Court Opinion

ID: 3203363
Source: CourtListenerOpinion
Date Created: 2016-05-13 17:00:55.246815+00
Date Added: 2024-06-11T14:02:52.583770
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                             Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                    File Name: 16a0114p.06

                   UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT
                                  _________________

 AMBER GASCHO, on behalf of herself and all others     ┐
 similarly situated, et al.,                           │
                             Plaintiffs-Appellees,     │
                                                       │
         v.                                            │
                                                       │      Nos. 14-3761/3798
 GLOBAL FITNESS HOLDINGS, LLC,                        >
                                                     │
                              Defendant-Appellee, │
                                                     │
 ROBERT J. ZIK, APRIL ZIK, and JAMES MICHAEL │
                                                     │
 HEARON (14-3761); JOSHUA BLACKMAN (14-3798).
                                                     │
                              Objectors-Appellants │
                                                     ┘
                       Appeal from the United States District Court
                      for the Southern District of Ohio at Columbus.
                   No. 2:11-cv-00436—George C. Smith, District Judge.

                                   Argued: June 9, 2015

                             Decided and Filed: May 13, 2016

                      Before: KEITH, CLAY, and STRANCH, Circuit Judges.

                                    _________________

                                        COUNSEL

ARGUED: Joshua T. Rose, HUMMEL COAN MILLER, SAGE & ROSE LLC, Louisville,
Kentucky, for Appellants in 14-3761. Theodore H. Frank, CENTER FOR CLASS ACTION
FAIRNESS, Washington, D.C., for Appellant in 14-3798. Kenneth J. Rubin, VORYS, SATER,
SEYMOUR AND PEASE LLP, Columbus, Ohio, for the Gascho Appellees. ON BRIEF:
Joshua T. Rose, HUMMEL COAN MILLER, SAGE & ROSE LLC, Louisville, Kentucky,
Gregory A. Belzley, BELZLEY BATHURST ATTORNEYS, Prospect, Kentucky, for
Appellants in 14-3761. Theodore H. Frank, CENTER FOR CLASS ACTION FAIRNESS,
Washington, D.C., for Appellant in 14-3798. Kenneth J. Rubin, Thomas N. McCormick,
VORYS, SATER, SEYMOUR AND PEASE LLP, Columbus, Ohio, Gregory M. Travalio, Mark
H. Troutman, ISAAC WILES BURKHOLDER & TEETOR, LLP, Columbus, Ohio, for the
Gascho Appellees. V. Brandon McGrath, BINGHAM GRENEBAUM DOLL LLP, Cincinnati,

                                              1
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 2

Ohio, Richard S. Gurbst, Larisa M. Vaysman, SQUIRE PATTON BOGGS (US) LLP,
Cleveland, Ohio, for Appellee Global Fitness.

       STRANCH, J., delivered the opinion of the court in which KEITH, J., joined. CLAY, J.
(pp. 34–46), delivered a separate dissenting opinion.
                                      _________________

                                           OPINION
                                      _________________

       STRANCH, Circuit Judge. This case involves challenges to the settlement of a consumer
class action. Amber Gascho and other Plaintiffs (collectively, “Plaintiffs”) sued Global Fitness
Holdings, LLC alleging that between 2006 and 2012 Global sold gym memberships and
incorrectly charged fees pertaining to cancellation, facility maintenance, and personal training
contracts. When class counsel and Global announced the settlement, two objectors—Joshua
Blackman and the Zik objectors—challenged its terms, both claiming that the settlement was
unfair under Federal Rule of Civil Procedure 23(e). They argued that class counsel’s fees were
disproportionate to the claims paid, that the settlement unnecessarily required a claims process,
and that the settlement contained “clear-sailing” and “kicker” provisions that suggest self-dealing
by class counsel. The Zik objectors further argued that the settlement must be rejected because it
failed to provide adequate compensation for the Kentucky plaintiffs’ state-law claims and for
plaintiffs who had signed an early, more favorable version of the contract.

       The district court approved the settlement based on a magistrate judge’s 80-page Report
and Recommendation (R&R), which addressed each objection. Both objectors appealed. We
find that the district court did not abuse its discretion when approving the settlement, and
therefore AFFIRM the district court’s decision.

                    I. BACKGROUND AND PROCEDURAL HISTORY

       This case is one of a number of suits against fitness facilities. Each is a consumer class
action consolidating numerous claims of small monetary value on behalf of individuals who
purchased memberships in such facilities and allege that they were charged improper fees.
Global is a Kentucky LLC that operated fitness facilities under the brand name “Urban Active”
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 3

in Ohio, Kentucky, Georgia, Nebraska, North Carolina, Pennsylvania, and Tennessee until
October 2012, when it sold its assets to the entity doing business as LA Fitness. Plaintiffs filed
suit against Global on behalf of a class of Ohio consumers in Ohio state court in 2011. Global
removed the suit to federal court under the Class Action Fairness Act (CAFA). The Gascho case
and several similar actions filed in other courts alleged that Global engaged in a variety of unfair
sales practices relating to lack of disclosure to consumers, improper deductions from bank
accounts, and improper handling of contract cancellations; the cases brought claims under
theories of breach of contract, unjust enrichment, fraud, and various state consumer protection
laws.

        One such consumer class action, Robins v. Global Fitness Holdings, LLC, 838 F. Supp.
2d 631 (N.D. Ohio 2012), was dismissed. The parties later stipulated to the dismissal of the
resulting appeal, apparently after settling the case. In another suit brought in Kentucky state
court in 2012, Global and plaintiffs’ counsel (not related to class counsel or the objectors in this
case) also attempted to settle claims, but class counsel in this litigation and counsel for the Zik
objectors together objected to that settlement. The Kentucky court rejected that settlement for
several reasons, including the “lack of value” of the settlement owing to the “dismal”
participation rate of the class plaintiffs. The court stated that the low participation rate might
have been because the settlement was a coupon settlement for the most part, and that those
seeking a cash refund had to undergo a “cumbersome” process in which 90% of the cash refund
claims were rejected. In denying approval of the settlement, the court noted that 1,444 out of the
242,243 potential class members—i.e, only 0.6% of the potential class—had claims of any kind
that were approved.

A. The approved Global settlement

        Global and class counsel reached a settlement in this case in September 2013, after more
than two years of litigation that included extensive discovery. The settlement class consists of
the approximately 606,246 people who signed a gym membership or personal training contract
with Global from January 1, 2006 through October 26, 2012. Id. at 1496–97, 1491. Any class
member who filed an approved claim received $5 in addition to any other claim award provided
for in the settlement. The settlement also created three subclasses, defined as follows:
Nos. 14-3761/3798               Gascho, et al. v. Global Fitness Holdings, LLC                   Page 4

        1. The “FIF Subclass,” which includes all class members who paid a $15 Facility
           Improvement Fee (FIF) or any other biannual $15 fee charged by the
           defendant between April 1, 2009 and October 26, 2012. The FIF Subclass has
           approximately 316,721 members, and all who filed approved claims were
           entitled to receive $20 in addition to any other claim award.
        2. The “Gym Cancel Subclass,” which includes all class members who cancelled
           their gym membership contracts between January 1, 2006 and October 26,
           2012. The Gym Cancel Subclass has approximately 387,177 people, and all
           who filed approved claims were entitled to receive $20 in addition to any
           other claim award.
        3. The “Personal Training Cancel Subclass,” which includes all class members
           who cancelled a personal training contract between January 1, 2006 and
           October 26, 2012. The Personal Training Cancel Subclass has approximately
           64,805 members, and all who filed approved claims were entitled to receive
           $30 in addition to any other claim award.

(R. 97-1, Settlement, PageID 1490, 1492, 1497.)1 Each class member had the opportunity to
recover once from each subclass to which she/he belonged. The maximum per-person recovery
was therefore $75 (5+20+20+30). Class members were required to file a simple claim form and
if total claims amounted to less than $1.3 million, approved claimants would have their awards
increased in equal shares.

        The settlement permitted class counsel to apply for $2.39 million in attorney’s fees and
costs, and contained a “clear sailing” clause: an agreement from Global not to oppose any
application for that sum or less. The agreement also included a “kicker” clause: an agreement
that in the event the court awarded less than $2.39 million for costs and fees, that amount would
constitute full satisfaction of Global’s obligation for costs and fees.

B. The notice-and-claims process

        Jeffrey Dahl, president of Dahl Administration, LLC, a claims administration firm hired
by class counsel to implement the settlement, testified that he sent individualized notice by
postcard to 601,494 class members, and email notice to just under half the class.                          After

        1
         These numbers were modified slightly in a February 22, 2014 Joint Motion in which the parties stated that
there were approximately 606,000 class members, 323,518 Gym Cancel subclass members, 300,017 FIF subclass
members, and 50,038 Personal Training Cancel subclass members.
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 5

correcting the addresses of the 146,617 postcard notices returned as undeliverable and re-mailing
them, 90.8% percent of the notices were successfully delivered to an address associated with a
class member, though Dahl could not confirm how many notices reached the specific class
member to whom they were addressed. Class members could either fill out a claim on paper or
on a website provided in both the postcard and the email notice. The claim form itself required
class members to provide basic contact information, identify which of the three subclasses they
qualified for, and sign under penalty of perjury. Dahl testified that about 55,600 claims were
made in total, and 49,808 claims were approved, resulting in a total class payment of $1,593,240.
Dahl calculated that the average payout to a claimant was $31.99, and that the average payout to
a claimant in the Gym Cancel Subclass was $41.28.

C. The Blackman objection

       Joshua Blackman, a class member, objected through his counsel affiliated with the Center
for Class Action Fairness. Though Blackman suffered no actual damages because he cancelled
his gym membership for a full refund within three days of enrolling, he fell within the definition
of the Membership Cancellation subclass, and made a claim for $25 under the settlement.
Blackman states that he did not make a $20 claim for the FIF subclass because the class notice
did not specify whether he was a member of that subclass. He almost certainly was not, as he
was a gym member for only three days. Blackman alleged that the settlement was one-sided in
favor of class counsel because it awarded $2.39 million for the legal services they rendered in
representing the class but likely paid much less in class claims due to the class members’
predictable low response to the claims-made process. Blackman argued that the terms of the
settlement were counter to this court’s decision in In re Dry Max Pampers Litigation, 724 F.3d
713 (6th Cir. 2013), which forbids “preferential treatment” to class attorneys over unnamed class
members. Invoking the Ninth Circuit’s decision in In re Bluetooth Headset Products Liability
Litigation, 654 F.3d 935 (9th Cir. 2011), Blackman further objected to the settlement’s clear
sailing clause and kicker clause, and argued that any fee award in a claims-made settlement must
be based on the claims paid only, rather than on the total amount made available by the
settlement should all class members make a claim.
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC            Page 6

D. The Zik objection

       The Zik objectors echo Blackman’s objections and add that the settlement is unfair
because it fails to provide sufficient relief for (1) class members who had an early version of the
contract with allegedly more favorable cancellation terms, and (2) class members from Kentucky
who can assert claims under the Kentucky Health Spa Act (KHSA). The Zik objectors argue in
the alternative that, if the settlement is approved, they should be awarded attorney’s fees because
they benefited this class by successfully objecting to the Seeger settlement and because their
Kentucky state court case likely drove Global and class counsel to settle in this case at the time
they did.

E. The fairness hearing and settlement approval

       Magistrate Judge King held a fairness hearing in February 2014, during which the parties
argued their positions and testimony was taken from Dahl. In April 2014, the magistrate judge
issued an 80-page R&R approving the settlement and the requested fees. The magistrate judge
found the settlement in Pampers distinguishable because this case had been “vigorously
litigated” for two-and-a-half years prior to settlement and involved “extensive” discovery and
motion practice, and because class counsel obtained “significant monetary relief to class
members” rather than the “illusory injunctive relief” obtained in the Pampers settlement.
(R. 141, PageID 2841.)

       The R&R found the proposed attorney’s fees and costs to be reasonable based on the
work performed and because the request was well below counsel’s lodestar (hours worked on the
case multiplied by counsel’s hourly rate), and also noted the significance of the settlement’s
creation of an available benefit of $15.5 million (the total payout if all of the class members filed
claims). The magistrate judge included a common fund cross check of the lodestar calculation.
For this percentage fee calculation, the $15.5 million available award was proposed; Blackman
argued that the relevant benefit is the $1.5 million actual payout. Instead of adopting either
position, the R&R split the difference and found that “the potential monetary compensation to
class members should be valued at $8,546,835, i.e., the midpoint between the Available Benefit
Nos. 14-3761/3798              Gascho, et al. v. Global Fitness Holdings, LLC                   Page 7

of $15,500,430 and the actual payment of $1,593,240,” resulting in a “reasonable” ratio of 21%.2
(Id. at 2874–75.) The R&R explained that the “clear sailing” clause was not an issue in light of
the reasonable value of the class settlement, and that the “kicker” clause was “not improper in
this case” because the parties negotiated a reasonable attorney fee that the court upheld, so the
class was not deprived of “any benefit, real or perceived.” (Id. at 2849–52.) The R&R further
determined that the claims-made process was reasonable, given the age of class address
information, the lack of certainty that the postcards actually reached the named class members,
and because the 8.2% response rate was “well within the acceptable range of responses in a
consumer class action.” (Id. at 2857–59.) Dahl had testified that response rates in consumer
class actions generally range from 1 to 12 percent and, given the age of the address information,
a claims-made process rather than a direct payout to class members was the norm.

        Upon reviewing all the circumstances surrounding the fee request, the R&R also
concluded that though class counsel had not submitted detailed billing records for review by the
court, the lodestar award was justified because: class counsel provided the number of hours
worked and averred under penalty of perjury that those hours were reasonably necessary to
prosecute the action; class counsel’s hourly rates were consistent with the market rate; class
counsel indicated they would not submit a fee request for the hours they worked after the
settlement date, which were substantial; the fee request resulted in a lodestar of less than one
(meaning that the fee requested represented payment for fewer hours than were actually worked);
and there was no objection to the reasonableness of the hourly rates or the number of hours
worked despite “vigorous objections” to other aspects of the settlement.

        Blackman and the Zik objectors filed objections to the magistrate judge’s R&R. The
district court overruled all objections to the R&R, and adopted and affirmed it. It issued a final
order approving the class action settlement and final judgment in July 2014. The separate
appeals of Blackman, Case No. 14-3798, and the Ziks, Case No. 14-3761, followed and were
consolidated.

        2
          The magistrate judge’s calculations: $8,546,835 + attorneys’ fees and costs of $2,390,000 +
administration costs of $496,259 = $11,433,094 Total Class Benefit. $2,390,000 ÷ $11,433,094 = Fees constituting
20.904% of the Total Class Benefit.
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC            Page 8

                                         II. ANALYSIS

       We review both the district court’s approval of the settlement and class counsel’s
attorney fee request under an abuse-of-discretion standard. In re Dry Max Pampers Litig.,
724 F.3d at 717 (settlement); Bowling v. Pfizer, Inc., 102 F.3d 777, 779 (6th Cir. 1996) (fees).

A. Fairness of the settlement

       Rule 23(e) governs class action settlements and mandates that the court may approve a
settlement upon holding a fairness hearing and concluding that it is “fair, reasonable, and
adequate.” Fed. R. Civ. P. 23(e)(2). In 2007, we set out the factors that guide the court’s inquiry
and that we apply here:

       (1) the risk of fraud or collusion; (2) the complexity, expense and likely duration
       of the litigation; (3) the amount of discovery engaged in by the parties; (4) the
       likelihood of success on the merits; (5) the opinions of class counsel and class
       representatives; (6) the reaction of absent class members; and (7) the public
       interest.

Int’l Union, United Auto., Aerospace, & Agric. Implement Workers of Am. v. Gen. Motors Corp.,
497 F.3d 615, 631 (6th Cir. 2007).

       The R&R determined that the following case specific factors weigh in favor of approving
the settlement: (1) The parties’ two-and-a-half years of litigation, extensive discovery, ongoing
settlement negotiations, and formal mediation session all weighed against the possibility of fraud
or collusion; (2) Discovery was “extensive,” including the service of multiple sets of
interrogatories, the production of over 400,000 documents, and over ten depositions, and
required “significant Court involvement,” (R. 141, PageID 2832); (3) The likelihood of
plaintiffs’ success on the merits was called into question by the dismissal of Robins, 838 F. Supp.
2d at 631, which the Gascho court had noted presented similar facts and legal issues to those
alleged here; (4) The litigation had been pending for nearly three years, resulting in millions of
dollars in legal fees, and continued litigation would undoubtedly require years of extensive and
costly litigation, including fact discovery, expert discovery, and motion practice; (5) Class
counsel and representatives approved the settlement agreement; (6) Out of a pool of 605,000
class members, only 90 class members opted out and only 2 objections were filed; (7) The public
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 9

interest favored settlement because it provided an immediate cash payout to class members for
their compensable injuries in an amount the court found to be fair, reasonable, and adequate, and
because settlement would conserve judicial resources.

       In addition to the seven UAW factors, Blackman and the dissent cite our recent Pampers
case, which addressed whether the settlement gave “preferential treatment” to class counsel or
named plaintiffs, while only “perfunctory relief to the unnamed class members.” Pampers,
724 F.3d at 718. They also rely on the Ninth Circuit’s decision in Bluetooth, which found that
signs of collusion include a kicker clause, a clear sailing clause, or a situation in which class
counsel “receive a disproportionate distribution of the settlement” or the “class receives no
monetary distribution but class counsel are amply rewarded,” 654 F.3d at 947 (internal quotation
marks omitted).

       The primary focus of the objections by Blackman and the dissent are these additional
considerations introduced in Pampers and Bluetooth. They take issue with the district court’s
conclusion that relief to the class was “substantial” (as opposed to nominal) because, though a
claims process was created to allow all class members to participate, only 8.2% of the class filed
a claim.   They argue that, because Global need only pay approximately $1.6 million—as
opposed to more than $15.5 million in relief that plaintiffs argue counsel secured for the entire
class—allowing class counsel to collect a fee of $2.39 million would constitute the “preferential
treatment” for class counsel that Pampers forbids.

       The central issue is how to value the benefit to the class: as (1) only the value of the
claims actually approved, (2) the total relief available to the class if every member filed a claim,
or (3) by splitting the difference between the two, as the district court did here. Blackman and
the dissent argue that for the benefit calculation to be valid under Pampers, only the value of the
claims actually approved may be used.

       We do not find either Pampers or Bluebooth to be dispositive here. First, the Pampers
case involved a Rule 23(b)(2) class for injunctive relief and does not discuss how to value cash
benefits for a class that are secured by the work of class counsel but go unclaimed. 724 F.3d at
716. The relief at issue in Pampers, moreover, has little relation to the cash settlement obtained
Nos. 14-3761/3798                Gascho, et al. v. Global Fitness Holdings, LLC                      Page 10

here. The Pampers settlement agreement allotted class counsel $2.73 million, even though
“counsel did not take a single deposition, serve a single request for written discovery, or even file
a response to [the defendant’s] motion to dismiss.” Id. at 718. The class members’s purported
benefits included (1) a refund for one box of diapers, if they retained a receipt and a UPC code
from a box of diapers purchased up to eight years before (relief that had been available before
the filing of a lawsuit), (2) changes to the Pampers box labeling to warn about diaper rash, and
(3) minimal and obvious medical advice about diaper rash posted on the Pampers.com website.
Id. at 718–19. The settlement contained no other cash relief whatsoever. The facts of Bluetooth
itself also shed little light on the instant case, as that was a cashless settlement for the class at
large that involved, among other things, $100,000 in cy pres awards3, package labeling about
acoustic safety, payments to the class representatives only, and up to $800,000 in attorney’s fees
for class counsel. Bluetooth, 654 F.3d at 939–40.

         Relying on Pampers and Bluetooth, Blackman asks us to approve a proposed per se rule
of unfairness, arguing that “disproportionate allocation violates Rule 23(e) even without a
showing of actual collusion.”             (Blackman Br. at 16.)           Blackman’s proposal depends on
acceptance of two premises: first, it assumes that use of the percentage of the fund calculation
method is mandated whenever class counsel settles a claim; and second, it requires that such
calculation be based only on the value of the class claims paid as opposed to the total relief that
class counsel’s work obtained for the entire class.

         As discussed below, the reasoned basis of ample precedent in our circuit and decisions
from multiple other circuits counsel against these presumptions. These authorities demonstrate
that it is within the discretion of a district court both to select a lodestar computation as the
appropriate method of fee calculation and, if choosing to use or include a percentage of the fund
calculation, to value the benefit to the class based on the total relief class counsel makes
available to all the class members. Supreme Court authority, moreover, does not support the
benefit calculation that Blackman proposes. The Court has held that class plaintiffs’ “right to
share the harvest of the lawsuit upon proof of their identity, whether or not they exercise it, is a

         3
           A cy pres award is “used to distribute unclaimed portions of a class-action judgment or settlement funds to
a charity that will advance the interests of the class.” Black’s Law Dictionary (10th ed. 2014)
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 11

benefit in the fund created by the efforts of class representatives and their counsel.” Boeing Co.
v. Van Gemert, 444 U.S. 472, 480 (1980) (emphasis added).

       The subsections below focus on each of Blackman’s and the dissent’s bases for
challenging the settlement in turn: that the attorney’s fee was too high as a proportion of the
claims paid, that the claims process was an improper barrier to the class obtaining relief, and that
the clear sailing and kicker provisions were improper. The Zik objectors raise the same concerns
and some additional objections that will be addressed.

       1. Attorney’s fee

       Blackman does not ask this court to find that the dollar payout to class claimants was
unreasonable: he does not challenge the fundamental fairness of the amount the class itself
received; instead, his objection is to the amount the attorneys received in comparison to the
amount the class members claimed and received. The analysis the district court employed when
approving class counsel’s fee—grounded in our precedent—reaches the heart of the issue.

       In applying the abuse-of-discretion standard to an award of attoreny’s fees, the trial court
is entitled to “substantial deference because the rationale for the award is predominantly fact-
driven.” Imwalle v. Reliance Med. Prods., Inc. 515 F.3d 531, 551 (6th Cir. 2008). Such
deference “is appropriate in view of the district court’s superior understanding of the litigation
and the desirability of avoiding frequent appellate review of what essentially are factual matters.”
Id. (quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)).

       “When awarding attorney’s fees in a class action, a court must make sure that counsel is
fairly compensated for the amount of work done as well as for the results achieved.” Rawlings v.
Prudential-Bache Properties, Inc., 9 F.3d 513, 516 (6th Cir. 1993). These two measures of the
fairness of an attorney’s award—work done and results achieved—can be in tension with each
other. The lodestar method of calculating fees “better accounts for the amount of work done,”
whereas “the percentage of the fund method more accurately reflects the results achieved.” Id.

       To determine the lodestar figure, the court multiplies the number of hours “reasonably
expended” on the litigation by a “reasonable hourly rate.” Bldg. Serv. Local 47 Cleaning
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 12

Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392, 1401 (6th Cir. 1995). The
court “may then, within limits, adjust the ‘lodestar’ to reflect relevant considerations peculiar to
the subject litigation.” Adcock-Ladd v. Sec’y of Treasury, 227 F.3d 343, 349 (6th Cir. 2000). In
contrast, to employ the percentage of the fund method, the court determines a percentage of the
settlement to award to class counsel. In re Sulzer Hip Prosthesis & Knee Prosthesis Liab. Litig.,
268 F. Supp. 2d 907, 922 (N.D. Ohio 2003).

       As the two methods measure the fairness of the fee with respect to different desired
outcomes, “it is necessary that district courts be permitted to select the more appropriate method
for calculating attorney’s fees in light of the unique characteristics of class actions in general,
and of the unique circumstances of the actual cases before them.” Rawlings, 9 F.3d at 516.
District court decisions must include “a clear statement of the reasoning used in adopting a
particular methodology and the factors considered in arriving at the fee” in order to allow
effective appellate review for abuse of discretion. Id. This court has noted that there are
advantages and drawbacks to each method. Id. at 516–17.

       The advantages of the percentage of the fund method are that: “it is easy to calculate; it
establishes reasonable expectations on the part of plaintiffs’ attorneys as to their expected
recovery; and it encourages early settlement, which avoids protracted litigation.” Id. But, “a
percentage award may also provide incentives to attorneys to settle for too low a recovery
because an early settlement provides them with a larger fee in terms of the time invested.” Id.
With the lodestar method, the

       listing of hours spent and rates charged provides greater accountability. In
       addition, enhancing the lodestar with a separate multiplier can serve as a means to
       account for the risk an attorney assumes in undertaking a case, the quality of the
       attorney’s work product, and the public benefit achieved. The lodestar method
       also encourages lawyers to assess the marginal value of continuing work on the
       case, since the method is tied to hours and rates, and not simply a percentage of
       the resulting recovery.

Id. But “the lodestar method has been criticized for being too time-consuming of scarce judicial
resources.” Id.
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 13

       District courts have the discretion to select the particular method of calculation, but must
articulate the “reasons for ‘adopting a particular methodology and the factors considered in
arriving at the fee.’” Moulton v. U.S. Steel Corp., 581 F.3d 344, 352 (6th Cir. 2009) (quoting
Rawlings, 9 F.3d at 516). Moulton set out the germane factors:

       Often, but by no means invariably, the explanation will address these factors:
       “(1) the value of the benefit rendered to the plaintiff class; (2) the value of the
       services on an hourly basis; (3) whether the services were undertaken on a
       contingent fee basis; (4) society’s stake in rewarding attorneys who produce such
       benefits in order to maintain an incentive to others; (5) the complexity of the
       litigation; and (6) the professional skill and standing of counsel involved on both
       sides.”

Id. (quoting Bowling, 102 F.3d at 780). Here, the district court employed the lodestar method to
determine the fairness of the fee, then chose to cross-check it with the percentage-of-the-fund
calculation. See, e.g., Bowling, 102 F.3d at 780; Van Horn v. Nationwide Prop. & Cas. Ins. Co.,
436 F. App’x 496, 500–01 (6th Cir. 2011).

               a. Lodestar method

       Applying the factors enumerated in Moulton, the district court determined that the
lodestar method was appropriate because the “results achieved” by the settlement are
“substantial” and therefore the “interest in fairly compensating counsel for the amount of work
done is great.”   (R. 141, PageID 2869.)      It further noted that class counsel had devoted
substantial time and energy (8,684 hours at the time of settlement) to the action despite the risk
of not being compensated, the litigation was complex, opposing counsel was skilled, and limiting
an award to a percentage of the actual recovery could dissuade counsel from undertaking similar
consumer class actions in the future. The district court also correctly noted that several of the
plaintiffs’ claims involved fee shifting statutes, KRS 367.930(2); O.R.C. 1345.09(F)(2), and that
the purpose of such statutes is to induce a capable attorney to take on litigation that may not
otherwise be economically viable. See, e.g., Perdue v. Kenny A. ex rel Winn, 559 U.S. 542, 552
(2010) (explaining that a “reasonable” fee is one that is “sufficient to induce a capable attorney
to undertake the representation of a meritorious civil rights case”). The court concluded that
“[u]nder the circumstances of the case, the lodestar method will best ensure that Class Counsel is
fairly compensated for their time and it will fairly account for the risk to Class Counsel and the
Nos. 14-3761/3798              Gascho, et al. v. Global Fitness Holdings, LLC        Page 14

policy underlying the fee shifting statutes.”       (R. 141, PageID 2869 (internal citation and
quotation omitted).) It was undoubtedly within the court’s discretion to select this method.

        The district court approved class counsel’s lodestar figure based on declarations from
counsel about each person who billed hours on the case, their rates and experience, and what
percentage of the billing was attributed to each lawyer or paralegal. Lawyers’ rates varied from
$180 to $450 per hour based on the lawyer’s experience, with the average at $275.20 per hour
after subtracting for costs.

        Several of this court’s opinions suggest that before approving class counsel’s lodestar
amount, the court should review the attorney’s lodestar fee request in more detail than what was
presented in class counsel’s affidavits in this case. We have found that

        [t]he key requirement for an award of attorney fees is that the documentation
        offered in support of the hours charged must be of sufficient detail and probative
        value to enable the court to determine with a high degree of certainty that such
        hours were actually and reasonably expended in the prosecution of the litigation
        . . . . Although counsel need not record in great detail each minute he or she spent
        on an item, the general subject matter should be identified.

Imwalle, 515 F.3d at 553 (internal quotation marks and citations omitted); see also Rawlings,
9 F.3d at 516–17.

        Here, the district court acknowledged this body of case law and noted that the “best
practice may have been to submit more detailed records of the costs and time expended in the
litigation.” (R. 141, PageID 2870.) Nonetheless, the court was “satisfied” that the number of
hours billed and hourly rates of class counsel were reasonable because counsel “averred under
penalty of perjury that the hours expended and costs incurred in the litigation were reasonably
necessary to prosecute the action,” the hourly rates were “consistent with those in the market”
and the court’s experience, class counsel had not billed for the significant number of attorney
hours expended after the date of settlement, and despite vigorous objections to other aspects of
the settlement, the objectors had not argued that class counsel’s number of hours worked or
hourly rates were unreasonable. (R. 141, PageID 2871-72.) Class counsel represented that, by
the time the magistrate judge ruled on the fairness hearing, the actual lodestar had grown to
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC          Page 15

almost $2.8 million, though it would only seek to recoup the $2.39 million it had already agreed
on.

       Blackman argues that the plaintiffs failed to sustain their “burden of providing for the
court’s perusal a particularized billing record,” (Blackman Br. at 36 (quoting Imwalle, 515 F.3d
at 553)), and that the R&R “drastically understated the problem” when opting to rely on the
lodestar method as the basis for awarding counsel fees in the absence of detailed billing records,
(Blackman Br. at 35). The dissent also challenges the adequacy of class counsel’s billing
records.

       The district court appropriately addressed the Moulton factors and explained its rationale
for choosing to use the lodestar method, and it would clearly have been within its discretion to
rely on the lodestar method supported by adequate billing records. It is, however, a close
question whether the minimal billing information provided suffices to justify the lodestar award
in light of our caselaw. We need not reach the issue, however, because the district court also
employed the percentage of the fund cross-check and, as discussed below, that method
independently validated the decision to award the attorney’s fees in the case. See Van Horn,
436 F. App’x at 501 (finding that a mistake in the district court’s percentage of the fund analysis
was not an abuse of discretion because the district court was justified in awarding the fee based
on the lodestar alone); Bowling, 102 F.3d at 779–81 (6th. Cir. 1996) (affirming the district
court’s fee award, which was based on the percentage-of-the-fund and cross-checked with the
lodestar, without reviewing the lodestar analysis).

               b. Percentage-of-fund cross check

       A percentage of the fund cross-check is optional, and we have repeatedly upheld a district
court’s determination that a fee award is reasonable based solely on a lodestar analysis. Van
Horn, 436 F. App’x at 500–01 (citing Rawlings, 9 F.3d at 516). Here we review the percentage-
of-fund cross check for two reasons: (1) the issue of sufficiency of the records submitted for the
lodestar analysis, and (2) Blackman’s argument for a standard creating a per se violation of Rule
23(e). With respect to the second issue, we specifically address below the calculation method;
Nos. 14-3761/3798                Gascho, et al. v. Global Fitness Holdings, LLC                       Page 16

the benefit to the class and its ratio to attorney’s fees; and—central to the dispute here—what the
district court may, within its discretion, choose to do.

         When conducting a percentage of the fund analysis, courts must calculate the ratio
between attorney’s fees and benefit to the class. Attorney’s fees are the numerator and the
denominator is the dollar amount of the Total Benefit to the class (which includes the “benefit to
class members,” the attorney’s fees and may include costs of administration). The dispute here
is over the first component—what the court may choose as the benefit to class members.
Blackman argues that the benefit may be only the actual payments to class members and
plaintiffs argue that it should be the entire benefit made available to the class through the efforts
of counsel.

         Because a settlement addresses the particular facts of and parties in a case, calculation of
the denominator is necessarily case specific. To reach a resolution satisfactory to all parties,
litigants may agree to cash and noncash settlement components. Calculating the ratio between
attorney’s fees and benefit to the class must include a method for setting the denominator that
gives appropriate consideration to all components that the parties found necessary for settlement.
Circuits have resolved the issue in several different ways, with a few establishing categorical
rules but many maintaining a more case-specific approach and reviewing for abuse of discretion
without mandating a particular method. Our circuit precedent fits within the latter approach.

         Here, class counsel asserts that the “benefit to the class” portion of the denominator is the
value of the settlement if all class members exercised their right to file valid claims. The
magistrate judge calculated that available benefit to be $15,500,430.4 Blackman counters that
the $15.5 million figure is illusory because class counsel and Global could easily anticipate that
only a fraction of the class would actually file a claim, given the testimony that only 5 to 8% of
plaintiffs file claims in a typical consumer class action. Blackman’s argument is that the benefit
component of the denominator must be calculated based only on the amount of money actually
paid to the class.

         4
          Though class counsel reiterates in its appellate brief that the available benefit is $17 million, we adopt the
lower court’s figure without further discussion because the difference is not dispositive, as either figure would lead
to an acceptable ratio if used to calculate the denominator.
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC            Page 17

       Here, the district court properly relied on Supreme Court authority recognizing that class
plaintiffs’ “right to share the harvest of the suit upon proof of their identity, whether or not they
exercise it, is a benefit in the fund created by the efforts of class representatives and their
counsel.” Boeing Co., 444 U.S. at 480 (emphasis added). Boeing concerned a case in which a
common fund was created for the class, and the court recognized that “[t]o claim their logically
ascertainable shares of the judgment fund, absentee class members need prove only their
membership in the injured class.” Id. Boeing’s “latent claim” to the money left in the fund after
class member claims had been paid did not affect the Court’s determination that the “present
rights” of class members to access that money through a claims process was a benefit to class
members. See id. at 482. The Supreme Court held that the district court had not abused its
discretion by awarding fees to class counsel based on the size of the entire fund as opposed to the
portion of it for which claims had been approved. Id. at 477–78.

       Despite Boeing’s guidance, the circuits have split on the most appropriate way to value
settlement funds, though such differences are sometimes explainable based on factual
distinctions in settlement structures. In a case where unclaimed funds would be distributed to a
cy pres beneficiary as opposed to reverting back to the defendant, we noted that it is correct to
weigh the amount allocated to the class rather than the amount actually disbursed in claims when
determining whether an attorney’s fee award is unreasonable:

       The thirty percent attorney’s fee award, [the objectors] add, is too high, claiming
       that it “will exceed the recovery of the Class by over $100,000.00.” Moulton Br.
       32. But this estimate is wrong: The objectors focus on the amount claimed rather
       than the amount allocated. Claimants, it is true, will in the aggregate receive less
       than Class Counsel. But that is because just 4,026 class members submitted
       claims. Except for fees and costs, class members had the first shot at the
       settlement proceeds—nearly $2.5 million by our estimate—which exceed the
       amount paid to Class Counsel by some measure. That the public schools [the
       beneficiaries of the unclaimed residue of the fund] will receive $1.28 million in
       unclaimed funds does not reflect on the settlement’s fairness.

Moulton, 581 F.3d at 352.

       In another case involving funds that would not revert back to defendants if unclaimed, the
Second Circuit held that a district court abused its discretion by calculating fees strictly based on
the dollar amount paid to approved claimants, and expressly rejected the idea that basing an
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 18

award on the benefit available to the class would create a windfall for class counsel. Masters v.
Wilhelmina Model Agency, Inc., 473 F.3d 423, 437 (2d Cir. 2007). The court reasoned that
“[t]he entire Fund, and not some portion thereof, is created through the efforts of counsel at the
instigation of the entire class. An allocation of fees by percentage should therefore be awarded
on the basis of the total funds made available, whether claimed or not.” Id.

       Similarly, in a class action settlement involving a fund where all unclaimed money would
revert to the defendant, the Eleventh Circuit affirmed a district court’s award of 30 percent of the
total recovery fund, and rejected the argument that the fee should only have consisted of 30
percent of the funds actually claimed. Waters v. Int’l Precious Metals Corp., 190 F.3d 1291,
1296–97 (11th Cir. 1999). Waters expressly noted that the district court had relied on the
Supreme Court’s reasoning in Boeing in reaching its conclusion and found that though the
unclaimed funds would revert to the defendant, the relief was real and available to the class. Id.
at 1297. The appellate court also noted that it was reviewing for abuse of discretion, and that a
different result might be warranted on the facts of a different case. Id. at 1298.

       The Ninth Circuit has also applied Boeing to determine that—with respect to a class
action settlement involving a common fund holding money that would revert to the defendant if
unclaimed—the district court erred by awarding class counsel a fee of only one third of the
$10,000 actually claimed rather than a fee of one third of the entire $4.5 million settlement fund
or a fee based on a lodestar calculation. Williams v. MGM-Pathe Commc’ns. Co., 129 F.3d
1026, 1026–27 (9th Cir. 1997) (per curiam).

       The Third Circuit has not ruled on the issue, but in dicta noted that it would be unwise to
impose on a district court a categorical rule in which a portion of a common fund that went
unclaimed by class members and was then distributed under the agreement as a cy pres award
must be discounted for the purpose of calculating attorney’s fees:

       There are a variety of reasons that settlement funds may remain even after an
       exhaustive claims process—including if the class members’ individual damages
       are simply too small to motivate them to submit claims. Class counsel should not
       be penalized for these or other legitimate reasons unrelated to the quality of
       representation they provided. Nor do we want to discourage counsel from filing
Nos. 14-3761/3798            Gascho, et al. v. Global Fitness Holdings, LLC              Page 19

       class actions in cases where few claims are likely to be made but the deterrent
       effect of the class action is equally valuable.

In re Baby Prods. Antitrust Litig., 708 F.3d 163, 178 (3d Cir. 2013). The Third Circuit refused
to mandate discounting of cy pres awards, though it noted that “awarding attorneys’ fees based
on the entire settlement amount rather than individual distributions creates a potential conflict of
interest between absent class members and their counsel.” Id. The court therefore concluded
that when “a district court has reason to believe that counsel has not met its responsibility to seek
an award that adequately prioritizes direct benefit to the class . . . it [is] appropriate for the court
to decrease the fee award.” Id. It explained that “our approach is case by case, providing courts
discretion to determine whether to decrease attorneys’ fees where a portion of the fund will be
distributed cy pres.” Id. at 179.

       A case-by-case analysis honors both the principles that undergird the abuse of discretion
review standard and the practical realities of examining a settlement reached by particular parties
in their specific circumstances. A case-by-case approach allows a reviewing court to address the
varying danger of tacit collusion between the parties for unclaimed funds distributed through a cy
pres award as in Moulton and Baby Products, as well as cases such as this one, where such funds
are left with the defendant. The Third Circuit correctly noted that devaluing the available relief
if it goes unclaimed could in many cases unduly penalize class counsel and have the lasting
effect of discouraging the filing of class actions in cases where few claims are likely to be made
but the deterrent effect of such a suit would be socially desirable. See In re Baby, 708 F.3d at
179. The latter policy concern reflects one of the purposes of consumer class actions—the need
to insure that mistreatment of consumers will not be insulated because the damage suffered by an
individual consumer is too small to justify the expense and time required to challenge the
practice—both for the individual harmed and the attorney who represents that consumer.

       Determining the appropriate relationship between fees and benefits to the class, however,
can be significantly impacted by the facts of a case. For example, where class counsel had
already been awarded more than the full lodestar value of their services but were seeking to
apply a multiplier, the Fifth Circuit permitted a district court to determine fees relative to benefits
distributed.   Strong v. BellSouth Telecomm., Inc., 137 F.3d 844, 851–52 (5th Cir. 1998).
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC             Page 20

It questioned reference to the percentage of the fund analysis in a lodestar case, but addressed the
issue, holding that under the facts the district court did not abuse its discretion by focusing on the
$1.5 million of benefits distributed to the class rather than the $64 million estimated value of the
settlement fund that included coupon-like benefits. Id. at 851-53. In this context, the district
court found class counsel’s valuation of the relief to be “phantom” because class members had
the option of continuing phone service or receiving a credit, making the relief akin to coupons or
certificates, “where the true value of the award was less than its face value.” Id. at 852.

       In upholding the district court’s method of determining fees, Strong acknowledged that in
Boeing the Supreme Court had upheld the district court’s decision to consider the potential
awards available rather than the actual claims made. Id. It distinguished Boeing because there
each member had an “ascertainable claim to part of [the] lump-sum judgment” that could be
accessed “simply by proving their individual claims,” whereas in Strong the agreement did not
establish a fund and included the difficult to access “phantom” benefits rather than cash. Id. But
far from creating a categorical rule requiring courts to consider only the benefits actually
distributed, Strong noted that fees had already been awarded under the lodestar method and
explained that “this course of action is not the usual one” and “under the atypical circumstances
of this case, the district court did not abuse its discretion in considering the actual results of the
settlement.” Id. at 853.

       In a recent decision on which the dissent relies, the Seventh Circuit varied from these
cases by overturning a district judge’s use of the value of the available settlement in the
denominator of a percentage of fund calculation. Pearson v. NBTY, Inc., 772 F.3d 778, 779–81
(7th Cir. 2014). There, the settlement agreement was reached only eight months after suit was
filed, and it called for the defendant to pay $3 per claim. Id. at 779, 781. Pearson held that the
correct ratio to calculate is always that of “(1) the fee to (2) the fee plus what the class members
received.” Id. at 781. The court noted that its mandated ratio “gives class counsel an incentive
to design the claims process in such a way as will maximize the settlement benefits actually
received by the class . . . .” Id. Importantly, Pearson held that the value of the attorney’s fees
being sought there also failed under a lodestar analysis. Id.
Nos. 14-3761/3798                Gascho, et al. v. Global Fitness Holdings, LLC                        Page 21

         Pearson addressed the import of Boeing to its decision, acknowledging that “it is true that
an option to file a claim creates a prospective value, even if the option is never exercised.” Id. at
782. Nonetheless, Pearson distinguished Boeing by noting that Boeing pertained to an existing
judgment fund, and that each class member’s claim on the fund was “undisputed” and
“mathematically ascertainable.” Id. In contrast, the court reasoned, the settlement in Pearson
did not concern a litigated judgment, and “there was no expectation in advance of the deadline
for filing claims that more members of the class would submit claims than did.” Id. Well under
one percent of the Pearson class members had filed claims for the $3 in relief at issue. Id.

         We find Pearson’s efforts to distinguish Boeing unconvincing. No matter how the
Boeing fund was structured, the Supreme Court found value in the work of class counsel that
provided a fund from which class members could access their claims. Further, though it went
unacknowledged by the Seventh Circuit, there was a claims process in Boeing, 444 U.S. at 479
(“members of the class can obtain their share of the recovery simply by proving their individual
claims against the judgment fund”), and there was a possibility that unclaimed funds would
revert back to the defendant, id. at 482 (acknowledging Boeing’s “latent claim against unclaimed
money in the judgment fund”). Boeing’s factual features are not significantly different from the
settlement terms in this case as they involve a straightforward claims process and a provision that
unclaimed funds will remain with the defendant. Considering these comparable facts, we see no
reason why Boeing’s application should turn on the existence of an actual escrow fund of money
for the payment of claims.5

         5
           We disagree with the dissent’s assertion that Boeing, while good law, has fallen into disfavor. Its sole
case citation for this point is Justice O’Connor’s statement regarding the denial of certiorari in International
Precious Metals Corp. v. Waters, 530 U.S. 1223 (2000). We do not find this statement to evidence rejection of
Boeing. First, no other justices joined it. Justice O’Connor, moreover, did not argue for overruling Boeing, but
simply for requiring “some rational connection between the fee award and the amount of the actual distribution to
the class.” Id. Our case-by-case approach is consistent with this statement; if a fee award lacks rational connection
to the amount distributed to the class, a district court may reject the settlement.
          The dissent also points to the Advisory Committee notes to the 2003 amendments to Rule 23, arguing that
the Committee distinguished benefits from actual results. But the Committee did not define “result actually
achieved” and, as Boeing makes clear, the total available benefit is a result actually achieved for the class. Further,
nothing in the note would support the dissent’s categorical rule—the Advisory Committee did encourage courts to
scrutinize the claims procedure to ensure “significant actual payments to class members,” but it also emphasized that
“[a]t the same time, it is important to recognize that in some class actions the monetary relief obtained is not the sole
determinant of an appropriate attorney fees award.” Fed. R. Civ. P. 23, 2003 Amend., Note to Subdivision 23(h).
Only a case-by-case approach can balance these twin concerns.
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 22

       The other cases noted do not suggest a different conclusion. While it may be true that a
class settlement with a needlessly onerous claims process might warrant discounted relief using
the case by case approach the Third Circuit (In re Baby) discussed, that is a different matter—
one of application as opposed to a general rule. Further, the Ninth Circuit (Williams) imposed
and the Eleventh Circuit (Waters) upheld attorney’s fees based on the whole value of the fund in
cases where unclaimed money in the fund would revert back to the defendant. There is no
meaningful distinction between a fund with a reversion provision and a defendant-paid-claims
process, as here. In both cases, unclaimed funds wind up with the defendant.

       As this survey of appellate decisions demonstrates, courts have upheld a variety of
methods employed by district courts to determine benefit to the class. The only circuits that have
crafted a strict rule have been the Ninth and Second (both holding that the district court erred by
using the value of the funds actually distributed rather than the full value of the authorized fund
when calculating attorney’s fees), and the Seventh (holding the opposite, i.e., that courts must
only consider the value of the funds actually distributed as opposed to the entire value of the
funds made available to the class).

       Rather than adopting the Seventh Circuit’s categorical rule that Blackman and the dissent
urge, we leave the determination of how to value the benefit provided to the class to a district
court’s discretion, exercised in accordance with our precedent. This respects the Supreme
Court’s position, as well as our own, that making claims available to all class members provides
them with a benefit. In a case-by-case analysis, district courts are able to determine fees by
considering all the facts of a case, and thereby address the concerns that Blackman and the
dissent argue can be resolved only by a per se rule. Courts may do so, moreover, without the
inherent problems recognized by Blackman in his ambiguous assertion he is not “proposing” that
the blanket rule would extend to all cases where “Congress established fee-shifting statutes to
vindicate specific rights beyond purely pecuniary ones.”        (Blackman Br. at 16 n.2.)      But
consumer claims also may seek to vindicate rights beyond monetary ones and many of those
cases, including this case, raise claims under both common law and fee shifting statutes.
Blackman’s counsel’s inability to articulate a functional limiting principle for application of a
Nos. 14-3761/3798               Gascho, et al. v. Global Fitness Holdings, LLC                     Page 23

per se rule to other categories of cases or settlements is evidence of the problematic nature of this
blanket rule proposal.

        Consumer class actions, furthermore, have value to society more broadly, both as
deterrents to unlawful behavior—particularly when the individual injuries are too small to justify
the time and expense of litigation—and as private law enforcement regimes that free public
sector resources.6 If we are to encourage these positive societal effects, class counsel must be
adequately compensated—even when significant compensation to class members is out of reach
(such as when contact information is unavailable, or when individual claims are very small).7
An inflexible, categorical rule neglects these additional considerations.

        Although we decline to adopt a categorical rule, we recognize the validity of the dissent’s
concern about settlement structures that are contrived to discourage claims.                       A needlessly
burdensome claims process was one problem with the settlement in Pampers, which provided
class members a refund for one box of diapers, but only if the claimant had a receipt and a UPC
code—including for diapers purchased up to eight years before the settlement. See 724 F.3d at
718.    Given the low value of individual awards in most consumer class actions, a sworn
statement attesting to the purchase may often be sufficient documentation.                         We also find
troubling claim forms and websites that appear designed to confuse class members, either by
omitting information on the claims process or by presenting this information in a confusing way.
A claims process that includes these features may well be inappropriate for approval. But as we
        6
           See William B. Rubenstein, On What A “Private Attorney General” Is—and Why It Matters, 57 Vand. L.
Rev. 2129, 2168 (2004) (“[Class counsel’s] clients are not just the class members, but the public and the class
members; their goal is not just compensation, but deterrence and compensation.”); Myriam Gilles & Gary B.
Friedman, Exploding the Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers, 155 U.
Pa. L. Rev. 103, 106 (2006) (“[T]he deterrence of corporate wrongdoing is what we can and should expect from
class actions.”); William B. Rubenstein, Why Enable Litigation?: A Positive Externalities Theory of the Small
Claims Class Action, 74 UMKC L. Rev. 709, 724-25 (2006) (“By enabling litigation, the class action has the
structural consequence of dividing law enforcement among public agencies and private attorneys general and of
shifting a significant amount of that enforcement to the private sector.”).
        7
           See Brian T. Fitzpatrick, Do Class Action Lawyers Make Too Little?, 158 U. Pa. L. Rev. 2043, 2047
(2010) (concluding that courts “should not be concerned about compensating class members in small-stakes class
actions and, instead, should be concerned only with fully incentivizing class action lawyers to bring as many cost-
justified actions as possible” because “the only function they serve is deterrence”); Hailyn Chen, Comment,
Attorneys’ Fees and Reversionary Fund Settlements in Small Claims Consumer Class Actions, 50 UCLA L. Rev.
879, 892 (2003) (arguing that courts should not limit attorney’s fees to a percentage of actual claims because doing
so will often “result in a fee that is so small as to prevent class action attorneys from pursuing such cases, which
serve primarily a regulatory and deterrent function”).
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 24

discuss in greater detail below, that is not the claims process here, which was transparent and not
burdensome.

       Having rejected a per se rule, we turn to the decision below.            In performing the
percentage of the fund cross-check, the district court took a middle of the road approach,
selecting a midway point between the benefit available to the entire class and the actual
payments made. It acknowledged that the claimants benefited from the potential for relief, but
found that, under these particular circumstances, it might be appropriate to value that potential
relief as different from money in the plaintiff’s pocket. The $8.5 million figure the R&R
selected recognizes that class counsel provided the valuable service of obtaining substantial relief
for each class member who cared to invest the minimal time required to claim it and that in
obtaining this relief, counsel undertook a substantial effort for which they deserve compensation.

       Blackman protests that if a court is allowed to “split the baby,” the parties can game the
system by awarding members an inflated benefit then imposing an onerous process to limit
claims, making the midpoint higher than if a more modest settlement award had simply been
mailed to each class member. Blackman also argues that there is no universally-applicable
“principled dividing line” between fully valuing a settlement where only .001% of the class
participates and fully valuing a settlement where just under 10% of the class participates. It does
not follow, however, that the only way to judge the validity of the claims process is to rely solely
on the amount the claims process will actually pay to the class. And concern about gaming the
system ignores the district court’s discretionary right to reject the settlement under Rule 23(e)
because the claims process is unduly burdensome.

       Our job is to determine whether the district court’s actions were an abuse of its discretion.
We do not agree with Blackman’s and the dissent’s argument that the district court erred by not
accepting the proposal of a per se rule of unfairness. Such a rule would require us to jettison the
Supreme Court’s guiding principles and our own circuit’s past acknowledgement that there is
value in providing a class member the ability to make a claim, whether she takes advantage of it
or not. We do not abandon that foundational principle.
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 25

       The question remains whether the district court’s valuation of the benefit amount as the
midpoint between the parties’ positions was a proper exercise of its discretion. As a general
matter, this procedure presents concerns and we do not endorse a rule adopting a “midpoint”
calculation. In the circumstances of this case, however, the decision is an acceptable way to
quantify the court’s recognition that having the ability to make a claim has value. Given the
facts of this case and the well-reasoned opinions concluding that the settlement relief made
available was fair to the class, we decide only that the method employed was within the court’s
discretion with respect to the case before it.

       2. The claims process

       Blackman, the Zik objectors, and the dissent assert that the district court abused its
discretion by approving the settlement given the claims process employed in this case. The court
considered the objectors’ position, and Dahl testified about the claims process at length during
the Fairness Hearing. Here, class members were identified using the name and address provided
at the time they initially signed a contract, between January 1, 2006 and October 26, 2012.
Because notice was sent to class members in October 2013, each class member’s contact
information was between one and eight years old. Class counsel also indicated that Global had
used four different electronic record management systems during the class period and had
transferred information between them, causing class members’ records to become incomplete
and inaccurate.

       Nearly 25% of the notice postcards were returned after the first mailing, suggesting that
many class members had moved since joining a gym. Dahl cross-checked the rejected cards
against available address databases, re-sent the cards and a far smaller number were returned.
Ultimately, slightly more than 90% of the cards were delivered to an address associated with the
member. Nonetheless, as Dahl testified, there is “no way of definitively saying they actually
reached the class member.” (R. 139, PageID 2718.) In addition to the postcard program, Dahl
also engaged in an email notice program in which 150,581 emails were delivered, created a
website for the class, published notice in papers of record, and established a toll-free information
helpline.
Nos. 14-3761/3798               Gascho, et al. v. Global Fitness Holdings, LLC                     Page 26

        Dahl testified that the notice and claims program was “robust” and that both postcard and
email notice prominently displayed the website or provided a direct link so that class members
could easily file a claim online. According to Dahl, who has been the settlement administrator
for hundreds of settlements, this method is “modern,” “grabs people’s attention,” follows how
people tend to consume media,” and “get[s] robust filing rates.” (R. 139, Fairness Hearing,
PageID 2704–08.)

        To file a claim, a class member had to click the link in the email, enter the website url
from the postcard, or request that a form be sent via U.S. Mail. The claim form required basic
information (name, address, phone number, and email address), that the claimant check boxes
indicating subclass membership if applicable, and that the claimant to sign a statement on the
form asserting “under penalty of perjury” that the information entered was true.

        Dahl testified that, of the more than 3,000 settlements he has administered in his 20 years
in the business, fewer than 20 involved direct payment rather than a claims process. Further, all
of those direct payment cases involved a “current component to the data,” meaning that the
recipients had relationships with the defendant that heightened the reliability of their address
data, such as current employees, insurance policy holders, and clients with ongoing account
relationships.8 (R. 139, PageID 2711–12.) None of these direct distributions had data as “out of
date” as Global’s data. The claims procedure was open, meaning that class members could make
claims even if they had not received direct notice. As a result, several hundred class members
who were not in Global’s records became claimants, and over 2,000 class members not
appearing in Global’s subclass records were granted subclass membership and will receive more
money than they would have had Global just mailed checks based on its data.

        The objectors assert that a check simply should have been mailed to the address listed for
each class plaintiff because common sense dictates that direct payment would have resulted in a
payout greater than 8% of the claims made. This ignores the inadequate member data, the
number of the checks that would not have reached the class members and the administrative

        8
          Dahl’s testimony is consistent with academic work on this issue. See Adam S. Zimmerman, Funding
Irrationality, 59 Duke L.J. 1105, 1167 (2010) (observing that direct payments are practical when the parties have “a
great deal of information” about potential claimants, but “more problematic” when parties “have less information
about potential claimants”).
Nos. 14-3761/3798              Gascho, et al. v. Global Fitness Holdings, LLC                  Page 27

costs of managing that procedure. Blackman’s assumption that class counsel “structured the
settlement to withhold benefit from 92% of the class,” (Blackman Br. at 19), moreover, is not
supported by any evidence of an unduly burdensome component of the claims process. Here,
there is every indication that Dahl diligently attempted to reach each class member: multiple
forms of notice were provided, including ads in 13 different newspapers, a website, and a dual
email and postcard mailing approach targeting individual class members. The actual claim form
was also short and straightforward.

        Class counsel has provided a substantial number of citations to cases employing claims
processes similar to this one, including in similar health club settlements. The objectors have
provided no authority indicating that the claims process here was improper. Furthermore, Dahl’s
testimony that response rates in class actions generally range from 1 to 12 percent, with a median
response rate of 5 to 8 percent, indicates that the 8 percent response rate was well within the
acceptable range for a consumer class action.9 Given this response, the obvious uncertainty
about any class member’s address, and Dahl’s testimony about the robustness of the process, we
conclude that the district court acted within its discretion when finding the claims process
employed here to be appropriate.

        3. The clear sailing and kicker clauses

        The objectors and the dissent point to the settlement’s clear-sailing and kicker-clauses as
evidence of self-dealing by class counsel that would warrant a finding that the settlement was
unfair under Rule 23(e). This court has recently noted different perspectives among the circuits
with respect to clear sailing provisions:

        Courts have expressed mixed views about the relationship between clear-sailing
        provisions and adequacy of representation. In Malchman v. Davis, the Second
        Circuit said that, “where . . . the amount of the fees is important to the party
        paying them, as well as to the attorney recipient, it seems . . . that an agreement
        ‘not to oppose’ an application for fees up to a point is essential to the completion
        of the settlement, because the defendants want to know their total maximum
        exposure and the plaintiffs do not want to be sandbagged.” 761 F.2d 893, 905 n.5

        9
         In contrast, only 0.6% percent of claims were approved in Seeger, R. 118-10, PageID 2002, and slightly
more than 0.5% of class members submitted claims in Redman v. RadioShack Corp., 768 F.3d 622, 628 (7th Cir.
2014).
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 28

       (2d Cir. 1985), cert. denied, 475 U.S. 1143 (1986), abrogated on other grounds,
       Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997). Other judges have been
       less impressed with clear-sailing provisions. In the view of a concurring judge in
       Malchman, such a “clause creates the likelihood that plaintiffs’ counsel, in
       obtaining the defendant’s agreement not to challenge a fee request within a stated
       ceiling, will bargain away something of value to the plaintiff class.” Id. at 908
       (Newman, J., concurring). Another danger is that “the lawyers might urge a class
       settlement at a low figure or on a less-than-optimal basis in exchange for red-
       carpet treatment on fees.” Weinberger [v. Great Northern Nekoosa Corp.],
       925 F.2d [518,] 520 [(1st Cir. 1991)] (holding that courts should “scrutinize” fees
       requested pursuant to clear-sailing agreements to see whether they “are fair and
       reasonable”).

Gooch v. Life Investors Ins. Co. of Am., 672 F.3d 402, 425 (6th Cir. 2012). After examining the
specifics of the application, the Gooch court approved the settlement with the clear sailing
provision. Id. at 426.

       Neither clear sailing provisions nor kicker clauses have ever been held to be unlawful per
se, but courts have recognized that their inclusion gives the district court “a heightened duty to
peer into the provision and scrutinize closely the relationship between attorneys’ fees and benefit
to the class.” Bluetooth, 654 F.3d at 948. Here, the R&R did peer into the relief to the class and
the attorney’s fees at issue, and found both to be appropriate.

       Blackman argues that “most critically, the reversion and separate compartmentalization”
brought about by a standalone attorney’s fee and an agreement with a clear-sailing provision and
kicker clause “precludes a district court from reallocating an excessive fee request to the class to
fix any disproportion: a reduction in attorneys’ fees goes to the defendant, thus deterring both
courts and objectors from reducing the fee. The combination unfairly insulates the fee request
from scrutiny.” (Blackman Br. 18.)

       Blackman’s concern is unwarranted here because the district court unreservedly found
that the relief to the class was “substantial” and that class counsel’s fee request was appropriate,
findings it made within its legitimate discretion. (R. 141, PageID 2850.) The lengthy R&R
extensively discussed both relief and fees, and did not exhibit any inclination to find that the
former was inadequate or the latter was excessive. Blackman’s argument that the court could not
rewrite the settlement agreement to reallocate funds between the plaintiffs and class counsel is
Nos. 14-3761/3798              Gascho, et al. v. Global Fitness Holdings, LLC                   Page 29

unpersuasive. If a court concludes that the ratio between attorney’s fees and relief to the class
creates an inequitable situation, it could reject the settlement on Rule 23(e) grounds and send the
parties back to the negotiating table.

        Though some courts have “disfavored” clear sailing agreements and kicker clauses, their
inclusion absent more—as is the case here—does not show that the court abused its discretion in
approving the settlement.

B. The Zik objectors’ contract claims and KHSA claims

        In addition to echoing Blackman’s arguments, the Zik objectors assert that the class
settlement was not fair, reasonable, and adequate because it did not appropriately distinguish
between the differing values of and legal theories underlying class members’ claims. The Zik
objectors assert that class counsel did not obtain any additional consideration for their “unique
and valuable” contract claims or for legal rights afforded under the Kentucky Health Spa Act.
(Zik Br. at 30-33.)

        With respect to their contract claims, the Zik objectors allege that (1) their contract terms
are clearer than subsequent versions of the contract about allowing only one month of additional
fees upon cancellation (as opposed to two), and (2) their contracts do not contain a provision for
a $10 cancellation fee, which later contracts did. They, like other plaintiffs, were charged two
months of fees after they cancelled (one more than permitted under their contracts, they allege),
and were charged the $10 cancellation fee. They argue that because their contracts terms are
different, their claims are worth more and deserve a higher settlement value.10

        In explaining the reasons it found the amount awarded in the Gym Cancel Subclass to be
“fair, reasonable, and adequate,” despite some differences in the actual charges individual class
members incurred, the R&R noted that

        The Zik Objectors sought to certify a class in the Zik action premised on a claim
        that Global Fitness acted in breach of “its members’ membership agreements by

        10
           The Ziks themselves (husband and wife) also appear to have been paying membership fees at the high
end of the range of what plaintiffs were charged: $49/month for Robert and $44.99/month for April, as opposed to
the class average of $26.76/month. The Zik objectors provide no information or evidence regarding the monthly
membership fees of other would-be members of their subclass.
Nos. 14-3761/3798            Gascho, et al. v. Global Fitness Holdings, LLC         Page 30

       charging its members one extra month of membership dues and a $10.00
       cancellation fee when members terminate their membership agreement.”
       As discussed . . . the claims asserted in the Zik action are subsumed in the Gym
       Cancel Subclass, and an Allowed Claimant who cancelled his or her gym
       membership contract during the Class Period is entitled to an award of $25. The
       Claims Administrator has validated claims and calculated final award amounts for
       the Allowed Claimants: the average Class Payment is $31.99 and the average
       Gym Cancel Subclass Payment will be $41.28.

(R. 141, PageID 2844 (internal citations removed).)          The court found the $31.99 and
$41.28 figures to be “a significant recovery because it exceeds the $26.76 average monthly fee of
a gym membership with Global Fitness between January 1, 2009 and July 2012.” (Id.) Because
the Zik class complaint sought the contract damages of payment for the one extra month charged
after cancellation (the first month was legitimate, the second was not) and reimbursement for the
$10 cancellation fee (with no mention of the FIF or other fees), the average Zik objector would
receive about $36.76 in contract damages. This is only a few dollars more than the average
claimant in the case, and several dollars less than the average Gym Cancel Subclass member, a
group in which each member of the Zik objectors’ proposed class would necessarily be a part.
The court noted the closeness of the value of the settlement to the average class member and the
expected damages of the average Zik objector and correctly found that this was an indicator of
the settlement’s fairness.

       Rejecting the Zik objectors’ argument that the settlement was unfair owing to its lack of
individual damages calculations, the court found it appropriate to consider the risks of the
litigation going forward and the costs and delays that would likely result from a settlement in
which it was required to calculate and verify individual damage awards for the approved
claimants, including those for which Global had no records. Given the close approximation of
the payout to a typical Zik plaintiff’s actual damages and the costs involved in individual
calculations, the court could reasonably find that this weighed in favor of approving the
settlement.

       The Zik objectors also fail to present meaningful factual support for their argument that
class counsel failed to extract sufficient value for their plaintiffs’ possible Kentucky Health Spa
Act (KHSA) claims. Instead they rely on class counsel’s testimony in Seeger about the potential
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 31

value of those claims. But as the Zik objectors acknowledge, the Robins court found no value in
the plaintiffs’ contract-based KHSA claims. Robins, 838 F. Supp. 2d at 650–51. And the dearth
of caselaw about the Act’s other provisions make its utility difficult to predict. Though the Zik
objectors’ briefing on appeal is vocal about the value of the relief attainable under the KHSA,
they fail to provide detail or offer a theory of how the statute would be applied.

       At the fairness hearing, the Zik objectors noted that the KHSA requires spas to register
the costs of their membership plans with the Kentucky Attorney General, and that if they fail to
register and provide the member a list of costs, the member is entitled to void the contract and
obtain disgorgement of any difference. The Zik objectors hypothesize that a Kentucky member
charged $39.99 per month for four years of membership when the plan registered with the
Kentucky Attorney General called for a charge of $29.99 per month would be entitled to
damages of $480 ($10/month).

       Class counsel countered that:

       [T]here is no situation of Kentucky Health Spa members signing contracts for $49
       when the contract was actually $29. We have all of that data from Urban Active’s
       third party vendor software because we subpoenaed it, and we through our IT
       staff have done technical analysis of that data. And the vast majority of the cases,
       which we would put forth as violations of the Kentucky Health Spa Act actually
       show that Urban Active sold memberships for less than what the price was
       registered with the Kentucky Attorney General. So, again, that brings us straight
       back to the equitable argument, that while we are confident that we can prove a
       violation, we have significant hurdles in proving damages in excess of what we
       already negotiated as part of the settlement . . . .

(R. 139, PageID 2782.)       The court appropriately found significance in the Zik objectors’
acknowledgement that class counsel “devoted a large percentage of [its] work . . . to ESI
discovery to be used for the purpose of proving the KHSA claims.” (R. 141, PageID 2846
(citing R. 118, PageID 1935).) This suggests that the KHSA claims were adequately developed,
and that class counsel considered the likelihood of success on the merits of those claims. And
though the Zik objectors litigated their case for over three years, there does not appear to be
anything in their briefing or in the record demonstrating that their hypothetical Kentucky class
member who was overcharged $10/month exists, or that they have the factual basis to assert a
viable KHSA claim on another theory.
Nos. 14-3761/3798            Gascho, et al. v. Global Fitness Holdings, LLC          Page 32

       As the court below noted, in the context of determining whether to approve a class action
consent decree, we have held that:

       A court may not withhold approval simply because the benefits accrued from the
       decree are not what a successful plaintiff would have received in a fully litigated
       case. A decree is a compromise which has been reached after the risks, expense,
       and delay of further litigation have been assessed. Class counsel and the class
       representatives may compromise their demand for relief in order to obtain
       substantial assured relief for the plaintiffs’ class.

Williams v. Vukovich, 720 F.2d 909, 922 (6th Cir. 1983) (internal citations omitted). Given that
the relief sought achieved a number roughly equivalent to the extra month of dues charged and
the cancellation fee the Zik objectors seek, while avoiding the costs and risk of additional
litigation, there was merit to the settlement. Williams also cautioned that:

       Significantly, however, the deference afforded counsel should correspond to the
       amount of discovery completed and the character of the evidence uncovered. The
       court should insure that the interests of counsel and the named plaintiffs are not
       unjustifiably advanced at the expense of unnamed class members. Objections
       raised by members of the plaintiff class should be carefully considered.

Williams, 720 F.2d at 923 (internal citations omitted). As discussed above, class counsel has
engaged in ample discovery and motion practice for a period of years, and specifically focused
on the Kentucky Health Spa Act claims. There is therefore reason to believe that some deference
is warranted. This case is a far cry from Seeger or Pampers, which were said to have settled
before conducting discovery or having an opportunity to understand the relative strengths and
weaknesses of their cases.

       The Zik objections were carefully considered during the Fairness Hearing and in the
orders of the lower court. Having failed to put forth any evidence suggesting that their proposed
class’s claims and—very importantly—realistic anticipated recovery are significantly different
from what was obtained here, we conclude that the district court acted within its discretion when
determining that the settlement was fair despite the Zik objectors’ assertions.

C. The Zik objectors’ attorney’s fee request

       The Zik objectors argue that the district court erred in refusing their request for fees.
This court reviews a district court’s award or denial of attorney’s fees for an abuse of discretion.
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC           Page 33

Bowling, 102 F.3d at 779. “Fees and costs may be awarded to the counsel for objectors to a class
action settlement if the work of the counsel produced a beneficial result for the class.” Olden v.
Gardner, 294 F. App’x 210, 221 (6th Cir. 2008); see also Lonrado v. Travelers Indem. Co.,
706 F. Supp. 2d 766, 803–04 (N.D. Ohio 2010) (“Sixth Circuit case law recognizes that awards
of attorneys’ fees to objectors may be appropriate where the objector provided a benefit to the
class by virtue of their objection.”). Here, the district court found that because none of the Ziks’
objections had merit, they had not provided the necessary benefit to the class to receive fees.
Though the Zik objectors also argue that counsel provided some benefit to the class by objecting
to the prior settlement in Seeger and helped drive the defendant to settle by advancing the Zik
case, they have provided no authority indicating that the district court must award attorney’s fees
to counsel whose work in an entirely separate litigation may have provided some benefit to a
class in the litigation before the court. Accordingly, we conclude that the district court acted
within its discretion in denying attorney fees to the Zik objectors.

                                       III. CONCLUSION

       For the reasons stated above, we AFFIRM the district court’s order.
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC            Page 34

                                       _________________

                                               DISSENT
                                       _________________

       CLAY, Circuit Judge, dissenting. Contrary to the focus of the majority opinion, this is
not primarily a case about the theoretical policy considerations that should be taken into account
in order to determine or apportion the economic or societal benefits of this form of consumer
class action litigation. What the majority misses in its survey of the case law and academic
literature is that the court below abused its discretion in approving a class action settlement
which fails to adequately protect the interests of class members and unduly enriches class
counsel at the expense of their own clients.

       Rule 23 imposes obligations on class representatives, class counsel, and the district court
to protect the interests of absent class members: class representatives may be appointed only if
they will “fairly and adequately protect the interests of the class”; class counsel has the “duty” to
do the same; and a court may approve a settlement “only after a hearing and on finding that it is
fair, reasonable, and adequate.” Fed. R. Civ. P. 23(a)(4), (g)(4), (e)(2). We have previously
described class counsel’s duty as “fiduciar[ies]” of the class, whose performance as such “courts
must carefully scrutinize.” In re Dry Max Pampers Litig., 724 F.3d 713, 718 (6th Cir. 2013); see
also Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513, 516 (6th Cir. 1993). Because
class counsel fell short of their obligations both under Rule 23 and as fiduciaries, and the district
court failed to exercise the necessary careful scrutiny to determine that the settlement was fair,
reasonable and adequate, I respectfully dissent.

       When deciding whether to approve a class action settlement, courts look to several
factors:

       (1) the risk of fraud or collusion; (2) the complexity, expense and likely duration
       of the litigation; (3) the amount of discovery engaged in by the parties; (4) the
       likelihood of success on the merits; (5) the opinions of class counsel and class
       representatives; (6) the reaction of absent class members; and (7) the public
       interest.
Nos. 14-3761/3798               Gascho, et al. v. Global Fitness Holdings, LLC                    Page 35

Int’l Union, United Auto., Aerospace, & Agr. Implement Workers of Am. v. Gen. Motors Corp.,
497 F.3d 615, 631 (6th Cir. 2007).               The circumstances of this settlement, including its
disproportionate fee award, strongly suggest an abuse of discretion by the district court in
approving the settlement, including the fee award.

        The Ninth Circuit warned that courts “must be particularly vigilant not only for explicit
collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-
interests and that of certain class members to infect the negotiations.” In re Bluetooth Headset
Products Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011). Bluetooth gave three examples of such
signs: (1) “when counsel receive a disproportionate distribution of the settlement”; (2) “when the
parties negotiate a ‘clear sailing’ arrangement1 providing for the payment of attorneys’ fees
separate and apart from class funds, which carries ‘the potential of enabling a defendant to pay
class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on
behalf of the class’”; and (3) “when the parties arrange for fees not awarded to revert to
defendants rather than be added to the class fund.” Id. (internal citations omitted). All three
warning signs are present in this case.

        Class counsel, who were also class counsel in the court below, argue that we must
consider the compensation to the class and the award of attorney’s fees separately. They
obtained what they consider significant relief for the class—which, in congratulating themselves,
they label “exceptional” at least five times in their brief—and therefore believe that they have
rightly earned a hefty fee award. Objector Joshua Blackman, however, urges us to view the
settlement and the fee award as inseparable. Because the class recovery was dwarfed by the fee
award class counsel ultimately received—a fee award negotiated behind closed doors—the
settlement and fee award represent an unconscionable elevation of the interests of class counsel
over those of the class that should be rejected under Dry Max Pampers. See 724 F.3d at 717
(rejecting $2.73 million attorney fee award where the class itself received no cash whatsoever).
To evaluate these arguments, both separately and together, it is necessary to retrace the relief, the
settlement, the fee award, and the role of the district court.

        1
          A so-called “clear sailing” provision is an agreement on the amount of attorney’s fees whereby “the party
paying the fee agrees not to contest the amount to be awarded by the fee-setting court so long as the award falls
beneath a negotiated ceiling.” Gooch v. Life Inv’rs Ins. Co. of Am., 672 F.3d 402, 425 (6th Cir. 2012).
Nos. 14-3761/3798               Gascho, et al. v. Global Fitness Holdings, LLC                      Page 36

        At the time of the fairness hearing in this case, the deadline to file claims had passed, and
although some of the payments were still being finalized, the claims administer, Jeffrey Dahl,
had filed a declaration, docketed in the record, that identified 49,810 “Allowed Claimants”2 out
of a total gym membership of 605,735. (R. 136-1, Dahl Decl. of Feb. 11, 2014 at Page ID 2659.)
Thus, when the fairness hearing took place, the district court was on notice that only some
8.2% of class members had obtained monetary relief. Dahl testified at the fairness hearing that
the median response rate in a study of consumer class actions was 5-8%. (R. 139, Fairness Hr’g
Tr. at Page ID 2722.) These figures are consistent with the recent observation of the Third
Circuit that “consumer claim filing rates rarely exceed seven percent, even with the most
extensive notice campaigns.” Sullivan v. DB Investments, Inc., 667 F.3d 273, 329 n.60 (3d Cir.
2011) (en banc) (quoting finding of special master). Dahl’s testimony, and Plaintiffs’ argument,
might be recharacterized to ask whether the district court, aware of the low customary response
rate in consumer class actions, should have approved a settlement in which 91.8% of the class—
whose interests class counsel were under a fiduciary obligation zealously to represent—is left
with absolutely nothing.

        The majority opinion’s argument regarding the propriety of the district court’s approval
of the settlement is predicated entirely on acceptance of the status quo. Focusing on the average
payment amount to a claimant—and not the average payout spread across all class members—
the magistrate judge described the recovery, which by that point had been fixed at $1,593,240, as
“substantial.”3 (R. 141, Report and Recommendation at Page ID 2844.) And perhaps this case
may exceed the average claim rate of consumer class actions.                       However, there is another
interpretation of class counsel’s performance in this scenario: class counsel spent years litigating
this case and, as a result of the claims process in whose design they participated, their clients
were left with little to show for their counsel’s efforts. From this perspective, class counsel did
poorly in absolute terms.

        2
         This was later amended to 49,808 in a later declaration from Dahl, docketed between the fairness hearing
and the magistrate judge’s report and recommendation. (R. 140-1, Dahl Decl. of Mar. 21, 2014 at Page ID 2797.)
        3
          Unclaimed funds were to be redistributed pro rata to claimants only if the total payout were less than
$1.3 million, and were capped at that amount. Class counsel also did not see fit to include a cy pres beneficiary, as
there often is in cases like this; all unclaimed funds were to revert to Defendant. Compare Moulton v. U.S. Steel
Corp., 581 F.3d 344, 351 (6th Cir. 2009) (awarding unclaimed funds to a nearby school district).
Nos. 14-3761/3798                Gascho, et al. v. Global Fitness Holdings, LLC                      Page 37

         In the district court’s view, this purportedly substantial recovery and the protracted
proceedings—which had already dragged on for nearly three years by the time of the report and
recommendation—were enough to justify class counsel’s requested $2,390,000 fee award. (Id.
at Page ID 2831–32, 2835–36, 2841.) The district court first justified its findings under the
lodestar approach, a method of compensating counsel based on hours of work at the applicable
rates (and sometimes a multiplier), and then performed a so-called “percentage of the fund cross-
check” whereby it calculated the percentage of the fee award as a proportion of its valuation of
an $8.5 million constructive common fund.4 See Rawlings, 9 F.3d at 516–17 (approving both
lodestar and percentage-of-the-fund methods in this Circuit). Such cross-checks against the
other method are not uncommon. See Van Horn v. Nationwide Prop. & Cas. Ins. Co., 436 F.
App’x 496, 500 (6th Cir. 2011); Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th Cir. 1996). Even
if Blackman had not raised issues about the allocational fairness of this fee relative to the class
payout, the fee award could not be sustained under either of these methodologies.

         Although “the lodestar method has been criticized for being too time-consuming of
scarce judicial resources,” the “listing of hours spent and rates charged provides greater
accountability.” Rawlings, 9 F.3d at 516. Class counsel failed to submit the voluminous records
contemplated by Rawlings and instead submitted perfunctory, impenetrable bullet-point lists in
two affidavits in which they simply asserted that they had kept contemporaneous records. (R.
114-1, McCormick Decl. at Page ID 1865–80; R. 114-2, Troutman Decl. at Page ID 1881–1903.)
To these bullet lists were appended the lengthy curriculum vitae of class counsel. (Id.) With no
such contemporaneous records actually submitted by class counsel, the message to the district
court was obvious: we are experienced litigators; just trust us that we did this work. The district
court took class counsel at their word, although it chided counsel that “the best practice may
have been to submit more detailed records of the costs and time expended in the litigation.”
(R. 141, Report and Recommendation at Page ID 2870.)

         4
          District courts are required to explain their reasons for “adopting a particular methodology and the factors
considered in arriving at the fee.” Moulton, 581 F.3d at 352. Such explanations often discuss the following factors:
“(1) the value of the benefit rendered to the plaintiff class; (2) the value of the services on an hourly basis;
(3) whether the services were undertaken on a contingent fee basis; (4) society’s stake in rewarding attorneys who
produce such benefits in order to maintain an incentive to others; (5) the complexity of the litigation; and (6) the
professional skill and standing of counsel involved on both sides.” Id.
Nos. 14-3761/3798           Gascho, et al. v. Global Fitness Holdings, LLC             Page 38

       Confronted with counsel’s uncorroborated sworn statements, the district court should not
have been so trusting. This Circuit places the “burden of providing for the court’s perusal a
particularized billing record” on the party seeking fees. Imwalle v. Reliance Med. Products, Inc.,
515 F.3d 531, 553 (6th Cir. 2008) (quoting Perotti v. Seiter, 935 F.2d 761, 764 (6th Cir. 1991))
(upholding fee award where counsel “submitted 52 pages of detailed, itemized billing records
that specify, for each entry, the date that the time was billed, the individual who billed the time,
the fractional hours billed (in tenths of an hour), and the specific task completed”). Reviewing
case law, Imwalle held that “[a]lthough counsel need not record in great detail each minute he or
she spent on an item, the general subject matter should be identified.” 515 F.3d at 553 (citations
omitted).   District courts, Imwalle noted, have reduced fee awards “where billing records
‘lumped’ together time entries under one total so that it was ‘impossible to determine the amount
of time spent on each task.’” Id. (quoting Cleveland Area Bd. of Realtors v. City of Euclid,
965 F. Supp. 1017, 1021 (N.D. Ohio 1997)). In the bullet points at issue here, there was no
description of the specific task or of the subject matter—apart, of course, from what counsel
simply termed the “Litigation.” For example:

               I[, Thomas McCormick, class counsel,] have 11 years of experience in handling
                complex litigation and billed at my standard hourly rates of $260 per hour in
                2011, $350 in 2012; and $375 in 2013. My time constitutes over 52% of the time
                billed by Vorys in the Litigation.

(R. 114-1, McCormick Decl. at Page ID 1868.) Such “documentation” is completely inadequate
and should not have been accepted, especially coming from attorneys who touted their
experience in the succeeding pages. Cf. McCombs v. Meijer, Inc., 395 F.3d 346, 360 (6th Cir.
2005) (affirming fee award where the district court found that “entries made by [the plaintiff’s]
counsel were sufficient even if the description for each entry was not explicitly detailed”)
(emphases added). In approving the $2.39 million fee award, the magistrate judge relied on this
deficient recitation and the oral representation of class counsel that the lodestar by the time of the
fairness hearing was “just shy of $2.8 million.” (R. 141, Report and Recommendation at Page
ID 2871.) That the fee ultimately awarded was below its orally asserted lodestar should not,
alone, save it. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 433–37 (1983) (allowing district
court to reduce lodestar amount for inadequate documentation and limited success).
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 39

       In performing its percentage-of-the-fund cross-check, the district court also committed
legal error because it miscalculated the value of the fund. Following the approach of Lonardo v.
Travelers Indem. Co., 706 F. Supp. 2d 766 (N.D. Ohio 2010), it chose as its valuation the
midpoint of the $1,593,240 actual payout to class members and the “Available Benefit” of
$15,500,430, the maximum payout if all class members were to file claims, for a final valuation
of $8,546,835.    (R. 141, Report and Recommendation at Page ID 2875.)             It then added
administration costs ($496,259) and the attorney’s fee itself for a “Total Class Benefit” of
$11,433,094, of which the requested fee award was 20.9%—an acceptable percentage, in its
view. (Id.)

       Not only has no Circuit in the country approved of such a methodology, it is premised on
the faulty and fictional premise that counsel should be given credit for compensation that the
class did not receive—in other words, for millions of dollars that would never leave Defendant’s
coffers. We have long held that “[w]hen awarding attorney’s fees in a class action, a court must
make sure that counsel is fairly compensated for the amount of work done as well as for the
results achieved.” Rawlings, 9 F.3d at 516 (emphasis added). Rawlings further stated that “the
percentage of the fund method more accurately reflects the results achieved.” Id. With the
claims deadline months past, the district court knew that neither the $15.5 million “Available
Benefit” nor the $8.5 million midpoint figure could ever materialize. Yet the district court could
have predicted this beforehand simply because it was presiding over a claims-made consumer
class action, which would have an extremely low response rate, as courts have begun to
recognize. See Sullivan, 667 F.3d at 329 n.60.

       This is the predictable “economic reality” of claims-made class actions, and one that we
must acknowledge.      Dry Max Pampers, 724 F.3d at 717 (quoting Strong v. BellSouth
Telecomms., Inc., 137 F.3d 844, 849 (5th Cir. 1998)). The defense bar, at least, recognizes this;
among defense counsel, low participation rates under claims-made class action settlements are
both common knowledge and a selling point: class members recover—and a defendant pays—
much less when class members opt in than when a defendant disburses funds directly to class
Nos. 14-3761/3798                Gascho, et al. v. Global Fitness Holdings, LLC                      Page 40

members.5 The problem is not, as the majority seems to think, with settlement procedures that
are intented to discourage claims. Even without overt efforts on the part of defense counsel to
thwart claims, opt-in claims procedures naturally depress response rates to single-digit
percentages for the very predictable reason that class members simply are not sufficiently
incentivized to bother to opt in.

         The Seventh Circuit rightly rejected a hypothetical total maximum payout of
$14.2 million in a consumer class action in which $1 million was paid out as “fiction,” holding
that the district court should have computed the percentage of the fund by calculating the “‘ratio
of (1) the fee to (2) the fee plus what the class members received.’” Pearson v. NBTY, Inc.,
772 F.3d 778, 781 (7th Cir. 2014) (quoting Redman v. RadioShack Corp., 768 F.3d 622, 630 (7th
Cir. 2014)).6 See also Strong, 137 F.3d 844. This is a simple, common-sense rule: in assessing
the fairness of the division of the payout between class counsel and the class, courts should look
to the amounts actually pocketed by both parties. Thus, the district court should have used the
$1,593,240 actually paid as the benefit to the class for the calculation of its fee.

         Yet if valuations based on counterfactual maximum payouts are fiction, they are the sort
of fiction in which courts, including the Supreme Court some decades ago, have indulged. In
Boeing Co. v. Van Gemert, 444 U.S. 472, 480 (1980), the Supreme Court held that the “right to
share the harvest of the lawsuit upon proof of their identity, whether or not they exercise it, is a
benefit in the fund created by the efforts of the class representatives and their counsel.” Accord
Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 437 (2d Cir. 2007). Although Boeing
has never been directly overruled, it has hardly been met with universal acclaim. In a statement
respecting the denial of a petition for certiorari in Int’l Precious Metals Corp. v. Waters,
530 U.S. 1223, 120 S. Ct. 2237 (2000), Justice O’Connor expressed serious misgivings about a
fee award of $13,333,333 based on a reversionary fund of $40 million, the unclaimed portion of
which (all but the $6,485,362.15 actually paid out to the class) would revert to the defendant:

         5
          Wystan M. Ackerman, Class Action Settlement Structures, 63 Federation of Defense and Corporate
Counsel Quarterly 35 (2012) (claiming that the “principal advantage” of opt-in, claims-made settlements from the
perspective of the defense is that defendants would pay much less than if they simply mailed out checks).
         6
          On this basis, the court also held, correctly, that “administrative costs should not have been included in
calculating the division of the spoils between class counsel and class members. Those costs are part of the settlement
but not part of the value received from the settlement by the members of the class.” Id.
Nos. 14-3761/3798               Gascho, et al. v. Global Fitness Holdings, LLC                      Page 41

        We had no occasion in Boeing, however, to address whether there must at least be
        some rational connection between the fee award and the amount of the actual
        distribution to the class. The approval of attorney’s fees absent any such inquiry
        could have several troubling consequences. Arrangements such as that at issue
        here decouple class counsel’s financial incentives from those of the class,
        increasing the risk that the actual distribution will be misallocated between
        attorney’s fees and the plaintiffs’ recovery. They potentially undermine the
        underlying purposes of class actions by providing defendants with a powerful
        means to enticing [sic] class counsel to settle lawsuits in a manner detrimental to
        the class.
120 S. Ct. at 2237–38. The Advisory Committee notes to the 2003 amendments to Rule 23 that
“[o]ne fundamental focus” of a district court’s analysis “is the result actually achieved for class
members, a basic consideration in any case in which fees are sought on the basis of a benefit
achieved for class members. . . . For a percentage approach to fee measurement, results achieved
is the basic starting point.” Fed. R. Civ. P. 23, 2003 Amend., Note to Subdivision 23(h). The
Advisory Committee had no power to abrogate Boeing, but it nonetheless distinguished benefits
from actual results.7

        In Pearson, the Seventh Circuit also found Boeing distinguishable from constructive
common fund cases because Boeing was actually litigated to a judgment of $3,289,359 plus
interest, and “[n]othing in the court’s order made Boeing’s liability for this amount contingent
upon the presentation of individual claims.” 772 F.3d at 782 (quoting Boeing, 444 U.S. at 479
n.5). In a case involving an actual, quantifiable common fund with a cy pres beneficiary, we
valued “settlement proceeds,” which, by virtue of the cy pres beneficiary, the defendant had to
pay out, as the amount received by both the class members and the cy pres beneficiary for
calculation of attorney’s fees. Moulton v. U.S. Steel Corp., 581 F.3d 344, 352 (6th Cir. 2009).
Such valuations are intuitive when courts are forced to calculate liabilities or a defendant actually
agrees to pay out a certain sum. In so-called “constructive common fund” cases where the vast
majority of class members do not claim their awards, but in which unclaimed money remains
with the defendant, district courts should not be allowed to engage in unreasonable,

        7
           The Note’s caution that “in some class actions the monetary relief obtained is not the sole determinant of
an appropriate attorney fees award,” for which it cites Blanchard v. Bergeron, 489 U.S. 87, 95 (1989), appears to
refer to the irrefutable fact that class counsel should have an incentive to seek and be compensated for obtaining
injunctive or declaratory relief, and does not necessarily support basing a fee award on funds never actually claimed
or paid out.
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 42

counterfactual valuations of the fund—even supposed compromise measures, as the district court
did here.

       The correct valuation of the benefit of the class at $1.59 million leads naturally to
Blackman’s preferred approach of treating the $1.59 million class payout in the context of the
$2.39 million attorney fee award. In a case involving a “clear sailing” agreement not to contest
fees before the court, the Eighth Circuit described settlement terms and a negotiated fee amount
as a “package deal.” Johnston v. Comerica Mortgage Corp., 83 F.3d 241, 246 (8th Cir. 1996).
By Johnston’s sound logic, the fee award and the settlement must be considered together because
the fee amount was, for all intents and purposes, negotiated between the parties and
memorialized in the settlement agreement, as the other settlement terms were. Courts have
frequently expressed “the fear that class actions will prove less beneficial to class members than
to their attorneys,” as here. Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 524 (1st Cir.
1991). Courts’ concerns are twofold—not only might class counsel benefit more than the class,
but they might also benefit at the expense of the class. A defendant, concerned only with its total
payout, has little incentive to be concerned with “the allocation between the class payment and
the attorneys’ fees.” In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Products Liab. Litig.,
55 F.3d 768, 820 (3d Cir. 1995). See also Dry Max Pampers, 724 F.3d at 717; Strong, 137 F.3d
at 849–50. Weinberger recognized that class counsel could, in essence, sell out its client: “the
lawyers might urge a class settlement at a low figure or on a less-than-optimal basis in exchange
for red-carpet treatment on fees.” 925 F.2d at 524.

       To decide whether that was the case here, it is worth doing a little arithmetic.
The amount that the attorneys received exceeded the amount the class received by just over 50%;
put differently, calculating the “relevant” ratio that Pearson and Redman proposed—which
compares the amounts received by class counsel and the class as a percentage of the defendant’s
total payout, exclusive of administration costs—reveals that the attorney’s fees represent 60% of
Defendant’s payout. See Redman, 768 F.3d at 630 (rejecting fee award where 55% of the
defendant’s payout went to attorney’s fees). Even though the $1.59 million paid to the class was
a more substantial result than the “perfunctory,” non-cash relief at issue in Dry Max Pampers,
which Blackman concedes, that case compels us to consider the allocation of relief between class
Nos. 14-3761/3798             Gascho, et al. v. Global Fitness Holdings, LLC          Page 43

counsel and the class. 724 F.3d at 718. Because of its concerns about the misallocation of relief
between class counsel and the class, Dry Max Pampers rejected a settlement that “g[ave]
preferential treatment to class counsel” as demonstrating “disregard” of their “fiduciary
responsibilities.” Id. A fee award that exceeds the recovery of the class by 50%, as the
$2.39 million attorney fee award granted by the district court in this case did, seemingly
constituted a windfall to the attorneys that the district court should not have allowed in the proper
exercise of its discretion.

        Two particular clauses in the settlement relating to the fee award are of additional
concern: the “clear sailing” clause, whereby Defendant agreed not to contest any attorney’s fee
request up to $2,390,000, and the “kicker” clause, which stipulated that if the district court were
to award less than $2,390,000 in attorney’s fees, the unpaid balance would revert to Defendant.
(See R. 97-1, Settlement, at Page ID 1499–1500.) Blackman sees both these clauses as evidence
of yet further “self-dealing” on the part of class counsel at the expense of the class. (Blackman
Br. at 17.) The clear sailing clause required Defendant to file a notice with the district court at
least 21 days before the fairness hearing stating that it did not oppose the requested fee amount
up to the $2,390,000 cap. The kicker clause, in seemingly uncontroversial legalese, stipulated
that whatever payment the district court approved “shall constitute full satisfaction of
Defendant’s obligations” to pay the attorney’s fee. (R. 97-1, Settlement, at Page ID 1499.) A
clause two paragraphs prior, stating that “such payments shall have no effect on . . . the Class
Payment” precluded any potential pro rata distribution of unpaid attorney’s fees—and sent such
unpaid fees right back to Defendant. (Id.)

        Plaintiffs defend the use of the clear sailing clause, and argue that we have upheld clear
sailing agreements in the past, as in Gooch v. Life Inv’rs Ins. Co. of Am., 672 F.3d 402 (6th Cir.
2012), which held that “not every ‘clear sailing’ provision demonstrates collusion.” Id. at 426
(affirming use of clear sailing provision “where the ‘clear sailing’ provision caps attorney
compensation at approximately 2.3% of the total expected value of the settlement to the class
members”).     However, as Weinberger acknowledged, clear sailing agreements necessarily
suggest conflict between the class and its counsel, for “the very existence of a clear sailing
provision increases the likelihood that class counsel will have bargained away something of
Nos. 14-3761/3798             Gascho, et al. v. Global Fitness Holdings, LLC         Page 44

value to the class.” 925 F.2d at 525 (citing Malchman v. Davis, 761 F.2d 893, 908 (2d Cir. 1985)
(Newman, J., concurring), abrogated on other grounds by Amchem Products, Inc. v. Windsor,
521 U.S. 591 (1997).

       Plaintiffs also accuse Blackman of predicating his argument “on the erroneous factual
assumption that negotiations concerning attorneys’ fees affected the relief available to the class,”
and point to the district court’s finding that class counsel negotiated the fee award only after
agreeing to the other settlement terms. (Pls. Br. at 47.) In support of their fee request, class
counsel from the two lead firms submitted affidavits to the district court in which they averred
the following:

       The parties did not begin negotiations on attorneys’ fees and costs until after the
       substantive relief was agreed upon between Plaintiffs and Urban Active. Thus, it
       is clear that the Settlement resulted from arms’-length negotiation and fair dealing
       with the named Plaintiffs and classes’ [sic] best interests in mind.

(R. 97-10, Decls. of Thomas McCormick and Mark Troutman at Page ID 1605, 1610). While
the blatantly self-serving and conclusory language of the second sentence might have raised
serious red flags, the district court held that the risk of collusion was “lessened” because of the
order of negotiations. (R. 141, Report and Recommendation at Page ID 2850.) In General
Motors, the Third Circuit declined to “place such dispositive weight on the parties’ self-serving
remarks” about counsel’s assurances about the order in which the settlement and fees had been
negotiated. 55 F.3d at 804.

       General Motors also expressed skepticism about this nearly simultaneous form of
negotiation, with no intervening court involvement. Id. (citing Court Awarded Attorney’s Fees,
Report of the Third Circuit Task Force, 108 F.R.D. 238 (1985)) (“even if counsel did not discuss
fees until after they reached a settlement agreement, the statement would not allay our concern
since the Task Force recommended that fee negotiations be postponed until the settlement was
judicially approved, not merely until the date the parties allege to have reached an agreement”).
See also Pearson, 772 F.3d at 786 (dismissing similar arguments as “not realistic”). Quoting the
same Third Circuit task force report, the Ninth Circuit explained that “[e]ven if the plaintiff's
attorney does not consciously or explicitly bargain for a higher fee at the expense of the
beneficiaries, it is very likely that this situation has indirect or subliminal effects on the
Nos. 14-3761/3798            Gascho, et al. v. Global Fitness Holdings, LLC           Page 45

negotiations.” Staton v. Boeing Co., 327 F.3d 938, 964 (9th Cir. 2003). Class counsel cannot be
unaware that fee negotiations are nigh—that is, after all, how plaintiffs’ lawyers finance their
work—and that knowledge simply might cause them to push less hard for the interests of their
clients, even if they fail to realize that they are doing so.

        With subconscious or even overt collusion a serious risk, the district court possesses a
vital role in monitoring potential collusion. The Ninth Circuit held in Bluetooth that “when
confronted with a clear sailing provision, the district court has a heightened duty to peer into the
provision and scrutinize closely the relationship between attorneys’ fees and benefit to the class,
being careful to avoid awarding unreasonably high fees simply because they are uncontested.”
654 F.3d at 948 (emphasis added and citations omitted). Gooch, the only Sixth Circuit case to
date to have considered the validity of clear sailing provisions, did not explicitly adopt the Ninth
Circuit requirement of heightened scrutiny of such provisions, but Bluetooth was correct that
district courts must be especially wary when the parties agree not to contest fees in class actions.
See Gooch, 672 F.3d at 426. To its credit, the district court did not simply “ignore[] the clear
sailing fee provision,” as the court below did in Bluetooth, and instead discussed it at some
length. 654 F.3d at 948. The court below nonetheless greatly underestimated how the very
presence of the clear sailing provision was itself evidence of possible collusion, and thereby cast
doubt on the fairness of the settlement as a whole, including the adequacy of class counsel’s
representation. See Rule 23(e)(2), (g)(4).

        The inclusion of the so-called “kicker clause,” which allowed unpaid attorney’s fees to
revert to Defendant, only “amplifies the danger of collusion already suggested by a clear sailing
provision.” Bluetooth, 654 F.3d at 949. Bluetooth recognized that these two types of suspicious
clauses are intimately related: “[t]he clear sailing provision reveals the defendant’s willingness to
pay, but the kicker deprives the class of that full potential benefit if class counsel negotiates too
much for its fees.” Id. At some point in the settlement negotiations, the parties presumably
wished to resolve what would happen if the district court decided to award less than the
$2.39 million cap, and agreed that, should the district court do so, any remaining funds would
revert to Defendant—rather than being distributed to class members. The district court reasoned
that this clause was in no way problematic and had no practical effect because class counsel were
Nos. 14-3761/3798          Gascho, et al. v. Global Fitness Holdings, LLC           Page 46

awarded the full $2.39 million in attorney’s fees. (R. 141, Report and Recommendation at Page
ID 2852.) Yet as with the clear sailing clause, the district court overlooked the extent to which
the inclusion of this provision in the agreement may have been the product of compromised
representation by class counsel who were willing to deprive their clients of Defendant’s full set-
aside for fees, so long as they themselves were paid off. The Seventh Circuit rightly held that it
is impossible to discern any “justification for a kicker clause,” which should be subject to a
“strong presumption of [] invalidity.” Pearson, 772 F.3d at 787.

       Consumer class actions may indeed confer societal benefits.            Yet allowing such
purportedly desirable litigation to remain economically viable should not guide a district court’s
fairness inquiry under Rule 23. Class counsel are fiduciaries of the class, not of the public at
large, and should not be able to justify a poor result for their clients because of the nobility of
their mission. The majority cites some scenarios in which “significant compensation to class
members is out of reach,” such as small claims and unavailable contact information for class
members. Indeed, acquiescence to the dysfunctional procedures associated with the status quo of
opt-in settlements fails to provide “an incentive to design the claims process in such a way as
will maximize the settlement benefits actually received by the class.” Id. at 781. In fact, the
desirable deterrent effect on defendants’ behavior might even be expected to increase as the
payout to class members grows.

       The “package deal” that this settlement, including its disproportionate fee award, offered
to the class was a bad one relative to what it offered class counsel. See Johnston, 83 F.3d at 246.
The disparity is so great that it calls into question whether class counsel may have violated their
“fiduciary obligations” to class members. Dry Max Pampers, 724 F.3d at 718. As in Dry Max
Pampers, “[t]he reality is that this settlement benefits class counsel vastly more than it does the
consumers who comprise the class.” Id. at 721. Accordingly, it should have flunked any
fairness inquiry the district court made under Rule 23(e).