. Ace Foam, Inc., — U.S.-,
Further, another small group of objections, filed by serial objectors, are not well-taken. In contrast, over 27,000 individuals and businesses have so far filed
These statistics weigh in favor of final approval. “That the overwhelming majority of class members have elected to remain in the Settlement Class, without objection, constitutes the ‘reaction of the class,’ as a whole, and demonstrates that the Settlement is ‘fair, reasonable, and adequate.’ ” In re Cardizem CD Antitrust Litig.,
The Public Interest
Resolution of disputes through settlement rather than trial is normally in the public interest, as settlement serves to conserve scarce judicial resources. Further, “[s]ettlement of this antitrust action serves the public interest by ensuring effective enforcement of the antitrust laws and deterrence of anti-competitive conduct in the marketplace.” In re Cardizem,
Treatment of the Named Plaintiffs
A settlement can be unfair if it “gives preferential treatment to the named plaintiffs while only perfunctory relief to unnamed class members.” Vassalle,
This is very different from the circumstances in Vassalle, where the named plaintiffs each received $2,000 plus exoneration of debts, while the unnamed class members received no money and their debts were not exonerated. Id. at 755-56. The disparity in Vassalle was stark, amounting to essentially no relief to unnamed class members. That is certainly not the case here.
Objections
The UAW / Vassalle factors listed above each weigh in favor of final approval. This Court has also carefully examined the submissions filed by the objectors, who contend various aspects of the nine settlement agreements are unfair. The IPPs have responded to all the objections on the merits, but also spend several pages detailing the background of each objector. To varying degrees, IPPs assert that all the objectors (1) are serial objectors; (2) have improper motives; (3) plainly misstate the facts; (4) offer boilerplate language they have presented to other courts unsuccessfully; (5) have suffered serious disciplinary proceedings; (6) make scurrilous, unfounded accusations (e.g., perjury and fraud by IPP counsel); and/or (7) make extortionist threats. Except for the fact that objector CCAF has appeared and objected in numerous other class-action cases, these characterizations do not apply to CCAF— CCAF’s objection is lucid and filed in good faith. In contrast, all these characterizations do apply to objector Narkin, and at least some apply to every other objector. IPPs ask this Court to impose sanctions against at least some of the objectors, and also to require each objector to post a bond for any appeal.
“It is undisputed that some objectors add value to the class-action settlement process by: (1) transforming the fairness hearing into a truly adversarial proceeding; (2) supplying the Court with both precedent and argument to gauge the reasonableness of the settlement and lead
Several of the objectors in this case clearly fall into the latter category. Nonetheless, this Court chooses not to impose any sanction — at least now. Even objector Andrews, who repeatedly makes baseless accusations using inappropriate language (e.g., Doc. 1928 at 43) (asserting Class Counsel engaged in “high on meth document discovery review”), also identifies a few legitimate concerns (e.g., Doc. 1920 at 9) (questioning why counsel did not identify specific potential cy -pres beneficiaries in the settlement agreement). Andrews deserves opprobrium, but his objection is not entirely devoid of color. Accordingly, even though the objectors raise many unfounded, eonclusory, and frivolous objections, this Court will simply focus on the merits of the objections that deserve analysis.
Content of Forms and Claims Administration Process
Objector Andrews offers a litany of questions as a means of complaining about the claims process and claim forms. For example, he asks (Doe. 1920):
1. Why do claimants have to provide a social security number?
2. Why do they have to check off each separate settlement from which exclusion is desired, rather than check off the ones in which they want to be included?
3. Why don’t claimants receive acknowledgment of their claim by the Administrator?
4. Why is it not stated how long it will take for checks to arrive?
Of course, there are good answers to each of these questions:
1. To prevent fraud and comply with potential tax requirements.
2. To make a claimant’s participation in all settlements more likely.
3. Because it would increase administrative costs.
4. Because it is impossible to predict accurately how long it will take to investigate spurious claims and finally determine benefit amounts.
None of the issues Andrews raises suggests the design of the claim forms or the claims administration process carries any meaningful or serious faults.
Andrews also challenges the requirements for opting-out. For example, Andrews asks (1) Why can’t opt-outs file their form online instead of having to mail it in?; and (2) Why are opt-outs asked to provide “unnecessary” information, such as which particular settlements they want to opt out of, and what foam-products they bought? It suffices to say, again, there are good answers to these questions and Andrews does not identify any serious faults in the opt-out process. Indeed, even if the occasional suggestion Andrews offers is reasonable, he does not show the existing format is unreasonable. And, so long as the settlement agreements and the processes used to effectuate them are “fair, reasonable, and adequate,” Federal Civil Rule 23(e)(2), this Court has no reason to disapprove them.
In a two-page objection, Sweeney offers a list of boilerplate, eonclusory assertions, including the “[c]laims administration process fails to require reliable oversight, ac
Plan of Allocation
Andrews asserts there “should be a minimum distribution amount set, say $10.00, because a de minimis threshold is necessary to ensure an efficient allocation of the settlement fund” (Doc. 1920 at 8-9). The effect of such a threshold, however, would be — if anything — to deprive a number of class members with low-value claims from receiving any payment. While it is true there comes a point where the cost of sending a check for settlement benefits can exceed the value of the check itself, it is also true that “something is better than nothing” in a class settlement. In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig.,
Objector Cochran offers a different criticism, complaining that, by “weighting” various claims (e.g., bedding claims are weighted at 80% while carpet claims are weighted at 90%), the Plan of Allocation “sets improper limits on the amount that a claimant may receive for each Qualifying Claim” (Doc. 1964 at 1). Cochran implies that a claim for a $1,000 mattress should be weighted at 100%, not 80%, and the 80% weighting deprives the claimant of funds he is due: “If the entire amount of the Net Settlement Fund is not consumed by filed claims at the existing caps, the caps should be removed and the entire Settlement Fund paid out to the claimants pro rata.” Id. at 3.
This objection is not well-taken for three reasons. First, the mattress is not made up entirely of foam, so the purchaser is not entitled to 100% of the purchase price as damages. Second, even if the mattress was 100% foam, the “pass through” of illegal foam markup attributable to the final mattress price is not 100% of that price. In other words, the weightings reflect a reasonable estimate of the relative proportions of how much the illegal foam markup affected the total price of different categories of a final product. And third, it is already clear that “the entire amount of the Net Settlement Fund” will be “consumed by filed claims at the existing caps” (id.).
Incentive Awards
The settlements provide for a total of $200,000 in incentive awards for the Class Representatives — $10,000 each for the 13 individuals, and $35,000 each for the two companies.
As noted above, the disparity in Vassalle was stark, amounting to essentially no relief to unnamed class members, compared with $2,000 incentive awards to the representative plaintiffs. In other words, all the available compensation went to the named plaintiffs. In this case, there will be over $100 million available to all claimants on a pro rata basis; the $200,000 in incentive awards will amount to less than 0.2% of the total payments. There is no unfair disparity.
Moreover, the Sixth Circuit has endorsed the use of incentive awards. See Hadix v. Johnson,
The incentive awards of $10,000 each for the individuals and $35,000 each for the companies are well within an appropriate range. And this Court accepts Class Counsel’s explanation that “[t]he requested incentive award for the corporate plaintiffs is higher than for the individuals because ... [the corporations] did a more substantial amount of work on the case— reviewing and producing a much larger quantity of documents and making their corporate executive available for lengthy depositions” (Doc. 1997 at 21).
Amount of Damages versus Amount of Settlements
Several objectors suggest the settlement results are so unimpressive that the settlement agreements are inadequate. Cochran characterizes the settlements as “a very modest result,” “decidedly mediocre,” and “underwhelming” (Doc. 1964 at 3, 5). Narkin asserts “[t]here is no adequate showing that the proposed Settlement bears any relationship to the alleged damages inflicted by Defendant [sic] on Plaintiffs” (Doc. 1965 at 1). And Andrews throws muck by asking rhetorically “what are the highest single damages calculated by the expert that the class can recover before [trebling]?”; and suggesting the $151.25 million total settlement is inadequate by quoting the statistic that wholesale U.S. mattress revenues in 2012 were $6.8 billion (Doc. 1920 at 7-8).
This Court rejects these mischaraeteri-zations. Addressing Andrews’ objection first, the answer to his question is that IPP expert Dr. Lamb calculated damages in this case using four different methods. The first method was to use chemical price data published by Independent Chemical Information Services (“ICIS”), and not capping the possible pass-through at 100%, which yielded a damages calculation of $2.2 billion. The second method was to use ICIS chemical price data and capping the possible pass-through at 100%, which yielded a damages calculation of $1.25 billion. The third was to use data obtained by the DPPs from Defendants’ own chemical suppliers, and not capping the possible pass-through at 100%, which yielded a damages calculation of $279.5 million. And
Calculated against these different damage assessments, the $151.25 million settlement is, respectively, 7%, or 12%, or 54%, or 87% of Lamb’s estimates. Measured in this way, it is unfair to call the $151.25 million settlement “mediocre.” For example, IPPs cite In re Rite Aid Corp. Securities Litigation,
• Further, the statistic cited by Andrews — that wholesale U.S. mattress revenues in 2012 were $6.8 billion — is a non sequitur. This figure does not in any way measure the “antitrust markup / pass-through” at issue, which is how damages must be measured, much less account for the fact that the class definition does not include numerous states.
More important, “[i]t is well-settled that a cash settlement amounting to only a fraction of the potential recovery will not per se render the settlement inadequate or unfair. Indeed, there is no reason, at least in theory, why a satisfactory settlement could not amount to a hundredth or even a thousandth part of a single percent of the potential recovery.” In re Bear Stearns Cos., Inc. Sec. Litig.,
The objectors’ armchair-quarterbacking and wishing-for-more does not provide valid grounds to disapprove the settlements. The objection that the settlement is insufficient, inadequate, or unfair is not well-taken.
Matters Not Mentioned in the Class Notice
Contingent Amounts. Although the Class Notice lists nine settlement amounts and the $151.25 million total, it does not state that $9.25 million (6.1%) is contingent upon whether Defendants Hickory Springs and Future Foam succeed in separate litigation against Dow Chemical. Nor does it state that $10 million (6.6%) will not be paid into the settlement escrow account(s)
CCAF cites to no case directly on point; rather, it cites cases for the general proposition that “notice must be of such nature as reasonably to convey the required information, and it must afford a reasonable time for those interested to make their appearance.” Mullane v. Central Hanover Bank,
In Vassalle, the Sixth Circuit set out the relevant standard for assessing whether class notice is adequate:
[D]ue process requires that notice to the class be 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. Due process, however, does not require the notice to set forth every ground on which class members
might object to the settlement. Rather, all that the notice must do is fairly apprise the prospective members of the class of the terms of the proposed settlement so that class members may come to their own conclusions about whether the settlement serves their interests.
Vassalle,
The Notice in this case meets this standard. The Notice directs class members ■ to the website www.polyfoam classaction.com, where the full settlement agreements are posted. The amount of contingent funds is only 6.1% of the total, which is highly unlikely to be a decisive factor in whether a class member would decide to participate or instead opt out.
Identity of Cy Pres Beneñciaries. Several objectors raised issues related to cy pres beneficiaries. One issue is whether Class Notice was inadequate because it did not identify with particularity the entities that might receive settlement funds pursuant to the cy pres doctrine. The second issue is whether it is appropriate for the
Objector CCAF, and to a lesser extent objector Andrews, take issue with the failure of Class Notice to provide the specific identities of potential cy pres beneficiaries. The Notice does explain that “it is possible that any money remaining after claims are paid will be distributed to charities or other beneficiaries approved by the Court” (Doc. 1860 at 16), but gives no other information. The Plan of Allocation adds only this (id. at 27):
In the event there are Settlement Funds remaining after distribution of all payments to Eligible Claimants according to Section III of this Plan of Allocation, the remaining Funds will be distributed to charities or other beneficiaries that have objectives related as closely as possible to the purposes and remedies sought by the class action. These beneficiaries will be suggested by Lead Counsel and are subject to approval by the Court at the appropriate time, if circumstances warrant.
Thus, class members do not know, before electing to participate or not, whether there will be a cy pres distribution and if so, to whom.
CCAF does provide support for the proposition that cy pres beneficiaries must be disclosed with particularity at the time of settlement. In Dennis v. Kellogg Co.,
Several other federal appellate courts, however, disagree with Dennis. In Baby Products Antitrust Litig.,
This Court has found another appellate case that sets out a well-considered approach for choosing between Dennis and
Relevant to CCAF’s objection, the BankAmerica court also discussed under what circumstances class notice will be inadequate for failing to identify the cy pres recipients. The court concluded: “[The objector] argues that the award must be reversed because [class counsel] did not notify the class of its motion for a cy pres distribution. We agree that, unless the amount of funds to be distributed cy pres is de minimis, the district court should make a cy pres proposal publicly available and allow class members to object or suggest alternative recipients before this court selects a cy pres recipient. This gives class members a voice in choosing a ‘next best’ third party [cy pres recipient] and minimizes any appearance of judicial overreaching.” Id. at 1066 (emphasis added) (citing Baby Prods.,
In this case, as discussed below, any cy pres distribution will be de minimis. Unlike Dennis, Baby Products, and Bank-America, where the cy pres distributions were in the millions of dollars, a cy pres distribution in this case will occur only after “the marginal cost of making an additional pro rata distribution to the class members exceeds the amount available for distribution.” Klier v. Elf Atochem N. America, Inc.,
Having concluded that Class Notice in this case is fair and adequate, despite its silence about the identity of potential cy pres recipients, this Court also adds that CCAF has nonetheless identified a best practice. Especially because the term “de minimis” carries no precise definition, and also in the interest of full disclosure, this Court agrees that class counsel in most cases would be wise to identify in their class action settlement precisely what entities may receive cy pres distributions. This practice increases transparency and minimizes the likelihood that a settlement agreement will not receive final approval, or that approval is reversed on appeal.
Accordingly, rather than put this issue off until the claims administration process comes to a close, this Court orders as follows.
Within thirty (30) days of the date of this Order, Lead Counsel shall submit a proposal identifying the “charities or other beneficiaries that have objectives related as closely as possible to the purposes and remedies sought by the class action,” to whom any cy pres distributions will be made. Doc. 1860 at 27; see also Bank-America,
Cy Pres Distribution
Objector Cochran takes issue not with the absence in the Class Notice of the identity of cy pres beneficiaries, but with any cy pres distributions at all. For example, Cochran asserts that “no settlement money may be paid to cy pres [sic] until every class member who has filed a claim has received 100% of alleged damages, which in this case would include treble and punitive damages” (Doc. 1964 at 1-2) (emphasis changed from original). In support of this assertion, Cochran cites Klier and BankAmerica. But these authorities do not stand for the proposition Cochran asserts. Rather, Klier states as follows:
Because the settlement funds are the property of the class, a cy pres distribution to a third party of unclaimed settlement funds is permissible “only when it is not feasible to make further distributions to class members” [quoting ALI Principles § 3.07 cmt. a]. Where it is still logistically feasible and economically viable to make additional pro rata distributions to class members, the district court should do so, except where an additional distribution would provide a windfall to class members with liquidated-damages claims that were 100 percent satisfied by the initial distribution. A cy pres distribution puts settlement funds to their next-best use by providing an indirect benefit to the class. That option arises only if it is not possible to put those funds to their very best use: benefitting the class members directly.
Klier,
The essence of these authorities is that a “cy pres award is supposed to be limited to money that can’t feasibly be awarded to the intended beneficiaries.” Pearson,
In large class actions, substantial administrative costs attend the distribution of settlement funds. As the settlement funds are disbursed and the amount still available for distribution to the class declines, there comes a point at which the marginal cost of making an additional pro rata distribution to the class members exceeds the amount available for distribution. It is only at this point that a district court has discretion to order a cy pres distribution.
Klier,
In this case, Class Counsel and the Claims Administrator have made clear that the claims administration process will follow the precepts set out above. Specifically, the Claims Administrator explained that (1) there will be at least two distributions; (2) expectations are that, after all distributions are made, “[less] than $50,000 will remain as residual,” mostly due to uncashed checks; and (3) “To avoid having leftover funds at the completion of the
In sum, this case is not like Klier, Bank-America, or Pearson, where hundreds of thousands or even millions of dollars were directed to cy pres recipients instead of to class members. Rather, cy pres distributions will be made only after it is no longer economically practical to make distributions to the class, and only with this Court’s approval that this de minimis distribution is appropriate.
Attorney Fees
The single most-addressed issue raised by all the objectors is the amount of attorney fees and expenses requested by Class Counsel. In addition to the amount of fees, objectors also challenge the timing of Counsel’s receipt of fees, and how the fees are divided among Class Counsel. This Court addresses these issues in reverse order.
Division of Common Benefit Fees Between Counsel
Although the nine settlement agreements do not speak to how any fee award will be divided among IPP Class Counsel, the motion for fee award does state: “Lead Counsel also requests the Court’s authorization to distribute the fees in a manner that, in the judgment of Lead Counsel, fairly compensates each firm for its contribution to the prosecution of Plaintiffs’ claims” (Doc. 1987-1 at 14-15 n.l). CCAF objects to this plan, asserting that “Rule 23(h) requires the district court to set and allocate the fee award. It is legal error for the court to delegate the allocation of that fee award to a non-judicial third party or to defer to the allocation proposed by the attorneys themselves.” (Doc. 1960 at 36).
CCAF is wrong. Courts routinely permit counsel to divide common benefit fees among themselves. See, e.g., In re Warfarin Sodium Antitrust Litig.,
The district court examined the work performed by [both] class and special counsel and the value their work conferred upon the class. Thus, the district court decided exactly what that group of attorneys’ work was worth and then awarded a fee commensurate with that worth. How special counsel and class counsel ultimately divide that fee among themselves appears to be irrelevant. As long as class and special counsel are paid only what their collective work is worth, their distributions among themselves, even if done in a manner unrelated to the services a particular counsel has performed for the class, will in no way harm the class or negatively impact the fund from which the class’s benefit is measured.
Id. (emphasis added).
CCAF cites one case that gives some support to its position. In re High Sulfur Content Gasoline Prods. Liab. Litig.,
Appellees cite several district court eases from this circuit in which courts... award[ed] a lump-sum attorneys’ fee and allow[ed] counsel to divide up the award by agreement. That fee allocation procedure, however, is significantly different from the procedures used here. It is one thing for all attorneys to come to an agreement about dividing up fees, and quite another for five attorneys to declare how an award will cover themselves and seventy-four other attorneys with no meaningful judicial supervision or review.
High Sulfur is inapposite for two reasons. First, as between High Sulfur and Bowling, this Court is bound to follow the latter which is from the Sixth Circuit. Second, from the beginning of this case, all attorneys working as Class Counsel have long known the procedure for how any fee award would be divided (see Doc. 29 at 2) (making Lead Counsel responsible for “[a]lloeating among counsel any attorneys fees that may be awarded by the Court (subject to the jurisdiction of the Court to resolve any disputes related to such allocation)”). Unlike High Sulfur, where there was no fee agreement between counsel, all the Plaintiffs’ attorneys who participated in this case agreed (at least implicitly) to receive remuneration under this mechanism.
Accordingly, the objection that this Court may not delegate to Lead Counsel the task of allocating the fee award among Class Counsel is overruled. This Court adds, however, that if a fee dispute does erupt — and this Court does not expect one will — this Court retains jurisdiction to settle that dispute.
Timing of Payment of Attorney Fee Awards
As noted earlier, of the $151.25 million in settlement funds, Defendants will have deposited $88.5 million into escrow within fifteen (15) days of the date of this Order. There is another $10 million in payments payable over the next two years,
This objection is well-taken, as Class Counsel concedes. In fact, Class Counsel cites another case standing for the same proposition (Doc. 1991 at 40):
Class Counsel has always been willing to wait to obtain the portion of its.. .fee until the contingency is satisfied and Defendants deposit such funds in escrow. Courts have applied this sort of fee payment schedule in cases where there is a delayed payment into the fund. See, e.g., In re Flonase Antitrust Litig.,291 F.R.D. 93 , 113 (E.D.Pa.2013) (awarding 33a% of the amounts paid into the initial settlement fund “plus 33a% of any sums that may become part of the Settlement Fund after the calculation provided for in the Plan of Allocation”).
It is worth noting there are good reasons for IPPs to agree that some of the settlement funds should not be payable immediately. The delayed-payment mechanism was necessary in order to secure a larger total fund from Defendants, some of whom were at risk of bankruptcy and had already obligated themselves to pay other settlements to DPPs. Ultimately, IPPs will get more money by agreeing to accept some of it as deferred or contingent.
That said, however, it is only fair that counsel and the class they represent are treated equally. Class members will receive benefits, and Class Counsel will receive fees, only if and when funds become available. Payment of common benefit attorney fees to IPP Class Counsel will be made on a percentage basis only as settlement funds are deposited into the settlement escrow account(s).
The Amount of the Award of Attorney Fees and Expenses
In their fee petition, Class Counsel for IPPs asks this Court to (a) use the “per-eentage-of-the-fund” method to calculate a common benefit fee award; and (b) award a fee of 30% of the gross settlement amount of $151.25 million, which equals $45,375,000. IPPs also ask for reimbursement of $5,122,065.78 in expenses.
Objectors attack these figures in three ways, arguing (1) the 30% figure is too high; (2) Counsel’s lodestar, which this Court must use as a cross-check against the 30% figure, is inflated; and (3) the percentage should be applied against the net settlement amount, not the gross amount. This Court examines the last contention first, and then weighs the other two objections together.
Gross versus Net. Objectors Andrews and CCAF assert that any common benefit fee percentage should be assessed only after subtracting the $5.1 million in expenses, $200,000 in incentive awards, and roughly $1.57 million in notice costs (see Doc. 1920 at 23-24 (misstating some of these numbers); Doc. 1960 at 20-23). Andrews and CCAF cite several cases supporting this position. See, e.g., Pearson,
As CCAF concedes, however, other cases hold it is within the discretion of this Court to use the gross amount. See, e.g., In re Online DVD-Rental Antitrust Litig.,
Furthermore, numerous district courts in the Sixth Circuit have based fees on the gross settlement amount, and none have been reversed on that ground. See, e.g., In re Prandin Direct Purchaser Antitrust Litig.,
Accordingly, this Court overrules objectors’ assertion that, when using the “percentage-of-the-fund” method to determine a common benefit fee award, the percentage this Court chooses must be applied to the net settlement amount.
The Fee Award. The Sixth Circuit directs district courts, “[w]hen awarding attorney’s fees in a class action, [to].. .make sure that counsel is fairly compensated for the amount of work done as well as for the results achieved.” Rawlings,
A court has available “two methods for calculating [common benefit] attorney’s fees: the lodestar and the percentage-of-the-fund.” Van Horn v. Nationwide Prop. & Cas. Ins. Co.,
In this case, for three reasons, this Court elects to use the percentage-of-the-fund method, with a lodestar crosscheck. First, Class Counsel requests the percentage approach, and none of the’ objectors argue otherwise — they argue only that the percentage requested is too high. Second, “[i]n general,.. .percentage of the fund has been the preferred method for common fund cases, where there is a single pool of money and each class member is entitled to a share (i.e., a ‘common fund’).” Lonardo v. Travelers Indem. Co.,
When assessing the reasonableness of a fee award, courts examine these factors: “(1) the value of the benefit rendered to the plaintiff class; (2) the value of the services on an hourly basis; (3) whether the services were undertaken on a contingent fee basis; (4) society’s stake in rewarding attorneys who produce such benefits in order to maintain an incentive to others; (5) the complexity of the litigation; and (6) the professional skill and standing of counsel involved on both sides.” Moulton v. U.S. Steel Corp.,
Value of the Benefit Provided. As discussed above, the value of the nine settlements is substantial. The total settlement amount is excellent, amounting to 87% of Dr. Lamb’s most conservative damages model prior to trebling. See Rodriguez,
Class Counsel’s Fee Arrangement. The representative Plaintiffs entered into contingent fee agreements with Class Counsel. This Court has reviewed in camera copies of those agreements. Each agreement conditions payment of attorney fees on recovery by the client, and several agreements specify that attorney fees will be at least 35% of the client recovery. Class Counsel also have gone out-of-pocket
Societal Interest in Rewarding Class Counsel. “Attorneys who take on class action matters serve a benefit to society and the judicial process by enabling.. .small claimants to pool their claims and resources.” In re Telectronics Pacing Sys., Inc.,
Case Complexity and Risk. “Antitrust class actions are inherently complex. The legal and factual issues are complicated and highly uncertain in outcome.” In re Skelaxin (Metaxalone) Antitrust Litig.,
Skill and Reputation of Class and Defense Counsel. Lead Counsel is a respected antitrust practitioner, litigating important antitrust matters in other courts while at the same time managing the IPPs’ case. See Messner v. Evanston Nw. Healthcare Corp. Antitrust Litig.,
Value of Attorney Services. Class Counsel invested a large amount of attorney time and money in prosecuting this case on behalf of the IPP Class. Class Counsel submits a final lodestar calculation showing that (1) they spent a total of 75,361 hours (after some write-offs); (2) their rates, including secretaries through partner-level attorneys, ranged from $75 to $900, averaging $448; and (3) their total lodestar is about $33.74 million. Class Counsel calculates this lodestar using historical hourly rates — that is, the hourly rate the attorney charged (for example) in 2013 when the work was performed, not the attorney’s hourly rate at the time the fee petition was filed. Class Counsel tout this billing tactic as an added benefit to the Class, explaining that class counsel in other cases often estimate a lodestar using rates in effect at the time of the fee petition. This Court agrees that this decision not to recoup the time value of past work is a benefit to the Class.
This Court thoroughly reviewed the time sheets and summaries submitted by Class Counsel in order to assess the strength of the objectors’ attacks upon the fee petition. The objectors assert that (i) many of the rates charged by Counsel are too high and above-market, (ii) many of the hours charged are unnecessary or du-plicative, (iii) there is insufficient documentation of hours spent, (iv) expensive partner-level attorneys did work that other individuals with lower rates could have done, and (v) counsel paid contract attorneys low rates and then billed them at many times what they were paid. Some of these concerns are valid. In particular:
• Are the rates charged too high?
The rates charged by Counsel are high. But IPPs provide the following statistics, which generally undercut this objection: (i) the average billing rate for partners in the DPPs’ lodestar was 25.8% higher than the average rate for partners in the IPPs’ lodestar ($705.06 versus $560.13); (ii) the average rate for all other (non-partner) attorneys in the DPPs’ lodestar was 25.1% higher than the average rate for all other attorneys in the IPPs’ lodestar ($438.30 versus $350.22); and (iii) the average rate for paralegals in the DPPs’ lodestar was 27.8% higher than the average rate for paralegals in the IPPs’ lodestar ($244.84 versus $191.60). Ultimately, the hourly rates used by Counsel in the lodestar calculation are not unreasonable, with the understanding that they are already “calculated to account for litigation risk” (Doc. 1971 at 22 (entering the final fee award for DPP Class Counsel)).
• Are some of the hours charged unnecessary or duplicative?
There are certainly hours lurking in the time sheets that could have been avoided. “While this Court does not doubt that all the work billed was in fact performed, it does doubt that all of that time was reasonably necessary to advance this case... .The Class Counsel legal team includes leading antitrust lawyers, but even they are not perfect” (id.).
But nothing stands out as a clear waste of time. Based on this Court’s review, it would be fair to decrease the number of hours used by Counsel in the lodestar calculation by a few percentage points, but not more.
• Is there insufficient documentation of hours spent?
Put simply, no.
• Did expensive attorneys do work that cheaper attorneys or paralegals could have done?
Analysis of the time sheets leads to the same conclusion noted above, that some of the law firms were better than others at ensuring work was performed by the least expensive individual capable of doing the job. This factor leads this Court to conclude it would be fair to decrease the lodestar calculation by another few percentage points, but not more.
• Did counsel pay contract attorneys low rates but bill them at high rates?
The answer is “yes,” and this factor gives this Court the greatest concern. Counsel submitted for in camera review a chart showing what contract attorneys were paid. These same attorneys were billed out at $250-$525/hour. As CCAF
With these factors, this Court concludes the lodestar is about 20% higher than it should be. Rather than $33.74 million, an appropriate lodestar is closer to $27 million. Using this figure, Class Counsel’s request for a $45.375 million fee award would translate to a multiplier of 1.68.
As this Court noted in its Order entering the final fee award for DPP Class Counsel, discussions by other courts of the fund percentage selected, and the effective multiplier that this percentage implied, provide “at best only anecdotal evidence of how other district courts, confronting different facts, have exercised their broad discretion to set a reasonable fee award” (Doc. 1971 at 19). It is easy to find cases with higher percentages and higher multipliers than the ones IPPs request (see Doc. 1987-1 at 19-21, 29-30), and easy to find cases with much lower ones as well (see Doc. 1960 at 16,18-20, 32-33). In the Sixth Circuit, “[w]hen using a percentage-of-the-fund approach to calculate attorneys’ fees, twenty-five percent has traditionally been the benchmark standard, with the ordinary range for attorney’s fees between 20-30%.” In re Cardizem CD Antitrust Litig.,
In the DPP case, final award to Class Counsel totaled “23.6 percent of the gross settlement amount,” yielding an effective multiplier of 1.57 (Doc. 1971 at 19). Weighing all the factors discussed above, this Court concludes IPPs are entitled to a final award amounting to 24% of the gross settlement amount, which is an effective multiplier of 1.34 of the appropriate lodestar of $27 million. This means that Class Counsel essentially received the multiplier requested. It is this Court’s understanding that, within fifteen (15) days of the date of this Order, Defendants will have deposited a total of $88.5 million in settlement funds into the settlement escrow account(s). Accordingly, IPP Class Counsel are entitled to payment of 24% of this amount (equal to $21,240,000) immediately upon deposit of those funds. As additional settlement funds are deposited, Class Counsel are entitled to payment of 24% of those amounts. Counsel is not entitled to any portion of the interest generated by the settlement funds.
Finally, “under the common fund doctrine, ‘class counsel is entitled to reimbursement of all reasonable out-of-pocket litigation expenses and costs in the prosecution of claims and settlement, including expenses incurred in connection with document production, consulting with experts and consultants, travel and other litigation-related expenses.’ ” New England Health Care Emps. Pension Fund v. Fruit of the Loom, Inc.,
Appellate Bond
Class Counsel asks that, if any objector files an appeal from this Order, this “Court [should] require each objector to post a bond for appellees’ attorneys’ fees, as well as any litigation costs (e.g., escrow fees, distribution costs) or other expenses necessitated by an unsuccessful appeal” (Doc. 1991 at 89). The decision whether to require an appellate bond and its amount, however, will depend on the nature of the individual objector’s appeal. See Gemelas v. Dannon Co.,
Conclusion
This Court grants the Motions by the Indirect Purchaser Plaintiff Class for Final Approval of the nine settlement agreements (Docs. 1987 & 1988), and grants in part and denies in part the Motion for Attorney Fees and Expenses, and an Incentive Award to the Class Representatives (Doc. 1908).
Therefore:
• Final approval of the nine Settlement Agreements is granted pursuant to Federal Civil Rule 23(e).
• Each Indirect Purchaser Settlement Class consists of the certified Indirect Purchaser Litigation Class minus the persons and entities who request exclusion from the Litigation Class or from the relevant Indirect Purchaser Settlement Class. For the reasons explained in this Court’s Order on Class Certification (Doc. 1102), the Indirect Purchaser Settlement Classes meet the requirements of Rule 23 and are therefore certified for the purposes of these settlements.
• The persons and entities identified in Exhibit A have timely and validly requested exclusion from the Indirect Purchaser Settlement Classes or from the Litigation Class and therefore are excluded from the Indirect Purchaser Settlement Classes and are not bound by this Order, and may not make any claim or receive any benefit from the relevant settlement, whether monetary or otherwise. These excluded persons and entities may not pursue any Released Claims on behalf of those who are bound by this Order. Each Indirect Purchaser Settlement Class member who has not requested to be excluded from the Indirect Purchaser Settlement Classes for a specified settlement, and is not listed in Exhibit A, is bound by this Order, and will remain forever bound.
• As to the Released Parties, as defined in the respective Settlement Agreements, the Class Action and any and all currently pending indirect purchaser class action lawsuits directly related to the subject matter of this litigation are dismissed with prejudice and in their entirety, on the merits, and, except as provided for in the Settlement Agreements, without costs. This dismissal shall not affect, in any way, Indirect Purchasers’ right to pursue claims, if any, outside the scope of the releases set forth in the nine Settlement Agreements.
• The Releasing Parties release, forever discharge, and covenant not to sue the Released Parties from and for Claims as set forth in the nine Settlement Agreements. The Releasing Parties are permanently enjoined and barred from instituting, commencing, or prosecuting any action or other proceeding asserting any Released Claims released in the nine Settlement Agreements against any of the Released Parties, either indirectly, individually, representatively, derivatively, or in any other capacity, by whatever means, in any local, state, or federal court, or in any agency or other authority or arbitral or other forum wherever located.
• This Order does not settle or compromise any other claims by Class Representatives or the Indirect Purchaser Settlement Classes against the Defendants or. other persons or entities other than Released Parties, and all rights against any other Defendant or other person or entity are specifically reserved. The sales of goods containing Polyurethane Foam to members of the Indirect Purchaser Settlement Classes by Released Parties shall remain against the non-settling Defendants, to the extent any exist, as a basis for damage claims, and shall be part of any joint and several liability claims against any non-settling Defendant or other person or entity other than the Released Parties.
• Pursuant to Federal Civil Rule 54(b), this Court directs entry of final judgment of dismissal as to the Released Parties, as set forth in its separate orders entered following this Order.
• Without affecting the finality of this Order, this Court retains exclusive jurisdiction over the Class Action and the Settlement Agreements, including the administration, interpretation, consummation, and enforcement of these Settlement agreements.
• The escrow accounts established by certain of the parties, and into which Settlement Funds have been and will be deposited, plus accrued interest, are approved as Qualified Settlement Funds pursuant to Internal Revenue Code Section 468B and related Treasury Regulations.
IT IS SO ORDERED.
Attachment
EXHIBIT A
Notes
. An attorney also filed a notice of appearance on behalf of “Objector Kelly Marie Spann,” but neither Spann nor her attorney ever filed any objection (Doc. 1962).
Sweeney’s objection was filed on November 17, 2015. The due date was November 13, 2015, and IPPs assert the objection is untimely. Sweeney indicates in his certificate of service, however, that he mailed his objection on November 11, so this Court accepts it as timely.
Finally, IPPs argue that Andrews and Hino-josa do not have standing to object, because they have not provided sufficient documentation to show they purchased a covered foam-containing product in a covered State. This Court agrees their claim documentation is weak, but nevertheless chooses to simply address their respective objections on the merits.
. If Hickory Springs succeeds in separate litigation against Dow Chemical, the proceeds are payable as follows: (1) Hickory must use the proceeds to pay certain amounts to the “Sealy Plaintiffs” in this case; (2) if there are additional proceeds, Hickory must pay the
. Class counsel explains that eight entities or individuals have requested exclusion, but: (1) three have done so even though they are direct purchasers — that is, not members of the IPP class — but want to make clear they will not be bound by orders in this case; (2) one is a school in Pennsylvania, which is not a Class State; (3) two have not provided the requisite information about their purchases; (4) one submitted the exclusion request after the deadline; and (5) one purchased two pillows for a total of $10.
. Objectors Andrews, Hinojosa, and Cannata all state the incentive awards will be $285,000, but their math is incorrect — the total will be $200,000. Hinojosa simply asserts “the requested $285,000 in incentive payments” is excessive, without any analysis or explanation (Doc. 1967 at 1). Cannata does even less, merely asserting that all requested fees and awards are unreasonable (Doc. 1950 at 1). This Court's analysis of Andrews' objection applies equally, to Hinojosa and Cannata.
. For example, a $1,000 mattress claim will be valued at 80% ($800), and will then ultimately be assigned a pro rata payment of, say, 20% ($160) — probably less. The contingent settlement funds (assuming all are received) would pay only 6.1% of this amount, or about $9.75 of this $160. This potential difference is unlikely to be a factor in the class member's decision to participate or opt out, especially when the alternative is to bring an independent lawsuit.