Opinion
Case Number C-02-1227-JF (PVT).
October 13, 2004
On September 24, 2004, the Court conducted a hearing with respect to the following motions and objections: (1) motion of named Plaintiffs and Defendant for final approval of the settlement; (2) motion of named Plaintiffs and Defendant for approval of plan of allocation; (3) motion of class counsel for an award of attorneys' fees and costs; (4) motion class representative Jeffrey Resnick for an award of expenses; (5) motion of class members Deborah Elias and Jan Gadow to intervene in action; and (6) objections of class members to settlement and to proposed award of attorneys' fees and expenses. The Court has reviewed the voluminous documents filed in connection with these motions, objections and requests and has considered the oral arguments presented at the hearing. The Court finds and concludes as follows:
(1) The proposed settlement is "fundamentally fair, adequate and reasonable" as is required under Fed.R.Civ.P. 23(e) and applicable Ninth Circuit authority. See Officers for Justice v. Civil Service Commission, 688 F.2d 615, 625 (9th Cir. 1982). The Court finds that the settling parties are in a particularly good position to assess the strengths and weaknesses of their cases in that settlement was reached well into the litigation and after seven months of settlement negotiations. Both sides faced substantial risk in continuing the litigation. The trial was certain to be lengthy and expensive. Experienced counsel negotiated the settlement at arm's length with the assistance of Magistrate Judge Edward A. Infante, an experienced and skilled mediator, and all counsel agree that the settlement is fair and reasonable under the circumstances of this case.
The conditional nature of the Court's approval stems from the manner in which the release of claims is drafted. While the release discharges class members' claims against PayPal and its affiliates, the released claims may be asserted as a defense to actions brought by PayPal only. The Court raised this apparent discrepancy at the hearing, and expressed concern that a situation might arise in which a class member appropriately might wish to assert the released claims as a defense against a PayPal affiliate or successor in interest but might be precluded from doing so because of the manner in which the release of claims is drafted. Counsel expressed a willingness to modify the release of claims to express this interest. The Court's approval of the settlement therefore is conditioned upon counsel making such a modification. Upon receiving a satisfactory modification of the release of claims language, the Court will sign the proposed Final Judgment And Order Of Dismissal With Prejudice.
(2) The plan of allocation of the settlement proceeds appears to be fair, reasonable and adequate as required by applicable authority. See Class Plaintiffs v. Seattle, 955 F.2d 1268, 1284-85 (9th Cir. 1992). The conditional nature of the Court's approval stems from the uncertainty with respect to allocation of funds to long-form claimants. Based upon the representations made at the hearing by class counsel with respect to the manner in which the claims administrator likely will proceed, the Court is persuaded that the plan of allocation is fair, reasonable and adequate. However, the Court will defer final approval of the plan of allocation with respect to the long-form claimants until class counsel is in a position to present the Court with more definite information as to the number of long-form claimants and the manner in which the claims administrator will proceed on the long-form claims.
(3) Class counsel seeks a fee award in the amount of $3,332,500 as well as reimbursement of litigation expenses in the amount of $115,052. With respect to the expenses, the question is whether the costs typically would be billed by attorneys to paying clients. Harris v. Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994). The $115,052 figure is well-documented and represents costs that typically would be billed to clients.
With respect to the fees, the Court concludes that the "reasonable percentage" method appropriately may be applied. The Ninth Circuit has held that under the reasonable percentage method, 25% of the common fund is the "benchmark" award. Paul, Johnson, Alston Hunt v. Graulty, 886 F.2d 268, 272-73 (9th Cir. 1989). This figure should be adjusted upward or downward as dictated by the particular circumstances of the case. Id. The Court concludes that an upward adjustment to 30% is warranted in the present case based upon the following facts: the settlement achieved is quite favorable to the class; the settlement was solely the result of the attorneys' hard work over more than two years; counsel took on the burden of the contingent fee arrangement and fronted all the litigation expenses; a 30% award reflects the market rate in similar complex, contingent litigation; and the case would have been difficult and risky to litigate. If the Court were to apply the 30% figure to the cash settlement fund of $9,250,000, the fee award would be $2,775,000. However, such a calculation would not take into account the fact that PayPal returned $5.1 million in previously restricted funds to class members prior to settlement. The record reflects that the return of these funds was a direct result of the class action. Including the $5.1 million in the common fund for purposes of calculating fees, a 30% fee award would be $4,305,000. Under these circumstances, the Court concludes that the requested fee award of $3,332,500 is entirely appropriate. Accordingly, the Court will award $3,332,500 in attorneys' fees and $115,052 in litigation expenses.
The Court's conclusion accords with that reached by Judge Infante, who worked with the parties to settle the action over several months. Given his familiarity with the facts of this case, and his intimate knowledge of the strengths and weaknesses of the parties' positions as a result of his role as mediator, Judge Infante's recommendation that class counsel be awarded $3,332,500 in attorneys' fees must be given significant weight.
(4) Class representative Jeffrey Resnick has requested $2,500 in expenses, including lost wages, he incurred serving as a class representative. The Court concludes that this request is reasonable and justified and therefore will award Mr. Resnick the requested $2,500.
(5) Deborah Elias and Jan Gadow separately seek to intervene in the action for the purpose of objecting to the settlement and the requested attorneys' fees. While an unnamed class member clearly has standing to object to a proposed award of attorneys' fees absent intervention, there is some uncertainty as to whether an unnamed class member has standing to object to a proposed settlement. See Powers v. Eichen, 229 F.3d 1249, 1252-56 (9th Cir. 2000). However, the Court concludes that the motions for intervention are untimely and that the interests of the proposed intervenors are represented adequately by the class representatives. Accordingly, the motions for intervention will be denied. In light of the seriousness of the issues raised, however, the Court nonetheless will consider all of the objections asserted by Ms. Elias and Mr. Gadow on the merits.
(6) The Court received approximately fifty letters and communications that could be construed as objections to the settlement and/or the request for attorneys' fees. The following nine individuals indicated that they intended to appear at the hearing: Stan Choflet, Daniel Finamore, Joel Shapiro, Paul Scheibal, Amanda Murphy, Deborah Elias, Nicholas Fausto, Jan Gadow and Randy Rosens. Prior to the hearing, Mr. Choflet and Mr. Scheibal withdrew their objections. With respect to the remaining individuals, no appearance was made by Ms. Murphy, Mr. Fausto or Mr. Finamore. Mr. Shapiro, Mr. Gadow, Ms. Elias and Mr. Rosens each appeared through counsel. Class counsel objected to the appearance of Mr. Gadow, Ms. Elias and Mr. Rosens on the ground that their objections were not served in compliance with the requirements set forth in the class notice. The Court provisionally granted counsel for these individuals leave to present oral arguments based upon counsels' representations as to their efforts to comply with the notice provisions. After considering the record as a whole, the Court concludes that counsel made a good faith effort to comply with the notice provisions, that class counsel will not be prejudiced if all of the oral arguments presented at the hearing are considered, and that the objections of the individuals who appeared at the hearing are representative of all of the objections filed in this case. Accordingly, the Court will consider all of the oral arguments presented at the hearing.
Several of the objections focused upon the issues addressed above with respect to the release of claims and the allocation of funds for long-form claimants. The Court appreciates the time and effort the objectors expended in bringing these issues to the Court's attention and has conditioned its approval of the settlement and the plan of allocation so as to ensure that these issues are resolved in an appropriate manner. Other objections asserted that the attorneys' fees requested are excessive. The Court has reviewed the entire record as well as the relevant law and concludes that the requested attorneys' fees are appropriate for the reasons discussed above. Still other objections raised concerns that the proposed settlement agreement does not cap administrative costs, that the class notice was misleading, and that the provision permitting access to class members' records could lead to an invasion of privacy. The Court understands the objectors' concerns that the proposed settlement agreement provides no safeguards with respect to future administrative costs, but the Court is persuaded that the $375,000 that has been set aside for administrative costs likely is adequate and that setting a hard cap at this stage of the proceedings would not be appropriate. There is no evidence in the record that a significant number of class members were misled by the class notice, and the asserted ambiguity in the class notice is clarified on the website maintained by class counsel. Finally, the Court does not expect that any significant numbers of class members' records will be accessed during the allocation process, but agrees with class counsel that such access may be necessary to verify claims in certain cases. Accordingly, the Court concludes that none of the objections asserted warrants denying approval of the settlement, the plan of allocation or the award of fees and expenses.
IT IS SO ORDERED.