situated,

• 2:1 1-cv-04586-KM-MAH

Plaintiffs, OPINION

-against

HYDROXATONE LLC and ATLANTICCOAST MEDIAGROUP LLC,

Defendants.

x

KEVIN MCNULTY, U.S.D.J.:

This matter comes before the Court on the Plaintiffs’ motion for final

approval of a proposed settlement, award of attorneys’ fees, reimbursement ofexpenses, and participation awards. (Docket No. 91). I am simultaneously

signing an Order granting final approval to the proposed Amended Settlement

Agreement (“ASA”). My essential findings as to the relevant factors are

contained therein. I write separately to address the objection asserted by oneclass member, Lisa Margolis.’ (Docket No. 104).

I accepted voluminous proofs from the parties and from Ms. Margolis as

objector, and I held a Fairness Hearing with respect to the proposed settlement.

Before the hearing, Ms. Margolis received access to all discovery produced by

the parties, and all documents related to the financial health of the Defendants

‘ In this opinion, Lisa Margolis is referred to as “Ms. Margolis.” Her attorney, who

is also her husband, is referred to as “Robert Margolis” or “Mr. Margolis.”
documentary evidence and oral arguments of counsel.

I have considered Ms. Margolis’s objection, along with all related material

and exhibits, including some that Plaintiffs sought to exclude from

consideration. Giving due deference to the negotiated settlement, and due

consideration to the recommendation of the highly regarded and experiencedmediator in this case, Hon. Stephen M. Orlofsky (ret.), I overrule Ms. Margolis’s

objection.

Introduction

A class action offers significant procedural advantages, especially in a

case like this one, where a defendant has allegedly hurt a lot of people just alittle. It affords a remedy for claims that might not have been efficiently

pursued one-by-one. And, by holding out the potential of an award of

attorney’s fees, it gives counsel the incentive to pursue widely-dispersed claimson behalf of class members who, by definition, are not present in court. Withthose advantages come certain pitfalls. In social science jargon, class actions

address a collective action problem, but, in doing so, may create externalities.

Generally, these concerns arise from the difficulty of asserting the

presumed rights and interests of persons who are not present to speak for

themselves. That concern is particularly poignant when a settlement is

2
ensure that the settlement is fair to the class. Class counsel’s interest in

maximizing the settlement, however, may wane as the prospect of a fee grows

imminent. Ultimately the court must be satisfied that the settlement is fair.

The factors that a court must consider are well-settled, and I have

considered them. I pause at the outset, however, to note that this settlementdoes not bear any strong indicia of potential unfairness to absent class

members.

First, this claim does not involve physical injury, property damage, or

even a defective product; it is pure consumer dissatisfaction claim. The injury,

if any, is suffered only by purchasers of skin cream who wanted to return the

product for some reason, or who changed their minds about participating in

the automatic-shipment plan. Many customers seemingly were happy with the

product and content to keep it.

Second, the number of claims is far from overwhelming, and objections

to the settlement are vanishingly few. Over 2.5 million notices of settlement

went out. Fukunaga Deci., (Docket No. 94-9). As of July 16, 2013, only about

36,000 purchasers, or about 1.4%, had submitted claims. 2A total of two class

members, including Ms. Margolis, submitted timely actual objections.

2 A declaration submitted on August 15, 2013, contains an updated figure of

41,813. Shipley Decl. (Docket No. 148-1) ¶ 9 (table).

3
action. She and her counsel, who also happens to be her husband, declined to

participate in the negotiations that produced the proposed settlement here.

Rather, they tried to consolidate this action with their own, obtain various

forms of discovery, and challenge or delay the settlement of this action. Failing

that, they have attempted to establish that their action asserts distinct claims

that should not be released by this settlement. Toward that end, in their own

action they have revised the alleged facts underlying Ms. Margolis’s claim andadded defendants, threatening to draw this settlement into collateral litigation

involving other claims and parties. This objection is, at least in part, the

continuation by other means of a struggle among counsel for control of the

litigation.

Fourth, retired Judge Stephen M. Orlofsky presided over the mediation

between the parties in which they reached agreement on the key terms of the

settlement before me. His declaration states his belief that the terms of the

agreement were “fair, adequate, reasonable, and in the best interest of the

Plaintiffs and the proposed class.” Orlofsky Decl., (Docket No. 122), ¶ 14. Judge

Orlofsky stated that negotiations were hard fought without indication of “anycollusion between any persons or parties.” Id. ¶ 16.

Of course, a class member who feels strongly enough is free to opt out and

pursue her claims individually, in small claims court if necessary.

4
Atlantic Coast Media Group LLC, No. 2:1 1-cv-04355-SRC (the “Margolis Action”).The Margolis Action was filed on July 27, 2011. Margolis Compi., No. 2:1 1-cv04355-SRC, (Docket No. 1). In that complaint, the representative plaintiff, Ms.

Margolis, asserts claims on behalf of consumers allegedly defrauded by the

Defendants in connection with purchases of these skin care products. Id.;

(Docket No. 96 at 2). She is represented in that action by her husband, Robert

Margolis, Esq.

In the Margolis Action complaint as originally filed, Ms. Margolis alleged

that she spoke with a live agent when she signed up for Hydroxatone products.

See Margolis Compl. ¶J 10—12. This will be important later on.

This class action lawsuit, Sabol v. Hydroxatone LLC (the “Sabol Action”), 4

was commenced against Hydroxatone and Atlantic Coast Media Group

(“ACMG”) on August 8, 2011. (Docket No. 1). On February 7, 2012, Plaintiffs

Susan Sabol and Valerie Done filed a Second Amended Complaint (the “Sabol

SAC”). (Docket No. 65). The Sabol SAC alleged deceptive customer service

practices relating to Hydroxatone’s risk-free trial offers and auto-shipment of

products. Id. ¶ 2. The claims related to customers who received unordered

The lead plaintiff in the Sabol Action was initially Tami Gray. Susan Sabol was

substituted in for Gray on March 23, 2012. (Docket Nos. 29—30). For the sake ofsimplicity, the “Sabol Action” will refer to the case both before and after the

substitution.

5
representations in connection with the ordering process. See id. ¶J 26 — 43.

B. Mediation and Settlement Agreement

The Sabol Action progressed more rapidly than the Margolis Action. In

June 2012, Defendants’ counsel contacted Sabol Class Counsel to suggest a

meeting to discuss the possibility of settlement. Def. Opp. to Consolidation, No.

2:1 1-cv-04355-SRC, (Docket No. 64), at 4. Counsel for the Plaintiffs requested

discovery regarding the Defendants’ sales and financial status in advance of

any settlement negotiations, which was produced on July 10, 2012. Id. at 5.

The parties met on July 17, 2012, to discuss settlement. Id. at 5. At the

conclusion of that meeting, the parties had not agreed to any of the terms of

the settlement, but did agree that additional negotiations with a mediator

would be helpful. Id. at 5 — 6. The next day, the parties advised the magistrate

judge then assigned to Sabol that they were working towards a resolution of the

putative class claims. See Joint Letter, (Docket No. 49) (proposing Joint

Stipulation and Consent Order for Stay); Joint Status Report, (Docket No. 51).

The parties engaged Hon. Stephen Orlofsky (Ret.) and exchanged data in

advance of the mediation. Id. at 6. Class Counsel made several requests for

additional information from the Defendants, including sales data, customer

return/refund data, return/refund policies and record-keeping facilities, and

6
No. 49); Order Denying Consolidation, No. 2:1 1-cv-04355-SRC, (Docket No.

79), at 3; Sabol Plaintiffs’ Opp. to Consolidation, No. 2:1 1-cv-04355-SRC,

(Docket No. 63), at 5 — 6. Margolis was apprised of the mediation. OrderDenying Consolidation at 3.

On August 17, 2013 Magistrate Judge Hammer entered an Order staying

the Sabol action for sixty days so the parties could formalize the settlement and

conduct confirmatory discovery. (Docket No. 50). The parties then filed a Joint

Status Report on August 21, 2013, regarding the status of the settlement and

discovery. (Docket No. 51). The parties reported that fact discovery was not yet

complete although a tentative agreement had been reached. Id. at 2. The

completion of confirmatory discovery was scheduled for November 20, 2012,

and the parties had not yet conducted expert discovery. Id. The parties did not

request a settlement conference because they were working on draft settlement

papers with the aid of Judge Orlofsky. Id. at 3.

On October 23, 2012, the Court granted the parties an additional sixty

days to formalize the settlement and complete discovery. (Docket No. 56). On

January 3, 2013, this Order was again extended an additional thirty days until

February 4, 2013. (Docket No. 60).

C. The Margolis Amended Complaint

7
¶ 17. The parties dispute the timing and content of the Sabol Action parties’disclosure of settlement negotiations to counsel for Margolis. However, August

2012 emails between Sabol Class Counsel and counsel for Ms. Margolis (Mr.

Perotti and Mr. Margolis) confirm that Ms. Margolis declined to participate in

the settlement discussions. See Exhs. A — B, Def. Opp. to Consolidation, No.

2:1 1-cv-04355-SRC, (Docket Nos. 63-1, 63-2). Counsel for the Sabol Action

Plaintiffs contacted Patrick Perotti and Nicole Fiorelli on August 15, 2012—the

day after the mediation. Def. Opp. to Consolidation at 7. The following day,

Class Counsel participated in a telephone call with Mr. Perotti regarding the

settlement negotiations, and requested that they participate in a joint

settlement. Id.

Instead, on September 7, 2012, Ms. Margolis moved to amend her

complaint in the Margolis Action. No. 2:1 1-cv-04355-SRC (Docket Nos. 48—49).

A copy of the proposed Margolis Amended Complaint (“Margolis AC”) was

attached to the motion. Id.; No. 2:1 1-cv-04355-SRC, (Docket No. 59). On

December 19, 2012, Magistrate Judge Waldor granted the motion to amend.

Order, No. 2:11-cv-04355-SRC, (Docket No. 58).

The modifications reflected in the Margolis AC are aimed at

distinguishing the Margolis Action from the Sabol Action. One such

8
Margolis AC ¶ 54. This, Ms. Margolis believes, is a class distinct from that in

the Sabol action. These new allegations directly contradict the allegations of

the original Margolis Action complaint, in which Ms. Margolis alleged that she

signed up to purchase Hydroxatone products through a live agent. Margolis

Compi. ¶J 10 — 12.

The Margolis Amended Complaint also adds two defendants not named in

the Sabol complaint: Thomas Allan Shipley and Marketing Architects. Margolis

AC ¶J 10—14. Shipley was the chief executive officer of ACMG and

Hydroxatone. Shipley Deci. ¶ 2. The Margolis AC alleges that Shipley

participated in creating the marketing program and IVR system. Margolis AC ¶

10. Marketing Architects provided marketing consulting services to

Hydroxatone. See Opp. to Objection at 18. Marketing Architects, says Ms.

Margolis, should be liable because it co-authored certain advertisements and

assisted with the set-up of the IVR system. Margolis AC ¶J 12—14, 81; Opp. to

Objection at 13.

D. Margolis Motion to Consolidate and Submission of the Sabol

Settlement Agreement

On January 11, 2013, less than a month after she filed the Margolis AC

and while the settlement agreement in Sabol was still being finalized, Ms.

9
that Ms. Margolis feared that her class claims would be mooted by a settlement

in the Sabol Action. See id. at 2, 4 (stating that parties in Sabol intended to

moot her claim and those of her putative class through a global settlement);

Order Denying Consolidation at 3. The motion further alleged that the parties

to Sabol intentionally withheld this information from Magistrate Judges Waldor

and Hammer because they were “involved in collusive settlement negotiations.”

Id.

On February 7, 2013, while the consolidation motion was pending, the

Defendants and Plaintiff class representatives in the Sabol Action signed a

settlement agreement. They submitted a detailed Amended Settlement

Agreement (“ASA”), to this Court for preliminary approval. (Docket Nos. 66, 68).

Shortly thereafter, on March 6, 2013, Magistrate Judge Waldor denied

Ms. Margolis’s pending motion to consolidate the Margolis and Sabol Actions.

Order Denying Consolidation at 2. Magistrate Judge Waldor reasoned that

consolidation would prejudice the parties in the Sabol Action, delay

consideration of the settlement, increase costs, and fail to save judicial

resources. Id. at 6. Judge Waldor’s Opinion noted that if the proposed

settlement in the Sabol Action encompassed the claims of Ms. Margolis (andher putative class), she could still object to the settlement. Id. Judge Waldor

10
E. Preliminary Approval of Settlement, Notice to Class

On March 28, 2013, in the Sabol action, this Court granted preliminary

approval of the ASA (“Preliminary Approval Order”). (Docket No. 80). The Court

directed the parties to provide notice of the proposed settlement to the Class

and scheduled a hearing to determine whether the settlement was fair,

reasonable and adequate. Id. at 17.

My Preliminary Approval Order directed Class Members who objected to

the settlement to file written notices of intent to object. It advised any such

objectors that they would be permitted to appear and be heard at the fairness

hearing, either in person or by counsel. Preliminary Approval Order at 12—13.

F. Ms. Margolis Attempts to Intervene in Anticipation ofFiling an Objection

On behalf of Ms. Margolis, Attorney Rubin Sinins (as local counsel of

record) entered an appearance in the Sabol Action on May 16, 2013.

Simultaneously, he alerted the Court that Ms. Margolis intended to object tothe settlement. (Docket No. 89). At that time, defense counsel had refused her

discovery request for relevant documents because she had not yet filed an

objection. See id. at 2. Ms. Margolis argued that she needed the documents

first, and requested a telephone conference with Magistrate Judge Hammer. Id.

On May 21, 2013, Class Counsel Andrew Freidman provided the written

11
96, Exh. 12).

On June 5, 2013, Ms. Margolis filed a letter with this Court regarding the

discovery dispute. (Docket No. 96). Ms. Margolis informed this, the Sabol Court,

of her pending action before Judge Chesler. See id. at 2—3. Previewing her tobe-filed objection, she framed the allegations in the Margolis Action as being

based on deceptive practices surrounding the IVR. Id. These IVR allegations

she portrayed as being distinct from the refund policy at the center of the Sabol

Action. Id. at 2. And she alleged that Shipley and Marketing Architects were

implicated in the deceptive IVR scheme. Id.

Ms. Margolis’s proffered objection was essentially that, while the

proposed settlement in the Sabol Action purported to cover and release her

claims, it did not provide any additional funding for them. Id. In support of

such an objection, she sought the Court’s assistance in obtaining additionaldiscovery. Specifically, Ms. Margolis’s letter requested:

1. The confidential settlement letter submitted by the Sabol Action

defendants as part of their mediation efforts;

2. Information regarding Thomas Shipley’s compensation;

3. Financial statements from Marketing Architects;

4. Financial information relating to the assertion of ACMG that

12
7. Correspondence between attorneys for the Sabol Action plaintiffs and

attorneys for the parties released by the settlement agreement.

(Docket No. 96 at 4—7).

Class Counsel for the Sabol Plaintiffs responded to Ms. Margolis’s letter

on June 7, 2013, representing to the Court that Ms. Margolis had already been

given access to: (1) “all discovery” produced by Defendants in the Sabol Action;

(2) the same financial data that was produced to Class Counsel in the Sabol

Action (including audited financial statements and projections); and (3) all

insurance policies that “arguably covered the claims” made against the

defendants in both the Sabol and Margolis actions. (Docket No. 99 at 2).

Further documents, said Class Counsel, were not “relevant to the fairness or

adequacy” of the settlement. Id. In particular, Class Counsel contested the

requests for the confidential settlement letter and correspondence between

Class Counsel and Defendants’ counsel, which lay outside the scope of

discovery and related to confidential settlement negotiations. Id. at 2—3.

Counsel for the Defendants also objected to Ms. Margolis’s additional

requests. (Docket No. 103). Defendants argued that Ms. Margolis lacked

standing to pursue a remedy from the Court because she had not yet filed an

objection; they noted that they nevertheless had provided her with copies of all

13
Ms. Margolis’s counsel filed additional letters on June 10, 2013, and

June 12, 2013, renewing discovery requests. (Docket Nos. 101, 102). Ms.

Margolis argued that the requested documents were “highly relevant” to her

objection because they would be probative of the Defendants’ ability to

withstand a greater judgment. (Docket No. 101 at 2). The Defendants again

refused her request. (Docket No. 103).

On July 8, 2013, the Margolis Action was stayed by Magistrate Judge

Cathy Waldor. Order, No. 2:1 1-cv-04355-SRC, (Docket No. 104).

G. Ms. Margolis’s Written Objection, as Supplemented at the Hearing

The Preliminary Approval Order set a deadline of June 16, 2013, for the

filing of objections. See Order, Docket No. 80 at 13 — 14 (setting deadline at 30

days prior to Fairness Hearing).

The only substantial objection came from Ms. Margolis. 5(Docket No.

104). Ms. Margolis’s objection, filed on June 16, 2013, raises the following

The Court received eleven timely “objections” to the proposed settlement. Nine of

these were not really objections at all; they are more properly viewed as opt-outs, or as

claims under the ASA. See Docket Nos. 82—87, 88, 90, 104. Mr. Joseph P. Lussier

objected that the amount of attorneys’ fees to be awarded was far higher than his

individual recovery. (Docket No. 87 at 1). I considered that rather generic objection

and overruled it in my final approval of the settlement. Another objection was recently

received on November 12, 2014 from Ms. Mary F. Carr. (Docket No. 151). Regardless of

its timeliness, or lack thereof, it is also overruled in my final approval of the

settlement.

14
without contributing to the settlement amount; (3) the settlement amount does

not take into account $13 million in additional insurance coverage; (4) the

release of claims is overbroad because it releases claims in the Margolis Action

that have a “separate factual predicate”; (5) the settlement preferentially treats

a subset of class members by making a cash reward available only to “refund”

class members and not to “IVR” members; and (6) the settlement does not deter

the Defendants’ deceptive conduct. Margolis Br., (Docket No. 104), at 1—2.

Ms. Margolis’s papers in support of her objection consisted of: (1) an

expert report from insurance expert John O’Brien (Docket No. 104-1); (2)

declaration of Robert Greenwald, CPA, regarding Defendants’ financial status

(Docket No. 104-2); (3) declaration of marketing consultant Susan Kleimann

(Docket No. 104-3); (4) affidavit of Paul W. Flowers Esq. regarding

reasonableness of the settlement; (5) copies of Defendants’ insurance policies

(Docket Nos. 104-5 — 104-6, 104-8); (6) a copy of Marketing Architects

insurance policy (Docket No. 104-7); (7) an affidavit from herself (Docket No.

104-9); (8) ACMG financial statements (Docket No. 104-10); (9) marketing

scripts used by the Defendants (Docket No. 104-11 — 104-13, 104-23); (10)correspondence between counsel for Ms. Margolis and Sabol Action parties

(Docket No. 104-14 — 104-15, 104-20); (11) document production requests,

15
judgment (Docket No. 104-24); (15) customer and sales data produced by

Defendants under protective order during settlement negotiations (Docket No.

104-25); (16) the Sabo1ASA (Docket No. 104-26); (17) SAC (Docket No. 104-27);

(18) Margolis AC (Docket No. 104-28); (19) Sabol Plaintiffs’ Opp. to Motion to

Consolidate (Docket No. 104-29); and (20) Plaintiffs’ Memorandum in Support

of Motion for Final Approval of Proposed Settlement (Docket No. 104-30).

After filing her objection, Ms. Margolis filed two additional motions: a

motion for leave to file four additional exhibits (Docket No. 134), and a motion

for leave to file a consolidated reply in response to the Plaintiffs’ Reply

Memorandum in Further Support of Motion for Final Approval and to

Defendants’ Memorandum of Law in Opposition to the Margolis Objection

(Docket No. 135). I heard oral argument on those applications at the fairness

hearing. July 16, 2013 Fairness Hrg. Transcript (Docket No. 149 at 49, 71) (one

volume, hereinafter cited as “T _“).

Although these four additional exhibits were submitted after the

objection deadline, I hereby grant the motion to include them in the record.

They are: (1) a supplemental report by John O’Brien, Ms. Margolis’s insurance

expert; (2) a transcript of a recorded conversation between Ms. Margolis and

the Defendants’ customer service representative that occurred after her order

16
purpose. See pp. 18, 31, infra. Items 2, 3, and 4, says Ms. Margolis, are

relevant to rebut Defendants’ contention that she did not make an IVR

purchase. (Docket No. 134 at 2). I have considered them on that issue. See p.

19, infra.

I deny the motion to submit a consolidated reply. An additional

submission would be superfluous, because all of the relevant information is

before the Court and I have already reviewed it.

The Defendants filed under seal an Opposition to Ms. Margolis’s

Objection. Opp. to Objection, (Docket No. 119). The Opposition is supported by

affidavits from the Settlement Administrator, Jill Fukunaga (Docket No. 120);

counsel for Defendants Laura Mazzuchetti (Docket No. 121); the mediator, Hon.

Stephen M. Orlofsky (Ret.) (Docket No. 122); and Thomas Shipley (Docket No.

123).

H. Fairness Hearing

The Preliminary Approval Order (Docket No. 80) set a Fairness Hearing

for July 16, 2013. The parties appeared through counsel. The only objector to

appear was Ms. Margolis, through her counsel, Robert A. Margolis, Esq. T 3—4.

At the hearing I heard arguments from both parties and Mr. Margolis

regarding the proposed settlement, and in particular, the framework for both

17
for Ms. Margolis also requested that the Court permit them to take the

deposition of Marketing Architects, and to offer live testimony from their

insurance expert, O’Brien. T 75. Mr. Margolis then conceded that live testimony

from O’Brien would not be necessary if the Court accepted the two reports

submitted in lieu of his testimony. Id. at 75, 91. Counsel for the Defendants

vigorously opposed both requests. Id. at 86 — 89, 92.

The issue of deposing Marketing Architects was left open at the

conclusion of the hearing. See id. at 91. Ms. Margolis had sufficient

information on Marketing Architects for her Objection, including its insurance

policy that her counsel argues would potentially provide coverage (Docket No.

104-7) and deposition testimony from Mr. Shipley and Mr. Siegel regarding the

Defendants’ relationship with Marketing Architects (Docket Nos. 104-21, 104-

22). See T 64 — 67. Finding no justification for further discovery, I will deny the

request for a deposition.

I have, however, admitted and considered both of O’Brien’s insurance

expert reports. Mr. Margolis agreed to the Court’s acceptance of these reports

in lieu of O’Brien’s live testimony, and I have considered them as part of the

Margolis objection. See T 75, 91.

Beyond these two specific issues, neither the parties nor Ms. Margolis

18
requests made by Mr. Margolis and on the proposed settlement.

Following the hearing, counsel for Ms. Margolis did not submit any

additional declarations. With leave, defense counsel filed a corrected and

supplemented Shipley declaration after the hearing. (Docket 148-1).

II. Ms. Margolis’s Objection

A. Standard of Review

Ms. Margolis’s objection must be reviewed in light of the general principle

that the law favors settlement, particularly in class actions where substantial

judicial resources may be conserved by avoiding litigation. In re Gen. Motors

Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 784 (3d Cir.

1995) (citing Alba Conte & Herbert B. Newberg, Newberg on Class Actions §

11.41, at 11—85 (citing cases); Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir.

1977); Van Bronkhorst v. Safeco Corp., 529 F.2d 943, 950 (9th Cir. 1976)). “The

strong judicial policy of favoring class action settlement contemplates a

circumscribed role for the district courts in settlement review and approval

proceedings.” Erheart v. Verizon Wireless, 609 F.3d 590, 594 — 95 (3d Cir.

2010). The decision of whether to approve a proposed settlement of a class

action is left to the sound discretion of the district court. In re Prudential Ins.

Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 299 (3d Cir. 1998)

19
• ; (2) the reaction of the class to the settlement . . . ; (3) the stage

of the proceedings and the amount of discovery completed . . . ; (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 . . . ; (9) the range of

reasonableness of the settlement fund to a possible recovery in

light of all the attendant risks of litigation . . ..“

Girsh v. Jepsori, 521 F.2d 153, 157 (3d Cir. 1975) (quoting City of Detroit v.

Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974)). I have considered the Girsh

factors and made the necessary findings in my Order approving the settlement.

To the extent they are specifically relevant to the objection, however, I touch on

them here and in Section III, infra.

B. Ms. Margolis’s Standing to Make IVR-based Objection

One essential premise of Ms. Margolis’s objection is that the proposed

settlement fails to recognize that the IVR-based claims she alleges in the

Margolis Action are distinct from the Sabol Action claims. The Margolis and

Sabol Actions, according to Ms. Margolis, have “different factual predicates.” Id.

at 5. Ms. Margolis contends that her IVR-based claims should not be released

in the Sabol Action settlement.

There is a threshold problem with this objection, according to the

Defendants. They contend that Ms. Margolis lacks standing to bring her

20
Margolis spoke to a live agent when she signed up for Hydroxatone products in

December 2011. See Margolis Compi. ¶11 10—12. Nor was this a slip of the pen.In February 2012, Ms. Margolis provided a written interrogatory response

stating that, when she called the Defendants to accept their offer, “[t]he

employee or agent of Defendants with whom Plaintiff spoke attempted to sell

her numerous other products.” Mazzuchetti Deci., Exh. B (Docket No. 121-2),

at 11-12.

Almost immediately after the August 2012 mediation resulted in a

framework for the settlement in Sabol, Ms. Margolis moved to amend her

complaint in the Margolis Action. Contradicting the original complaint, the

Margolis AC alleges that Ms. Margolis purchased her Hydroxatone products

through the automated IVR system. Margolis AC ¶ 36. She purports to

represent a class of customers who did likewise. Id. ¶ 54. According to the

Margolis AC, consumers expected to pay little or nothing, but, through the IVR

system, were lured into further purchases and were charged a minimum of$69.95. See id. ¶J 18 — 52. Ms. Margolis also alleges that Marketing Architects

is liable because it contracted with ACMG to jointly operate the IVR system,

produce commercials, and prepare scripts. Id. ¶j 11 — 14.

The Defendants have submitted persuasive evidence that Ms. Margolis

21
by Hydroxatone’s vendor, Northside. Id. That call center used only live

operators, not the IVR system. Shipley Deci. (Docket No. 148-1) ¶f 6-8; see

alsoT 48— 49.

The parties contend that Ms. Margolis’s attempt to revise the facts

underlying her own claim raises questions as to her motivations, but I need not

resolve them. I am bound in any case to consider the potential benefit to the

class. And from that perspective, the Defendants’ argument does not entirely

succeed as a standing argument. It is perhaps unlikely that Ms. Margolis

would have standing to assert the rights of IVR purchasers in her own action.

It is uncontested, however, that Ms. Margolis is a member of the Sabol class.

As such, she may object to the settlement on the basis that a larger pool of

funds might have produced a larger settlement, which would have benefited

her.

Ironically, this theory of standing undermines the premise of Ms.

Margolis’s objection, which is that the claims in the two actions are separate

and distinct. They are not. The class defined in the Sabol SAC includes all

purchasers of the “risk-free trial” from Hydroxatone: both live-operator and IVR

customers. See Sabol SAC ¶ 13. Likewise, the settlement class in the ASA

covers customers who purchased through either the IVR system or a live

22
¶ 

the far smaller class of approximately 41,813 claimants; of those claimants,

approximately 49.58% are IVR customers. Id.

The fundamental distinction suggested by Ms. Margolis is no distinction

at all. But irrespective of the manner in which she purchased the products, Ms.

Margolis is a member of the Sabol class. That circumstance may or may notbear on the strength of her objection, but it does give her standing to object.

C. Specific Objections to the Proposed Settlement

1. The Settlement Amount is Disproportionate to the Value of

the Claims.

Ms. Margolis’s major contention is that the dollar amount of the

settlement is insufficient; this theme runs through all of the sub-points of herobjection. The total cash payment in the Common Fund of the ASA is $3

million. ASA § 4. 1(a)(i) (claimants in group 2 get free products, rather than

cash). Attorney’s fees and costs, participation awards, administrative costs,

and costs of the notice will be paid out of the Common Fund prior to any

distribution to the Settlement Class. ASA § 4. 1(a)(ii). Ms. Margolis argues,

however, that the marketing practices used by the Defendants resulted in over

$300 million collected from consumers through fraudulent charges. Margolis

Br. at 9, 12.

The Sabol Action settlement, Ms. Margolis says, does not address the

23
but releases liability for a much larger pool of IVR claims. Id. at 5. Ms. Margolis

also notes that the settlement amount does not account for the liability of

Shipley and Marketing Architects (who are named as Defendants in the

Margolis Action, but not the Sabol Action). Id. Ms. Margolis contends that both

Shipley and Marketing Architects played substantial roles in implementing the

deceptive IVR-related practices alleged in her suit. Id. at 10. The $3 million

dollar amount offered by the ASA, she contends, is therefore unreasonable in

comparison to the vast recovery promised by her own IVR-based action. Id. at

14.

Ms. Margolis arrives at her $300 million calculation, she says, by taking

the percentage of Defendants’ sales through IVR out of the total amount of net

sales from 2007—2011. See id. at 11—12.

First, the figure itself is manufactured from thin air. The documents

provided to Ms. Margolis demonstrate that total IVR sales through 2011 are

$80 million, and Ms. Margolis did not really deny this. See T 69. And overall

sales figures, of course, are not damages or claims from dissatisfied customers

who sought a refund or cancellation. T 24-25. The parties could not have been

expected to rely on $300 million, or even $80 million, as an estimate of

damages when settling the case. It simply is not a damages figure at all.

24
invited to participate in those negotiations but declined to do so. Friedman

Deci., (Docket No. 94), ¶ 17. There is no evidence that the parties did not, andpersuasive evidence that they did, consider the IVR claims during the

settlement negotiations. For the reasons expressed above in this section, and in

the following sections, they reached a responsible settlement of claims, taking

into account, inter alia, the size of the likely claims and the available resources.

2. Whether Defendants Can Withstand a Greater Judgment.

Ms. Margolis cites the Girsh factor that asks “whether the defendants

could withstand a judgment for an amount significantly greater than the

settlement.” See Sullivan v. DB mv., Inc., 667 F.3d 273, 323 (3d Cir. 2011),

Girsh, supra. She argues that the Defendants and related parties, Thomas

Shipley and Marketing Architects, possess additional available resources. For

the reasons expressed below, I disagree. In any event, it must be remembered

that this is not the only Girsh factor; against the wealthiest defendant in theworld, the fairness of a settlement amount depends on other matters as well,

such as the strength of the claims, litigation risk, and so on.

a. Defendants‘finances

Ms. Margolis first argues that Defendants have not produced sufficient

data to establish their own insolvency.

25
REDACTED Id.; Shipley Deci., (Docket No. 123), ¶ 35JRED

REDACTED to

REDACTED kL; Shipley DecL ¶ 37. REDACTED

REDACTED

REDACTED kL; Shipley DecL ¶ 38. And REDACTED

REDACTED

REDACTED 45.

REDACTED

REDACTED

Ms. Margolis received copies of all the financial information produced by

the Defendants, including audited financial statements and projections.

(Docket No. 99 at 2). Ms. Margolis was not satisfied with the records she

received, and submits a report from Robert Greenwald, a ôertified public

accountant. Margolis Br. at 3, 15; Greenwald Deci., (Docket 104-2). Greenwald

states that the financial data produced by the Defendants are “inadequate to

26
state of the Defendants’ finances. More fundamentally, “insolvency” is not a

requirement under Girsh; a settlement is not to be deemed inadequate because

it failed to drive the defendant out of business.

The financial data before the Court are more than adequate to merit my

deference to one of the premises of the parties’ settlement, which was that it

was fruitless to try to wring more money from these Defendants. And of course

the Defendants are the parties primarily liable for whatever misconduct

occurred.

b. Shipley and Marketing Architects

Ms. Margolis argues, in addition, that Thomas Shipley and Marketing

Architects would be potential sources of more money for a settlement fund.

Margolis Br. at 16. In her view, the settlement’s release of claims against nonparties Shipley and Marketing Architects is inappropriate. Id. at 31. Shipley

and Marketing Architects were never named as defendants in the Sabol Action.

Ms. Margolis added them to her amended complaint after she was notified of

the Sabol mediation and pending settlement.

There is nothing wrong, in general, with releasing non-parties in

connection with the settlement of a class action. That is frequently done when

the claims against the non-parties are closely related factually to the claims

27
2000); Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 12:16, at

318 (4th ed. 2002)).

Contrary to Ms. Margolis’s assertions, and as discussed in more detail at

pp. 9, 20—23, supra, the claims against Shipley and Marketing Architects in the

Margolis Action have the same factual basis as the claims against the

Defendants in the Sabol Action. Ms. Margolis has not provided a persuasive

reason for excluding Shipley and Marketing Architects from the release. The

desire for finality requires that the settlement include a release of individuals in

addition to the corporate Defendants.

Shipley is the CEO of the Defendant companies. Shipley Deci., (Docket

No. 123), ¶ 2. Ms. Margolis has not made any showing that he would be

personally liable for claims related to the corporate Defendants’ practices. T 20

— 21. Shipley is not alleged to have made any representations to the class.

There are no veil-piercing allegations or the like. Id. He is properly released as a

director/officer. See In re Prudential, 962 F. Supp. 450, 559 (D.N.J. 1997)

(releasing claims against officers, directors, and agents for corporate

Defendant).

Ms. Margolis has also failed to show why Marketing Architects should

not be released. The release of Marketing Architects serves the goal of finality,

28
available facts suggest that the parties made a permissible decision that it was

not worth holding up a settlement to pursue an additional recovery from

Marketing Architects. Marketing Architects served as a consultant for the

Defendants, entering into a marketing agreement on or about May 24, 2007,

for audio advertising and other services regarding the marketing of

Hydroxatone products via the IVR system. T 21; Shipley Deci. ¶ 47, Exh. F

(Advertising Agreement). In that agreement, the Defendants warranted that

they would approve all advertiser content and that such content would comply

with “all applicable laws and regulations.” Shipley Deci. ¶ 50, Exh. F. ¶ 5.

Defendants therefore had the final say over the IVR scripting. T 58-59.

Marketing Architects acted as the agent of the Defendants when it co-produced

advertisements and assisted with the set-up of the IVR system. See Margolis AC

¶J 12—14, 81. And a global settlement cannot be reached without releasing

Marketing Architects, which would have a contractual right to be indemnified

by Defendants if sued separately. T 576

There is ample evidence that Ms. Margolis was not herself an IVR

purchaser, and would lack standing to pursue the rights of IVR customers

6 The agreement also provided for mutual indemnification. Id., Exh. F ¶ 8; T 21.

So even if Ms. Margolis was able to establish liability on the part of Marketing

Architects, the company would likely seek indemnification from the Defendants under

their Advertising Agreement.

29
g 

j

settlement,

Ms. Margolis requested a deposition of Marketing Architects at the

Fairness Hearing. T 75, 91. As noted above, after hearing from counsel at the

Hearing, and considering the information already available to Ms. Margolis, I

agree with the Magistrate Judge that this deposition is not necessary. All of the

information about Marketing Architects that was considered by the settling

parties was available to Ms. Margolis. Ms. Margolis has a copy of the relevant

agreement between Defendants and Marketing Architects. At the Fairness

Hearing, Mr. Margolis read into the record excerpts from depositions of Mr.

Shipley and Mr. Siegel in which the relationship between Defendants and

Marketing Architects was explored. T 65-68.

The materials already provided to the Court and the presentation at the

Fairness Hearing provide more than sufficient information to evaluate thefairness of the settlement.

3. Whether Additional Insurance Coverage Is Available.

Ms. Margolis also contends that the settlement is inadequate because

Class Counsel overlooked an additional $13 miflion in insurance coverage that

is available to satisfy the class members’ claims. Margolis Br. at 3.

REDACTED

30
No. 122, ¶ 10. 

REDACTED See Shipley Decl.

¶ 46. REDACTED

REDACTED Id.

The carriers for all of the other relevant policies held by the Defendants

were placed on notice, and have disclaimed coverage. Opp. to Objection at 17;

REDACTED

see also T 39.

REDACTED

REDACTED

REDACTED 40. The Defendants did not at first serve notice under

their Directors and Officers (“D&O”) 7policy, known as the “Darwin” policy,

because there was no claim against a director or officer. T 40.

Ms. Margolis’s argument that the carriers would potentially reverse their

decisions is speculative at best. There is no evidence that these insurers

disclaimed coverage lightly or inadvisedly. There is no evidence that Plaintiffsor Defendants had any incentive to forgo available insurance coverage, or that

Defendants failed to investigate it.

“ In the transcript, “D&O” is sometimes incorrectly rendered as “denote.”

31
the Margolis action contained claims for disgorgement that were distinct from

the refund claims in Sabol and not covered in the proposed settlement. (Docket

No. 104-1 at 7-8). To cover these claims, O’Brien considered the availability of

coverage under policies other than the Great American policy. Ic!. at 16 (stating

that these parties are given a “free ride” in the settlement). He also considered,

in particular, coverage related to Marketing Architects and Thomas Shipley—

the additional defendants named in the Margolis action. Id. at 8, 10, 14, 17

(examining the AIG “Chartis” and Darwin Director and Officer policies held by

ACMG, and the “Beasley Media Policy” held by Marketing Architects). Counsel

rested on O’Brien’s written submissions, and waived the right to present live

testimony from O’Brien. T 75, 90-91.

Setting aside the issue of whether the additional Margolis claims have

merit, O’Brien does not really state that the other policies cover these claims.

O’Brien states that that it is “more likely than not” that coverage could be

obtained under the Darwin policy (id. at 17), and that a “strong claim can be

made” for coverage under Marketing Architects’ Beasley Media Policy (see id. at

19, reasoning that the insurer bears the burden of demonstrating an

exclusion). In his supplemental report, O’Brien argues that AIG took a “narrow

position” regarding the period of coverage and that the parties had not

32
contentions: an assurance that the insurer has the burden and that, if

pressured, might offer money. O’Brien does not speculate as to cost and

additional time that would be required by such an effort, or the difficulties

presented by pursuing policies held by these non-parties.

Counsel for Defendants pointed out that fighting the insurers would

deplete the settlement fund for the sake of a speculative claim and a recovery

that would be long delayed, if it came at all:

extending this case, and extending the cost, and forcing the

company to burn through the current insurance policy, which

right now we have set aside to cover the settlement fund with the

risk, of course, being that the legal fees will burn through that, and

at the end of the day, it’s completely speculative as to whether

there’s going to be additional coverage or not.

T 41. While Girsh requires an evaluation of whether Defendants could

withstand a greater judgment, it does not demand that significant resources be

spent in separate litigation to unearth other sources of recovery. See Girsh, 521

F.2d at 157. The parties’ decision to forgo such protracted collateral litigation is

understandable.

In the mediation presided over by Judge Orlofsky, the parties considered

the availability of insurance coverage. I see no reason to second-guess the

33
coverage, and Ms. Margolis has not introduced any persuasive evidence or

arguments to the contrary.

4. Whether the ASA’s Release of Claims is Overbroad.

Ms. Margolis also argues that the ASA’s release of factually related claims

is overbroad. Id. at 17. The ASA releases “any and all actions ... that in any way

challenge Defendants’ Risk Free Trials and/or Auto-Shipment Programs, billing

practices ..., the representations and/or disclosures and/or Defendants’

adherence to the terms ... of such offers, and/or any claim related to the

receipt of and/or payment for unordered products.” ASA § 14.2. This, says Ms.

Margolis, is too broad; the release, in her view, should not encompass the

separate allegations of the Margolis Action.

Ms. Margolis again attempts to establish that the claims and allegations

underlying the Sabol Action and the Margolis Action are distinct. According to

Ms. Margolis, the Sabol Action deals with the Defendants’ refund and

cancellation policies, while the Margolis Action deals with the Defendants’ IVR

marketing scheme. Margolis Br. at 18. As discussed above, this supposedly

critical IVR-based predicate did not appear in the Margolis Action until after

the settlement negotiations in the Sabol Action had begun. At any rate, as

established above, the proffered distinction between the two actions is a false

34
and claims related to those purchases are contemplated and provided for in the

ASA. Seep. 23, supra; T 9—10; Orlofsky Deci. ¶ 12; ASA ¶ 3.1.

Further, as the Defendants rightly point out, a release for purposes of a

class action settlement may be quite broad. Opp. to Objection at 26. It “may

include all claims, including unpleaded claims that arise out of the same

conduct alleged in the case.” In re Prudential Ins. Co. ofAm. Sales Practice Litig.

Agent Actions, 148 F.3d 283, 326 (3d Cir. 1998) (citing Grimes v. Vitalink

Commc’ns Corp., 17 F.3d 1553, 1563 (3d Cir.), cert. denied, 513 U.S. 986, 115

S.Ct. 480, 130 L.Ed.2d 393 (1994); SandlerAssocs., L.P. v. Bellsouth Corp., 818

F.Supp. 695, 704—05 (D. Del. 1993), affd, 26 F.3d 123 (3d Cir. 1994)). Such

broad releases serve judicial economy and prevent relitigation by permitting

parties to enter into comprehensive settlements. In re Prudential Ins. Co. ofAm.

Sales Practices Litig., 261 F.3d 355, 366 (3d Cir. 2001) (citing TBK Partners,

Ltd. v. Western Union Corp., 675 F.2d 456, 460 (2d Cir. 1982)). Indeed, a class

action judgment may even bar later claims that were not, or could not have

been, presented in the first action. Id.

Ms. Margolis’s IVR based claims are part of the same course of conduct

alleged in the Sabol SAC and addressed by the ASA. In the alternative, even if

the “factual predicate” of the Margolis Action diverged from that of the Sabol

35
treatment to class members who requested a refund. Margolis Br. at 20.

The ASA establishes two groups of claimants. ASA § 5.3—5.4. Group One

consists of class members who submit a claim with a sworn statement on the

claim form that they: (1) returned or attempted to return risk-free trial

products and/or auto-shipment program products, and (2) paid more than

shipping and processing and/or return postage and/or received additional

shipments of the product OR cancelled and/or attempted to cancel their autoshipment memberships but received additional shipments. Id. § 5.3. These

Group One claimants are eligible to receive their choice of a pro rata share of

the cash benefit, or additional products. Id. Group 2 consists of all other class

members: essentially, those who are dissatisfied now, but did not attempt to

return the product or cancel their auto-shipment membership. Id. 5.4. These

claimants are eligible to receive a product benefit but are not eligible for a cash

benefit. Id.

Ms. Margolis, for example, would likely be a Group One class member,

entitled to a cash benefit. She alleged in her original complaint and

interrogatory responses that she attempted to return the products for a refund.

Opp. at 29—30; Mazzuchetti Deci., Exh. B (Docket No. 121-2) (Ms. Margolis’s

Response to Defendants’ First Set of Interrogatories). Under those facts, Ms.

36
product, while those who did not contemporaneously object are entitled to

product only.

Overall, the claims rates and selection of benefits data have indicated

general satisfaction with the settlement among Group 2 claimants. The ClaimsAdministrator, Gilardi & Co. LLC, sent 2,555,443 million notices to class

members. Fukunaga Deci. (Docket Nos. 94-9, 120). As of the date of the

Opposition filing (July 10, 2013), none of the supposedly oppressed Group 2

claimants had objected. Opp. at 30.

By the deadline for submitting claims, 36,005 claims were made.

Fukunaga Decl., at 2. Group 2 claimants submitted 39.5% of the total claims.

Fukunaga Decl., Exhibit A, (Docket No. 10 1-1 at 2). The “vast disparity”

between the number of class members who received notice and the number of

objectors strongly suggests that the settlement is fair. See In re Cendant Corp.

Litig., 264 F.3d 201, 235 (3d Cir. 2001) (applying Girsh factors).

Nothing on the face of the distinction between Group 1 and Group 2

claimants suggests unfairness, and there has been literally no objection from

any Group 2 claimant. The parties’ agreement is the product of advocacy and

negotiation from both sides. Again, I see no reason to dissent from Judge

Orlofsky’s opinion that the negotiations were hard fought and conducted at

37
Finally, Ms. Margolis objects to the settlement because she claims that it

fails to deter deceptive conduct, which is one of the purposes of the New Jersey

Consumer Fraud Act, as well as the class action device itself. Margolis Br. at

21-22 (citing Boyko v. Am. Int’l Group, Inc., No. 08-2214 (RBK), 2012 U.S. Dist.

LEXIS 59125, at *57 (D.N.J. Apr. 26, 2012) (vacated in part on

reconsideration); Lettenmaeir v. Lube Connection, Inc., 162 N.J. 134, 138

(1999); Gammon v. GC Servs. Ltd. P’ship, 162 F.R.D. 313, 321 (N.D. Iii. 1995)).

Ms. Margolis argues that the ASA does not require disgorgement of ill-gotten

gains. Id. at 22 (citing Secs. and Exch. Comm’n v. Teo, No. 2:04-cv-0 1815, 2011

U.S. Dist. LEXIS 103413, at *14 (D.N.J. Sept. 12, 2011); State v. Andrews, 73

Md. App. 80, 89 (1987)). Rather, the settlement amount is paid by the

Defendants’ insurer. Id. at 23.

Given the state of the Defendants’ finances, and the primary goal of

compensating the class, I find that an insurance-funded settlement is fair and

responsible.

Ms. Margolis objects to the particulars of the prospective relief outlined

in the ASA. The ASA, she says, does not bar Defendants from using the terms

“risk-free” or “free trial” in advertisements. Id. at 24 (citing ASA § 4. 1(c)(ii)(2)).

In addition, Defendants are not barred from delaying disclosure of all the terms

38
FTC v. Wilims, another case, which required such disclosure before payment

information is collected. No. 2:1 1-cv-828 (MJP), (W.D. Wash. Feb. 22, 2012);

Margolis Br. at 24.

The Willms consent order has no precedential authority here. While it is

possible that imposing the Willms requirements would ensure better

deterrence, final approval of the proposed settlement before me does not hinge

on what was negotiated in a different case on different facts. Nor does my

standard of review require me to fashion the best possible settlement. In any

event, Defendants have discontinued the practice to which Ms. Margolis

objects, rendering injunctive relief inappropriate at present. T 23. Should the

practice be resumed, Defendants may place themselves at risk of being found

to have acted unfairly, but that is a dispute for another day.

To the contrary, the Court will give deference to the proposed settlement

agreed to by the parties to this case after careful negotiation and under the

guidance of Judge Orlofsky in the mediation.

III. Remaining Girsh Factors

As noted above, a court considering the fairness of a class action should

consider, inter alia, the nine Girsh factors:

(1.) the complexity, expense and likely duration of the litigation. . .;

39
(8) the range of reasonableness of the settlement fund in light of

the best possible recovery.

(9) the range of reasonableness of the settlement fund to a possible

recovery in light of all the attendant risks of litigation

Girsh, 521 F.2d at 157.

I have discussed at length the particular objections of Ms. Margolis,

which chiefly focus on factors 7, 8 and 9. For completeness, I here briefly

discuss the rest.

The first factor—the complexity, expense, and likely duration of the

litigation—favors settlement. Id. Litigation of this case would involve further

discovery, including extensive inquiry into the Defendants’ business practices

and depositions of expert witnesses. Plaintiffs’ Memorandum in Support of

Motion for Final Approval of the Proposed Amended Settlement (“Plaintiffs’

Final Approval Br.”), (Docket No. 92), at 19; T 6. Even if Plaintiffs were

successful at trial, the Defendants would likely appeal, prolonging the litigation

further.

The second factor, the reaction of the class, also favors settlement. Girsh,

521 F.2d at 157. Out of nearly 2.6 million class members, only a handful have

objected to the settlement, and over 36,000 claims have been made. See pp. 14

— 15, 37 infra; Fukunaga Deci. at 2; T 7. Ms. Margolis made the only

substantive objection to the proposed settlement, which has been thoroughly

40
prior to settlement.” In re Gen. Motors, 55 F.3d at 813. Access to evidence,

whether from this case or others, also bears on this factor. See id.; In re Beef

Industry Antitrust Litig., 607 F.2d 167, 180 (5th Cir. 1979); City of Detroit v.

Grinnell Corp., 356 F.Supp. 1380, 1386 (S.D.N.Y. 1972), rev’d on other grounds,

495 F.2d 448 (2d Cir. 1974); In re Baldwin—United Corp., 105 F.R.D. at 483.

Here, the parties conducted adequate discovery. By the time the

settlement was reached, interrogatories and document requests had been

served. Plaintiffs’ Final Approval Br. at 17; Friedman Deci., (Docket No. 94),

¶ 10. Defendants initially produced approximately 62,000 documents which

were reviewed by Class Counsel. Friedman Deci. ¶ 11. During the course of

mediation and settlement negotiations, Defendants provided additional

discovery regarding sales, customer data, financial status, record-keeping, and

insurance coverage. Id. ¶J 12, 16. With the benefit of this discovery, the parties

participated in mediation and arms-length settlement negotiations. See id. ¶{

16 — 25; Orlofsky Dccl. ¶ 13. The parties and the mediator, Judge Orlofsky,

were aware of the parallel Margolis Action at the time of the mediation. Orlofsky

Dccl. ¶ 12. Ms. Margolis further provided some of the discovery from her case,

including the deposition transcripts of Mr. Shipley and Mr. Siegel, in support of

her objection. (Docket Nos. 104-21, 104-22). Aside from certain confidential

41
approval of the settlement.

The fourth factor requires consideration of the “risks of establishing

liability.” Girsh, 521 F.2d at 157. This factor also weighs in favor of settlement.

Plaintiffs have alleged claims under the New Jersey Consumer Fraud Act

(“NJCFA”), and for breach of contract and unjust enrichment. Plaintiffs’ Final

Approval Br. at 19. The Defendants previously set forth legitimate arguments

for dismissal, including the lack of a sufficient allegation that individual

plaintiffs had suffered ascertainable harm. Id.; see also Def. Memorandum of

Law in Support of the Motion to Dismiss the First Amended Complaint (“Def.

MTD Br.”) (Docket No. 33) (administratively terminated). If the settlement were

not approved, Defendants could be expected to reassert these arguments.

Furthermore, although the Plaintiffs believe they can establish liability at trial,

there are inherent risks in litigating consumer fraud claims on behalf of the

Class. See Plaintiffs’ Final Approval Br. at 19—20. For example, the Plaintiffs

would need to show that class members attempted to properly return their

products and/or cancel future shipments, and that the Defendants had a

pattern and practice of denying proper returns. Id. at 19—20. The risks of

establishing liability weigh in favor of approving the settlement.

Relatedly, the fifth factor, the risk of proving damages, also weighs in

42
Def. MTD Br. at 23 (citing N.J.S.A. § 56:8-19; DeHart v. U.S. Bank, N.A., 811 F.

Supp. 2d 1038, 1049-50 (D.N.J. 2011)); Barrows v. Chase Manhattan Mort.

Corp., 465 F. Supp. 347, 360 — 61 (D.N.J. 2006). Therefore, the Plaintiffs would

need to prove that the Class consumers suffered economic harm as a result of

being unable to return their products or cancel shipments. Proving (or

disproving) these damages would most likely require dueling expert testimony,

some of it specific to each individual Plaintiff. Plaintiffs would bear the risk of

failing to convince the jury of their position. Plaintiffs’ Final Approval Br. at 21—

22.

Finally, Girsh also requires consideration of the risks of maintaining the

class action throughout the litigation. 521 F.2d at 157. Class counsel believes

that this case is suitable for class certification in the settlement context, and as

explained in my accompanying Order, I agree. Plaintiffs’ Final Approval Br. at

22. Maintenance of a class action throughout a contested litigation, however, is

a different matter. See Fed. R. Civ. P. 23(a); In re Cendant Corp Litig., 264 F.3d

201, 239 (3d Cir. 2001). The Plaintiffs point out that choice of law issues pose

one serious threat to class certification here. Plaintiffs’ Final Approval Br. at 22

(citing Maniscalco v. Brother Int’l Corp., 709 F.3d 202, 208—09 (3d Cir. 2013)

(upholding district court’s finding that South Carolina, not New Jersey, had

43
as a class action.

In addition, in a contested certification proceeding, there might have

been difficulty in establishing injury and/or damages on a class-wide basis.

Certification is a difficult process, and perhaps is growing more so. See, e.g.,

Comcast Corp. v. BehrencZ, 569 U.S. ---, 133 S. Ct. 1426 (2013) (discussing

predominance under Rule 23(b)(3)). Claimants here had different experiences:

Some perhaps felt they were inveigled by a telephone sales representative,

others may complain of the automated IVR ordering system, others may have

unsuccessfully sought refunds, others may have tried to cancel the automatic

shipment program, and others may simply have been dissatisfied with the skincare product itself. If class certification were litigated, such differences would

fracture the claims, and would at least add to the complexity and length of

litigation. The settlement, however, minimizes such disparities, 8and grants

cash awards and/or additional product, essentially based on a claimant’s

statement of dissatisfaction with the product or the purchase process.

In total, the Girsh factors weigh significantly in favor of final approval of

the ASA. For these and the reasons discussed throughout the Opinion, I will

grant final approval to the proposed settlement.

8 Claimants are divided into two groups, as explained above.

44
Dated: November 22, 2013

Hon. Kevin McNultyUnited States District Judge

45