ORDER MODIFYING CLASS CERTIFICATION ORDER, PRELIMINARILY APPROVING CLASS ACTION SETTLEMENT AND CLASS NOTICE, AND SETTING FINAL FAIRNESS HEARING
Having reviewed and considered all the briefing filed with respect to plaintiffs Unopposed Motion for Modification of Class Certification Order; Preliminary Approval of Settlement; and Establishment of Qualified Settlement Fund (Dkt.246-1, “Motion”) and the oral argument presented at the hearing on December 3, 2015 (see Dkt. 250, Minutes of December 3, 2015, hearing), the court concludes as follows.
INTRODUCTION
Plaintiff Cynthia Spann (“plaintiff’) filed this action, individually and on behalf of others similarly situated, against J.C. Penney Corporation, Inc. (“JCPenney” or “defendant”) on February 8, 2012. The Fourth Amended Complaint (Dkt. 160, “4AC”), the operative complaint in this matter, alleges five causes of action for (1) unfair, (2) fraudulent, and (3) unlawful business practices in violation of Cal. Bus. & Prof.Code §§ 17200 et seq. (“UCL”); (4) false advertising in violation of Cal. Bus. & Prof.Code §§ 17500 et seq. (“FAL”); and (5) violations of the California Consumers Legal Remedies Act, Cal. Civ.Code §§ 1750 et seq. (“CLRA”). (See Dkt. 160, 4AC at ¶¶ 56-90). The court granted plaintiffs motion for class certification on May 18, 2015, appointing class counsel and plaintiff as representative of the class. (See Dkt. 209, Court’s Order of May 18, 2015 (“Certification Order”) at 38). Specifically, the certified class includes:
*316 [a]U persons who, while in the State of California between November 5, 2010 and January 31, 2012 who purchased from JCPenney one or more private or exclusive branded items of apparel or accessories advertised at a discount of at least 30% off of the stated “original” or “regular” price, and who have not received a refund or credit for their purchases.
Excluded from the class are defendant, as well as its officers, employees, agents or affiliates, and any judge who presides over this action, as well as all past and present employees, officers and directors of JCPenney. Also excluded is any person who only received a discount of 30% or more as a result of using one or more coupons.
(Dkt. 209, Certification Order at 38).
The parties engaged in substantial settlement negotiations — beginning in the summer of 2013 — and reached a settlement in September, 2015. (See Dkt. 246-1, Motion at 4-5). In her motion, plaintiff seeks an order: (1) modifying the definition of the class previously certified; (2) preliminarily approving the proposed settlement between plaintiff and defendant; (3) directing notice of the proposed settlement to the class; (4) directing the establishment of a settlement fund; and (5) setting a schedule for final approval of the proposed settlement. (See id. at 33).
BACKGROUND
This case arises from plaintiffs March 5, 2011, visit to a JCPenney store in Brea, California. (See Dkt. 160, 4AC at ¶ 18). During that visit, “in reliance on Defendants’ false and deceptive advertising, marketing and pricing schemes, [plaintiff] purchased over $200.00 in private branded and exclusive branded apparel and accessories[.]”
Plaintiff asserts that, prior to February 1, 2012, “JCPenney engaged in a pervasive false advertising scheme by which it advertised ’sale’ prices that were substantially lower than comparative Tegulari or ’original’ prices for its private and exclusive branded apparel and accessories.” (Dkt. 246-1, Motion at 2) (citations omitted). She asserts that the “higher ’regular’ and ’original’ prices (and implied savings) were false and deceptive because JCPenney hardly, if ever, offered, sold or intended to sell its merchandise at those prices.” (Id.) (citations omitted). She further alleges that JCPenney “temporarily stopped using false price comparisons on February 1, 2012 when it initiated a ‘fair and square’ pricing campaign but, after a significant decline in revenues, it returned to its original scheme, at least for some products, in early 2013.” (Id.) (citations omitted).
Since 2012, this litigation has been “vigorously pursued and hotly contested[.]” (See Dkt. 246-1, Motion at 3). In the summer of 2013, the parties engaged in “substantial negotiations” regarding the structure of a class-wide settlement, which led to private mediation. (See Dkt. 2462, Declaration of Matthew J. Zevin in Support of Unopposed Motion for Modification of Class Certification Order; Preliminary Approval of Settlement and Notice Program; and Establishment of Qualified Settlement Fund (“Zevin Deck”) at ¶ 9). No settlement was reached at that time, but the parties “periodically engaged in informal settlement negotiations” over the course of the following two years. (See id. at ¶¶ 9-10). In July 2015, the parties attended another set of mediation sessions and reached a settlement in September. (See id. at ¶¶ 11-13).
all persons who, while in the State of California and between November 5, 2010 and January 31, 2012, and between January 1, 2013 through December 31, 2014, purchased from JCPenney one or more private or exclusive branded items of apparel or accessories at a discount of at least 30% off the stated “original” or “regular” priee, and who have not received a full refund or credit for their purchases. Excluded from the Settlement Class are Defendant, as well as its officers, employees, agents or affiliates, and any judge who presides over this action, as well as all past and present employees, officers and directors of JCPenney.
(Dkt. 246-3, Settlement Agreement at ¶ 2.31).
The parties have agreed that JCPenney will establish a $50,000,000 settlement fund, which will include both a Cash Component and Class Allocation. (See Dkt. 246-3, Settlement Agreement at ¶ 6.1). The Cash Component will cover reasonable attorney’s fees and costs, a reasonable class representative enhancement payment, and notice and administration costs. (See id. at ¶¶ 6.1.1.1-3). The portion of the settlement fund not used for the Cash Component will comprise the Class Allocation, which will be provided to class members in JCPenney store credit or cash. (See id. at ¶ 6.1.2). The amount of store credit or cash that each claimant receives will be determined using a system of points based on the value of each class member’s qualifying transactions. (See id. at ¶¶ 6.1.2.1 & 6.1.2.1.4). For example, claimants with total purchase amounts
The Settlement Agreement also contemplates non-monetary relief. Defendant agrees that going forward, “its advertising and pricing practices ... will not violate Federal or California law, including California’s specific price-comparison advertising statutes.” (Dkt. 246-3, Settlement Agreement at ¶ 6.1.7). “Specifically, JCPenney agrees that any former price to which JCPenney refers in its price comparison advertising will be the actual, bona fide price at which the item was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of business, honestly and in good faith.” (Id). Additionally, JCPenney has agreed to “implement a compliance program, which will consist of periodic (no less than once a year) monitoring, training and auditing to ensure compliance with California’s price comparison laws.” (Id.).
LEGAL STANDARD
“[I]n the context of a case in which the parties reach a settlement agreement
I. MODIFICATION OF THE CLASS.
At the preliminary approval stage, the court “may make either a preliminary determination that the proposed class action satisfies the criteria set out in Rule 23 or render a final decision as to the appropriateness of class certification.” Smith v. Wm. Wrigley Jr. Co.,
A party seeking class certification must first demonstrate that: “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a).
“Second, the proposed class must satisfy at least one of the three requirements listed in Rule 23(b).” Wal-Mart Stores, Inc. v. Dukes,
Below, the court evaluates the propriety of class certification for purposes of the settlement while keeping in mind that it previously certified a slightly more limited class. (See Dkt. 209, Certification Order at 38). As before, the proposed modified class must meet the requirements of Rule 23. See, e.g., Hahn v. Massage Envy Franchising LLC, 2015
II. FAIRNESS OF CLASS ACTION SETTLEMENT.
Rule 23 provides that “[t]he claims, issues, or defenses of a certified class may be settled ... only with the court’s approval.” Fed.R.Civ.P. 23(e). “The primary concern of [Rule 23(e) ] is the protection of th[e] class members, including the named plaintiffs, whose rights may not have been given due regard by the negotiating parties.” Officers for Justice v. Civil Service Comm’n of the City & Cnty. of San Francisco,
Approval of a class action settlement requires a two-step process — a preliminary approval followed by a later final approval. See Tijero v. Aaron Bros., Inc.,
DISCUSSION
I. CERTIFICATION OF THE MODIFIED CLASS.
On May 18, 2015, the court certified a class of California customers who purchased private or exclusive branded items from JCPenney at a discount of at least 30% off between November 5, 2010, and January 31, 2012. (See Dkt. 209, Certification Order at 38). The class definition excluded individ
With respect to the additional 2013-2014 period, plaintiff alleges that JCPenney only temporarily stopped using false price comparisons in February 2012 and returned to the scheme in early 2013. (See Dkt. 160, 4AC at ¶¶ 6-7). The court previously found it undisputed that “defendant is still formulating its official rules for its current comparative pricing strategy, but that in 2013 it began the process of returning the majority of its business to a promotional model.” (Dkt. 204, Court’s Order of March 23, 2015 (“MSJ Order”) at 18) (internal quotation and alteration marks omitted). Defendant acknowledges that “some of JCPenney’s business returned to use of price comparison advertising” at that time. (See Dkt. 173-2, Statement of Uncontroverted Facts at 40). A JCPenney Senior Buyer testified that she was not aware of any differences between the pricing strategies used during the November 2010-January 2012 period and the period beginning in 2013. (See id. at 43).
With respect to the second expansion— elimination of the coupon exclusion — the parties agree that “only a tiny fraction of [class] Members would be subject to this exclusion, but Plaintiff has not discovered an automated or mechanical process to identify those persons with certainty.” (See Dkt. 246-1, Motion at 15). Therefore, determining which individuals should be excluded on that basis would require a manual review of customer receipts, and the parties have determined that the “cost and burden” of such a process “would greatly outweigh the utility of maintaining the exclusion[.]” (See id. at 15-16). Additionally, plaintiff contends that the difference between discounts with coupons, as opposed to discounts through in-store “sales” or “markdowns” is a distinction without a difference. (See id.). This is because “JCPenney’s products were hardly ever offered at the stated regular price[,]” “the use and dissemination of coupons at JCPenney was prolific[,]” and “the grossly inflated ‘regular’ and ‘original’ prices were used to support, and could only be temporarily sustained by, the false price comparison scheme” at the heart of this lawsuit. (Id. at 15).
For the reasons explained above, plaintiff contends the class definition should be broadened “because it is appropriate to include and award settlement proceeds to those additional consumers who were likely exposed to the same or similar practices as Plaintiff and the certified Class.” (Dkt. 246-1, Motion at 12). She also asserts that it is appropriate “for JCPenney to buy and obtain peace with respect to all consumers who were likely exposed to such practices[.]”
A. Rule 23(a) Requirements.
1. Numerosity.
The court previously found that the class was sufficiently numerous under Rule 23(a)(1) (see Dkt. 209, Certification Order at 9-10), and an expansion of the class strengthens plaintiffs argument for satisfaction of this element. The original class was comprised of 3,256,888 members that could be identified through defendant’s sales data, and including the 2013-2014 period will add 2,395,410 new and unique class members who can be identified. (See Dkt. 246-1, Motion at 13; Dkt. 246-8, Declaration of Brian J. Berg-mark in Support of Plaintiffs Motion for Modification of Certification Order and Preliminary Approval of Class Action Settlement (“Bergmark Deck”) at ¶ 9). Thus, the expanded class will include 5,652,298 identifiable class members. (See Dkt. 2468, Berg-mark Deck at ¶ 9). JCPenney estimates that there are between 3,116,875 and 5,454,532
2.Commonality.
The court’s prior discussion of commonality under Rule 23(a)(2) (see Dkt. 209, Certification Order at 10-12) applies to the proposed expanded settlement class. The commonality requirement is satisfied if “there are common questions of law or fact common to the class,” Fed.R.Civ,P. 23(a)(2), which requires that plaintiffs claims “depend upon a common contention ... [whose] truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Dukes,
3.Typicality.
Similarly, the court’s prior discussion of typicality under Rule 23(a)(3) (see Dkt. 209, Certification Order at 13) applies with equal force to the proposed expanded settlement class. Typicality requires a showing that “the claims or defenses of the representative parties are typical of the claims or defenses of the elass[.]” Fed.R.Civ.P. 23(a)(3). The purpose of the requirement “is to assure that the interest of the named representative aligns with the interests of the class.” Wolin v. Jaguar Land Rover North Am., LLC,
4.Adequacy of Representation.
Rule 23(a)(4) permits certification of a class action if “the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). Defendant did not challenge this factor at the outset, and the court found it satisfied. (See Dkt. 209, Certification Order at 13). With no reason to find otherwise, the court concludes that the adequacy of representation element of Rule 23(a) remains satisfied.
B. Rule 23(b)(3) Requirements.
Certification under Rule 23(b)(3) is proper “whenever the actual interests of the parties can be served best by settling their differences in a single action.” Hanlon v. Chrysler Corp.,
1. Predominance.
The Rule 23(b)(3) predominance inquiry focuses “on the relationship between the common and individual issues.” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 957 (9th Cir.2009) (internal quotation marks omitted). “[I]f the main issues in a case require the separate adjudication of each class member’s individual claim or defense, a Rule 23(b)(3) action would be inappropriate.” Zinser v. Accufix Research Institute, Inc.,
As described in the Certification Order, plaintiffs claims are under the UCL, FAL, and CLRA, and “the basic common question — whether defendant’s price comparison scheme generated false advertisements that deceived consumers — predominates under [all three statutory schemes].” {See Dkt. 209, Certification Order at 30). The court found that the essential questions at the heart of plaintiffs claims were common and would predominate over any other individualized issues, largely due to the fact that plaintiff would rely almost entirely on common evidence in the form of defendant’s internal pricing guidelines, Price Pacing Flow Charts, and California sales data. {See id. at 15-16). Plaintiffs request to add the additional time period to the class definition does not alter any of the court’s prior analysis, as plaintiff specifically alleges that the allegedly false advertising stopped only temporarily between 2012 and 2013. {See Dkt. 160, 4AC at ¶¶ 67). As a result, the claims, analysis, and evidence required would only expand to include additional transactions over the course of an additional year; their character and nature would remain unchanged.
For similar reasons, removing the coupon exclusion alters the predominance analysis slightly but does not change the nature of the claims such that the requirement is no longer met.
In this case, liability under the UCL and CLRA could be established if plaintiff showed that defendant’s advertisements of 30% discounts, whether printed in-store on price tags or signs above clothing racks, or printed in newspapers, magazines or coupons, were material and likely to deceive customers. As the court stated previously, “[i]t may be shown from [defendant’s pricing policies, guidelines, practices, and actual sales data] that defendant’s advertising practices are deceptive, and that inquiry predominates over any individualized issues that arise in connection with the advertisements themselves. See, e.g., Blackie v. Barrack,
2. Superiority.
Finally, the superiority requirement of Rule 23(b)(3) remains satisfied because the ultimate recovery by settlement class members would be dwarfed by the cost of litigating on an individual basis, and any settlement class member who wishes to opt out may do so. (See Dkt. 209, Certification Order at 34-35). “In short, the court finds that ’a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’” (See id. at 35) (citing Fed. R.Civ.P. 23(b)(3)). As stated previously, in the context of settlement, the other requirements of Rule 23(b)(3) such as “the desirability or undesirability of concentrating the litigation of the claims in the particular forum” and “the likely difficulties in managing a class action[,]” see Fed.R.Civ.P. 23(b)(3)(C)— (D), “are rendered moot and are irrelevant.” Barbosa v. Cargill Meat Solutions Corp.,
II. FAIRNESS OF THE SETTLEMENT.
The court’s preliminary evaluation of the Settlement Agreement “does not disclose grounds to doubt its fairness[,] ... such as unduly preferential treatment of class representatives or of segments of the class, or excessive compensation for attorneys, and appears to fall within the range of possible approval[.]” In re Vitamins Antitrust Litig.,
A. The Settlement is the Product of Arm’s-Length Negotiations.
“This circuit has long deferred to the private consensual decision of the parties.” Rodriguez v. W. Publ’g Corp.,
the court’s intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.
Id. (internal quotation marks omitted). The Ninth Circuit does not follow the approach of other circuits that requires district courts to “specifically weight ] the merits of the class’s case against the settlement amount and quantify] the expected value of fully litigat
Here, there is no evidence of collusion or fraud leading to, or taking part in, the settlement negotiations between the parties. On the contrary, this matter was “hard fought and contentiously litigated throughout.” (See Dkt. 246-1, Motion at 18). For example, plaintiffs counsel describes the parties’ discovery efforts as follows:
[M]y co-counsel and I engaged in extensive legal research and analysis and conducted thorough and substantial class and merits discovery, including depositions of four Rule 30(b)(1) witnesses, five Rule 30(b)(6) witnesses and two expert witnesses designated by JCPenney. These depositions took place in Washington D.C., Plano, Texas, and Los Angeles and Palo Alto, California. We also served interrogatories, requests for admissions and six sets of document requests, and we defended the depositions of Plaintiff and her expert, Brian Bergmark. We received, reviewed and analyzed JCPenney’s written discovery responses, as well as the documents that JCPenney produced in the Litigation, including the extensive and voluminous sales data for the tens of millions of transactions entered into by the certified Class.
(Dkt, 246-2, Zevin Decl. at ¶ 5).
In addition to discovery practice, the parties engaged in substantial motion practice before this court:
My co-counsel and I amended the complaint in order to keep up with changes in JCPenney’s pricing practices; opposed three motions to dismiss and/or strike; opposed two motions for summary judgment; briefed three motions for class certification; and successfully opposed JCPenney’s petition for interlocutory appellate review of the Court’s order granting class certification. We also engaged in numerous discovery disputes, including several motions to compel, and participated in countless hours of meet and confer negotiations, many of them transcribed, concerning a multitude of discovery issues and motion practice.
(Dkt. 246-2, Zevin Decl. at ¶ 6). After the court certified the class, the parties continued to litigate the matter. They took additional depositions, sought and obtained additional discovery, and continued to engage in motion practice and consult with their experts. (See id. at ¶ 8).
Settlement discussions were ongoing throughout the litigation. During the summer of 2013, the parties engaged in “substantial negotiations ... concerning the possible structure of a class-wide settlement.” (Dkt. 246-2, Zevin Decl. at ¶ 9). Those negotiations led to private mediation in the fall of 2013, which was unsuccessful despite a full day of mediation and follow-up discussions. (See id.). Over the next two years, the parties “periodically engaged in informal settlement negotiations,” which also proved unsuccessful. (See id. at ¶ 10). Then, in July 2015, the parties attended another full day of mediation with a different mediator. (See id. at ¶ 11). The parties accepted the mediator’s proposal after that session and returned for another two full days of mediation in August and September 2015. (See id. at ¶¶ 12-13). The mediation “concluded with the Parties agreeing to all material terms of the Settlement, which was documented in a short-form Memorandum of Settlement, executed by the Parties and counsel on September 10 and 11, 2015.” (Id. at ¶ 13). Thereafter, the parties “negotiated, drafted, and executed the comprehensive Settlement Agreement that is currently before the Court[.]” (Id.).
Based on the evidence and record before the court, the court is persuaded that the parties thoroughly investigated and considered their own and the opposing party’s positions. The parties clearly had a sound basis for measuring the terms of the Settlement Agreement against the risks of continued
B. The Amount Offered in Settlement Falls Within a Range of Possible Judicial Approval and is a Fair and Reasonable Outcome for Class Members.
1. Recovery for Class Members.
The settlement is fair, reasonable, and adequate, particularly when viewed in light of the risks of continued litigation in this case. As the Ninth Circuit has noted, “the very essence of a settlement is compromise, a yielding of absolutes and an abandoning of highest hopes.” Officers for Justice,
The recovery for each claimant, in the form of cash or store credit, will vary depending on the percentage of class members that make claims. For example, assuming a high-end estimate of 11,106,830 class members (see Dkt. 246-8, Bergmark Decl. at ¶ 22) and a low-end estimate of 8,769,173 (see id. at ¶ 21), a 2% claim rate would provide a minimum benefit of $101.48 — $128.54; an average benefit of $152.22 — $192.81; and a maximum benefit of $507.40 — $642.70 per claimant.
Additionally, the settlement promotes consumer protection in that JCPenney has agreed that its advertising and pricing practices as of the date of the settlement agreement and continuing forward “will not violate Federal or California law, including California’s specific price-comparison advertising statutes.” (Dkt. 246-3, Settlement Agreement at ¶ 6.1.7). “Specifically, JCPenney agrees that any former price to which JCPenney refers in its price comparison advertising will be the actual, bona fide price at which the item was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of business, honestly and in good faith.” (Id). Additionally, and “[a]s a further direct result of this Litigation,” JCPenney will implement a compliance program that will include monitoring, training, and auditing to ensure compliance with California’s price comparison laws. (See id,.).
The settlement the parties have reached is even more compelling given the substantial litigation risks in this case. Even if plaintiff were to prevail at trial, there is a very real risk that plaintiff could recover nothing. See, e.g., Schaffer v. Litton Loan Servicing, LP,
Under plaintiffs proposed “transaction value” measure of restitution, claimants would receive the value promised but not delivered by JCPenney’s price comparisons. (See Dkt. 204, MSJ Order at 11). Using this method, claimants would receive the difference between the amount that the claimant actually paid and the amount that the claimant would have paid if the discount from the regular price of the item in question was actually as advertised. (See id). Although the Settlement Agreement was signed before plaintiff commissioned the “complete and costly analysis that would be required” to calculate recovery under this methodology (see Dkt. 246-1, Motion at 24), plaintiffs expert was able to estimate damages per class member using average discounts and average price paid per item during the class periods. (See Dkt. 246-8, Bergmark Deck at ¶ 15). If this litigation were to continue, defendant would undoubtedly challenge such a methodology and the use of statistical analysis to calculate damages at all.
Finally, under plaintiffs “net profit” measure of restitution, the court would “calculate defendant’s net profits (revenue minus cost) for each item sold thi'ough its deceptive price comparison scheme and order defendant to
The parties also “litigated and negotiated under a huge cloud of uncertainty concerning JCPenney’s financial stability.” (See Dkt. 246-1, Motion at 21). Throughout this litigation, the parties have acknowledged JCPenney’s financial losses following its move to a non-comparative pricing scheme in 2013. (See, e.g., Dkt. 173-2, Statement of Uncontroverted Facts at 39-40). According to plaintiff, “JCPenney’s stock price is currently trading at a fraction of its value from 2011 and, for the fiscal year ended January 31, 2015, it suffered an adjusted net loss from operations of $816 million and had free cash flow of only $57 million.” (Dkt. 246-1, Motion at 21; Dkt. 246-2, Zevin Decl. at ¶ 17). These and other facts “weighed heavily on the settlement negotiations and strongly support [its] reasonableness[.]” (Dkt. 246-1, Motion at 21); see Torrisi v. Tucson Elec. Power Co.,
In sum, even if plaintiff successfully proved her case at trial, the amount of restitution recovered, if any, could vary widely depending on a number of factors, including the court’s discretion as to whether and how much to award in restitution, discovery and analysis regarding the appropriate method by which to calculate such an award, and JCPenney’s ability to satisfy a judgment awarding the maximum amounts sought by plaintiff. Further, if any sum — whether large or small — were recovered, it may take years to complete the appeals that would likely follow entry of judgment. Under this Settlement Agreement, on the other hand, the class has access to a guaranteed, fixed, immediate, and substantial recovery of $50 million, as well as meaningful and prospective remedial relief.
2. Release of Claims.
Beyond the value of the settlement, potential recovery at trial, and inherent risks in continued litigation, courts also consider whether a class action settlement contains an overly broad release of liability. See Newberg on Class Actions § 13:15, at p. 326 (5th ed. 2014) (“Beyond the value of the settlement, courts have rejected preliminary approval when the proposed settlement contains obvious substantive defects such as ... overly broad releases of liability.”); see also Fraser v. Asus Computer Int'l,
Here, plaintiff and the settlement class members who do not opt out of the Settlement Agreement release claims “of any and every kind that were asserted in the Litigation, or that could have been asserted but were not asserted in the Litigation ... on the basis of, connected with, arising out of, or related in whole or in part to any or all of the alleged acts, omissions, facts, matters, transactions, circumstances, and occurrences that were directly or indirectly alleged” in the litigation. (Dkt. 246-3, Settlement Agreement at ¶¶ 13.1.1 & 13.1.3). Additionally, while the Settlement Agreement contains a waiver of rights under § 1542 of the California Civil Code, such waiver is specifically limited to such “rights or benefits that they ... may now have as a result of the alleged facts, circumstances, and occurrences underlying the claims set forth in the Litigation[.]” (See id. at ¶ 13.1.3.). With this understanding of the release, ie., that it does not apply to claims other than those related to the subject matter of the litigation, the court finds that the release adequately balances
C. The Settlement Agreement Does Not Improperly Grant Preferential Treatment to the Class Representative.
“Although [the Ninth Circuit] ha[s] approved incentive awards for class representatives in some cases, [it has instructed] district courts to scrutinize carefully the awards so that they do not undermine the adequacy of the class representatives.” Radcliffe v. Experian Info. Solutions Inc.,
In Staton, the Ninth Circuit reversed the district court’s approval of a class-action settlement where the incentive payments of up to $50,000 were disproportionately large as compared to class members’ payments averaging $16,500 for one subclass, and $1,000 for another. See
With this guidance in mind, the court must examine whether there is a “significant disparity between the incentive awards and the payments to the rest of the class members” such that it creates a conflict of interest. See Radcliffe,
The Settlement Agreement indicates that JCPenney will not oppose class counsel’s application for a $10,000 enhancement payment for plaintiff. (See Dkt. 246-3, Settlement Agreement at ¶ 6.1.1.2). However, they have also agreed that “[i]n the event that the Court does not approve the Class Representative Enhancement Payment, or the Court awards an amount that is less than sought, the amount that is not awarded will be available for distribution to the Class and shall not affect the validity and enforceability of the Settlement^]” (Id.). Accordingly, the court considers the fairness and adequacy of the settlement without any incentive awards to the named plaintiffs.
As an initial matter, because the parties agree that the Settlement Agreement shall remain in force regardless of any service awards, the awards here are unlikely to ere-
Regardless of the enhancement award the court ultimately approves, it is clear that the plaintiff in this action has taken on substantial responsibility in litigating this case, and the class has benefitted from the time and effort she spent doing so. (See, e.g., Spann Decl. at ¶¶ 5-15) (describing her review of complaint drafts and other filings, her active participation in written discovery and preparation for her deposition, monitoring of the litigation and communication with counsel, in-person and telephonic participation in mediation sessions and settlement discussions, and review of the mediator’s proposal and ultimate settlement). While a disparity may exist between the award plaintiff receives and the potential monetary awards to absent class members, the court does not believe, under the circumstances here, that such disparity rises to the level of unduly preferential treatment. On the contrary, the additional payment — with her request only amounting to less than a quarter of one percent of the $50 million settlement fund — is warranted based on Spann’s role in protecting the interests of the class and ensuring that the class benefits from the litigation. See In re Online DVD-Rental,
D. The Opt-Out Threshold is Reasonable.
Finally, the court notes that the Settlement Agreement provides that “JCPenney, at its sole discretion, has the right to terminate this Settlement pursuant to the terms of the confidential Supplemental Agreement Regarding Opt Outs [Confidential Agreement].” (See Dkt. 246-3, Settlement Agreement at ¶ 9.4). Pursuant to the oral argument on December 3, 2015, the parties provided the Confidential Agreement to the court under seal. The agreement sets a threshold level of opt-outs which, if reached, permits JCPenney to withdraw from the Settlement Agreement. Having reviewed the Confidential Agreement, the court finds that the opt-out threshold is reasonable, and, given the circumstances of this case and the parties involved, they need not disclose it to the class. See, e.g., In re Skelaxin (Metaxalone) Antitrust Litig.,
As the court recognized in In re Skelaxin, “at worst, [publicizing the threshold] could result in the failure of the Settlement to become effective. At best, it could result in settlement proceeds being unfairly channeled away from the proposed Settlement Class members to parties and attorneys who do not deserve them.”
E. The Proposed Class Notice and Notification Procedures Are Adequate.
Upon a settlement of a certified class, “[t]he court must direct notice in a reasonable manner to all class members who would be bound by the proposal.” Fed.R.Civ.P. 23(e)(1). Federal Rule of Civil Procedure 23(c)(2) prescribes the “best notice that is practicable under the circumstances, including individual notice” of particular information. Fed.R.Civ.P. 23(e)(2)(B) (enumerating notice requirements for classes certified under Rule 23(b)(3)).
A class action settlement notice “is satisfactory if it generally describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard.” Churchill Vill., LLC v. Gen. Elec.,
Here, the Settlement Agreement proposes that the costs of notice and administration, in an amount not to exceed $2,667,000, will be deducted from the $50 million settlement fund. (See Settlement Agreement at ¶ 6.1.1.3). The parties have selected Heffler Claims Group (“Heffler”), a firm with “expertise in all aspects of administration for consumer ... matters” (see Dkt. 246-9, Declaration of Jeanne C. Finegan in Support of Preliminary Approval of Settlement and Notice Program (“Finegan Deck”) at ¶ 4), as Claims Administrator. (See Settlement Agreement at ¶2.7). The notice program Heffler developed for this matter utilizes a combination of individual notice to known class members in the form of Email Notices and Post-Card Notices and a schedule of publication notices in English and Spanish in magazines, on certain internet networks, on Facebook, and in a press release. (See Dkt. 246-9, Finegan Deck at ¶ 21). Heffler anticipates that the notices will reach 75% of targeted potential class members, on average, 2.3 times. (See id. at ¶ 39).
Attached to the Email Notice is a longer-form notice presented in question-and-answer format. (See Dkt. 255, Email Notice at 2-6). There, the class definition is conspicuously included in a section entitled, “How do I know if I am part of the settlement class?,” and a following section explains that benefits may be available to certain customers, and directs class members to the settlement website for more information and for a complete copy of the Settlement Agreement. (See id. at 3-4). The document also includes an explanation that lays out the class members’ options under the settlement: they may remain in the class, exclude themselves, or object. (See id. at 4); see also Fed.R.Civ.P. 23(e)(2)(B)(v)-(vi). It also provides that class members may elect to exclude themselves by completing and submitting online or mailing a simple Opt-Out Form, which will be available by phone and on the settlement website. (See id.). The Email Notice also states that if class members choose to object to the settlement, they may object by submitting their written objections to the court, and they may attend the final approval hearing. (See id. at 4-5); see also Fed.R.Civ.P. 23(c)(2)(B)(iv). Finally, the Email Notice explains that all members of the class will release all claims that relate to the claims or issues asserted in the lawsuit, and directs class members to the “Release of Claims” section of the Settlement Agreement for additional information. (See id. at 5).
For all settlement class members whose Email Notice was not deliverable, or for whom JCPenney does not have an email address, a Post-Card Notice will be mailed by first class mail. (See Settlement Agreement at ¶ 7.1; see also Dkt. 255, Amended Exhibits, Exh. 3 (“Post-Card Notice”)). The Post-Card Notice provides a summary of the information described in the preceding paragraphs and directs class members to the website for further information. (See id.). Importantly, the Post-Card Notice contains the same language as the Email Notice informing recipients that “JCPenney’s records indicate that [the recipient is] an eligible class member who purchased JCPenney private or exclusive branded clothing or accessories[,]” and it provides customers with their unique ID numbers. (See id.). Information regarding class members’ options to opt out or object, as well as the date and time of the final fairness hearing, is also included. (See id.).
To supplement the reach of the notices sent out to class members directly, Heffler will issue all elements of the publication notice “on the soonest practicable date” after the Email and Post-Card Notices are sent, “but in no event shall it commence more than ten (10) days later.” (See Dkt. 246-3, Settlement Agreement at ¶ 7.3). The design and format of these materials are clear; they feature bold headlines to capture attention, Spanish language options, concise plain language, and embedded links to allow immediate access to more detailed information. (See Dkt. 255, Email Notice & Post Card Notice; see also Dkt. 246-3, Exh. 4 (“Publication Notice”). The Settlement Administrator confirms that the program is “reasonably calculated to provide notice that is consistent with best practicable court approved notice programs in similar matters, and which are consistent with the Federal Judicial Center’s guidelines concerning appropriate reach.” (See Dkt. 246-9, Finegan Deck at ¶ 39).
CONCLUSION
Based on the foregoing, IT IS ORDERED THAT:
1. The Motion for Modification of Class Certification Order; Preliminary Approval of Settlement; And Establishment of Qualified Settlement Fund (Document No. 246) is granted upon the terms and conditions set forth in this Order.
2. The court modifies the previously-certified class definition, so that the class is now defined as set forth in ¶ 2.31 of the Settlement Agreement (Document No. 246-3), for the purposes of settlement.
3. The court preliminarily finds that the terms of the Settlement Agreement are fair, reasonable and adequate, and comply with Rule 23(e) of the Federal Rules of Civil Procedure.
4. The proposed manner of the notice of settlement set forth in the Settlement Agreement, as set forth in the Amended Exhibits (Document No, 255), constitutes the best notice practicable under the circumstances and complies with the requirements of Due Process.
5. The court approves the form, substance, and requirements of the Email Notice (Document No. 255, Exh. 2); the Post-Card Notice (id., Exh. 3); the Publication Notice (Document 246-3, Exh. 4); and the Claim Form (id., Exh. 5).
6. Heffler Claims Group LLC (“Heffler”) is hereby appointed as the Claims Administrator. Promptly following entry of this Order, Heffler will prepare final versions of the notice and claim forms, incorporating the relevant dates and deadlines set forth in this Order and the Settlement Agreement, and will commence the notice process in accordance with the Settlement Agreement.
7. The parties shall establish a Qualified Settlement Fund (“QSF”) in accordance with the terms of the Settlement Agreement. Heffler is hereby appointed the trustee of the QSF. JCPenney is hereby ordered to transfer to Heffler, in its capacity as trustee, the required portions of the class settlement amount to be held in the QSF pursuant to the terns of the Settlement Agreement.
8. The parties shall carry out the settlement and claims process according to the terms of the Settlement Agreement.
9. Plaintiff shall file a motion for an award of class representative service payment and attorney’s fees and costs no later than May 19, 2016, and notice it for hearing for the date final fairness hearing set forth below.
10. Class members shall submit claims, requests for exclusion, or objections to the settlement and/or plaintiffs motion for an award of class representative service payments and attorney’s fees and costs, no later than June 30,2016.
11. In the event any objections or opposition to the motion for an award of class representative service payment and attorney’s fees and costs are filed, class counsel shall, no later than July 28, 2016, file a reply addressing the objections.
12. The parties shall file and serve a motion for final approval of the Settlement and any response to objections to the Settlement no later than July 28, 2016, and notice it for hearing on the date set forth in paragraph 13 below.
13. A final approval (fairness) hearing is hereby scheduled for August 25, 2016, at 10:00 a.m. in Courtroom 22, to consider the fairness, reasonableness, and adequacy of the Settlement Agreement as well as the award of attorney’s fees and costs to class counsel, and service awards to the class representatives.
Notes
. Private brands are brands that JCPenney owns, designs, and develops, and exclusive brands are outside brands that are sold exclusively at JCPenney. (See Dkt. 209, Certification Order at 2) (citation omitted).
. Total purchase amounts will be determined in a number of ways. First, the transaction data for all known and identifiable class members will be supplied by JCPenney to the claims administrator, who will provide such class members with a unique identification number that they can enter on the settlement website to view the date and purchase amount of their transactions. (See Dkt. 246-3, Settlement Agreement at ¶ 6.1.2.1.2). Second, claimants who believe they made purchases that were not identified by JCPenney, or who believe that their data is incomplete or inaccurate, may submit receipts demonstrating qualified purchases, which may increase their allocation points. (See id. at ¶ 6.1.2.1.3). Finally, claimants who certify under penalty of perjury that they are members of the class, but do not have receipts, and for which there is no information in JCPenney’s database, will receive one point. (See id. at ¶ 6.1.2.1.4).
. The court acknowledges that the parties agreed to expand the class for settlement purposes only. (See Dkt. 246-1, Motion at 13 n. 9). If the settlement is not approved, each party shall retain its rights as they existed prior to the execution of the Settlement Agreement, including maintenance of the original class certified by the court.
. This is particularly so because plaintiff alleges — and one of defendant’s employees confirmed — that the pricing and advertising methods in use during the 2013-2014 period were the same as those in use during the initial class period. {See Dkt. 160, 4AC at ¶¶ 6-7 & Dkt. 173— 2, Statement of Uncontroverted Facts at 43).
. The court recognizes that the parties have agreed to the expansion of the class for settlement purposes only. (See Dkt. 246-1, Motion at 15). If the settlement is not approved, the court will not presume that defendant agreed to this expansion of coupon users for all purposes. Each party shall retain its rights as they existed prior to the execution of the Settlement Agreement, including maintenance of the original class certified by the court.
. The Settlement Agreement authorizes up to $500,000 in costs for class counsel, but at the time plaintiff's expert Brian Bergmark estimated claim rates and per-claimant allocations, he estimated that class counsel's costs were not more than $250,000. (See Dkt. 246-1, Motion at 22). Class counsel has since filed an Unopposed Motion for Attorneys' Fees, Litigation Costs and Class Representative’s Enhancement Payment (Dkt. 248-1, ("Fees Motion”)), which requests an award of costs in the amount of $191,080.91. (See Fees Motion at 1). Assuming that the court awards that amount, the per-claimant recovery described in this paragraph is slightly underestimated. Rather than a Class Allocation of $33,814,726, an estimated $33,873,645.09 would remain to be allocated among class members.
. The minimum benefit refers to the minimum benefit available with proof of a qualifying purchase, which would entitle a claimant to two points. (See Dkt. 246-8, Bergmark Decl. at ¶ 22). Bergmark defines the average benefit as three points and the maximum benefit as ten points. (See id.; see also Dkt. 246-3, Settlement Agreement, ¶ 6.1.2.1.4 (setting forth the formula for point allocations)). Claimants who do not have a proof of purchase would receive one point, and with a 2% claim rate, such individuals would receive $50.74. (See Dkt. 246-8, Berg-mark Decl. at ¶ 22). They would receive $20.30 with a 5% claim rate, $10.15 with a 10% claim rate, and $5.07 with a 20% claim rate. (See id.).
.The use of two, five, ten and 20 percent claim rates is reasonable in this case. See, e.g., Couser v. Comenity Bank,