Opinion
Civil Action No. 12-204
08-08-2012
FRANCES O'BRIEN, Plaintiff, v. BRAIN RESEARCH LABS, LLC, Defendant.
NOT FOR PUBLICATION
OPINION
I. INTRODUCTION
This matter is before the Court by way of the plaintiff's motions for: (1) certification of the settlement class; (2) final approval of the class settlement embodied in the agreement dated March 19, 2012; and (3) an award of attorney's fees. For the reasons set forth in this Opinion, the motions are granted.
II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On January 11, 2012, Plaintiff Frances O'Brien ("Plaintiff") filed a putative class action Complaint in the United States District Court for the District of New Jersey against Defendant Brain Research Labs, LLC ("Defendant"), alleging that Defendant made misleading claims about the health benefits of Procera AVH ("Procera"). (Compl. ¶¶ 9-14, Jan. 11, 2012, ECF No. 1.) According to the Complaint, Defendant advertised that Procera was "clinically shown to restore the memory power you had 10-15 years ago" and could improve focus, concentration, and energy. (Id. ¶ 10.) Plaintiff alleges that after she purchased and took Procera, she discovered that it did not provide any of the promised benefits. (Id. ¶ 12.) Based on these allegations, Plaintiff asserted claims under the New Jersey Consumer Fraud Act (CFA) and common law fraud. (Id. ¶¶ 36-55.)
On January 25, 2012, Defendant filed its Answer, denying most of the allegations and asserting several affirmative defenses. (Ans., Jan. 25, 2012, ECF. No. 7.)
On February 22, 2012, the parties consented to Magistrate Judge jurisdiction for all proceedings, including the entry of final judgment. (Consent Order, Feb. 22, 2012, ECF No. 14.)
On February 24, 2012, Plaintiff filed an unopposed motion for an order: (1) preliminarily approving a settlement the parties had reached; (2) setting the date for a hearing to consider final approval of the proposed settlement, as well as class counsel's fee and expense application; (3) directing that notice be disseminated to settlement class members at the times and in the manner proposed; and (4) granting such other relief as the Court may deem just and proper. (Prelim. Appr. Mot. 1, Feb. 24, 2012, ECF No. 15.) Attached to the motion were Plaintiff's counsel's declaration, (Hoffman Decl. Feb. 24, 2012, ECF No. 15), a proposed settlement agreement, (Original Settlement, Ex. 1 to Hoffman Decl.), and proposed notice and claim forms. (Exs. A-C to Hoffman Decl.)
On March 7, 2012, a telephone hearing was held concerning the motion for preliminary approval of a settlement class and a class settlement. (Tele. Hr'g, March 7, 2012) During the telephone hearing, the Court expressed concerns about the certifiability of a nationwide class for each claim in the Complaint, (id. 1:00-11:54), the notice and claim process, (id. 18:16-20:10; 27:50-30:56; 30:57-33:06), and the need to ensure personal injury claims were excluded from any release. (Id. 40:01-40:20.) As a result, the Court ordered the parties to submit either: (a) an amended complaint containing claims for which a nationwide class could be certified, revised notices to the class, and a preliminary approval order incorporating the directives set forth on the record on March 7, 2012; or (b) a joint letter setting forth the legal authority to certify a nationwide class alleging a violation of the New Jersey Consumer Fraud Act and revised notices to the Class and preliminary approval order incorporating the directives set forth on the record on March 7, 2012. (Order on Informal Appl., Mar. 7, 2012, ECF No. 19.)
Pursuant to the Order, Plaintiff filed an Amended Complaint on March, 14, 2012. (Am. Compl., Mar. 14, 2012, ECF No. 20.) The Amended Complaint added causes of action for unjust enrichment, breach of express warranty, and breach of implied warranty of merchantability. (Id. ¶¶ 56-76.)
On March 15, 2012, the parties submitted a joint memorandum in further support of the motion for preliminary approval, (Supp. Memo., Mar. 15, 2012, ECF No. 22), and Plaintiff filed a supplemental declaration, (Hoffman Supp. Decl., Mar. 15, 2012, ECF No. 21), attaching a revised proposed settlement agreement. (Revised Settlement, Ex. 1 to Hoffman Supp. Decl.) On March 23, 2012, Plaintiff filed a second supplemental declaration, (Hoffman 2d Supp. Decl., Mar. 23, 2012, ECF No. 23), attaching revised notice and claim forms. (Exs. A-C to Hoffman 2d Supp. Decl.)
On March 23, 2012, the Court issued an Order preliminarily approving the settlement, conditionally certifying a settlement class, scheduling a fairness hearing, and approving the forms of class notice. (Prelim. Appr. Order ¶¶ 2, 3, 6, 8, Mar. 23, 2012, ECF No. 24.) The Order provides for preliminary certification of a class described as:
All residents of the United States who purchased Procera AVH from
January 1, 2005 through the date of this Order through direct marketing channels or through retail. Purchasers who have received a refund or debit/credit card chargeback of the purchase price for one or more bottles of the Product at any time shall NOT be included in the Settlement Class.(Id. ¶ 3.) For relief to the class members, the proposed settlement provides a choice of either a single cash payment of twenty dollars or a savings voucher for fifty percent off any of the following Brain Research products: (1) Procera AVH; (2) Ceraplex; (3) Omega-3 DHA; (4) Gabarest; or (5) 20/20 BrainPower Book, (Revised Settlement §§ 2(A)(i)-(ii)), each of which currently has a manufacturer's suggested retail price of between $19.95 and $59.95 per unit, (Platt Decl. ¶ 4, July 16, 2012, ECF No. 31). Defendant agreed to pay up to $500,000 to class members who request cash payments, so if the value of cash claims submitted exceeds $500,000, then the amount paid to each class member who submitted a valid cash claim will be reduced on a pro rata basis so that the amount Defendant pays will not exceed $500,000. (Revised Settlement § 2(B).) As to the vouchers, each customer is allowed to claim only one coupon for half off of any of the six products listed in the agreement. (Id. § 2 (C).) Furthermore, the settlement stipulates that following entry of final judgment, Defendant will refrain from making certain statements about the efficacy or benefits of Procera. (Id. § 4.)
The Preliminary Approval Order also directed that notice of and information about the proposed settlement be communicated in the following ways: (1) by e-mail to settlement class members for whom Defendant had an e-mail address; (2) by First Class U.S. Mail to the last known mailing address of each settlement class member for whom Defendant did not have an e-mail address; (3) by establishment of a settlement website; and (4) by creation of a toll-free hotline for class members to call for information about the settlement. (Revised Settlement § 9; Prelim. Appr. Order ¶ 8.) The Order also preliminarily approved Harold Hoffman's appointment as class counsel. (Prelim. Appr. Order ¶ 5.)
On June 20, 2012, Plaintiff filed a motion for class certification and final approval of the class action settlement, (Final Appr. Mot., June 20, 2012, ECF No. 25), and a motion for attorney's fees, (Mot. for Fees, June 20, 2012, ECF No. 26), along with supporting declarations from the Settlement Administrator, (Sherwood Decl., June 20, 2012, ECF No. 25), class counsel Hoffman, (Hoffman Fee Decl., June 20, 2012, ECF No. 26), and Plaintiff Frances O'Brien, (O'Brien Decl., June 20, 2012, ECF No. 26).
On June 28, 2012, the Court requested that Mr. Hoffman provide all billing records for the work he performed on this matter so that the Court could evaluate his request for $75,000 in attorney fees. (Order, June 28, 2012, ECF No. 28.) Mr. Hoffman complied with this request on June 29, 2012, by sending in his time sheets for this case. (Hoffman Supp. Fee Decl., June 28, 2012, ECF No. 30.)
On July 11, 2012, the Court conducted a Fairness Hearing and by Order dated July 11, 2012, the Court directed Plaintiff to provide: (1) the case citations/opinions in which Plaintiff's counsel was appointed class counsel in the past; (2) citations to cases in which counsel's hourly rate of $475 was approved; (3) the number of calls to the settlement "hotline" and number of visits to the settlement website; and (4) an updated list of individuals who requested exclusion from the settlement. The Court directed Defendant to provide: (1) five case citations/opinions in nutritional supplement class action cases reflecting the settlement payment received as compared to the product's price; (2) the average price of Procera for each year of the settlement class period; and (3) the current price of the products to which the discount coupon may be applied. (Order, July 11, 2012, ECF No. 30.)
On July 16, 2012, both parties provided submissions pursuant to July 11, 2012 Order. Plaintiff provided a letter identifying the one other instance in which he had been certified as class counsel and also cited a case that he argues supports the proposition that his $475 per hour rate was reasonable. (Hoffman 2d Ltr., July 16, 2012, ECF No. 32.) Defendant's submission provided documentation of class action settlements in cases involving dietary and nutritional supplement manufacturers and gave the Court the average retail price of Procera during the class period as well as the current price of the products to which the coupon may be applied. (Platt Decl.)
III. DISCUSSION
A. Subject Matter Jurisdiction
The Class Action Fairness Act of 2005 (CAFA) grants district courts original jurisdiction over any civil action involving a proposed class of at least 100 members "in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interests and costs, and is a class action in which . . . any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(5)(B); see also DiCarlo v. St. Mary Hosp., 530 F.3d 255, 261 (3d Cir. 2008) (citing the district court's application of 28 U.S.C. § 1332(d)(2)). In determining whether the jurisdictional amount is met, "the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs." 28 U.S.C. § 1332(d)(6); see also Frederico v. Home Depot, 507 F.3d 188, 199 (3d Cir. 2007). The jurisdictional amount also includes attorney fees. Id.
The requirements for CAFA subject matter jurisdiction are satisfied here. First, the proposed class involves at least 100 members. Almost 270,000 individuals purchased the product in question. (Sherwood Decl. ¶ 5.) Second, at least one member of the class is a citizen of a state different than Defendant's state of citizenship. Plaintiff is a citizen of New Jersey, while Defendant is a limited liability company organized and existing pursuant to the laws of Delaware, with its principal place of business in Spokane, Washington. (Ans. ¶ 5.) Third, the amount in controversy exceeds $5,000,000 in the aggregate, exclusive of interest and costs, if damages are measured by the cost of refunding all purchases of Procera, as the total cost of reimbursing the class would be approximately $10-12 million. (Fairness Hr'g 18:06-22:34.) While Defendant agreed to pay up to $500,000 in total to class members, a settlement agreement below the requisite $5,000,000 value does not divest this Court of jurisdiction because subject matter jurisdiction is established at the outset. See Frederico, 507 F.3d at 194. Accordingly, the Court has subject matter jurisdiction over this case pursuant to CAFA.
B. Personal Jurisdiction and Venue
Personal jurisdiction exists over the parties in the District of New Jersey. Plaintiff is a citizen of New Jersey. Defendant acknowledged that it advertised, marketed, distributed, and sold Procera in commerce throughout the United States, including in New Jersey. (Ans. ¶ 6.) As to out-of-state class members, sufficient notice of the settlement and an opportunity to object have been provided, (Class Notices, Exs. A-B to Sherwood Decl.), thereby satisfying due process and the requirements of Fed. R. Civ. P. 23(b)(3). See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812-13 (1985); In re Prudential Ins. Co. of Am. Sales Practice Litig. Agent Actions., 148 F.3d 283, 306 (3d Cir. 1998) ("In re Prudential"); Varacallo v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207, 224 (D.N.J. 2005).
C. Class Certification
For the Court to certify a class, Plaintiff must satisfy all of the requirements of Rule 23(a), and the case must fall within one of the types of class actions enumerated in Rule 23(b). Fed. R. Civ. P. 23(a)-(b). Class certification cannot be presumed and a class may be certified only after a rigorous analysis demonstrates that all Rule 23 requirements are met. See In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 307 (3d Cir. 2008). Even where a plaintiff seeks certification of a settlement class, as opposed to formal class certification, courts "must consider the propriety of certification as if the case were to go to trial." In re Prudential, 962 F. Supp. at 508. With these rules in mind, the Court now addresses the class certification factors.
A settlement class is "a device whereby the court postpones the formal certification procedure until the parties have successfully negotiated a settlement, thus allowing a Defendant to explore settlement without conceding any of its arguments against certification." In re Prudential, 962 F. Supp. at 508 (quoting In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 786 (3d Cir. 1995) ("In re Gen. Motors")) (internal citations omitted).
1. Rule 23(a)
Under Rule 23, a class action is appropriate when:
(1) the class is so numerous that joinder of all members is impracticable;Fed. R. Civ. P. 23(a). These prerequisites are known as numerosity, commonality, typicality, and adequacy. Baby Neal v. Casey, 43 F.3d 48, 55 (3d Cir. 1994). They are "meant to assure both that class action treatment is necessary and efficient and that it is fair to the absentees . . ." Id. The Court will address each in turn.
(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.
a. Numerosity
The Court must first consider whether the class is so numerous that joinder of all members is impracticable. See Varacallo, 226 F.R.D. at 229 (noting that joinder of hundreds of individuals would be impracticable). The numerosity "requirement does not demand that joinder would be impossible, but rather that joinder would be extremely difficult or inconvenient." Szczubelek v. Cendant Mortgage Corp., 215 F.R.D. 107, 116 (D.N.J. 2003); see also McGee v. Cont'l Tire N. Am., Inc., Civ. No. 06-6234, 2009 WL 539893, at *8 (D.N.J. Mar. 4, 2009) (observing that it is impracticable to join 280,000 geographically dispersed class members). While no minimum number of plaintiffs is required, "generally if the named plaintiff demonstrates that the potential number of plaintiffs exceeds forty, the first prong of Rule 23(a) has been met." Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001); see also In re Prudential, 148 F.3d at 309 (holding that a proposed class of eight million past and present policyholders satisfies the numerosity requirement). Moreover, a class must be large enough in number to ensure that, for efficiency purposes, the defendant is not subjected to multiple, similar lawsuits. Thus, to determine if numerosity is satisfied, a court should "consider the estimated number of parties in the proposed class, the expediency of joinder, and the practicality of multiple lawsuits." Cannon v. Cherry Hill Toyota, Inc., 184 F.R.D. 540, 543 (D.N.J. 1999) (citations omitted).
Numerosity and commonality are both used to evaluate the sufficiency of the class itself. See Hassine v. Jeffes, 846 F.2d 169, 176 n.4 (3d Cir. 1988).
Here, the number of individuals who purchased the product exceeded 268,000, (Sherwood Decl. ¶ 5), and notices were successfully sent to all but 3,864, (id. ¶ 9). The large number of class members demonstrates that it would be impracticable for all potential parties to be joined and managed in a single case. Moreover, absent a class approach, Defendant could be subjected to numerous lawsuits simultaneously. Accordingly, the number of potential plaintiffs in this case favors class certification.
b. Commonality
Second, the Court must consider whether there are questions of law or fact shared among the named plaintiff and all members of the class. For a class to satisfy the commonality requirement, "the named plaintiffs [must] share at least one question of fact or law with the grievances of the prospective class." In re Prudential, 148 F.3d at 310 (citing Baby Neal, 43 F.3d at 56). Though identical claims ease satisfaction of this requirement, "factual differences among the claims of the putative class members do not defeat certification." Id. at 310 (citations omitted). The key consideration is whether the class seeks a remedy to a grievance involving common questions of law and fact. Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir. 1985). Thus, it is usually relatively simple to satisfy this requirement. In re Ikon Office Solutions, Inc., 191 F.R.D. 457, 463 (E.D. Pa. 2000) ("In re Ikon I").
Here, common questions of fact arise in this case because the claims concern whether Defendant misrepresented the health benefits that one would receive by taking Procera. (Am. Compl. ¶¶ 9-14.) Moreover, common questions of law exist concerning whether the representation caused Plaintiff compensable harm. For instance, Plaintiff's cause of action for unjust enrichment and those of the class members present a common question of law because: (1) the laws of the fifty states are relatively uniform with respect to the elements of proof of an unjust enrichment claim; and (2) those elements of proof require little, if any, individualized inquiry. See In re Mercedes-Benz Tele Aid Contract Litig., 257 F.R.D. 46, 58, 72 (D.N.J. 2009) (finding "no material conflict relating the elements of unjust enrichment between the different jurisdictions from which class members will be drawn" and stating that for a claim of unjust enrichment, "virtually all of the legal and factual issues which will be adjudicated at trial are common to the class"); Slapikas v. First Am. Title Ins. Co., 250 F.R.D. 232, 248 (W.D. Pa. 2008) (stating that the "determination whether an overcharge by First American is 'unjust' is common to all putative class members and appropriate for class treatment"); see also Hoving v. Lawyers Title Ins. Co., 256 F.R.D. 555, 567-570 (E.D. Mich. 2009) (surveying and finding practically identical the elements of unjust enrichment of the various states). Thus, the commonality requirement is satisfied.
c. Typicality
Third, the Court must determine whether the claims of the representative plaintiff are typical of those of the class members. Specifically, "[t]ypicality lies where there is a strong similarity of legal theories . . . or where the claims of the class representatives and the class members arise from the same alleged course of conduct by the defendant." In re Prudential, 962 F. Supp. at 518 (internal citations omitted). This factor also considers "whether the action can be efficiently maintained as a class and whether the named Plaintiffs have incentives that align with those of absent class members so as to assure that the absentees' interests will be fairly represented." Baby Neal, 43 F.3d at 57. Like the commonality requirement, however, all putative class members need not "share identical claims." In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 531-32 (3d Cir. 2004) ("In re Warfarin"). Indeed, "cases challenging the same unlawful conduct which affects both the named plaintiffs and the putative class usually satisfy the typicality requirement irrespective of varying . . . fact patterns." Stewart, 275 F.3d at 227 (citation omitted). Put differently, the typicality requirement is met, regardless of factual differences, as long as the same unlawful conduct was directed at or affected both the named plaintiff and the absent class members. In re Warfarin, 391 F.3d at 531-32; Cannon, 184 F.R.D. at 544 (claims are typical if they "arise from the same course of conduct" and are "based on the same legal theory").
In this case, Plaintiff's claims arise from the same conduct that gives rise to the claims of other class members and are based on the same legal theory. Like the other members, Plaintiff purchased a product that Defendant promised would improve memory, concentration, focus, and energy. (Am. Compl. ¶¶ 10, 12.) There is no evidence that there are any factual differences between Plaintiff's claims and those of other members of the class, other than perhaps that the class members may have purchased different quantities or types of the product. (Class Notice, Ex. B to Sherwood Decl) (stating that class members "may only submit one claim regardless of the number of units of Procera AVH" they purchased); (Objection Ltrs. of Anzelmo and Hodge, Ex. D to Sherwood Decl.) Furthermore, as discussed earlier as to commonality, Plaintiff's claim for unjust enrichment in particular is typical of each class member because of the relative uniformity of the laws of the fifty states and the lack of need for individualized proof. See Mercedes-Benz, 257 F.R.D. at 58. To establish her unjust enrichment claim at trial, Plaintiff would need to prove that: (1) she conferred a benefit on Defendant; and (2) retention of that benefit without compensation would be unjust. Id. at 72 (citing VRG Corp. v. GKN Realty Corp., 135 N.J. 539 (1994); Restatement (First) of Restitution § 1 (1937)). Plaintiff's claim would therefore be typical because each class member, including Plaintiff, conferred a benefit on Defendant by way of a payment or payments for Procera, and it would be unjust for Defendant to retain those payments because the product allegedly did not provide the health benefits Defendant had promised.
d. Adequacy
Fourth, the Court must be satisfied that the Plaintiff and her counsel will "fairly and adequately protect the interests of the class." In re Warfarin, 391 F.3d at 532. This inquiry "has two components designed to ensure that absentees' interests are fully pursued." Id. (quoting Georgine v. Amchem Prods., Inc., 83 F.3d 610, 630 (3d Cir. 1996)). First, the Court must assess whether the plaintiff's counsel will adequately represent the class. Id.; In re Gen. Motors, 55 F.3d at 800. To this end, courts consider whether the plaintiff's counsel is qualified, experienced, and able to conduct the litigation. In re Prudential, 148 F.3d at 312. Second, courts must evaluate "conflicts of interest between named parties and the class they seek to represent." In re Warfarin , 391 F.3d at 532. This requires the Court to embark on a two-step inquiry. First, it must determine whether "the putative named plaintiff has the ability and incentive to represent the claims of the class vigorously," In re Cmty. Bank of N. Va., 622 F.3d 275, 291 (3d Cir. 2010) (quoting Hassine v. Jeffes, 846 F.2d 169, 179 (3d Cir. 1988)), and then it must examine whether or not there is "'antagonism between [the named plaintiffs'] objectives and the objectives of the [class]', [which constitutes] a 'legally cognizable conflict of interest' between the two groups." In re Ins. Brokerage Antitrust Litig., Civ. No. 04-5184, 2007 WL 542227, at *15 (D.N.J. Feb. 16, 2007) (quoting Jordan v. Commonwealth Fin. Sys., Inc., 237 F.R.D. 132, 139 (E.D. Pa. 2006)). A conflict will not be sufficient to defeat class certification "unless [that] conflict is apparent, imminent, and on an issue at the very heart of the suit." Id. (internal quotation marks and citation omitted).
Here, the first prong of adequate representation is met. Plaintiff's counsel has been appointed by a court as a class counsel in one other case, (Hoffman 2d Ltr., July 16, 2012, ECF No. 32), and he represents that he has experience handling complex class action litigation and consumer protection matters, particularly those involving the CFA. (Hoffman Decl. ¶ 2, n.1.) Hoffman has drawn on his experience in the field to achieve a quick and fair resolution of this case. Consequently, Plaintiff has selected class counsel who can adequately represent the interests of the class in this matter.
As to the second prong, Plaintiff has ability and incentive to litigate the case vigorously on behalf of the class and there are no conflicts of interest or antagonism between the other class members and the Plaintiff. Plaintiff is in the same position as other class members as she was exposed to the same alleged misrepresentations about a product she purchased and she seeks the same relief as the class members, namely reimbursement for the price she paid for the product. Nothing before the Court demonstrates that Plaintiff has any interest that is different from the rest of the class members or that the relief she seeks is different from the other class members. See Dewey v. Volkswagen, 681 F.3d 170, 184 (3d Cir. 2012) (citation omitted) (stating that "[a] conflict concerning the allocation of remedies amongst class members with competing interests can . . . render a representative plaintiff inadequate."). Thus, there is no reason to find that Plaintiff will fail to adequately protect the interests of the class.
Accordingly, the Court appoints Harold Hoffman as class counsel and Plaintiff O'Brien as class representative.
2. Rule 23(b)
Having determined that Rule 23(a)'s requirements of numerosity, commonality, and typicality, and adequacy are satisfied, the Court now considers whether the proposed class falls within one of the categories set forth in Rule 23(b). Plaintiff seeks class certification under Rule 23(b)(3) and, as such, must demonstrate that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3); see e.g., Dal Ponte v. Am. Mortgage Express Corp., Civ. No. 04-2152, 2006 WL 2403982, at *4 (D.N.J. Aug. 17, 2006); Cannon, 184 F.R.D. at 545. The Court will address the predominance and superiority requirements in turn.
a. Predominance
To determine whether common issues predominate over questions affecting only individual members, the Court must look at each claim upon which the Plaintiff seeks recovery and identify the law that applies to the claim. See In re Hydrogen Peroxide, 552 F.3d at 311 (noting that the predominance inquiry requires an examination of the elements of the plaintiffs' claims "through the prism of Rule 23"). Once the court identifies the applicable law, it must determine whether generalized evidence exists to prove the elements of the plaintiff's claims on a simultaneous, class-wide basis, or whether proof will be overwhelmed by individual issues. Lyon v. Caterpillar, Inc., 194 F.R.D. 206, 210 (E.D. Pa. 2000). While the "presence of individual questions . . . does not mean that the common questions of law and fact do not predominate," In re Ins. Brokerage Antitrust Litig., 2007 WL 542227, at *15 (quoting Eisenberg, 766 F.2d at 786), the predominance requirement demands that the issues in the class action be applicable to the class as a whole, support at least one cognizable common cause of action, and involve common proof. See Szczubelek, 215 F.R.D. at 120-22.
At the outset, the Court recognizes that because certification is sought for purposes of settlement and is not contested, the concerns about divergent proofs at trial that underlie the predominance requirement are not present here. See Sullivan v. DB Invests., Inc., 667 F.3d 273, 302-03 (3d Cir. 2011) (en banc) (stating that "the concern for manageability that is a central tenet in the certification of a litigation class is removed from the equation" in the case of a settlement class and thus "the class settlement posture of this case largely marginalizes the objectors' concern that state law variations undermine a finding of predominance"); In re Warfarin, 391 F.3d at 529 (citation omitted) (stating that "concerns with regards to case manageability that arise with litigation classes are not present with settlement classes, and thus [variations in state law] are irrelevant to certification of a settlement class").
In any event, as discussed earlier as to the commonality and typicality requirements of Fed. R. Civ. P. 23(a), the Court finds that, at least as to Plaintiff's unjust enrichment claim, issues common to the class predominate over individual questions. Because of the relative uniformity of the laws of the fifty states as to a claim for unjust enrichment, see Mercedes-Benz, 257 F.R.D. at 72, and the lack of need for individualized proof for such a claim, the concerns of trial manageability underlying the predominance requirement would not be present, even if certification were sought for purposes of trial.
b. Superiority
Next, the Court considers whether a class action is a superior method of fairly and efficiently adjudicating the controversy. Rule 23(b)(3) provides a non-exhaustive list of factors to be considered when making this determination. These factors include:
(A) the class members' interests in individually controlling the prosecution or defense of separate actions;Fed. R. Civ. P. 23(b)(3). An analysis of each factor demonstrates that a class action is a superior method of addressing this dispute.
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
As to the first factor, it is not clear that the individual class members would have an interest in controlling the prosecution of individual actions given the limited amount each plaintiff could recover. Assuming the recovery of each class member is full reimbursement for their purchases of Procera, that is between $39.95 and $59.95 per item, the cost to file an individual lawsuit ($350.00, assuming it could be filed in federal court) and the expenses required to litigate the case would be more than the potential recovery. Moreover, the legal fees to pursue an individual claim would be far greater than the potential individual recovery. Here, the case has proceeded extremely quickly to settlement, yet the plaintiff's law firm has accumulated professional fees exceeding $70,000 even though no formal discovery or motion practice has occurred. Thus, it is not apparent that the money potentially recoverable by an individual class member as compared to the cost to pursue recovery through a lawsuit is sufficient to make individual litigation a realistic possibility. See Florence v. Bd. of Chosen Freeholders of Burlington, Civ. No. 05-3619, 2008 WL 800970, at *13-14 (D.N.J. Mar. 20, 2008); Jones v. Commerce Bancorp, Inc., Civ. No. 05-5600, 2007 WL 2085357, at *4 (D.N.J. July 16, 2007). Moreover, denying certification would require each consumer to file suit individually at the expense of judicial economy. In re Wellbutrin, 2008 WL 1946848, at *9.
More precisely, Hoffman avers that he has spent 147.5 hours on this case. Multiplied by what he represents to be his typical hourly billing rate of $475, Hoffman has accumulated $70,181.25 in fees for this case. (Hoffman Fee Decl. ¶ 5.)
As to the second factor, there has been at least one additional putative class action initiated against Defendant in Orange County Superior Court in California, but it was dismissed with prejudice on May 21, 2012. Rotenberg v. Brain Research Labs, Orange County Super. Ct., No. 30-2010-00401652. Thus, no other case is pending and this settlement, if approved, will resolve the claims of all Procera purchasers, including the named plaintiff from the California matter. (Fairness Hr'g 38:18-38:31.) While individual suits brought by a large number of members of a putative class tend to show that each have an interest in controlling the prosecution of their claims and that a class action would not be a superior adjudicative method, see Frankford Hosp. v. Blue Cross, 67 F.R.D. 643, 648 (E.D. Pa. 1975), such a concern is not implicated here, where the only pending is the one that Plaintiff has brought. Consequently, the second factor does not weigh against the finding that a class action is the superior way to resolve this dispute.
The third factor also favors certification because efficiency makes it "desirable to litigate similar, related claims in one forum." Florence, 2008 WL 800970, at *14 (quoting Cannon, 184 F.R.D. at 546); In re Ford Motor Co., 174 F.R.D. at 351.
The fourth factor also favors a class approach because there is nothing before the Court to suggest difficulty in managing this case as a class action settlement. In fact, "litigating all claims together avoids the risk of inconsistent results for [the d]efendant and for [the class members]." In re Wellbutrin, 2008 WL 1946848, at *10. In short, a class action here promotes judicial economy, avoids inconsistency, and provides a single forum to resolve numerous common claims.
For these reasons, the Court finds that Plaintiff has satisfied Rule 23(a) and 23(b)(3). Thus, the Court certifies the class for settlement purposes. The Court next turns to the question of whether the settlement should be approved.
D. Fairness of the Class Action Settlement
Rule 23(e) requires court approval of any class action settlement and sets forth procedures to be followed for deciding whether approval should be granted. Fed. R. Civ. P. 23(e); Varacallo, 226 F.R.D. at 235. The procedures "strengthen the process of reviewing proposed class-action settlements" and "assure adequate representation of class members who have not participated in shaping the settlement." Fed. R. Civ. P. 23(e) advisory committee's note (2003 Amendments). Rule 23(e) requires the Court to follow these procedures and "make findings that support the conclusion that the settlement is fair, reasonable, and adequate. The findings must be set out in sufficient detail to explain to class members and the appellate court the factors that bear on applying the standard." Id.
Specifically, Rule 23(e) provides:
The claims, issues, or defenses of a certified class may be settled . . . only with the court's approval. The following procedures apply to a proposed settlement . . .
(1) The court must direct notice in a reasonable manner to all class members who would be bound by the proposal.
(2) If the proposal would bind class members, the court may approve it only after a hearing and on finding that it is fair, reasonable, and adequate.
(3) The parties seeking approval must file a statement identifying any agreement made in connection with the proposal.
(4) If the class action was previously certified under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so.
(5) Any class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court's approval.
Fed. R. Civ. P. 23(e).
The Court approaches the parties' request for approval of their settlement mindful of its obligation under Rule 23 and the fact that "[t]he law favors settlement, particularly in class actions and other complex cases where substantial judicial resources can be conserved by avoiding formal litigation." In re Gen. Motors, 55 F.3d at 784. In Weiss v. Mercedes-Benz of N. Am., 899 F. Supp. 1297, 1300 (D.N.J. 1995), former Chief Judge John W. Bissell observed that this policy is further supported by the advantages to the parties of a settlement as they "have far greater control of their destiny than when a matter is submitted to a jury" and reflects the consideration that "the time and expense that precedes the taking of such a risk can be staggering." The Court of Appeals reiterated these benefits in Ehrheart v. Verizon Wireless, 609 F.3d 590, 595 (3d Cir. 2010), in which it stated that settlements conserve judicial resources and enable the parties to avoid the costs and risks of a complex trial.
Here, the settlement requires Defendant to provide class members with their choice of either: (a) cash reimbursement payment of twenty dollars (totaling up to $500,000 on a class-wide basis); or (b) a savings voucher for fifty percent off the purchase price of one of several products Defendant sells. (Revised Settlement §§ 2(A)(i)-(ii).) Furthermore, under the terms of the settlement, Defendant must refrain from making eleven different claims about Procera in marketing and advertising concerning the health benefits one would receive if he or she takes Procera. (Id. § 4.)
Notice of the proposed settlement was transmitted to the settlement class pursuant to the Preliminary Approval Order, using the best practicable notice methods under the circumstances, namely by: (1) e-mailing notice of the settlement to those class members for whom Defendant has e-mail addresses; (2) mailing notice via First Class U.S. Mail to those customers for whom Defendant does not have e-mail addresses; (3) establishing a settlement website with the necessary forms on it; and (4) creating a toll-free hotline class members can call if they have questions about the settlement agreement. (Sherwood Decl. ¶¶ 5-13.)
The settlement claims administrator, Gilardi & Co., LLC, ("Gilardi") received contact information from Defendant's counsel, including names, addresses, and in some cases e-mail addresses, for 295,898 individuals who purchased Procera from January 1, 2005 to March 23, 2012. (Id. ¶ 5.) After formatting the list for mailing purposes and eliminating 27,350 duplicate names, Gilardi processed the names and addresses through the National Change of Address Database to update any addresses. (Id.) It sent 108,390 notices via e-mail to those class members with e-mail addresses on file and 160,158 notices to the remaining class members via a paper mailing. (Id. ¶¶ 5-6.) After sending the notice to the e-mail addresses, it was discovered that 28,440 notices were not successfully delivered, and Gilardi thereafter mailed notices to at least 18,413 of these individuals. (Id. ¶ 6.) Gilardi has also identified the remaining 10,027 class members and intended to mail a notice packet to them on June 19, 2012. (Id.) As for those class members for whom Defendant did not have e-mail addresses, Gilardi sent notice to all 160,158 of them and received 9,444 notices returned as undeliverable. (Id. ¶¶ 7-8.) Through a third party locator service, it found and updated addresses for 6,829 of these individuals. (Id. ¶ 8.) Gilardi continues to receive undeliverable mail and will continue to perform address searches and send the settlement documents to any updated addresses located until one week prior to the August 10, 2012 deadline to file claims. (Id.) In total, out of the 268,548 purchasers of Procera whose contact information Defendant provided to Gilardi, Gilardi reports 3,684 purchasers for whom multiple attempts to provide notice have been unsuccessful. (Id. ¶ 9.) There may be additional purchasers for whom notice ultimately is not provided but, as of June 15, 2012, at least 254,657 or 94 % of purchasers received notice—156,474 by mail and 98,363 by e-mail.
Furthermore, Gilardi established a toll-free hotline for the settlement, where a caller is able to listen to a pre-recorded message that provides information about the settlement. (Id. ¶¶ 11-12.) The caller is then prompted to press the keypad to contact a live representative to answer any additional questions about the settlement. (Id. ¶ 12.) As of July 12, 2012, 4,658 callers had listened to the pre-recorded message and approximately 1,289 of them requested to speak with a representative. (Sherwood 2d Decl. ¶ 3, Ex. 2 to Hoffman 2d. Ltr., July 16, 2012, ECF No. 32.) There is also a settlement website that provides information, a chart of important dates, and links to documents pertaining to the settlement. (Sherwood Decl. ¶ 13.) The website has been viewed approximately 80,652 times as of July 12, 2012. (Sherwood 2d Decl. ¶ 4.)
As of July 12, 2012, 20,884 claims for compensation have been filed. (Fairness Hr'g 1:45-1:58.) Eleven individuals elected to exclude themselves from the settlement, three provided formal objections, seven voiced their displeasure with the settlement but did not follow the established procedures for objecting to the settlement, and thirteen notified the settlement administrator that they were satisfied with the product and would not be filing claims. (Sherwood Decl. ¶¶ 15-16.)
At the Fairness Hearing, counsel also explained that the online claims process resulted in complete forms, but about ten percent of the claims submitted by class members in paper form had deficiencies. Each of these claimants will be notified of the deficiency, provided an opportunity to cure the deficiency, and to submit corrected paper claim forms by October 2, 2012. (Fairness Hr'g 13:01-13:14.)
According to class counsel, the total value of the settlement is $457,543, comprised of: (a) the 18,587 class members who elected the cash payment, the value of which is $377,140 and (b) the 2,097 class members who elected the coupon, which class counsel values at $80,403. (Fairness Hr'g 2:23-3:35.) For reasons discussed later in this Opinion, the Court finds that class counsel overvalued the coupon portion of the settlement.
Thus, Gilardi has been largely successful in its efforts to contact members of the potential class and provide them with sufficient information about the class settlement by e-mailing and mailing settlement documents to members as well as posting them on a website and creating a toll-free hotline. Accordingly, the Court is satisfied that such efforts have provided valid, due, and sufficient notice of the settlement and these proceedings. Thus, such notice complies with due process requirements and satisfies Rule 23(e).
Furthermore, counsel seeking approval of the settlement are experienced and engaged in arms-length negotiations. (Final Appr. Mot. 3.) The opinion of experienced counsel, based upon their familiarity with the facts and law and understanding of the strengths and weaknesses of their positions, is entitled to considerable weight and favors finding that the settlement is fair. See In re Cendant Corp. Litig., 264 F.3d 201, 233 n.18 (3d Cir. 2001) ("In re Cendant") (quoting In re Gen. Motors, 55 F.3d at 785); In re Warfarin, 391 F.3d at 535; Varacallo, 226 F.R.D. at 240. Even with counsel's concurrence, however, the Court must carefully examine the fairness and reasonableness of the settlement, as it serves as a fiduciary that "guard[s] the claims and rights of the absent class members." Ehrheart, 609 F.3d at 593.
In this Circuit, the factors set forth in Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975), are used to determine whether a class settlement is fair and reasonable. See In re Warfarin, 391 F.3d at 534-35. The Girsh factors are:
(1) the complexity, expense and likely duration of the litigation;
(2) the reaction of the class to the settlement;
(3) the stage of the proceedings and the amount of discovery completed;Girsh, 521 F.2d at 157 (quotation marks and alterations omitted). In addition, in In re AT & T Corp., 455 F.3d 160, 165 (3d Cir. 2006), the appellate court observed that:
(4) the risks of establishing liability;
(5) the risks of establishing damages;
(6) the risks of maintaining the class action through the trial;
(7) the ability of the Defendants to withstand a greater judgment;
(8) the range of reasonableness of the settlement fund in light of the best possible recovery; and
(9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
district courts should also consider other potentially relevant and appropriate factors, including, among others: the maturity of the underlying substantive issues, as measured by the experience in adjudicating individual actions, the development of scientific knowledge, the extent of discovery on the merits, and other factors that bear on the ability to assess the probable outcome of a trial on the merits of liability and individual damages; the existence and probable outcome of claims by other classes and subclasses; the comparison between the results achieved by the settlement for individual class or subclass members and the results achieved-or likely to be achieved-for other claimants; whether class or subclass members are accorded the right to opt out of the settlement; whether any provisions for attorneys' fees are reasonable; and whether the procedure for processing individual claims under the settlement is fair and reasonable.In re AT & T Corp., 455 F.3d at 165 (internal citation, quotation marks, and alteration omitted). The Court has considered all of these factors to the extent they are applicable to decide whether to approve or reject the proposed class action settlement.
i. The Complexity, Expense, and Likely Duration of the Litigation
First, the Court must consider the complexity, expense, and likely duration of the litigation. The purpose of this factor is "to capture the probable costs, in both time and money, of continued litigation." In re Ikon Office Solutions Secs. Litig., 209 F.R.D. 94, 104 (E.D. Pa. 2002) ("In re Ikon II") (quoting In re Gen. Motors, 55 F.3d at 812). In short, "[b]y measuring the costs of continuing on the adversarial path, a court can gauge the benefit of settling the claim amicably." In re Gen. Motors, 55 F.3d at 812.
At the time the parties executed a settlement agreement, about six weeks had passed from the filing of this action. The parties were engaged in settlement negotiations from very early on and wished to avoid the adversarial path of litigation. (Hoffman Ltr., Feb. 14, 2012, ECF No. 8.) Without a settlement, this litigation would have stretched on much longer, as the parties had yet to serve and respond to interrogatories and document demands or engage in depositions, expert discovery, dispositive motion practice, trial, or appeal. Indeed, even without such activities, the plaintiff's counsel avers that he has already expended more than $70,000 in legal fees for 147.5 hours of work. (Hoffman Fee Decl. ¶ 5.) Accordingly, in the event this settlement is not approved, the parties will likely engage in contentious and expensive litigation. Avoiding these potential protracted proceedings and expenditure of resources favors settlement. See In re Gen. Motors, 55 F3d. at 812; In re Cendant Corp. Derivative Action Litig., 232 F. Supp. 2d. 327, 333 (D.N.J. 2002) ("In re Cendant Derivative") (stating that disputed questions of liability and damages "'would involve fairly complex and protracted litigation'") (quoting Cendant, 264 F.3d at 234). Therefore, this factor weighs in favor of approving the settlement.
ii. The Reaction of the Class to the Settlement
The second factor the Court must consider is the reaction of the settlement class to the settlement. Under this factor, courts "attempt[] to gauge whether members of the class support the settlement." In re Warfarin, 391 F.3d at 536 (internal quotations and citations omitted). Courts do this by looking at the "number and vociferousness of the objectors." In re Gen. Motors, 55 F.3d at 812. While courts "generally assume[] that 'silence constitutes tacit consent to the agreement,'" id. (quoting Bell Atl. Corp. v. Bolger, 2 F.3d 1304, 1313 n.15 (3d Cir. 1993), the "practical realities of class actions [have] led some courts to be considerably more cautious about inferring support from a small number of objectors to a sophisticated settlement." Id. (citing In re Corrugated Container Antitrust Litig., 643 F.2d 195, 217-18 (5th Cir.1981); In re General Motors Corp. Engine Interchange Litig., 594 F.2d 1106, 1137 (7th Cir. 1979)).
Here, there are 268,548 class members, and at least 254,657 of them have already received notice of the settlement. (Sherwood Decl. ¶¶ 7-9.) As of the Fairness Hearing, the Settlement Administrator received eleven exclusion requests, three formal objections, and seven communications which appear to embody objections to the settlement, but, according to the settlement administrator, are procedurally deficient. (Id. ¶¶ 15-16.) Even counting these procedurally deficient objections, there have only been ten objections and eleven requests for exclusion out of the 264,684 purchasers who received notice of the settlement, while 18,564 customers have filed claims. (Id.) The small number of class members who have expressed dissatisfaction with the settlement as compared with the much larger segment of the class that has actively sought relief and the even larger majority who have stayed silent support the conclusion that the class supports the settlement. See Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 118-19 (3d Cir. 1990) (10% objection rate indicates class favors settlement); Bolger, 2 F.3d at 1313-14; Bryan v. Pittsburgh Plate Glass Co., 494 F.2d 799, 803 (3d Cir. 1974) (affirming the settlement agreement where more than 20% of the class objected); Weiss, 899 F. Supp. at 1301 (a small percentage of objections allows an inference that a majority silently consents); Varacallo, 226 F.R.D. at 237-38. Moreover, as set forth herein, none of the objections supports a finding that the settlement is not fair or reasonable.
Under Rule 23(e)(5), "[a]ny class member may object to the proposal if it requires court approval . . . ." Fed. R. Civ. P. 23(e)(5). The Court received three formal objections that met the procedural requirements set forth in the notice and seven other communications expressing varying degrees of displeasure with the settlement but which were procedurally deficient in some way. (Sherwood Decl. ¶¶ 15-16.) The Court will consider all objections to the settlement, regardless of procedural compliance. To ignore the vigorous protests of class members because of minor technicalities would be to exalt form over substance and abdicate this Court's responsibilities as a fiduciary for the absent class members. Ehrheart, 609 F.3d at 593.
Nevertheless, even after considering these objections, the Court finds that none of them warrant a rejection of the settlement. In aggregate, the objectors contend that the settlement: (1) does not adequately compensate the class, is unfair, or is insufficient; (2) allows for a disproportionately large attorney's fee award; (3) does not provide for additional compensation should unforeseen negative health effects arise from consumption of Procera; and/or (4) is unwarranted because the product worked as advertised. Each of these claims will be considered in turn.
a. Adequacy of Compensation
Seven class members assert that the settlement provides inadequate relief for their injuries. Their primary contention is that the potential twenty dollar cash reimbursement pales in comparison to the amount that they spent on multiple bottles of Procera. Some class members are not pleased with the option to accept a fifty-percent off voucher as they feel that Defendant misled them, and they thus do not wish to purchase any more products from the company. (See, e.g., Jameson Objection Ltr., Ex. D to Sherwood Decl.) Other class members indicate that Procera's marketing created "unfair hope" and thus object on the basis of "unfairness and insufficiency." (See, e.g., Goldner Objection Ltr., Ex. D to Sherwood Decl.)
The seven class members who challenged the adequacy of compensation are Anna Anzelmo, Susan Jane Goldner on behalf of her deceased mother Susan Goldner, Debra Dagwan, Fannie Robertson, Karen Ward, Elsie Jameson, and one anonymous objector. (Ex. D to Sherwood Decl.)
While the Court recognizes the dissatisfaction these class members have expressed, their objections do not show that the settlement is insufficient. When evaluating the fairness of settlements, courts have held that "full compensation is not a prerequisite for a fair settlement." Careccio v. BMW of N. Am. LLC, Civ. No. 08-2619, 2010 WL 1752347, at *6 (D.N.J. Apr. 29, 2010). Moreover, "complaining that a settlement should be 'better' . . . is not a valid objection." Browning v. Yahoo! Inc., Civ. No. 04-1463, 2007 WL 4105971, at *5 (N.D. Cal. Nov. 16, 2007). In this case, an examination of the monetary and non-monetary compensation that the settlement provides shows that the compromise provides a reasonable benefit to the class.
The settlement provides immediate and definite relief. Class members may elect to receive a coupon or a cash payment equal to about fifty percent of what they paid for one bottle of Procera. (Revised Settlement §§ 2(A)(i)-(ii).) Moreover, the settlement provides injunctive relief, barring Defendant from making certain claims about the purported health benefits that Procera provides. (Id. § 4.) If this settlement were rejected and the litigation were to continue, the class might receive considerably less relief at a much later time or might never receive any compensation.
During the Fairness Hearing, counsel for the parties asserted that the current settlement exceeds the typical compensation provided to class members in consumer fraud class action suits brought against nutritional and dietary supplement manufacturers. (Fairness Hr'g 44:38-45:21) The Court requested that the parties provide examples, (Order, July 11, 2012, ECF No. 30), and Defendant identified five cases for comparison. (Ex. A to Platt Decl.) While two of the cases were at the preliminary approval stage and hence do not reflect court approved settlements, three of the cases Defendant identified had been finally approved: Keller v. Gaspari Nutrition, Inc., Civ. No. 11-6158 (C.D. Cal. Mar. 20, 2012) (providing class members who demonstrate proof of purchase $20, and those without proof of purchase $10, or a free bottle of Viridex XT); Geis v. Walgreen Co., Civ. No. 07-4238 (D.N.J. Sept. 30, 2010) (giving class members a choice between receiving a full refund of $4.99 per purchase of Wal-born for up to three purchases, a maximum value of $14.97, or a voucher for a flu shot); Rivera v. Bio-Engineered Supplements & Nutrition, Civ. No. 07-1306 (C.D. Cal. Nov. 11, 2009) (providing class members with at most $50 in cash rebates for future sales of the products in question and $60 in cash refunds for purchases of the product during the class period). In terms of the amount of money remitted to each class member who files a valid claim in this case, the $20 reimbursement is within range of the total amount refunded to class members in those actions. In terms of the percentage of the retail price for which the class members are being reimbursed, the settlement, which refunds the class members for more than fifty percent of the retail price of one unit of the product, is at the lower end of the range of similar settlements. In Geis, for example, the class members received 100% refunds for up to three purchases, Geis No. 07-4238 at 7-8, while in Keller, the class members received twenty-eight percent of the retail price of one unit, Keller No. 11-06158 at 9. Thus, when compared to settlements in similar cases, the compensation that class members are receiving here is somewhat similar to the reimbursements provided in the other consumer fraud cases, but does not provide additional relief for those who made multiple purchases. The lack of full compensation, however, is not a basis to reject this settlement given the injunctive relief it provides regarding the statements that may not be made about the product and the monetary compensation it does provide, and the fact that the vast majority of class members have not objected to the settlement nor requested exclusion. Lastly, it is worth noting that all class members were able to opt out of the settlement and pursue their claims individually and seek more compensation than the settlement provides.
b. Attorney's Fees
One objector contends that the only concern of the class action attorneys is to "line their pockets" with as much money as possible at the expense of the class. (Hildegarde Letter, Ex. E to Sherwood Decl.) While the Court recognizes that there is an inherent danger in class actions that class counsel might urge a class settlement on a less than optimal basis in exchange for "red carpet treatment on fees," In re Gen. Motors, 55 F.3d 768 (3d Cir. 1995) (citation omitted), there is no evidence to suggest that such collusion occurred here. Unsubstantiated assertions about class counsel's intentions and actions in the course of settlement negotiations will not suffice to persuade the Court to invalidate the settlement. Furthermore, the Court has conducted an exhaustive analysis of class counsel's application for attorney's fees and, for the reasons set forth later in the Opinion, has fashioned an award that is justified by the facts and the law.
c. Set-Aside for Future Health Effects
One objector contends that a portion of the settlement fund should be set aside to "address any unforeseen affects or problems (physical, mental, or psychological,) in which consumers (as user of the products) develop [sic]." (Dagwan Ltr., Ex. D to Sherwood Decl.) The parties acknowledged on the record during the March 7, 2012 telephonic preliminary approval hearing, (Tel. Hr'g 40:01-40:20), and during the Fairness Hearing, (Fairness Hr'g 36:48-37:11), that any personal injury claims arising from use of Procera are specifically excluded from release under the settlement. The Judgment also will reflect that class members are not releasing any personal injury claims arising from their use of the product. Consequently, any class member who experiences unforeseen negative health effects is free to bring a separate lawsuit. Thus, this objector's concern is addressed.
d. Positive Results
One objector states that she has "noticed nothing but POSITIVE results" and thus feels that the settlement is unwarranted. (Merkel Objection Ltr., Ex. E to Sherwood Decl.) In addition, while not classifying them as "objectors," the Settlement Administrator reported receiving at least thirteen communications from class members expressing satisfaction with the product and declining to file claims. (Sherwood Decl. ¶ 17.) Class members who are pleased with Procera and do not seek compensation may exclude themselves from the settlement. Moreover, any such class member is also free to accept the twenty dollar payment or discount voucher for additional products. Consequently, although certain class members' satisfaction with the product may have posed a proof problem for Plaintiff if the case proceeded to trial, it alone is not a basis to reject the settlement.
For all these reasons, none of the objections "present [a] sufficient basis for this Court to reject or modify the [s]ettlement." McCoy v. Health Net, Inc., 569 F. Supp. 2d 448, 475 (D.N.J. 2008) (approving settlement over nine objections raised for a class of two million members).
iii. The Stage of the Proceedings and the Amount of Discovery Completed
Under the third Girsh factor, the Court must consider the stage of the proceedings and the amount of discovery completed. This factor "captures the degree of case development that class counsel have accomplished prior to settlement." In re Cendant, 264 F.3d at 235 (quoting In re Gen. Motors, 55 F.3d at 813). This factor allows courts to "determine whether counsel had an adequate appreciation of the merits of the case before negotiating." In re Gen. Motors, 55 F.3d at 813.
Here, the parties reached a settlement six weeks after the case was filed and they did not engage in formal discovery. (Hoffman Ltr., Feb. 14, 2012, ECF No. 8.) Nevertheless, before filing suit, class counsel received sales data on Procera from Defendant, researched advertising and marketing materials for the product, examined clinical studies and scientific data on Procera, and consulted with a physician at the Cleveland Clinic, a non-profit academic medical center. (Hoffman Decl. ¶ 3; Hoffman Supp. Fee Decl.) In addition, Defendant provided class counsel with all discovery produced in Rotenberg v. Brain Research, which involved the same allegations concerning Defendant's representations about Procera. (Fairness Hr'g 37:54-38:00; 43:51-44:10.) Furthermore, at the Fairness Hearing, class counsel said he received data concerning Defendant's financial condition and its profits and costs. (Fairness Hr'g 27:19-28:04.) Class counsel asserts that all of this information was sufficient to allow him to assess the merits of this case. (Hoffman Decl. ¶ 3.) While class counsel did not engage in formal discovery, the Court is satisfied that his pre-suit investigation and Defendant's informal disclosures were sufficiently comprehensive to enable counsel to review the factual basis for the case and assess the risks of continued litigation. The remedy subsequently achieved for a national class in light of the causes of action alleged demonstrates class counsel's appreciation of this case's challenges, its merits, and the relief that would best benefit the entire class. Under these circumstances, the fact that a settlement was reached early in the case does not preclude approval. See Klingensmith v. Max & Erma's Rests., Inc., Civ. No. 07-318, 2007 WL 3118505, at *4 (W.D. Pa. Oct. 23, 2007); In re AremisSoft, 210 F.R.D. 109, 124 (D.N.J. 2002); Weis, 899 F. Supp. at 1301. Therefore, this factor weighs in favor of approving the settlement.
iv & v. The Risks of Establishing Liability and Damages
The fourth and fifth factors require the Court to consider the risk of establishing both liability and damages. These factors "survey the possible risks of litigation in order to balance the likelihood of success and the potential damage award if the case were taken to trial against the benefits of an immediate settlement." In re Prudential, 148 F.3d at 319. Stated differently,
if it appears that further litigation would realistically risk dismissal of the case on summary judgment or an unsuccessful trial verdict, it is in the Plaintiffs' interests to settle at a relatively early stage. In contrast, if it appears that liability is extraordinarily strong, and it is highly likely that Plaintiffs would prevail at trial, settlement might be less prudent. On this issue, the court should avoid conducting a mini-trial and must to a certain extent, give credence to the estimation of the probability of success proffered by class counsel, who are experienced with the underlying case, and the possible defenses which may be raised to their causes of action.In re Ikon II, 209 F.R.D. at 105-06 (quoting LaChance v. Harrington, 965 F. Supp. 630, 638 (E.D. Pa. 1997)) (internal quotation marks omitted).
Plaintiff would face numerous hurdles to overcome if the litigation continued. First, as discussed earlier, the issues of commonality, typicality, and predominance are more difficult to establish in a contested class certification motion. See Sullivan, 667 F.3d at 302-03; In re Warfarin, 391 F.3d at 529. Second, Defendant would most likely continue to zealously defend itself against these claims as it did in Rotenberg, the California Procera suit. Third, Defendant could assert substantive defenses against Plaintiff's claims. Indeed, not only have a number of purchasers come forward and said that Procera has worked as promised, (Sherwood Decl. ¶ 17), but Defendant has already provided class counsel with numerous studies upon which its advertising and marketing claims are based. (Hoffman Decl. ¶ 3.) Fourth, Defendant would likely retain its own experts to testify as to the health benefits that Procera could provide. Fifth, even if Plaintiff succeeded at trial, Defendant would have the opportunity to appeal. Sixth, as will be discussed later in this Opinion, Plaintiff might have had difficulty collecting a judgment from Defendant at the conclusion of a hard-fought lawsuit. All of these considerations affect the likelihood of establishing liability and damages or achieving finality, whereas the settlement guarantees prompt recovery and a speedy final disposition of the case. Thus, the balance of the costs of continued litigation against the benefits of settlement for each party weighs in favor of approving the settlement.
vi. The Risks of Maintaining the Class Action Through the Trial
Sixth, the Court must consider the risk of maintaining the class action through the trial. Courts in the Third Circuit previously approached this factor with the understanding that "[t]he value of a class action depends largely on the certification of the class because, not only does the aggregation of the claims enlarge the value of the suit, but often the combination of the individual cases also pools litigation resources and may facilitate proof on the merits." In re Gen. Motors, 55 F.3d at 817. As a result, "the prospects for obtaining certification have a great impact on the range of recovery one can expect to reap from the action." Id. Therefore, "this factor measures the likelihood of obtaining and keeping a class certifi[ed] if the action were to proceed to trial." In re Warfarin, 391 F.3d at 537.
Here, there is no guarantee that the class would be or would remain certified on each claim throughout future litigation. For example, there may be challenges establishing that New Jersey law governs the claims of non-New Jersey plaintiffs. See Cooper v. Samsung Elecs. Am., Inc., 374 F.App'x. 250, 254-55 (3d Cir. 2010) (finding that an Arizona resident who purchased a television set in her home state could not sue under the New Jersey CFA). Moreover, differences in the applicable state law may make it impossible to maintain a nationwide class, particularly for claims under the New Jersey CFA and common law of fraud. See, e.g., Arcand v. Brother Intern. Corp., 673 F. Supp. 2d 282, 293-94 (D.N.J. 2009) (recognizing a difference between the New Jersey CFA and the Virginia Consumer Protection Act); Agostino v. Quest Diagnostic, 256 F.R.D. 437, 461-62, 464 (D.N.J. 2007) (noting the conflict between the New Jersey CFA and common law fraud and consumer protection laws and common law fraud in other states). Even as to the unjust enrichment claim for which the Court is certifying this class for settlement purposes, one other court has denied a contested class certification for such a claim, reasoning that, as part of its defense to an unjust enrichment claim, the defendant "would be permitted to defend itself by introducing evidence regarding whether, in that specific transaction, the existence of the [allegedly omitted information] was disclosed." Chesner v. Stewart Title Guar. Co., Civ. No. 06-476, 2008 WL 553773, at *14 (N.D. Ohio Jan. 23, 2008). Because "[a] district court retains the authority to decertify or modify a class at any time during the litigation if it proves to be unmanageable," In re Warfarin, 391 F.3d at 537 (citing In re Prudential, 148 F.3d at 321), the specter of decertification makes settlement an appealing alternative. As certification of a nationwide class on each claim is not guaranteed, this factor weighs in favor of approving the settlement.
vii. The Ability of the Defendants to Withstand a Greater Judgment
The seventh factor for the Court's consideration, the ability of the defendant to withstand a greater judgment, has been problematic for courts within the Circuit to analyze. See e.g., In re Prudential, 148 F.3d at 322 (noting it is "difficult to determine [the value of the proposed settlement] because both the compensatory relief available under the [alternative dispute processes] and the additional relief available through Basic Claim Relief are uncapped"). Regardless, the Court of Appeals has found that a defendant's ability to pay a larger settlement sum is not particularly damaging to the settlement agreement's fairness as long as the other factors favor settlement. See id. at 321-22; McGee, 2009 WL 539893, at *6 (noting that withholding approval because the Defendant could withstand a greater judgment makes "little sense" where Defendant is paying a large settlement and class counsel's fees and expenses).
In the present case, class counsel contends that Defendant is a young start up company with limited resources and that Defendant is settling at the upper limit of what it can afford. (Final Appr. Mot. 27.) During the Fairness Hearing, defense counsel represented that the company would lack sufficient resources to pay a post-trial judgment after paying fees to defend the case. (Fairness Hr'g 28:04-28:26.) Assuming these representations to be accurate, this factor supports approving the settlement.
viii & ix. The Range of the Reasonableness of the Settlement Fund in Light of Both the Best Possible Recovery & All the Attendant Risks of Litigation
Finally, the Court must consider the range of the reasonableness of the settlement in light of both the best possible recovery and the attendant risks of litigation. These factors are used to "evaluate whether the settlement represents a good value for a weak case or a poor value for a strong case." In re Warfarin, 391 F.3d at 538. In assessing this factor, the Court should determine "whether the settlement is reasonable in light of the best possible recovery and the risks the parties would face if the case went to trial." In re Prudential, 148 F.3d at 322.
Here, the best possible recovery for each class member would be refunds for each bottle of Procera purchased. Assuming each purchaser bought just one bottle, the recovery would be approximately $10-12 million. (Fairness Hr'g 18:06 - 22:34.) While the $500,000 cash compensation is far less than the total possible recovery, it is still reasonable given the challenges to certifying a nationwide class on all claims, the proof problems that may exist, and the injury that has occurred. The class members have allegedly been misled into buying a product that was to supposed to deliver various health benefits but did not. While certain class members may feel that only full reimbursement or more would constitute adequate relief, full compensation is not a prerequisite for finding that a settlement is reasonable and the proposed settlement achieves reasonable relief sooner than would be received had the class succeeded on all claims at trial. See Careccio, 2010 WL 1752347, at *6 (noting that "full compensation is not a prerequisite for a fair settlement"); McGee, 2009 WL 539893, at *6-7 (approving a class settlement considering the risks faced, the immediate benefits provided, and the absence of a guaranteed favorable verdict even though it does not provide full recovery). The twenty dollar cash payment option offered under the settlement would reimburse class members for more than fifty percent of the average price of one bottle of Procera, $34. (Revised Settlement § 2(A)(i); Platt Decl. ¶ 3.) Such relief is within range of that obtained in similar consumer fraud class actions discussed earlier, such as Keller and Geis, in terms of the total amount the class members received and the percentage of the price of the product for which they were reimbursed. Furthermore, the settlement addresses the consumer fraud issues at the core of this case by prohibiting Defendant from making certain claims about the health benefits of taking Procera. (Revised Settlement § 4.) The injunctive aspect has an immediate effect on Defendant's representations about Procera and may prevent consumers from purchasing a product based upon representations that may not be accurate. Moreover, the injunction will likely cause this young company to carefully examine the representations it makes about all of its products to avoid the consequences it felt in this case and this may have an impact on Defendant's corporate conduct in the future. Therefore, this factor weighs in favor of approving the settlement.
The settlement also provides a coupon option, pursuant to which class members can receive half off the purchase price of one of six different products Defendant sells. (Revised Settlement § 2(A)(i).) The coupon option arguably has a minimum subjective value of twenty dollars to each such class member because any class member choosing it likely values it at least as much as the cash option. (Platt Decl. ¶ 4.) Nevertheless, had the settlement offered only a coupon option to the class, it is highly unlikely that it would have been approved, given that such relief would provide little value to the class, while serving as a "'tremendous sales bonanza'" for Defendant and thus, have little deterrent effect against alleged improper product marketing. In re Gen. Motors, 55 F.3d at 808 (quoting Bloyed v. Gen. Motors Corp., 881 S.W.2d 422, 431 (Tex. App. 1994)) (describing the coupon settlement as a "sophisticated GM marketing program").
Based upon the foregoing, and upon consideration of the submissions, record of proceedings, arguments, and representations of counsel, the Court finds that the proposed settlement of this class action is fair, reasonable, and adequate, and the Court grants Plaintiff's motion for final approval of the settlement.
The Court now turns to fees for class counsel.
E. Attorney's Fees
Class counsel has requested fees in the amount of $75,000, the maximum allowed under the settlement agreement. Hoffman avers that he has expended $70,181.25 worth of professional time, working 147.5 hours at his normal billing rate of $475 per hour. (Hoffman Fee Decl. ¶ 5.)
Courts must thoroughly analyze an application for attorneys' fees in a class action settlement. In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 299 (3d Cir. 2005) ("In re Rite Aid"); Yong Soon Oh v. AT & T Corp., 225 F.R.D. 142, 146 (D.N.J. 2004); Fed. R. Civ. P. 23(h). This is so even where the parties have consented to the proposed attorney's fees, Yong Soon Oh, 225 F.R.D. at 146; In re AremisSoft, 210 F.R.D. at 128, because of the risk that the "lawyers might urge a class settlement at a low figure or on a less-than-optimal basis in exchange for red-carpet treatment for fees." In re Gen. Motors, 55 F.3d at 820 (citation and quotation marks omitted).
In determining appropriate attorney's fees, courts generally apply either the lodestar method or the percentage-of-recovery method. In re Rite Aid, 396 F.3d at 300; Yong Soon Oh, 225 F.R.D. at 146. Even though "the ultimate choice of methodology will rest within the . . . court's sound discretion," In re Gen. Motors, 55 F.3d at 821, the Court of Appeals of the Third Circuit has stated that "each method has distinct advantages for certain kinds of actions, which will make one of the methods more appropriate as a primary basis for determining the fee." Id. at 820. Accordingly, "a court making or approving a fee award should determine what sort of action the court is adjudicating and then primarily rely on the corresponding method of awarding fees." Id. at 821.
The lodestar method is usually applied in statutory fee-shifting cases because it "reward[s] counsel for undertaking socially beneficial litigation in cases where the expected relief has a small enough monetary value that a percentage-of-recovery method would provide inadequate compensation." In re Rite Aid, 396 F.3d at 300 (quoting In re Prudential, 148 F.3d at 333). The fees are "de-coupled" from the class recovery which "assures counsel undertaking socially beneficial litigation . . . an adequate fee irrespective of the monetary value of the final relief achieved for the class." In re Gen. Motors, 55 F.3d at 821. Although primarily used for statutory fee-shifting cases, "the lodestar rationale has appeal where . . . the nature of the settlement evades the precise evaluation needed for the percentage of recovery method." Id. The lodestar method calculates fees by multiplying the hours expended by an appropriate hourly rate. Id. at 819 n.37. An upward adjustment of the amount is permitted only in rare and exceptional circumstances. Perdue v. Kenny A., 590 U.S. ___, 130 S. Ct. 1662, 1674-75 (2010); In re AT & T Corp., 455 F.3d at 164 n.4 (citation and quotation marks omitted).
In fee-shifting cases, "courts may not increase the lodestar amount in consideration of the attorney's contingent risk when calculating a fee." In re AT & T Corp., 455 F.3d at 163 n.4 (citations and quotation marks omitted).
The percentage-of-recovery method "awards counsel a variable percentage of the amount recovered for the class," In re Gen. Motors, 55 F.3d at 819 n.38, and requires the Court "to determine a precise valuation of the settlement on which to base its award." Id. at 822. After the Court determines the overall value of the settlement, it must then "calculate an appropriate percentage of that fund to award in attorneys' fees based on a series of reasonableness factors that have been developed through [the Third Circuit's] jurisprudence." In re Diet Drugs, 582 F.3d 524, 536 n.24 (3d Cir. 2009); see also In re Prudential, 148 F.3d at 339-40; Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 197-99 (3d Cir. 2000). The percentage-of-recovery method is preferred in "common fund" cases. In re Gen. Motors, 55 F.3d at 821. In a classic common fund case, an attorney is entitled to fees and costs from a fund set aside for class members. In re Cendant, 264 F.3d at 256. The percentage-of-recovery method is suitable for common fund cases because it permits attorneys' fees to be deducted directly from the settlement fund "in a manner that rewards counsel for success and penalizes it for failure." In re Rite Aid, 396 F.3d at 300 (quoting In re Prudential, 148 F.3d at 333). The percentage-of-recovery method also ensures that the class is not unjustly enriched by getting a benefit without compensating the lawyers for securing the benefit. In re Gen. Motors, 55 F.3d at 820 n.39, 821. Besides classic common fund cases, the percentage-of-recovery method is also appropriate "where, although the parties claim that the fee and settlement are independent, they actually come from the same source." Id. at 821. Thus, the Court can apply the "common fund" principles when the fees and settlement are paid by the same source even though the fees are not actually drawn from a fund established for the class. See id.
As described by the Court of Appeals for the Third Circuit, "[t]he common fund doctrine provides that a private plaintiff, or plaintiff's attorney, whose efforts create, discover, increase, or preserve a fund to which others also have a claim, is entitled to recover from the fund the costs of his litigation, including attorneys' fees." In re Gen. Motors, 55 F.3d at 820 n.39 (citation omitted).
In In re Gen. Motors, for example, the parties contended that the fee agreement and settlement fund were separate agreements and "thus superficially resembl[ed] the separate awards in statutory fee cases." Id. at 821. The Court of Appeals for the Third Circuit, however, determined that "private agreements to structure artificially separate fee and settlement arrangements cannot transform what is in economic reality a common fund situation into a statutory fee shifting case." Id. The Court concluded that the settlement was a "hybrid," which "more closely resemble[d] a common fund case" after determining that the fee was not made pursuant to a fee-shifting statute and the fund did not award the hard-to-value intangible rights that would justify using the lodestar method. Id. at 822.
In sum, the lodestar method generally applies to cases involving fee-shifting statutes or where the settlement "evades the precise evaluation needed for the percentage-of-recovery method." Id. at 821. The percentage-of-recovery method applies where there is a common fund or, as explained below, where the economic reality of the settlement is akin to a common fund, id., or where the settlement payment is not the result of a finding that the class has prevailed on a fee-shifting claim.
In In re Diet Drugs, the appellate court rejected the argument that the lodestar method should have been used to calculate fees in a class action settlement simply because a statutory fee-shifting claim was involved. 582 F.3d at 540. In the context of a class settlement, the Court of Appeals for the Third Circuit determined that "there [wa]s no such [fee-shifting] statute at work here. [Defendant] voluntarily undertook the process of compensating opposing counsel, by establishing and funding various escrow accounts dedicated to the payment of claimants' legal costs." Id. Consequently, the Court determined that the case fell under the common fund doctrine and that the percentage-of-recovery method was appropriate. Thus, In re Diet Drugs and In re Gen. Motors teach that if a class action is brought under a fee-shifting statute but is resolved through a settlement, then the fees should be calculated based upon the percentage-of-recovery method if: (1) the benefits to the class can be valued; (2) the compensation to the class and counsel come from the same source; and (3) the source has voluntarily agreed to pay class counsel's fees. 582 F.3d 524; 55 F.3d 768.
This settlement provides for a payment of twenty dollars to class members or a voucher for half off of one of six Brain Research products, as well as injunctive relief prohibiting Defendant from making certain representations about the benefits of Procera. The settlement therefore has a quantifiable cash component, a voucher component for which the value is less precisely ascertainable but can be inferentially quantified, and an injunctive component for which insufficient evidence has been provided for the Court to fix a value.
Defendant is the source of both the settlement fund and the attorney's fee payment and has voluntarily agreed to pay class counsel's fees. (Revised Settlement § 6.) The Court will therefore apply the factors used to analyze attorney's fees using the percentage-of-recovery method as applied to the quantifiable components of the settlement and then, in accordance with Circuit law, perform a cross-check using the lodestar analysis.
Class counsel asks the Court to use the percentage of recovery method of determining fees. (Mot. for Fees 2.)
1. Percentage-of-Recovery Analysis
The Court of Appeals for the Third Circuit has identified a non-exhaustive list of the factors for courts to consider when determining the reasonableness of attorneys' fees in a class action settlement where fees are calculated as a percentage of recovery. The factors are:
(1) the size of the fund created and the number of persons benefitted;In re AT & T Corp., 455 F.3d at 165; In re Rite Aid, 396 F.3d at 301 (citation omitted); Gunter, 223 F.3d at 195 n.1 (citing In re Prudential, 148 F.3d at 336-40; In re Gen. Motors, 55 F.3d at 819-22). The appellate court identified three other factors to consider, namely:
(2) the presence or absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel;
(3) the skill and efficiency of the attorneys involved;
(4) the complexity and duration of the litigation;
(5) the risk of nonpayment;
(6) the amount of time devoted to the case by plaintiffs' counsel; and
(7) the awards in similar cases.
(1) the value of benefits accruing to class members attributable to the efforts of class counsel as opposed to the efforts of other groups, such as government agencies conducting investigations; (2) the percentage fee that would have been negotiated had the case been subject to a private contingent fee agreement at the time counsel was retained; and (3) any 'innovative' terms of settlement.In re AT & T Corp., 455 F.3d at 165 (citing In re Prudential, 148 F.3d at 338-40). Because the facts of each case are different, the factors "need not be applied in a formulaic way" and some factors may be afforded greater weight than others. In re Rite Aid, 396 F.3d at 301; Gunter, 223 F.3d at 195 n.1.
In addition to considering these factors, courts are advised to cross-check the proposed attorneys' fees calculated under the percentage-of-recovery method by comparing them to the amount the attorneys would have earned under the lodestar method. In re Rite Aid, 396 F.3d at 300; Gunter, 223 F.3d. at 195 n.1. The "crosscheck . . . [is] a means of assessing whether the percentage-of-recovery award is too high or too low." In re Diet Drugs, 582 F.3d at 545 n.42 (citation omitted). The "crosscheck is performed by dividing the proposed fee award by the lodestar calculation, resulting in a lodestar multiplier." In re AT & T Corp., 455 F.3d at 164. This cross-check calculation does not require mathematical precision, or a "full-blown lodestar inquiry" Id. at 169 n.6.
a. The Size of the Fund and the Number of Persons Benefitted
The Court must first consider the size of the fund created and the number of persons benefitted. In re Rite Aid, 396 F.3d at 301. Here, the settlement class has 268,548 members. The total amount that Defendant will provide class members in the form of cash reimbursements is capped at $500,000. At the Fairness Hearing, counsel for both parties represented that the rate of claims was such that compensation to the class was likely to exceed $428,606. (Fairness Hr'g 5:24-5:29.)
Class members have the option of forgoing the cash payment and instead receiving a voucher for one-half off the price of one of six products ranging from $19.95 to $59.95. The value of this coupon is more difficult to fix. While the maximum savings that a class member could realize by using the coupon would be $29.97, the Court need not accept this figure as the value of the coupon. First, it is difficult to measure the subjective value that each class member would attach to the coupon; the only inference the Court can draw is that the class members choosing the coupon value it at least as much as the twenty dollar cash payment, for if they valued it less, they would have opted for cash. Second, Defendant likely valued the coupon at less than the $20 cash payment as reflected by the fact that they did not cap the number of coupons it would issue. Third, Defendant is likely to profit further from the additional sales resulting from class members using their coupons. See In re Gen. Motors, 55 F.3d at 808 (characterizing a coupon settlement as a "sophisticated GM marketing program"). Given these factors, the Court values the coupon option at no more than $20 per class member.
Valuing both the cash payment and the coupon option at $20, and considering the $500,000 cash cap and the number of coupons sought as of July 12, 2012, makes the value of this settlement approximately $541,440. Class members who take advantage of the cash portion of the settlement will recover $20, which is more than fifty percent of the average sale price of one unit of Procera. (Revised Settlement §§ 2(A)(i)-(ii)). Class members electing the coupon derive a similar benefit or more if they purchase a product that exceeds $40 in price, and class counsel has obtained injunctive relief that ensures that Defendant will refrain from making eleven separate statements about the health benefits Procera does or does not deliver. (Id. § 4.)
The Court notes, however, that while these benefits are valuable, they do not compensate the class for all of its possible damages, and some other class action settlements involving claims of consumer fraud have resulted in compensation to each class member at or above actual damages. See, e.g., In re Kentucky. Grilled Chicken Coupon Mktg. & Sales Practice, Litig., 280 F.R.D. 364 (N.D. Ill. 2011) (approving settlement that awarded up to full purchase price to holders of a dishonored coupon for free chicken); Kelly v. Phiten USA, Inc., 277 F.R.D. 564, 567-68 (S.D. Iowa 2011) (approving settlement that awarded up to 300% of purchase price to class members with proof of purchase and 100% of retail price to those without); Hartless v. Clorox Co., 273 F.R.D. 630 (S.D. Cal. 2011) (approving settlement that awarded 100% of damage sustained from use of improperly warrantied toilet bowl cleaner). Thus, the prompt refund of fifty percent or more of Procera's purchase price on one item even if the class members purchased more than one item, or a discount voucher, combined with substantial injunctive relief, is a reasonable outcome for the class members, but it does not reflect the sort of exceptional value to the class as compared to other cases that would warrant a particularly large fee award.
b. The Presence or Absence of Substantial Objections By Members of the Class
The second factor the Court must consider is the presence or absence of substantial objection by class members to the settlement terms and/or counsel's fee request. In re Rite Aid, 396 F.3d at 301. The "absence of large numbers of objections mitigates against reducing fee awards." Yong Soon Oh, 225 F.R.D. at 152 (citation and quotation marks omitted) (determining this factor weighed in favor of approving fees where three of the thousands of class members objected to fees); In re Cendant, 232 F. Supp. 2d at 337 (citation omitted) (determining this factor weighed in favor of approving fees where six of the 200,000 shareholders noticed objected to fees); see also In re Rite Aid, 396 F.3d at 305 (describing two objections after notice to 300,000 class members as a low level). Indeed, the Court of Appeals has stated that "silence constitutes tacit consent to the agreement" to the proposed fees. In re Gen. Motors, 55 F.3d at 812 (citing Bolger, 2 F.3d at 1313 n.15).
Here, there were three formal objections, eleven exclusion requests, and seven procedurally deficient submissions indicating displeasure with the settlement. (Sherwood Decl. ¶¶ 15-16.) Only one objection takes particular exception to the settlement on the basis that "[t]he only group that makes a large profit are the lawyers representing the plaintiff groups." (Hildegarde Letter, Ex. E to Sherwood Decl.) This statement embodies the objector's personal views about class action litigation generally and is not addressed to the specifics of this settlement. (Id. (prefacing objections by stating that he is "very careful in joining any class action suit, for the following reasons" and then saying that class action lawyers are not concerned with the interests of the class).) The Court acknowledges that counsel's requested fee award may appear large compared to an individual class member's recovery, but this is in part due to the fact that the maximum recovery for a class member is the price paid for the product. This reality and the one objection to the fee award, however, do not require rejection of the fee request and cannot be characterized as "substantial objection by class members . . . to counsel's fee request." In re Rite Aid, 396 F.3d at 301.
c. Counsel's Skill and Efficiency
Third, the Court considers the skill and efficiency of the attorney involved in this case. In re Rite Aid, 396 F.3d at 301. Courts consider the result and an attorney's experience and resume in assessing his skill and efficiency. See In re Cendant, 232 F. Supp. 2d at 338. Indeed, the "single clearest factor reflecting the quality of counsel's services is the result obtained." Id. (citation and quotation marks omitted); see also In re Rite Aid, 396 F.3d at 304 (determining that counsel as "extraordinarily deft and efficient in handling this most complex matter" because, among other things, he negotiated a particularly favorable cash settlement); In re Linerboard Antitrust Litig., MDL No. 1261, 2004 WL 1221350, at *5 (E.D. Pa. June 2, 2004) (citation omitted) (stating "the result achieved is the clearest reflection of petitioners' skill and expertise").
As discussed earlier as to the size of the recovery, class counsel obtained a fair settlement to the class members in light of the facts of this case and inherent risk in continued litigation. Given the degree of recovery in some other consumer fraud cases and the fact that each class member is limited to a $20 refund regardless of how many units of Procera they purchased, however, the relief in this case cannot be characterized as exceptionally large, nor can class counsel's representation be characterized as exceptionally skillful. Class counsel's initial reliance only on a New Jersey CFA claim and a common law fraud claim, despite law suggesting that a nationwide class is not certifiable for such claims, did not demonstrate exceptional skill. Counsel, however, should be credited for addressing this potential problem and quickly securing a settlement that provides direct benefits to class members.
d. Complexity and Duration of Litigation
The fourth factor the Court must consider is the complexity and duration of this litigation. In re Rite Aid, 396 F.3d at 301. In evaluating this factor, courts consider numerous aspects of the case, including the complexity of both the factual and legal issues, the amount of discovery and depositions conducted, the length of the litigation, the amount and quality of work produced, and attempts to negotiate and settle. See id. at 305 (taking into consideration the legal and factual complexities, time incurred reviewing and analyzing hundreds of thousands of documents, the fact that settlement occurred after several years of litigation and with the assistance of mediation, and the numerous revised pleadings); In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 735-36 (3d Cir. 2001) ("In re Cendant PRIDES") (criticizing the district court for failing to consider that the case was "relatively simple," Defendant had conceded liability, settlement occurred at a very early stage of litigation, and there was minimal motion practice and little discovery); In re Cendant, 232 F. Supp. 2d at 338-39 (noting that the case had been pending for four years and required a great deal of discovery, motion practice, and the development of new law); accord Yong Soon Oh, 225 F.R.D. at 152.
This litigation was not complex, prolonged, or unique. First, while the parties went through informal discovery prior to the filing of suit and Plaintiff had access to the discovery produced in Rotenberg, they did not engage in dispositive motion practice, formal document production, expert discovery, depositions, and many other facets of litigation. Furthermore, it does not appear that the pre-suit informal discovery was exhaustive, as class counsel merely analyzed sales data, marketing and advertising materials, and various scientific reports on Procera and briefly consulted with a physician at the Cleveland Clinic. Second, the law out of which the claims arise is established. Third, and relatedly, Plaintiff was not writing on a "blank slate" when counsel filed suit as he had the benefit of Rotenberg for guidance. Accordingly, this factor does not support an extraordinary fee award.
e. The Risk of Nonpayment
Fifth, the Court must consider the risk that counsel would not receive payment for the services provided in this case. In re Rite Aid, 396 F.3d at 301. Courts generally do not consider counsel's risk of not being paid or receiving its contingency fee. See In re Cendant, 232 F. Supp. 2d at 339 (recognizing that the risk of being unsuccessful and thus not getting paid is a risk confronted by all attorneys in every case taken on a contingency-fee basis and determining that the risk of nonpayment factor was "neutral" in the evaluation of approving fees). Rather, courts evaluating this factor focus on a defendant's financial health and the likelihood that it would be unable to satisfy a successful judgment against it. In re Cendant, 232 F. Supp. 2d at 339; Gunter, 223 F.3d at 199 (indicating that this factor militated in favor of granting fees where "the defendants were close to insolvency, and . . . [other] plaintiffs in similar cases . . . had lost on similar legal theories").
Here, information about Defendant's financial health comes only from the representations of counsel. They represent that Defendant is a young start up company that could not pay both a judgment and attorneys fees if the class were certified and prevailed at trial. (Fairness Hr'g 27:19-28:26.) Consequently, the Court has some basis to conclude that class counsel faced a risk of non-payment and this factor therefore weighs somewhat in favor of the requested fee award.
f. The Amount of Time Devoted to the Case by the Plaintiffs' Counsel
The sixth factor that the Court considers is the amount of time that the plaintiff's counsel devoted to the case. In re Rite Aid, 396 F.3d at 301. While courts may look to counsel's time sheets and affidavits, see Yong Soon Oh, 225 F.R.D. at 152, the district court "may [also] rely on summaries submitted by the attorneys and need not review actual billing records." In re Rite Aid, 396 F.3d at 307 (citation omitted); see also In re AT & T Corp., 455 F.3d at 169 n.6 (courts have discretionary authority to request time sheets or may rely on declarations). The appellate court has also held that this factor overlaps with the third factor, which deals with the skill and efficiency of the attorneys' prosecution of the case. Id. at 171.
As noted earlier, less than six weeks transpired between the filing of the Complaint and settlement. Even if time up until the Fairness Hearing is included, this class action will have lasted less than seven months, with neither of the parties going through formal document production, depositions, dispositive motion practice, among many other stages of litigation. To date, class counsel has spent 147.5 hours resolving this case, (Hoffman Fee Decl. ¶ 5), despite such rapid progress toward settlement. As detailed more extensively in the lodestar cross-check section below, the Court finds that class counsel billed an unreasonably high number of hours on certain tasks that do not command compensation at his high hourly rate. Consequently, this factor weighs against class counsel's requested fee award.
g. Awards in Similar Cases
Lastly, the Court compares the award requested in this action with the awards in similar actions. In re Rite Aid, 396 F.3d at 301. In doing so, the Court (1) compares the award requested to awards made in comparable settlements; and (2) ensures that the award here is consistent with what an attorney would have likely received if the fee was negotiated on the open market. In re Datatec Sys., Inc. Sec. Litig., Civ. No. 04-525, 2007 WL 4225828, at *8 (D.N.J. Nov. 28, 2007); In re Ins. Brokerage Antitrust Litig., Civ. No. 04-3184, 2007 WL 2916472, at * 7 (D.N.J. Oct. 5, 2007).
The Court of Appeals for the Third Circuit has held that since percentages of attorneys fees awarded have varied considerably, the Court "may not rely on a formulaic application of the appropriate range in awarding fees but must consider the relevant circumstances of the particular case." In re Cendant PRIDES, 243 F.3d at 736. Accordingly, in most cases, the courts have held that the percentages will decrease as the size of the fund increases because "[i]n many instances the increase [in recovery] is merely a factor of the size of the class and has no direct relationship to the efforts of counsel." In re Prudential, 148 F.3d at 339 (alteration in original) (quoting In re First Fidelity Bancorporation Sec. Litig., 750 F. Supp. 160, 164 n.1 (D.N.J. 1990)); see also In re Cendant PRIDES, 243 F.3d at 736 (noting that most fee awards in common fund cases range "from nineteen percent to forty-five percent of the settlement fund"); In re Rite Aid Corp. Sec. Litig., 146 F. Supp. 2d 706, 735 (E.D. Pa. 2001) ("In re Rite Aid") (a review of 289 settlements demonstrating "average attorney's fees percentage [of] 31.71%" with a median value that "turns out to be one-third").
Awards in similar consumer products cases are as follows:
Keller v. Gaspari Nutrition, Inc., Civ. No. 11-6158 (C.D. Cal. Mar. 20, 2012) (approving settlement of state consumer fraud statutory claims against manufacturer of a "testosterone booster"); In re Kentucky Grilled Chicken Coupon Mktg. & Sales Practice, Litig., 280 F.R.D. 364 (approving settlement of state consumer fraud statutory claims and common law claims of fraud and false advertising in connection with alleged failure to honor advertised coupon for free chicken); Kelly, 277 F.R.D. 564 (approving settlement of California and Iowa consumer protection claims in connection with Defendant's allegedly misleading advertising of its products and the purported health benefits they provide); Hartless, 273 F.R.D. 630 (approving settlement of state statutory claims and common law claim of breach of implied warranty in connection with alleged misrepresentations about safety of toilet bowl cleaner for use in household plumbing); Geis, Civ. No. 07-4238 (D.N.J. Sept. 30, 2010) (approving a settlement of state consumer fraud statutory claims against a manufacturer of a health supplement); Horton v. Leading Edge Mktg., Civ. No. 04-212, 2008 WL 323222 (D. Colo. Feb. 4, 2008) (approving motion for attorney's fees in connection with settlement of state statutory and federal RICO claims involving alleged misrepresentations about efficacy of herbal dietary supplements).
| Case | Value ofSettlement | Attorneys'FeesRequested | Attorneys'FeesGranted | % ofFund | Lodestar | LodestarMultiplier |
|---|---|---|---|---|---|---|
| Kelly | $3,200,000 | $ 1,056,000 | $ 1,056,000 | 33% | $616,252.50 | 1.71 |
| Hartless | $ 8,000,000 | $2,250,000 | $2,250,000 | 28% | $2,371,773.80 | 0.95 |
| In re Kentucky | $1,575, 000 | $515,000 | $515,000 | 33% | $554,348.50 | 0.93 |
| Geis | $1,400,000 | $1,410,000 | $600,000 | 42% | $620,862.50 | 0.96 |
|---|---|---|---|---|---|---|
| Keller | $750,000 | $250,000 | $250,000 | 33% | $230,985 | 1.08 |
| Horton | $6,510,000 | $1,500,000 | $1,500,000 | 23% | $1,447,440 | 1.03 |
The cases above are consistent with the general observation that in non-"megafund" cases, a typical fee award based on the percentage-of-recovery method is between 19% and 45%. See In re General Motors, 55 F.3d at 822. The unique facts of this case, however, lead the Court to find that a lower percentage-of-recovery is appropriate. As discussed above, that conclusion finds support in: (1) the fair yet modest recovery to the class; (2) the simplicity and brevity of the litigation; and (3) the small amount of time reasonably spent on this case. Because these considerations cannot be ignored, the Court concludes that a fee award of ten percent of the quantifiable value of the settlement appropriately compensates counsel for his efforts in this case. See In re Cendant PRIDES, 243 F.3d at 735-36 (vacating an excessive fee award because "the District Court apparently turned a blind eye to the following factors: 1) the case was relatively simple in terms of proof, in that Cendant had conceded liability and no risks pertaining to liability or collection were pertinent; 2) the case was settled at a very early stage of the litigation, with an agreement being announced two months after Kirby filed for class certification and a proposed settlement being submitted to the District Court two months after that; 3) there was a minimal amount of motion practice in this case-before settlement, Kirby submitted only the Complaint and three motions, all on the same day; 4) discovery was virtually nonexistent-indeed the District Court did not mention any depositions taken or document review conducted by Kirby; and 5) Kirby spent a relatively small amount of time on this case compared to the amount of time expended in most other large class actions.").
In "megafund" cases, defined as those with a settlement fund above $100 million, fee percentages are in a lower range between 4% and 18%. See In re Prudential, 148 F.3d at 339.
The Court cannot ignore that the $541,000 settlement value represents only .05% of the low end of the total $10 - 12 million recovery the class may have secured if the case went to trial. (Fairness Hr'g 18:06 - 22:34). This impacts its view of the reasonable compensation to counsel as the Court cannot ignore what the class gives up by way of the settlement as compared with what counsel receives.
Consequently, the Court approves an award of ten percent of the value of the settlement. Because claims may be filed until August 10, 2012, the Court will assume that the maximum cash payout of $500,000 will be reached and, together with the 2,097 coupons issued valued herein at $20, provides a total settlement value of $541,940. Thus, a ten percent percentage-of-recovery results in a fee award of $54,194.
2. The Lodestar Cross-Check
The Court will now use the "lodestar method" to cross-check the reasonableness of the percentage-of-recovery fee award. In re AT & T Corp., 455 F.3d at 164 (citation omitted). The lodestar is calculated by multiplying the hours expended by an appropriate hourly rate. Id.; In re Gen. Motors, 55 F.3d at 819 n.37. Then, the requested fee award, determined using the percentage-of-fee recovery method, is divided by the lodestar. In re AT & T Corp., 455 F.3d at 164. The resulting number is the lodestar multiplier. Id. Judicial approval of the multiplier is "discretionary and not susceptible to objective calculation." In re Prudential, 148 F.3d at 340. The Third Circuit has explained that even where courts have found that counsel performed extensive work the lodestar multiplier should not exceed three. In re Cendant PRIDES, 243 F.3d at 742 (stating that "we strongly suggest that a lodestar multiplier of 3 (the highest multiplier of the cases reviewed above) is the appropriate ceiling for a fee award, although a lower multiplier may be applied in the District Court's discretion"); see also id. (quoting In re Prudential, 148 F.3d at 341) (explaining that a range of one to three "is consistent with the principle that '[m]ultiples ranging from one to four are frequently awarded in common fund cases when the lodestar method is applied'"). However, "when the multiplier is too great, the court should reconsider its calculation under the percentage-of-recovery method, with an eye toward reducing the award." In re Rite Aid, 396 F.3d at 306.
The multiplier that a district court accepts in any particular case must rest on a reasoned basis. In re Prudential, 148 F.3d at 340-41. The Court must articulate the particular facts of the case that justify applying that multiplier. Id. For example, "[m]ultipliers may reflect the risks of nonrecovery facing counsel, may serve as an incentive for counsel to undertake socially beneficial litigation, or may reward counsel for an extraordinary result." Id. at 340; see also In re AT & T Corp., 455 F.3d at 164 n.4 (citation and quotation marks omitted) (observing that "[t]he multiplier is a device that attempts to account for the contingent nature or risk involved in a particular case and the quality of the attorneys' work").
In In re Cendant PRIDES, the Third Circuit vacated an attorney fee award where the lodestar multiplier was seven and the lower court failed to calculate, explain, or justify the result. 243 F.3d at 742. The fund had a value ranging from $263.5 to $341.5 million and attorneys' fees constituted 5.7% to 7.3% of the total fund. Id. at 741 n.25. The appellate court was "seriously troubled" by this result because the case was not legally or factually complex and required no significant motion practice or discovery. Id. at 742. The court stated that "[i]n all the cases in which high percentages were applied to arrive at attorneys' fees, the courts explained the extensive amount of work that the attorneys had put into the case, and appropriately the lodestar multiplier in those cases never exceeded 2.99." Id.
In In re AT & T Corp., the Third Circuit affirmed an award with a cross-check multiplier of 1.28 where there was "significant time and effort devoted to the case by class counsel." 455 F.3d at 173. Most importantly, "the District Court did not justify its approval of the fee by reference to high fees in the past. It justified its approval by demonstrating this case was not an average case." Id. The Third Circuit described it as a "lengthy, relatively complex case." Id. Indeed, in granting the multiplier, the District Court had noted the "massive time and effort expended by Lead Counsel in litigating this action" as well as the counsel's "high level of proficiency and professionalism" in securing a sizeable award of $100,000,000 for the Plaintiffs. In re AT & T Corp. Sec. Litig., Civ. No. 00-5364, 2005 U.S. Dist. LEXIS 46144 at *32 (D.N.J. Apr. 22, 2005).
Applying the lodestar cross-check to this case, class counsel represents that he has accumulated $70,181.25 in attorney's fees, based on the 147.5 hours he has worked multiplied by his hourly rate of $475. (Hoffman Fee Mot. 8.) While district courts should not exaggerate the importance of the lodestar cross-check in their analysis of the fee petition, they need not accept the information counsel submits at face value and may inquire further. See Milliron v. T-Mobile USA, Inc., Civ. No. 08-4149, 2009 WL 3345762, at *12 (D.N.J. Sept. 10, 2009). In this case, the Court examined class counsel's billing records because the number of hours reportedly spent appeared excessive given the infancy of the case. In this circumstance, therefore, and to ensure the basis of the cross-check is sound, counsel's lodestar must be examined before the Court can perform the required cross-check.
Although the parties settled within six weeks of the filing of the Complaint, class counsel represents that he spent 147.5 hours on this relatively straightforward consumer protection matter for which nothing occurred in court other than the filing the Complaint, Amended Complaint, and the motions concerning the settlement. This is not to say cases need to be dragged out to engage in unnecessary work and the Court applauds counsel's pre-suit efforts, but this does not mean the fees sought under the lodestar method are reasonable or that the tasks performed are compensable at a high hourly rate. For example, although counsel claims he has vast experience dealing with consumer fraud matters, he spent a large number of hours "researching" such issues and ascertaining plausible claims, including research conducted after being informed that there may be challenges certifying a nationwide class based solely on CFA and common law fraud claims. (Hoffman Supp. Fee Decl.) In addition, certain tasks reflected in his bill need not have been performed by a lawyer at a high hourly rate, such as reviewing PACER or other consumer complaints and conducting initial background research into the product. See In re Bluetooth Headset Prod. Liability Litig., Civ. No. 07-ML-1822 (C.D. Cal. July 31, 2012) (reducing fees in a lodestar analysis where no "reasonable paying client, and certainly not a sophisticated client paying out of its own pocket, would pay the amount of fees billed for some of the tasks performed"). That is not to say such tasks are unnecessary, rather, they do not necessitate payment at a rate of almost $500 per hour. Furthermore, class counsel spent almost five hours reviewing the claims statistics provided by Gilardi and reviewing the formal and informal objections, (id.), even though Gilardi summarized the claims statistics in four pages in its declaration, (Sherwood Decl. ¶¶ 5-17), and the communications from class members regarding the settlement totaled no more than thirty-five pages, (Exs. C-E to Sherwood Decl.). The Court finds that class counsel has spent either an excessive amount of time on certain tasks or spent time on tasks that did not require a person of his experience to perform at his high hourly rate. Although class counsel says he performs all of these tasks and charges the same rate for all tasks, whether legal or not, in all of his cases and chooses not to use the services of assistants who can perform non-legal tasks at a lower rate, the Court cannot ignore the market reality that a private paying client is unlikely to pay a lawyer rate of close to $500 per hour for paralegal tasks. Moreover, counsel cannot justify billing at a high rate for paralegal or secretarial work on the basis that he employs no junior attorneys or support staff. A component of counsel's adequacy to represent the class is his ability to bill at rates commensurate with the nature of the work performed, even if he must perform that work himself because he employs no lower-billing staff. See In re Bluetooth, at 4 (stating that "[h]ad the Court known that neither firm had the proper staffing available, it likely would not have found them to be appropriate as class counsel.").
These entries are as follows: (1) 11/7/11 - "research re: claims under NJ Consumer Fraud Act; California Unfair Business Practices and False Advertising Statutes; potential applicability of statutes on nationwide basis" - 4.75 hrs; (2) 1/5/12 - "research regarding complaint; assertable claims" - 2.75 hrs; (3) 2/2/12 - "continued discussions, document review, research and communications with defense counsel re: potential resolution" - 3.75 hrs; (4) 2/3/12 - "discussions, research and communication with def counsel re: possible resolution; consultation with client" - 1.75 hrs.
The tasks which could have been performed, at least in part, by a paralegal are as follows: (1) 9/14/11 - "examination of claims of product efficacy; background of marketer; product labeling; advertising claims; FDA disclaimer statement; research re: federal DSHEA; search for consumer complaints; Pacer database; product line offered by marketer, principals of entity" - 4.75 hours; (2) 9/15/11 - "Investigate Procera product including each constituent ingredient, claims of efficacy and marketing methods including retail marketing through GNC research; research re: Brain Research Labs" - 4.25 hours; (3) 9/16/11 - "review pub-med clinical studies regarding product ingredients and claims of efficacy; review FDA approved drugs claiming delivery of comparable results; mechanism for same; and ingredients therein" - 6.75 hours; (4) 9/19/11 - "review on-line studies regarding product's wherewithal to deliver promised results" - 3.5 hours; and (5) 1/25/12 - "review defendant corporate disclosure; review defendant answer to complaint" - 1.25 hours.
The entries, totaling four and a half hours, are as follows: (1) 4/27/12 - "review 4/20/12 statistics report from Gilardi; review communications from class members received by Gilardi" - 1.25 hours; (2) 5/20/12 - "review weekly statistics report from Gilardi" - .75 hours; (3) 5/29/12 - "review statistical reports; tel conf with settlement administrator" - 1.25 hours; (4) 6/11/12 - "review Gilardi statistics report and review seven potential objectors received by Gilardi" - 1.25 hours.
Accordingly, class counsel's lodestar must be reduced. For the reasons just discussed, the Court finds that the maximum number of hours a lawyer commanding a high hourly rate could have spent on the tasks counsel reports to have performed is 102.3. Additionally, a paralegal billing at a much lower rate could have spent 21.95 hours on this matter assisting class counsel. Multiplying 102.3 hours by an hourly billing rate of $475, assuming without deciding that this is a reasonable fee, equals $48,592.50. Multiplying the 21.95 hours which could have been spent on non-legal tasks that could have been performed by a non-lawyer, even at one-half of counsel's typical $237.50 rate, which is likely higher than what the market would bear, equals $5,213.13. Together, the adjusted lodestar is $53,805.63, which may be used as the lodestar cross-check figure.
Because no billing entry is below 0.25 hours and the entries often include multiple tasks, the Court is left without a way to more precisely determine exactly how long each task took class counsel to perform. As a result, the Court could not separate out certain tasks in each of the entries described herein that uniquely required a lawyer's attention. See In re Bluetooth, at 6 (stating that "[j]ust as block billing can improperly result in increased billing, billing separately to take advantage of the inherent overstatement of billing in tenths of an hour when less than 6, 12, or 18 minutes (for example) is spent on any individual task, can result in significant overbilling."). More precise billing entries may have not resulted in as great a reduction in the hours for which compensation is warranted at counsel's rate but the Court could only work with the information it was provided.
Counsel has not provided any example of a court finding his $475 per hour rate reasonable. In his most recent submission, counsel cites Jama v. Esmor Correctional Services, Inc., Civ. No. 97-3093, 2007 WL 4166016 (D.N.J. Nov. 20, 2007), where the Court found that Metropolitan New Jersey billing rates were $600/hour for a partner and $335/hour for an associate. (Hoffman 2d Ltr.) Class counsel argues that his hourly rate is only $7.50 above the "blended" hourly rate of $467.50, which he defines as the average of the partner and senior associate billing rates referenced in Jama. (Id.) Even if this average rate were appropriate for class counsel's legal work, the Court notes that the paralegal work in Jama was valued at $200 per hour. If the Court were to apply that paralegal rate to the non-legal tasks class counsel performed, the resulting lodestar would be lower.
The Court has already determined that a percentage-of-recovery of ten percent, or $54,194, is appropriate in this case. Dividing that figure by the adjusted lodestar of $53,805.63 results in a lodestar multiplier of 1.01, which is consistent with the multiplier in the comparable consumer fraud cases discussed earlier. See In re Ky. Grilled Chicken, 280 F.R.D. 364 (0.93 multiplier); Hartless, 273 F.R.D. 630 (0.95 multiplier); Horton, 2008 WL 323222 (1.03 multiplier). The lodestar cross-check thus confirms that a fee award of $54,194 as calculated under the percentage-of-recovery method is appropriate.
This multiplier is lower than that in Kelly, but there, class counsel invested over 1,100 hours in litigating the consumer protection claims and obtained a settlement for the class which provided some members with up to 300% of the Product's retail price.
F. Incentive Award to Class Representative Plaintiff
Under the settlement agreement, Defendant has agreed to pay Plaintiff an incentive award of $2,500. (Revised Settlement § 7.) Such a payment, however, is subject to court approval. Bernhard v. TD Bank, N.A., Civ. No. 08-4392, 2009 WL 3233541, at *2 (D.N.J. Oct. 5, 2009). Incentive awards are "not uncommon in class action litigation and particularly where, as here, a common fund has been created for the benefit of the entire class." Cullen v. Whitman Med. Corp., 197 F.R.D. 136, 145 (E.D. Pa. 2000) (internal quotation marks and citation omitted); accord Sullivan, 667 F.3d at 333 n. 65. This is because plaintiffs who serve as the representatives provide assistance and incur risks during the litigation not imposed upon any other putative class member. Id. Incentive awards are "important to compensate plaintiffs for the time and effort expended in assisting the prosecution of the litigation, the risks incurred by becoming and continuing as a litigant, and any other burdens sustained by the plaintiff." O'Connor v. A.R. Res., Inc., Civ. No. 08-1703, 2012 WL 12743, at *9 (D. Conn. Jan. 4, 2012) (quoting Castagna v. Madison Square Garden, L.P., Civ. No. 09-10211, 2011 WL 2208614, at *8 (S.D.N.Y. June 7, 2011)); accord Sullivan, 667 F.3d at 333 n. 65.
The award requested here is consistent with the range of awards made in similar cases. See e.g., In re Kentucky Grilled Chicken, 208 F.R.D. at 383 (awarding $25,000 in the aggregate to five class representatives in a consumer fraud case); Kelly, 277 F.R.D. at 572 (awarding $3,000 to named Plaintiffs in consumer fraud matter concerning health products); Varacallo v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207, 259 (D.N.J. 2005) (awarding $10,000 to lead plaintiffs closely involved in case preparation and $3,000 and $1,000 respectively to two other plaintiffs who were less involved in the class action litigation brought by insureds against their insurer for improper marketing, selling, servicing and administering practices). Furthermore, Plaintiff actively participated in this litigation by reviewing the Complaint and Amended Complaint, examining the settlement agreement as well as other related documents, and regularly engaging in conferences with counsel concerning this litigation. (O'Brien Decl.) Class counsel's bill reflects nine dates Plaintiff conferred with counsel. (Hoffman Supp. Fee Decl.) Moreover, Plaintiff avers that she spent approximately twenty hours of time in connection with this litigation. (O'Brien Decl.) Consequently, the Court finds the incentive award in this case reasonable and appropriate.
G. Expenses
No evidence of expenses has been presented for reimbursement, and therefore none will be awarded.
IV. CONCLUSION
For the reasons stated herein, the motion for final approval of the settlement class and class settlement is granted; the amount of $54,194 shall be awarded as fees to class counsel; and $2,500 shall be awarded to class representative Plaintiff Frances O'Brien.
A judgment consistent with this Opinion will be issued.
s/ Patty Shwartz
UNITED STATES MAGISTRATE JUDGE Date: August 8x, 2012