Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-16038/USCOURTS-ca9-12-16038-0/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE ONLINE DVD-RENTAL

ANTITRUST LITIGATION,

ANDREA RESNICK; BRYAN

EASTMAN; AMY LATHAM; MELANIE

MISCIOSCIA; STAN MAGEE;

MICHAEL OROZCO; LISA SIVEK;

MICHAEL WIENER,

Plaintiffs-Appellees,

v.

THEODORE H. FRANK,

Objector-Appellant,

v.

NETFLIX, INC.; WAL-MART STORES,

INC.; WALMART.COM USA LLC,

Defendants-Appellees.

No. 12-15705

D.C. No.

4:09-md-02029-

PJH

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2 IN RE ONLINE DVD RENTAL ANTITRUST LITIG.

IN RE ONLINE DVD-RENTAL

ANTITRUST LITIGATION,

ANDREA RESNICK; BRYAN

EASTMAN; AMY LATHAM; MELANIE

MISCIOSCIA; STAN MAGEE;

MICHAEL OROZCO; LISA SIVEK;

MICHAEL WIENER,

Plaintiffs-Appellees,

v.

JON M. ZIMMERMAN,

Objector-Appellant,

v.

NETFLIX, INC.; WAL-MART STORES,

INC.; WALMART.COM USA LLC,

Defendants-Appellees.

No. 12-15889

D.C. No.

4:09-md-02029-

PJH

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 3

IN RE ONLINE DVD-RENTAL

ANTITRUST LITIGATION,

ANDREA RESNICK; BRYAN

EASTMAN; AMY LATHAM; MELANIE

MISCIOSCIA; STAN MAGEE;

MICHAEL OROZCO; LISA SIVEK;

MICHAEL WIENER,

Plaintiffs-Appellees,

v.

EDMUND F. BANDAS,

Objector-Appellant,

v.

NETFLIX, INC.; WAL-MART STORES,

INC.; WALMART.COM USA LLC,

Defendants-Appellees.

No. 12-15957

D.C. No.

4:09-md-02029-

PJH

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4 IN RE ONLINE DVD RENTAL ANTITRUST LITIG.

IN RE ONLINE DVD-RENTAL

ANTITRUST LITIGATION,

ANDREA RESNICK; BRYAN

EASTMAN; AMY LATHAM; MELANIE

MISCIOSCIA; STAN MAGEE;

MICHAEL OROZCO; LISA SIVEK;

MICHAEL WIENER,

Plaintiffs-Appellees,

v.

MARIA COPE,

Objector-Appellant,

v.

NETFLIX, INC.; WAL-MART STORES,

INC.; WALMART.COM USA LLC,

Defendants-Appellees.

No. 12-15996

D.C. No.

4:09-md-02029-

PJH

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 5

IN RE ONLINE DVD-RENTAL

ANTITRUST LITIGATION,

ANDREA RESNICK; BRYAN

EASTMAN; AMY LATHAM; MELANIE

MISCIOSCIA; STAN MAGEE;

MICHAEL OROZCO; LISA SIVEK;

MICHAEL WIENER,

Plaintiffs-Appellees,

v.

JOHN SULLIVAN,

Objector-Appellant,

v.

NETFLIX, INC.; WAL-MART STORES,

INC.; WALMART.COM USA LLC,

Defendants-Appellees.

No. 12-16010

D.C. No.

4:09-md-02029-

PJH

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6 IN RE ONLINE DVD RENTAL ANTITRUST LITIG.

IN RE ONLINE DVD-RENTAL

ANTITRUST LITIGATION,

ANDREA RESNICK; BRYAN

EASTMAN; AMY LATHAM; MELANIE

MISCIOSCIA; STAN MAGEE;

MICHAEL OROZCO; LISA SIVEK;

MICHAEL WIENER,

Plaintiffs-Appellees,

v.

TRACEY KLINGE COX,

Objector-Appellant,

v.

NETFLIX, INC.; WAL-MART STORES,

INC.; WALMART.COM USA LLC,

Defendants-Appellees.

No. 12-16038

D.C. No.

4:09-md-02029-

PJH

OPINION

Appeal from the United States District Court

for the Northern District of California

Phyllis J. Hamilton, District Judge, Presiding

Argued and Submitted

February 13, 2014—San Francisco, California

Filed February 27, 2015

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 7

Before: Sidney R. Thomas, Chief Judge, Stephen

Reinhardt, Circuit Judge, and Lloyd D. George, Senior

District Judge.*

Opinion by Chief Judge Thomas

SUMMARY**

Settlement

The panel affirmed the district court’s approval of a

settlement between Walmart and a class of Netflix DVD

subscribers in a class action challenging as anti-competitive

an agreement under which Netflix and Walmart divided up

DVD-related business.

In the settlement agreement, Walmart agreed to pay a

total amount of $27,250,000, comprising both a “Cash

Component” and a “Gift Card Component.” 

The panel held that the district court did not abuse its

discretion in certifying the settlement class under Fed. R.

Civ. P. 23(a) and (b). The panel concluded that the class

representatives were adequate even though they received

incentive awards.

* The Honorable Lloyd D. George, Senior District Judge for the U.S.

District Court for the District of Nevada, sitting by designation.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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The panel concluded that, even though few class members

actually filed claims, the district court did not err in using the

claimant fund sharing approach, whereby each class member

who submits a claim receives an equal share of the settlement

fund, regardless of the harm he or she suffered. 

The panel concluded that the district court’s notice of

settlement did not violate either Rule 23 or due process.

The panel held that the district court did not err in

approving the settlement as fair, reasonable, and adequate

under Rule 23(e). The panel rejected arguments that the

incentive awards were unreasonably large, that a reverter

provision and a confidential opt-out provision were unfair,

and that the district court failed adequately to explain its

decision.

The panel held that the district court did not err in

awarding attorneys’ fees of 25% of the overall settlement

fund under Rule 23(h). The panel held that the fee award was

not subject to provisions of the Class Action Fairness Act

governing “coupon settlements” because the portion of the

settlement to be paid in Walmart gift cards was not a “coupon

settlement” within the meaning of CAFA. In addition, the

district court provided adequate notice to the class of the

attorneys’ fee petition and provided an adequate explanation

of its rationale.

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 9

COUNSEL

Theodore H. Frank (argued), Center for Class Action

Fairness, Washington, D.C.; Gary Sibley, Dallas, Texas;

Joseph Darrell Palmer, Law Offices of Darrell Palmer PC,

Solana Beach, California; Christopher A. Bandas, Bandas

Law Firm, P.C., Corpus Christi, Texas; Christopher V.

Langone and Grenville Pridham, Law Office of Christopher

Langone, Ithaca, New York; Joshua R. Furman (argued),

Joshua R. Furman Law Corp., Los Angeles, California, for

Objector-Appellants Frank, Cope, Cox, Bandas, Sullivan, and

Zimmerman.

Todd A. Seaver, (argued), Joseph J. Tabacco, Jr., and

Christopher T. Heffelfinger, Berman DeValerio, San

Francisco, California, for Plaintiffs-Appellees.

OPINION

THOMAS, Chief Judge:

In this appeal, class members challenge the district court’s

approval of a settlement between Walmart1and a class of

Netflix DVD subscribers arguing, among other matters, that

the gift card portion of the settlement constituted a coupon

settlement within the meaning of the Class Action Fairness

Act (“CAFA”), Pub. L. No. 109–2, 119 Stat. 4 (2005). We

hold that the settlement was fair and that the fee award was

proper, and we affirm the district court.

1 For ease of reference, “Wal-Mart Stores, Inc.” and “walmart.com USA

LLC” shall be collectively referred to as “Walmart” throughout this

opinion.

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I

Before its focus changed to streaming video, Netflix’s

primary business was renting DVDs to subscribers online and

shipping them out bymail. Other companies, including retail

giant Walmart, tried to compete. Netflix reached an

agreement with Walmart that divided up DVD-related

business between the two companies. Under the agreement,

Netflix stopped selling DVDs, and focused solely on its DVD

rental business. In return, Walmart wound down its own

burgeoning online rental service, but continued to act as a

major DVD seller.

In 2009, Andrea Resnick and seven other class

representatives (“plaintiffs”) filed a consolidated amended

class action complaint against Netflix and Walmart,

challenging the agreement as anti-competitive. Plaintiffs

assert that as a result of the agreement and Walmart’s

subsequent departure from the rental business, Netflix

charged its customers unfairly high monthly subscription

prices.

The district court granted plaintiffs’ motion for

certification of a litigation class of Netflix subscribers. The

court denied approval of an initial settlement agreement

between Walmart and a global class of both Netflix

subscribers and subscribers to Blockbuster’s online DVD

rental service. However, a class of just Netflix subscribers

then reached a settlement agreement with Walmart. The

court conditionally approved the Netflix settlement class and

also gave preliminary approval of the settlement, and the

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 11

form and plan of notice. The court denied a renewed motion

by Netflix to decertify the Netflix litigation class.2

In the settlement agreement, Walmart agreed to pay a

total amount of $27,250,000, comprising both a “Cash

Component” and a “Gift Card Component,” in exchange for

dismissal with prejudice of all claims asserted in the

complaint. The class consists of:

any person or entity residing in the United

States or Puerto Rico that paid a subscription

fee to rent DVDs online from Netflix on or

after May 19, 2005, up to and including the

date the Court grants Preliminary Approval of

the Settlement, or some other date to be

agreed to by the parties to this Agreement.3

The Cash Component funded attorneys’ fees and expenses,

costs of notice and administration, and incentive payments to

class representatives. The amount remaining constituted the

Gift Card Component and was used to provide class members

with either gift cards or, if they so chose, the cash equivalent

of a gift card. The gift card could only be used at the

Walmart website and was freely transferrable, although it

could not be resold. To receive payment, a class member was

required to submit a claim form. A claimant could submit a

2 Netflix had alleged that Plaintiffs’ lead counsel, Robert G. Abrams,

had a conflict of interest because he had moved to a new firm, Baker &

Hostetler, LLP, that represents Walmart on other, unrelated matters.

3 The court chose an ending date for the class (i.e., a person who

subscribes to Netflix after the ending date is not a class member) of

September 2, 2011.

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12 IN RE ONLINE DVD RENTAL ANTITRUST LITIG.

claim for a gift card via e-mail, the class action website, or

regular mail. A claimant could submit a claim for cash by

regular mail only, and had to include the last four digits of his

or her Social Security Number. Each claimant received an

equal share of the Gift Card Component. In other words, the

Gift Card Component (the amountremaining after subtracting

attorneys’ fees and expenses, notice and administration costs,

and incentive payments) was split evenly among all valid

claimants, regardless of the specific damages each individual

claimant incurred.

Initial e-mail notice of the settlement was provided to

some 35 million class members. Notice was mailed to more

than 9 million class members whose email addresses were

invalid such that the email notice “bounced back.” The

notice informed class members about the settlement and

claims-submission process; stated that class counsel would

seek $1.7 million in reimbursement of litigation expenses and

fees of 25% of the total settlement fund of $27,250,000 and

that Class Representatives would receive $5,000 each in

incentive payments; it also set a deadline for filing a claim,

leaving the class, or objecting to the settlement of February

14, 2012. The notice encouraged class members to visit the

class website for more details. In response to the notice,

1,183,444 claims were submitted. 744,202 requests were for

gift cards and 434,253 were for the equivalent value in cash. 

722 class members opted out of the class and 30 lodged

objections.

The appellants in this consolidated appeal, members of

the proposed class, all objected to the settlement. At a March

14, 2012 fairness hearing and in the accompanying March 29,

2012 orders, the court gave final approval to the settlement

and settlement class and awarded attorneys’ fees. The judge

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 13

rejected all objections, concluding that not “one objection

was sufficient [] – singular or in the aggregate – to preclude

[her] from approving this settlement.” The court determined

that CAFA’s coupon-settlement provisions should not apply

because the Walmart gift cards were sufficiently different

from coupons–especially given the fact that claimants could

choose between gift cards and cash, the gift cards were freely

transferrable, and they had no expiration date.

The court concluded the attorneys’ fees were properly

calculated as 25% of the settlement fund, including

administration and notice costs. It decided the percentage

amount was fair, especially given that the alternative lodestar

calculation would have resulted in attorneys’ fees three times

larger than the amount class counsel requested. The court

approved attorneys’ fees of $6,812,500 (25% of the total fund

of $27,250,000), reimbursement of some litigation expenses

totaling $1,700,000, incentive awards of $5,000 each for nine

class representatives (totaling $45,000), and payment of

notice and administration costs out of the fund. 

Administration and notice costs totaled roughly $4.5 million,

leaving roughly $14.1 million in the settlement fund for the

Gift Card Component. Divided among almost 1.2 million

claims, the Gift Card Component will provide claimants with

roughly $12 each.4

4 Prior to final approval of the Walmart settlement, but after preliminary

approval and after the initial notice was e-mailed to class members, the

court granted Netflix’s motion for summary judgment on November 23,

2011. The settlement website was updated to reflect the court’s decision

to grant Netflix’s summary judgment motion. The version of the notice

that was subsequently mailed to class members who did not receive an

email was also updated.

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Following the court’s approval of the settlement, six

objectors, Theodore Frank, Tracey Klinge Cox, Maria Cope,

Edmund F. Bandas, John Sullivan, and Jon M. Zimmerman

(“Objectors”), timely appealed and their cases were

consolidated.

We have jurisdiction under 28 U.S.C. § 1291. We review

a district court’s decision to approve a class action settlement

“for clear abuse of discretion.” In re Bluetooth Headset

Prods. Liab. Litig., 654 F.3d 935, 940 (9th Cir. 2011) (citing

Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 963 (9th Cir.

2009)). Similarly, we review a court’s “award of fees and

costs to class counsel, as well as its method of calculation”

for abuse of discretion. Id. (citing Lobatz v. U.S. W. Cellular

of Cal., Inc., 222 F.3d 1142, 1148–49 (9th Cir. 2000)). We

review a court’s “order on class certification for an abuse of

discretion,” as well. Parra v. Bashas’, Inc., 536 F.3d 975,

977 (9th Cir. 2008).

II

The district court did not abuse its discretion in certifying

the settlement class. In Amchem Products, Inc. v. Windsor,

521 U.S. 591, 620–21 (1997), the Supreme Court clarified the

difference between certifying a litigation class under Federal

Rule of Civil Procedure 23(a) and (b) and certifying a

settlement class under Rule 23(e). The Court noted that Rule

23(e) “was designed to function as an additional requirement,

not a superseding direction, for the ‘class action’ to which

Rule 23(e) refers is one qualified for certification under Rule

23(a) and (b).” Id. Thus, just because a settlement appears

to be fair, reasonable, and adequate under Rule 23(e) does not

mean a class has met the certification requirements of Rule

23(a) and (b). Id. at 621 (“[I]f a fairness inquiry under Rule

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 15

23(e) controlled certification, eclipsing Rules 23(a) and (b),

and permitting class designation despite the impossibility of

litigation, both class counsel and court would be disarmed.”). 

Here, the district court certified the settlement class of Netflix

subscribers pursuant to Rules 23(a) and (b)(3).

We have observed that “[e]xamination of potential

conflicts of interest has long been an important prerequisite

to class certification” and “is especially critical when the a

[sic] class settlement is tendered along with a motion for class

certification.” Hanlon v. Chrysler Corp., 150 F.3d 1011,

1020 (9th Cir. 1998). However, we do not “favor denial of

class certification on the basis of speculative conflicts.” 

Cummings v. Connell, 316 F.3d 886, 896 (9th Cir. 2003). 

Nor does a district court abuse its discretion when conflicts

are trivial. Abbott v. Lockheed Martin Corp., 725 F.3d 803,

813 (7th Cir. 2013). “Only conflicts that are fundamental to

the suit and that go to the heart of the litigation prevent a

plaintiff from meeting the Rule 23(a)(4) adequacy

requirement.” 1 William B. Rubenstein et al., Newberg on

Class Actions § 3.58 (5th ed. 2011). A conflict is

fundamental when it goes to the specific issues in

controversy. Id.

Cox argues the district court certified a class in violation

of Rule 23(a), because the class representatives are not able

to adequately represent the class. Relying on Dewey v.

Volkswagen Aktiengesellschaft, 681 F.3d 170, 187–89 (3d

Cir. 2012), Cox argues the representatives are not capable of

adequately representing the class because the nine class

representatives’ awards under the settlement, at $5,000 each,

are significantly larger than the $12 each unnamed class

member will receive. Cox argues that, like in Dewey, there

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is an arbitrary line drawn in this case between class

representatives and all other class members.

However, incentive awards that are intended to

compensate class representatives for work undertaken on

behalf of a class “are fairly typical in class action cases.” 

Rodriguez, 563 F.3d at 958. Incentive payments to class

representatives do not, by themselves, create an

impermissible conflict between class members and their

representatives. Cobell v. Salazar, 679 F.3d 909, 922, (D.C.

Cir. 2012); White v. Nat'l Football League, 41 F.3d 402, 408

(8th Cir. 1994), abrogated on other grounds by Amchem

Prods. v. Windsor, 521 U.S. 591 (1997). Rather,

“[r]esolution of two questions determines legal adequacy:

(1) do the named plaintiffs and their counsel have any

conflicts of interest with other class members and (2) will the

named plaintiffs and their counsel prosecute the action

vigorously on behalf of the class?” Hanlon, 150 F.3d at

1020. As to the latter question, “[t]he relevant inquiry is

whether the plaintiffs maintain a sufficient interest in, and

nexus with, the class so as to ensure vigorous representation.” 

Roper v. Consurve, Inc., 578 F.2d 1106, 1112 (5th Cir. 1978).

Here, as in Hanlon, there were no structural differences

in the claims of the class representatives and the other class

members. Hanlon, 150 F.3d at 1021. This case does not

involve an ex ante incentive agreement between the class

representatives and class counsel, which we criticized in

Rodriguez, 563 F.3d at 958–60. Nor does it involve a

settlement which explicitly conditioned the incentive awards

on the class representatives’ support for the settlement, as

was the case in Radcliffe v. Experian Information Solutions

Inc., 715 F.3d 1157, 1164 (9th Cir. 2013). In this case, as in

Cobell, the class settlement agreement provided no guarantee

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IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 17

that the class representatives would receive incentive

payments, leaving that decision to later discretion of the

district court. Cobell, 679 F.3d at 922. The amount sought

and awarded was relatively small, well within the usual

norms of “modest compensation” paid to class representatives

for services performed in the class action. Phillips v. Asset

Acceptance, LLC, 736 F.3d 1076, 1080 (7th Cir. 2013). 

Indeed, we approved an identical incentive fee in In re Mego

Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir. 2000). 

Thus, the district court did not abuse its discretion in

certifying the settlement class.

Dewey is not to the contrary. The settlement in that case

was structured far differently than in this case. Id. at 187. 

The class in Dewey was split up into two groups: a

reimbursement group and a residual group. Id. All of the

class representatives were in the reimbursement group. As a

result, the class representatives were apt to favor the

reimbursement group’s interests over the residual group’s,

which the court held was an impermissible conflict under

Rule 23(a). Id. This case involved only one settlement class,

with no subclasses. Each class member was entitled to the

same distribution, so the class representatives had no

incentive to favor one subclass over another. In short, this

case does not involve the intra-class structural conflict that

concerned the court in Dewey. Indeed, read properly, in its

extensive discussion of what conflicts are “fundamental,”

Dewey supports our conclusion that there was no fundamental

conflict between the class representatives and class members

that would prevent settlement class certification. Therefore,

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the district court did not abuse its discretion in certifying the

settlement class.5

III

The district court did not err in approving the settlement. 

We have previously recognized that settlements in class

actions “present unique due process concerns for absent class

members,” including the risk that class counsel “may collude

with the defendants.” In re Bluetooth Headset Prods. Liab.

Litig., 654 F.3d at 946 (internal quotation marks omitted).

To guard against these dangers, Federal Rule of Civil

Procedure 23(e) “requires court approval of all class action

settlements, which may be granted only after a fairness

hearing and a determination that the settlement taken as a

whole is fair, reasonable, and adequate.” Id. at 946. To

assess the fairness of a settlement, we look to the eight

Churchill factors, including:

(1) the strength of the plaintiff’s case; (2) the

risk, expense, complexity, and likely duration

of further litigation; (3) the risk of

maintaining class action status throughout the

trial; (4) the amount offered in settlement;

(5) the extent of discovery completed and the

stage of the proceedings; (6) the experience

5

Incorporating Frank’s arguments regarding the attorneys’ fees in this

case, Cox also claims class counsel “over-inflated their own fee award at

the expense of unnamed class members,” thereby creating a conflict of

interest that bars certification. Because we reject Frank’s arguments that

the attorneys’ fees in this case are unreasonable or over-inflated, infra, we

also reject Cox’s arguments that their fee request presents a conflict of

interest.

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and view of counsel; (7) the presence of a

governmental participant; and (8) the reaction

of the class members of the proposed

settlement.

Id. (quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d

566, 575 (9th Cir. 2004)); see also Torrisi v. Tucson Elec.

Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993).6“Our review

of the district court’s decision to approve a class action

settlement is extremely limited. It is the settlement taken as

a whole, rather than the individual component parts, that must

be examined for overall fitness.” Hanlon, 150 F.3d at 1026

(internal citation omitted). Keeping this standard in mind, we

6 Settlements in which the settlement agreement is negotiated prior to

formal class certification require “an even higher level of scrutiny.” In re

Bluetooth Headset Prods. Liab. Litig., 654 F.3d at 946. Here, the court

gave preliminary certification of the settlement class after the settlement

agreement had been reached, and final approval did not occur until the

court’s March 29, 2012 order. Unlike in In re Bluetooth, however, the

court did certify a Netflix litigation class in the action against both Netflix

and Walmart before a settlement was reached. See In re Bluetooth

Headset Prods. Liab. Litig., 654 F.3d at 939 (noting that “before any

motion was made to certify a class for merits purposes,” the parties

reached a settlement agreement); see also William B. Rubenstein,

Newberg on Class Actions § 11:27 (4th ed. 2002) (“The Manual [of

Complex Litigation] also notes that approval under Rule 23(e) of

settlements involving settlement classes, however, requires closer judicial

scrutiny than approval of settlements where class certification has been

litigated.”). The litigation and settlement classes in this case are

substantially the same. Thus, since the district court did not apply any

heightened scrutiny, and since the parties have not raised this issue on

appeal, we assume, without deciding, that the heightened scrutiny in In re

Bluetooth does not apply here. See Rodriguez, 563 F.3d at 963–64

(applying the eight Churchillfactors, but not heightened scrutiny, in a case

in which settlement negotiations came after certification of a litigation

class but before certification of a settlement class).

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review Objectors’ various challenges to the district court’s

decision to approve the settlement agreement.

A

The district court did not err in using the claimant fund

mechanism. Zimmerman argues that because so few class

members actually filed claims, the settlement should not have

used the claimant fund sharing approach—whereby each

class member who submits a claim receives an equal share of

the settlement fund, regardless of the harm he or she suffered. 

Labeling claimant fund sharing a type of fluid recovery,

Zimmerman argues that both state and federal courts disfavor

fluid recovery distribution methods, especially when only a

small proportion of class members participate. See

Democratic Cent. Comm. of the Dist. of Columbia v.

Washington Metro. Area Transit Comm’n, 84 F.3d 451, 455

n.2 (D.C. Cir. 1996) (“Implementing fluid recovery . . . in

federal class actions is controversial.”); see also State v. Levi

Strauss & Co., 41 Cal. 3d 460, 476 (Cal. 1986) (“Hence, the

advantages of claimant fund sharing can only be realized

where a large proportion of class members participate and

submit accurate claims.”).

The district court did not abuse its discretion in approving

this claimant-fund-sharing settlement. First, we are careful

not to conflate the concepts of “claimant fund approach” and

“fluid recovery.” Indeed, we have previously used “fluid

recovery” interchangeably with “cy pres” distributions to

describe a distribution that confers an indirect benefit on class

members. Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th

Cir. 2012) (“A cy pres remedy, sometimes called ‘fluid

recovery,’ is a settlement structure wherein class members

receive an indirect benefit (usually through defendant

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donations to a third party) rather than a direct monetary

payment.” (internal citation omitted)). The claimant fund

approach in this case, however, provides direct compensation

to class members.

Zimmerman cites the California Supreme Court, which

has called claimant fund sharing one “method[] of fluid

recovery” and has noted that claimant fund sharing is unique

among fluid recovery methods because it provides actual

compensatory benefits to class members. Levi Strauss &Co.,

41 Cal. 3d at 476 (explaining that claimant fund sharing “uses

the entire class recovery to provide monetary compensation

to individual class members”). Nevertheless, Zimmerman

does not cite any binding or persuasive federal authority for

the proposition that claimant fund sharing is prohibited when

only a small number of class members file settlement claims. 

In Six (6) Mexican Workers v. Arizona Citrus Growers, we

noted that settlements have been approved where less than

five percent of class members file claims. 904 F.2d 1301,

1306 (9th Cir. 1990).

Moreover, we have employed similar methodology in

other cases. See, e.g., Dennis v. Kellogg Co., 697 F.3d 858,

862–63, 868 (9th Cir. 2012) (rejecting a settlement because

the cy pres portion of the award lacked specificity; another

part of the settlement fund was distributed to claimants who

submitted claims and not to silent class members). Finally,

because this case involves a settlement agreement with a class

of plaintiffs who were allegedly harmed by paying

excessively high Netflix subscription prices, the concerns we

have raised before regarding fluid recoveryare not implicated

here. See Six (6) Mexican Workers, 904 F.2d at 1306 (noting,

following a class action antitrust case tried to a judge, that the

Second and Ninth Circuit’s concerns over fluid recovery

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involve “the impermissible circumvention of individual proof

requirements” rather than the allocation of unclaimed

damages). The district court did not abuse its discretion in

employing the claimant fund mechanism.

B

The district court’s notice of the settlement did not violate

either Federal Rule of Civil Procedure 23 or due process. 

Federal Rule of Civil Procedure 23(e)(1) requires a court to

“direct notice [of a proposed settlement] in a reasonable

manner to all [settlement] class members who would be

bound by the proposal.” Rule 23(e) requires notice that

describes “the terms of the settlement in sufficient detail to

alert those with adverse viewpoints to investigate and to come

forward and be heard.” Lane, 696 F.3d at 826 (internal

quotation marks omitted). However, Rule 23(e) “does not

require detailed analysis of the statutes or causes of action

forming the basis for the plaintiff class’s claims, and it does

not require an estimate of the potential value of those claims.” 

Id.

Objectors argue that the notice provided in this settlement

to class members violated Rule 23 and class members’ due

process rights. See Mendoza v. Tucson School Dist. No. 1,

623 F.2d 1338, 1350–51 (9th Cir. 1980) (“Although [Rule

23(e)] accords a wide discretion to the District Court as to the

form and content of the notice, due process requires its

presence and constitutional adequacy.”). We review “de

novo whether notice of a proposed settlement satisfies due

process.” Torrisi, 8 F.3d at 1374.

Cope and Bandas argue that the notice was deficient for

failing to provide an estimate as to how much of an award

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each claimant would receive, not disclosing what cost an

average claimant had incurred due to the anti-competitive

conduct at issue, neglecting to state the fact that

administration costs would be deducted from the settlement

fund, and not revealing that, according to Cope and Bandas,

state class attorneys could claim fees from the settlement fund

that would further reduce the amount available to class

members and drive the attorneys’ fees request over 25%. 

Sullivan contends that the dual notice provided to class

members—including both information regarding the ongoing

Netflix litigation and the settlement with Walmart—was

misleading and constitutionally and statutorily deficient.

The notice provided in this settlement, in both mail and email form, was sufficient under the Constitution and Rule

23(e). First, none of the cases Objectors cite require the level

of specificity they claim is needed. Indeed, as we made clear

in Lane, Rule 23(e) requires sufficient detail simply “to alert

those with adverse viewpoints to investigate and to come

forward and be heard.” Lane, 696 F.3d at 826 (internal

quotation marks omitted); see also Rodriguez, 563 F.3d at

962 (holding that a notice contained “adequate information”

when it did not exaggerate class representative support for the

settlement and described “the aggregate amount of the

settlement fund and the plan for allocation”). Here, the notice

meets the requirements articulated in Lane and Rodriguez. 

The email notice provides simple and straightforward

information about the class action, about the status of the

cases against both Netflix and Walmart, about what action

class members may take in either case, and about the

uncertain nature of the Netflix litigation and the need to check

the website for more detail. Most importantly, the notice

states the amount of the settlement fund with Walmart, the

amount class counsel will seek in fees, litigation expenses,

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and incentive awards, the fact that class counsel will seek

payment for other costs from the fund, the fact that class

members will need to submit a claim to obtain relief, an

internet link and phone number to obtain a claim form, and

the deadline for objecting or submitting a claim. The mail

form is substantially the same. The e-mail and mail notices,

which did not need to and could not provide an exact forecast

of how much each class member would receive, gave class

members enough information so that those with “adverse

viewpoints” could investigate and “come forward and be

heard.” Lane, 696 F.3d at 826.

To the extent Cope and Bandas argue the notice fails to

inform class members of the possibility that state class

counsel will request attorneys’ fees, in addition to the 25% in

the fee request in this case, the district court was within its

discretion to reject that argument. Paragraph 13.2 of the

Settlement Agreement clarifies that state attorneys’ fees and

other costs will come from the fees requested pursuant to

Paragraph 6.1.1.1. And, pursuant to Paragraph 6.1.1.1, class

counsel requested attorneys’ fees totaling 25% of the

settlement fund. Class counsel made clear at the fairness

hearing that any fee request from state class counsel would

come from the fee award granted in this case. The court did

not abuse its discretion in interpreting Paragraph 13.2 as class

counsel recommended.

Finally, we disagree with Sullivan that notice was

deficient because class members received information about

both the Netflix and Walmart cases in one notice and because

the e-mail did not include information about the district

court’s decision to grant summary judgment for the defendant

in the Netflix case. While it is true that the initial e-mail

notice came out shortly before the summary judgment

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decision but did not forecast it, the notice sent by regular mail

was promptly updated, and the website was too. The notice

in this case was not perfect, but the court did not abuse its

discretion in approving the notice plan and ultimately

approving the settlement.

C

The district court did not err in approving the settlement

as fair, reasonable, and adequate. As noted above, we

consider the eight Churchill factors when assessing whether

a settlement is fair, reasonable, and adequate under Federal

Rule of Civil Procedure 23(e). In re Bluetooth Headset

Prods. Liab. Litig., 654 F.3d at 946. Cox points to specific

provisions in the agreement to argue that the settlement was

not fair, reasonable, and adequate, and she contends that the

district court failed to adequately explain its decision. We

consider each argument in turn.

1

Cox argues the incentive awards in this case—$5,000 for

each of nine class representatives—were unreasonably large

and thus unfair. Cox cites to Staton v. Boeing, Co., 327 F.3d

938 (9th Cir. 2003),with the $12 each claimant will receive. 

But Staton does not support her argument. In Staton, we

reversed in part due to incentive awards that averaged

$30,000 for 29 class representatives, totaling $890,000. 

Staton, 327 F.3d at 976–77. Thus, the average incentive

award was 30 times the $1000 that unnamed class members

received. Id. at 948–49, 976–77. More importantly, the

incentive payments as a whole made up roughly 6% of the

total settlement (estimated, on the large end, to be $14.8

million). Id. In contrasting the Staton facts with other cases

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and reversing because the Staton incentive awards were too

large, we looked to “the number of named plaintiffs receiving

incentive payments, the proportion of the payments relative

to the settlement amount, and the size of each payment.” Id.

at 977. In this case, nine class representatives receive $5,000,

totaling $45,000, while unnamed class members receive $12. 

While it is true that a $5,000 incentive award is roughly 417

times larger than the $12 individual award, we focused less

on that fact in Staton and more on the number of class

representatives, the average incentive award amount, and the

proportion of the total settlement that is spent on incentive

awards. Id. at 977. Here, incentive awards are $5,000, an

amount we said was reasonable in Staton. Id. at 976–77. 

$5,000 is considerably less than the average of $30,000 in

Staton. There are nine class representatives, compared with

the 29 in Staton. Id. Finally, the $45,000 in incentive awards

makes up a mere .17% of the total settlement fund of

$27,250,000, which is far less than the 6% of the settlement

fund in Staton that went to incentive awards. Id. at 948–49,

976–77. Thus, under Staton, the district court did not abuse

its discretion in approving the settlement awards, especially

considering its conclusion that the litigation was

“complicated” and took up quite a bit of the class

representatives’ time. Further, as we noted previously, we

approved an identical incentive fee in In re Mego Fin. Corp.

Sec. Litig., 213 F.3d at 463.

2

Cox also argues that two provisions in the settlement

agreement, a reverter provision that she alleges allows

Walmart to keep excess settlement funds and a confidential

opt-out provision that allows Walmart to leave the settlement

agreement at any time, make the agreement unfair. We

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disagree. One clause of the reverter provision, Paragraph

11.1.1, applies only if the settlement is not approved, so any

argument regarding that clause is moot. The other relevant

clause, Paragraph 11.1.4, allows a return of funds to Walmart

only if “Wal-Mart has transferred monies in excess of the

amount needed to pay” all costs and claims under the

settlement. The district court did not abuse its discretion in

deciding that these provisions do not allow for any improper

reversion of allocated settlement funds to Walmart. The optout provision, Paragraph 9.4, allows Walmart to opt out if a

certain percentage of class members opt out of the

settlement.7 Only the exact threshold, for practical reasons,

was kept confidential. And because the court has granted

final approval of the settlement, that threshold necessarilyhas

not been met and the court therefore did not abuse its

discretion in holding this issue was moot.

3

Finally, Cox argues the court abused its discretion by

failing to fully explain its decision under the Churchill

factors. Cox cites Linney v. Cellular Alaska Partnership,

151 F.3d 1234, 1242–43 (9th Cir. 1998) for the proposition

that the district court needed to provide a detailed explanation

of its decision to approve the settlement, along with a

response to objections, in a written order. Cox misreads

Linney. In that case, we stated instead that a court needs to

provide a reasoned explanation, along with a response to

objections, either in an order or somewhere else in the record. 

Linney, 151 F.3d at 1242–43. Moreover, it is important to

7 Class counsel argues Cox waived this argument by not raising it below. 

Since the district court did rule on it, however, we consider it on appeal. 

United States v. Northrop Corp., 59 F.3d 953, 957 n.2 (9th Cir. 1995).

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remember that our review of a fairness determination is

“‘extremely limited,’ and we will set aside that determination

only upon a ‘strong showing that the district court’s decision

was a clear abuse of discretion.’” Lane, 696 F.3d at 818

(quoting Hanlon, 150 F.3d at 1026–27).

Here, the district court did not abuse its discretion. At the

March 14, 2012 hearing, the judge considered many of the

objections to the settlement and explained her decision to

reject each of them. The record reflects that she considered

the Churchill factors, most importantly the class’s chance of

success if it continued to pursue litigation. Given her

decision in the corresponding Netflix case and the length and

complexity of the case thus far, she reasoned that the

settlement was fair in large part because it would provide

class members with their only chance at relief. In her March

29, 2012 written order, she provided additional reasoning,

explaining that the settlement was in the public interest and

followed vigorous arm’s length negotiation between both

sides of the litigation. She also listed the Churchill factors,

noting briefly that she had considered each, as is reflected in

the record. Between the order and the fairness hearing, the

court provided sufficient explanation for its decision and did

not abuse its considerable discretion in approving a

settlement. See Lane, 696 F.3d at 818.

IV

The district court did not err in approving the fee award. 

Plaintiffs’ class counsel asked for attorneys’ fees in the

amount of 25% of the overall settlement fund of $27,250,000

and the district court granted class counsels’ request. In

awarding attorneys’ fees under Federal Rule of Civil

Procedure 23(h), “courts have an independent obligation to

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ensure that the award, like the settlement itself, is

reasonable.” In re Bluetooth Headset Prods. Liab. Litig.,

654 F.3d at 941. In this circuit, there are two primary

methods to calculate attorneys fees: the lodestar method and

the percentage-of-recoverymethod. Id. at 941–42. Under the

percentage-of-recovery method, the attorneys’ fees equal

some percentage of the common settlement fund; in this

circuit, the benchmark percentage is 25%. Id. at 942. The

lodestar method requires “multiplying the number of hours

the prevailing party reasonably expended on the litigation (as

supported byadequate documentation) bya reasonable hourly

rate for the region and for the experience of the lawyer.” Id.

at 941.

While a district court has discretion in calculating fees, or

approving a fee request, we have held that a district court

“abuses that discretion when it uses a mechanical or

formulaic approach that results in an unreasonable reward.” 

In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 992

(9th Cir. 2010) (internal quotation marks omitted). One way

that a court may demonstrate that its use of a particular

method or the amount awarded is reasonable is by conducting

a cross-check using the other method. For example, a crosscheck using the lodestar method “can ‘confirm that a

percentage of recovery amount does not award counsel an

exorbitant hourly rate.’” In re Bluetooth Headset Prods. Liab.

Litig., 654 F.3d at 945 (quoting In re Gen. Motors Corp.

Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768,

821 n.40 (3d Cir. 1995)).

A

We first consider the argument, advanced by several

objectors, that the attorneys’ fee award must comply with

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provisions of CAFA governing “coupon settlements.” We

conclude the district court properly decided that the portion

of the settlement that will be paid in Walmart gift cards was

not a “coupon settlement” within the meaning of CAFA. 

CAFA directs courts to apply heightened scrutiny to coupon

settlements. 28 U.S.C. § 1712(e); see also In re HP Inkjet

Printer Litig., 716 F.3d 1173, 1178 (9th Cir. 2013) (citing

Synfuel Tech., Inc. v. DHL Express (USA), Inc., 463 F.3d 646,

654 (7th Cir. 2006) (“[W]e note that in that statute Congress

required heightened judicial scrutiny of coupon-based

settlements . . . .”)). Objectors’ primary reason for raising

CAFA is Section 1712’s requirement that “the portion of any

attorney’s fee award to class counsel that is attributable to the

award of the coupons shall be based on the value to class

members of the coupons that are redeemed.” 28 U.S.C.

§1712(a). In other words, Objectors contend that the

Walmart gift cards are coupons and fall under CAFA and, as

a result, the district court erred by calculating the fee award

as a percentage of the overall settlement fund, including the

total dollar value of the gift cards, instead of calculating the

portion of the fee award based on the gift cards as a

percentage of the gift cards that were actually redeemed.

The district court correctly held that the Walmart gift

cards in this settlement do not constitute a coupon settlement

that falls under the umbrella of CAFA.

8

In construing a

statute, we first determine whether the statutory language is

8 Frank argues that the issue of whether CAFA applies to the gift card

portion of the settlement is an issue of statutory interpretation that should

be reviewed de novo. Bush v. Cheaptickets, Inc., 425 F.3d 683, 686 (9th

Cir. 2005) (“As we consider CAFA’s requirements, we may review the

construction, interpretation, or applicability of a statute de novo.”). Even

under de novo review, we hold that CAFA does not apply.

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plain and unambiguous, examining not only the text, but “the

structure of the statute as a whole, including its object and

policy.” Children's Hosp. & Health Ctr. v. Belshe, 188 F.3d

1090, 1096 (9th Cir. 1999). If the plain language is

unambiguous, our inquiry is at an end. Carson Harbor Vill.,

Ltd. v. Unocal Corp., 270 F.3d 863, 877–78 (9th Cir. 2001)

(en banc).

Because Congress does not define the ambiguous term

“coupon” within the statute, see 28 U.S.C. § 1711; see also In

re EasySaver Rewards Litig., 921 F. Supp. 2d 1040, 1047

(S.D. Cal. 2013) (“[CAFA] does not define what constitutes

a ‘coupon.’”), “we may ‘look to other interpretive tools,

including the legislative history’ in order to determine the

statute’s best meaning.” In re HP Inkjet Printer Litig.,

716 F.3d at 1181 (quoting Exxon Mobil Corp. v. Allapattah

Servs., Inc., 545 U.S. 546, 567 (2005)). CAFA’s legislative

history, along with the decisions of district courts that have

considered the issue, convince us that these gift cards are not

coupons.

In CAFA’s findings and purposes, Congress emphasized

its concern about settlements when class members receive

little or no value, including settlements in which “counsel are

awarded large fees, while leaving class members with

coupons or other awards of little or no value.” Class Action

Fairness Act of 2005, Pub. L. No. 109-2, § 2, 119 Stat. 4

(2005). The Senate Judiciary Committee’s Report offers

more detail, stating that congressional hearings have exposed

class action settlements in which “class members receive

nothing more than promotional coupons to purchase more

products from the defendants.” S. Rep. No. 109-14, at 15

(2005). The report goes on to give twenty-nine examples of

problematic coupon settlements. Id. at 15–20. The report

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cites and criticizes coupon settlement awards that provide

class members with “$30 to $40 discounts” on a future cruise,

“a $5 to $10 voucher good for future purchases of particular

computer hardware or software products”, “$1 off every

subsequent $5 purchase” at a chain of restaurants, “a 30

percent discount on selected products” during a one-week

time period, $55 to use on a purchase of a new crib from a

defendant crib producer accused of making defective cribs,

“$1.25 off a $25 dollar [video] game”, and so on. Id. at

15–17.

The Walmart-Netflix settlement differs from the

settlements that drew the attention of Congress. Affording

over 1 million class members $12 in cash or $12 to spend at

a low-priced retailer does not leave them with “little or no

value.” The district court did not err when it stated simply

that “$12, while not a lot of money these days even at WalMart, is $12.” Moreover, this case is distinguishable from

every single coupon-settlement example in the Senate report. 

The report focuses on settlements that involve a

discount—frequently a small one—on class members’

purchases from the settling defendant. S. Rep. No. 109-14, at

15–20; see also True v. Am. Honda Motor Co., 749 F. Supp.

2d 1052, 1069 (C.D. Cal. 2010) (stating that $500 or $1000

rebates off the purchase of a new Honda or Acura vehicle are

coupons and quoting Fleury v. Richemont North America,

Inc., No. C-05-4525 EMC, 2008 WL 3287154, at *2 (N.D.

Cal. Aug. 6, 2008) for the proposition that coupons offer only

“‘a discount on another product or service offered by the

defendant in the lawsuit’”). These discounts require class

members to hand over more of their own money before they

can take advantage of the coupon, and they often are only

valid for select products or services. The gift cards in this

case are different. Instead of merely offering class members

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the chance to receive a percentage discount on a purchase of

a specific item or set of items at Walmart, the settlement

gives class members $12 to spend on any item carried on the

website of a giant, low-cost retailer. The class member need

not spend any of his or her own money and can choose from

a large number of potential items to purchase. Even if the gift

card is only worth $12, it gives class members considerably

more flexibility than any of the coupon settlements listed in

the Senate report.

District courts that have considered the issue have not

classified gift cards as coupon settlements falling under

CAFA. See Reibstein v. Rite Aid Corp., 761 F. Supp. 2d 241,

255–56 (E.D. Pa. 2011) (holding that $20 Rite Aid gift cards

with “actual cash value,” that will be mailed to “(mostly)

regular customers, have no expiration date, are freely

transferrable, and can be used for literally thousands of

products for which ordinary consumers . . . have need”, are

“more like ‘cash’ than ‘coupons’”)9; Fernandez v. Victoria

Secret Stores, LLC, No. CV 06-04149, 2008 WL 8150856, at

*2, *4–16 (C.D. Cal. Jul. 21, 2008) (approving a settlement

and attorneys’ fees award, outside the strictures of CAFA,

that provides class members with gift cards to Victoria’s

9 Frank attempts to distinguish Reibstein from this case by arguing the

gift cards in Reibsten, unlike in this case, “‘have actual cash value’ and

‘are freely transferrable.’” However, the Reibstein gift cards are not

significantly different than in this case. The Reibstein court clarifies,

elsewhere in the decision, that the Rite Aid gift cards are “‘notredeemable

for cash’” and simply that they are “freely transferrable.” Reibstein,

761 F. Supp. 2d at 246. Similarly, the gift cards in this settlement

agreement are “fully transferrable,” though they cannot be resold. Both

appear to be equally freely transferrable and, to the extent they have cash

value, it is because they are equal to a certain dollar amount and can be

spent on a variety of useful goods.

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Secret); Petersen v. Lowe’s HIW, Inc., Nos. C 11-01996 RS,

C 11-03231 RS, C 11-02193 RS (N.D. Cal. Aug. 24, 2012)

(approving a settlement and attorneys’ fees award, outside the

strictures of CAFA, that provides class members with $9 gift

cards to Lowe’s); see also In re Bisphenol-A (BPA)

Polycarbonate Plastic Prods. Liab. Litig., MDL No. 1967,

Master Case No. 08-1967, 2011 WL 1790603, at *2–4 (W.D.

Mo. 2011) (holding that a settlement that provides class

members with vouchers to obtain new products was not a

coupon settlement because the vouchers do not require class

members to spend their own money and do not require class

members to purchase the same or similar products as those

that gave rise to the litigation). Similar to the gift cards in

these cases, the Walmart gift cards can be used for any

products on walmart.com, are freely transferrable (though

they cannot be resold on a secondary market) and do not

expire, and do not require consumers to spend their own

money.

Our conclusion that the settlement does not constitute a

“coupon settlement” within the meaning of CAFA does not

conflict with the Seventh Circuit’s decision in Synfuel

Technologies, Inc., 463 F.3d at 654, as Frank suggests. The

pre-paid shipping envelopes in Synfuel are different than the

Walmart gift cards. Unlike a pre-paid shipping envelope, a

gift card to walmart.com does not simply offer class members

one type of complete product. It offers them a set amount of

money to use on their choice of a large number of products

from a large retailer. Like the gift cards to Rite Aid in

Reibstein, part of what separates a Walmart gift card from a

coupon is not merely the ability to purchase an entire product

as opposed to simply reducing the purchase price, but also the

ability to purchase one of many different types of products. 

That distinction also separates these gift cards from the e-

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credits we deemed coupons in In re HP Inkjet Printer Litig.,

716 F.3d at 1176 (labeling e-credits, which could be used to

obtain Hewlett-Packard “printers and printer supplies,”

coupons).

Frank also argues that failing to apply CAFA to these gift

cards will “eviscerate the Class Action Fairness Act,” because

settlements will be able to avoid CAFA merely by labeling

their coupons as gift cards. Our holding will have no such

effect. First, gift cards are a fundamentally distinct concept

in American life from coupons. Cf. 15 U.S.C. § 1693l-1

(regulating gift cards, under the 1978 Electronic Fund

Transfer Act and the Credit Card Accountability

Responsibility and Disclosure Act of 2009, as an electronic

form of cash (i.e., similar to credit or debit cards)). District

courts are more than capable of ferreting out the deceitful

coupon settlement that merely co-opts the term “gift card” to

avoid CAFA’s requirements. Second, our holding is limited. 

We conclude only that the gift cards in this case are not

subject to CAFA, without making a broader pronouncement

about every type of gift card that might appear.

Finally, Frank raises the concerns that these gift cards will

not disgorge Walmart of ill-gotten gains and will force class

members to buy from the defendant in their class action. But,

giving thousands of consumers the ability to purchase $12 in

goods from the Walmart website for free will not be

insignificant to the retailer. Moreover, this case does not

present the same problems as one like Young v. Polo Retail,

LLC, in which the class members were former Polo Retail

employees who complained about being forced to purchase

Polo clothing and were then given Polo Retail gift cards. No.

C-02-4546, 2006 WL 3050861, at *3–5 (N.D. Cal. 2006)

(“[W]hywould former employees, who allegedlywere forced

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to buy a great deal of unwanted Polo products, desire product

vouchers so that they could purchase even more clothes?”). 

Here, class members are suing due to an online-DVD rental

agreement between Walmart and Netflix. Since Walmart

sells many products beyond DVDs, class members have less

reason to be wary of a gift card to the defendant retailer than

did the plaintiffs in Young. Moreover, the claimants in this

case had the option of obtaining cash instead of a gift card,

undercutting the argument that the settlement forces them to

buy from the defendant. In sum, we hold that the Walmart

gift cards in this case are not coupons that fall under the

umbrella of CAFA.10 The district court did not err in failing

to apply CAFA to this case.11

10 Because we reject Objectors’ argument that this settlement should fall

under CAFA, we also reject Objectors’ argument that the case should be

remanded for the district court to analyze the settlement itself under the

heightened scrutiny required by CAFA.

11 Pointing to empirical studies, Zimmerman also argues gift cards are

generally not worth their face value. He raises this point, however, in the

context of arguing the gift cards in this case are coupons. Since we have

held that CAFA does not apply to this settlement, we need not consider

this argument. Nevertheless, courts still have an obligation to review a

settlement carefully, whether CAFA applies or not. Fed. R. Civ. P.

23(e)(2). Indeed, some district courts have valued gift cards, in

settlements, at less than their dollar value. Fernandez, 2008 WL at

*10–11 (valuing Victoria’s Secret gift cards at 85% of their face value and

thus valuing the $10 million gift card settlement fund at $8.5 million “for

[the] purposes of evaluating counsel’s fee request”). Even if we construed

Zimmerman’s argument to mean he seeks a remand regardless of whether

CAFA applies, we still would conclude the court did not abuse its

discretion in valuing the Walmart gift cards at 100% of their face value. 

Although the court did not explicitly consider on the record whether the

gift cards might be worth less than face value, the court did note that the

“vast majority” of class members elected to obtain gift cards, concluding

this settlement was similar to an all-cash settlement. Moreover, unlike the

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B

The district court did not err in calculating the attorneys’

fees award by calculating it as a percentage of the total

settlement fund, including notice and administrative costs,

and litigation expenses. Frank argues the $4.5 million in

notice and administrative costs, which facilitate alerting class

members to the settlement and processing claims submitted

by class members, do not inure to the benefit of the class. See

In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d at 942

(noting that a percentage-of-recovery fee award is calculated

by taking a percentage of the “common fund for the benefit

of the entire class” (emphasis added)). He argues the district

court’s mode of calculation fails to encourage class counsel

to reduce notice and administrative costs. He also contends

that by basing the fee award on the entire common fund,

some of class counsels’ fees are simply a percentage of their

litigation expenses award—thus their work is being “doublecount[ed].”

The district court did not abuse its discretion in

calculating the fee award as a percentage of the total

settlement fund, including notice and administrative costs,

and litigation expenses. We have repeatedly held “that the

reasonableness of attorneys’ fees is not measured by the

choice of the denominator.” Powers v. Eichen, 229 F.3d

1249, 1258 (9th Cir. 2000) (rejecting an objector’s argument

that a fee award in a securities settlement should be based on

“net recovery,” which does not include “expert fees, litigation

gift cards in Fernandez or the vouchers in Young, these gift cards provide

class members with the ability to purchase a wide variety of items. Thus,

the court was within its discretion to value the gift cards at 100% of their

face value.

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costs, and other expenses”); see also Staton, 327 F.3d at

974–75 (“The district court also did not abuse its discretion

by including the cost of providing notice to the class . . . as

part of its putative fund valuation . . . . We have said that ‘the

choice of whether to base an attorneys’ fee award on either

net or gross recovery should not make a difference so long as

the end result is reasonable.’” (quoting Powers, 229 F.3d at

1258)). Here, the district court concluded that class counsels’

fee request, which applied the 25% benchmark percentage to

the entire common fund, was reasonable. Indeed, the court

explicitly explained how administrative costs in particular

make it possible to distribute a settlement award “in a

meaningful and significant way.” Similarly, notice costs

allow class members to learn about a settlement and litigation

expenses make the entire action possible. Thus, the court

acted within its discretion under this court’s precedent in

Powers and Staton.

12

C

The district court provided adequate notice to the class of

the attorneys’ fee petition. Federal Rule of Civil Procedure

23(h)(1) requires a claim for attorneys’ fees to be made by

motion under Rule 54(d)(2) and for “[n]otice of the motion

12 Sullivan briefly argues that some of the litigation expenses are not

properly reimbursable, because they relate to the related litigation against

Netflix. We disagree and hold that the district court did not abuse its

discretion in approving class counsel’s request for $1.7 million in

litigation expenses. The court oversaw both the Walmart settlement and

the litigation against Netflix and interacted with attorneys on both sides. 

It was within its discretion to accept class counsels’ contentions that the

expenses requested were “only approximately half the expenditures by

Class Counsel” on the litigation and that certain experts were needed in

the Walmart litigation to help push the company toward settlement.

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[to] be served on all parties and, for motions by class counsel,

directed to class members in a reasonable manner.” In re

Mercury Interactive Corp. Securities Litigation, 618 F.3d at

993–95, analyzed the rule and rejected as insufficient Rule

23(h) notice when the motion for attorneys’ fees was due

after the deadline for class members to object to the

attorneys’ fees motion. In other words, even though class

counsel had provided preliminary notice of the total amount

they would seek in fees, they had not provided class members

with “an adequate opportunity to object to the motion itself

because, by the time they were served with the motion, the

time within which they were required to file their objections

had already expired.” Id. at 994.

Citing In re Mercury, Objectors argue that class counsel

here failed to provide adequate notice of their attorneys’ fee

petition to class members under Rule 23(h).

13

See In re

Mercury Interactive Corp. Sec. Litig., 618 F.3d at 993–94

(“The plain text of [Rule 23(h)] requires that any class

member be allowed an opportunity to object to the fee

‘motion’ itself, not merely the preliminary notice that such a

motion will be filed.”). Objectors argue that by stating in the

email and mail notices only that class counsel would seek

attorneys’ fees in the amount of 25% of the common fund,

13 Sullivan contends that because class counsels’ notice regarding the

settlement, including the notice of the attorneys’ fee request, violates due

process, the court should review the issue de novo. See Torrisi, 8 F.3d at

1374 (“We review de novo whether notice of a proposed settlement

satisfies due process.”). Sullivan’s argument, however, focuses on

whether the notice of the attorneys’ fees request violates Rule 23(h). 

Thus, we review this argument for abuse of discretion. In re Mercury

Interactive Corp. Sec. Litig., 618 F.3d at 993 (reviewing a challenge under

Rule 23(h) to notice of an attorneys’ fee motion under the abuse of

discretion standard).

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class counsel did not provide the “[n]otice of the motion”

required by Rule 23(h).

The district court did not abuse its discretion in its

approval of the attorneys’ fees request. Here, the notice emailed and mailed to class members informed them that class

counsel would be seeking fees in the amount of 25% of the

total settlement fund of $27,250,000. The notice also gave

class members a clear deadline of Feb. 14, 2012 for filing an

objection. The district court set the deadline for filing a fee

motion fifteen days before the deadline for filing an

objection. Indeed, the motion was filed on January 30, 2012,

and the objection deadline was February 14, 2012. This

schedule satisfies the requirements of In re Mercury.

D

The district court provided an adequate explanation of its

rationale. In Vizcaino v. Microsoft Corp., 290 F.3d 1043,

1047–50 (9th Cir. 2002), we listed several factors courts may

consider in assessing a request for attorneys’ fees that was

calculated using the percentage-of-recovery method. These

factors include the extent to which class counsel “achieved

exceptional results for the class,” whether the case was risky

for class counsel, whether counsel’s performance “generated

benefits beyond the cash settlement fund,” the market rate for

the particular field of law (in some circumstances), the

burdens class counsel experienced while litigating the case

(e.g., cost, duration, foregoing other work), and whether the

case was handled on a contingency basis.14See id. at

14 Although the Supreme Court in City of Burlington v. Dague, 505 U.S.

557, 566 (1992) rejected using a case’s contingency status for “the

determination of a reasonable fee,” it did so in the context of using a

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1048–50 (internal quotation marks omitted). In addition, a

court may cross-check its percentage-of-recovery figure

against a lodestar calculation. Id. at 1050.

Sullivan argues the district court failed to adequately

explain its attorneys’ fee award, and that the case should be

remanded for the court to apply the list of six factors he

gleaned from Craft v. County of San Bernadino, 624 F. Supp.

2d 1113, 1116–17 (C.D. Cal. 2008).15 While there are no

doubt many factors that a court could apply in assessing an

attorneys’ fees award and while Vizcaino does not purport to

establish an exhaustive list, we conclude the district court did

not abuse its discretion in its analysis, explanation, and

approval of class counsels’ request for attorneys’ fees.

lodestar method to calculate the fee. See In re Bluetooth Headset Prods.

Liab. Litig., 654 F.3d at 942 n.7 (noting, in a discussion of the lodestar

calculation method, that the Supreme Court had rejected the

“contingency” factor that this court established in Kerr v. Screen Extras

Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975)). Thus, the Vizcaino court, in

analyzing a percentage-of-recovery fee request, appropriately noted that

class counsel had litigated the action on contingency for eleven years. 

Vizcaino, 290 F.3d at 1050.

15 In addition to arguing for remand, Sullivan also argues that “six

‘special circumstances’ justify (and mandate) an award of less than the

‘benchmark’” in this case. These special circumstances include

undisclosed conflicts of interest on the part of class counsel, the lack of

risk and lowlevel ofskill needed to litigate the Netflix and Walmart cases,

and the “partial” nature of the settlement. Because it appears these

“circumstances” are what Sullivan believes the district court should

properly apply on remand to reduce the attorneys’fees award, and because

we hold that the district court did not abuse its discretion in approving the

fee award or in its explanation of that decision, we do not address each of

these “special circumstances” individually.

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First, class counsel requested, and the court awarded, the

25% benchmark award only. While the benchmark is not per

se valid, it is a helpful “starting point.” Vizcaino, 290 F.3d at

1048. Second, the court did compare the benchmark to the

summary lodestar numbers provided by class counsel and

concluded those lodestar estimates were three times the

benchmark. The district judge noted that while she frequently

reduces a lodestar request, she has never reduced one by half. 

Thus, where, as here, the lodestar amount was three times the

benchmark, it was not an abuse of discretion for the district

court to accept the benchmark using a quick cross-check of

class counsel’s lodestar summary figures. Third, the judge

did provide a reasoned explanation for her decision to

approve the fee request, both in her order and in an oral

ruling. The judge addressed many of Objectors’ arguments,

summarized her lodestar cross-check, and, applying a number

of the Vizcaino factors, correctly noted that class counsel

risked great time and effort and advanced significant costs on

behalf of the class action. Thus, the court did not abuse its

discretion in the explanation of its decision to approve the

attorneys’ fees award.16

V

In sum, we affirm the district court’s decision to approve

the settlement between the class of Netflix subscribers and

16 Cope and Bandas also argue that the district court failed to properly

respond to their argument that class counsels’ fee petition was

substantively insufficient. We conclude, however, that the district court

did provide a reasoned explanation. Moreover, Cope and Bandas’s

citation to In re Bluetooth, which involves a lodestar fee request, does not

support its contention that class counsel’s fee motion was insufficiently

detailed.

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Walmart, to certify the settlement class, and to grant class

counsels’ motion for attorneys’ fees.

AFFIRMED.

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