Court Opinion

ID: 9907004
Source: CourtListenerOpinion
Date Created: 2023-12-05 18:01:01.946223+00
Date Added: 2024-06-11T09:55:32.118096
License: Public Domain

FOR PUBLICATION

      UNITED STATES COURT OF APPEALS
           FOR THE NINTH CIRCUIT

LISA KIM, individually and on behalf   No. 22-55345
of all others similarly situated,
                                          D.C. No.
              Plaintiff-Appellee,      2:18-cv-03093-
                                          JFW-AS
 v.

RICH ALLISON and STEVE FRYE,             OPINION

              Objectors-Appellants,

 v.

TINDER, INC., a Delaware
corporation; MATCH GROUP, LLC,
a Delaware limited liability company
and MATCH GROUP, INC., a
Delaware corporation,

              Defendants-Appellees.

LISA KIM, individually and on behalf   No. 22-55346
of all others similarly situated,
                                          D.C. No.
              Plaintiff-Appellant,     2:18-cv-03093-
                                          JFW-AS
2                     KIM V. TINDER, INC.

    v.

TINDER, INC., a Delaware
corporation; MATCH GROUP, LLC,
a Delaware limited liability company
and MATCH GROUP, INC., a
Delaware corporation,

                Defendants-Appellees.

and

RICH ALLISON and STEVE FRYE,

                Objectors,

         Appeal from the United States District Court
            for the Central District of California
          John F. Walter, District Judge, Presiding

         Argued and Submitted September 11, 2023
                   Pasadena, California

                   Filed December 5, 2023

      Before: MILAN D. SMITH, JR., MICHELLE T.
    FRIEDLAND, and ERIC D. MILLER, Circuit Judges.

            Opinion by Judge Milan D. Smith, Jr.
                        KIM V. TINDER, INC.                        3

                          SUMMARY *

                   Class Action / Settlement

    The panel vacated the district court’s order approving a
revised class action settlement between plaintiff Lisa Kim
and Tinder, Inc., a mobile dating application.
    The panel held that Kim was not an adequate
representative of the putative class, as required by Fed. R.
Civ. P. 23(a)(4). First, Kim had a conflict of interest with
other class members. She had a strong interest in settling her
claim because, unlike the 7,000 or more class members who
may not be bound by arbitration at all, she had no chance of
going to trial. Kim’s conflict was exacerbated by other
provisions in Tinder’s Terms of Use. Second, Kim did not
vigorously litigate this case on behalf of the putative
class. She failed to provide record evidence that the parties
conducted extensive discovery prior to engaging in the
settlement talks, and her approach to opposing Tinder’s
motion to compel arbitration was not suggestive of vigor.
   The panel remanded for the district court to consider
Kim’s individual action against Tinder, which has been
compelled to arbitration.

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4                     KIM V. TINDER, INC.

                        COUNSEL

Adrian R. Bacon (argued), Todd M. Friedman, and Thomas
E. Wheeler, Law Offices of Todd M. Friedman PC,
Woodland Hills, California; John P. Kristensen, Carpenter
Zuckerman, Beverly Hills, California; for Plaintiff-
Appellee.
Eve H. Cervantez (argued), Michael Rubin, P. Casey Pitts,
Jonathan Rosenthal, and Danielle Leonard, Altshuler Berzon
LLP, San Francisco, California; Kimberly A. Kralowec,
Kralowec Law PC, San Francisco, California; Alfred G.
Rava, Rava Law Firm, San Diego, California; for Objectors-
Appellants.
Robert H. Platt, Donald R. Brown, Benjamin G. Shatz, and
Benjamin E. Strauss, Manatt Phelps & Phillips LLP, Los
Angeles, California, for Defendants-Appellees.

                         OPINION

M. SMITH, Circuit Judge:

    Objector-Appellants Rich Allison and Steve Frye
(Objectors) appeal, for a second time, the district court’s
final approval of a class action settlement between
Defendant-Appellees Tinder, Inc., Match Group, LLC, and
Match Group, Inc. (collectively, Tinder) and Plaintiff-
Appellee Lisa Kim. In the first appeal, a panel of our court
reversed the district court’s approval of a settlement between
Tinder and Kim because its terms were suggestive of
collusion. Kim v. Allison, 8 F.4th 1170, 1174–75 (9th Cir.
2021) (Kim I). On remand, the parties entered into a revised
                           KIM V. TINDER, INC.                            5

settlement, which the district court again approved over
objections. Because we agree with the Objectors that Kim
is not an adequate representative of the putative class, we
vacate the district court’s order approving the revised
settlement, reverse, and remand.
      FACTS AND PROCEDURAL BACKGROUND
    I. Tinder’s Pricing Model
    Tinder is a mobile dating application that allows users in
geographical proximity to view and “like” each other’s
profiles. Users also can send one another a “Super Like,”
which they can purchase for $1.59 each. Kim I, 8 F.4th at
1175. 1
    The Tinder app is free for anyone who downloads the
basic version, but users can pay extra to access certain
premium features. In March 2015, Tinder unveiled “Tinder
Plus,” which offered purchasers a variety of premium
features. Kim I, 8 F.4th at 1175. In 2017, Tinder launched
a similar premium service called “Tinder Gold.” Id.
    Until February 2019, Tinder Plus and Tinder Gold
operated on a two-tiered pricing model based on age.
Specifically, Tinder charged customers over thirty around
ten dollars more per month for Tinder Plus than it charged
younger customers, and it charged them around fifteen
dollars more per month for Tinder Gold. Id. (explaining that,
for Tinder Plus, subscribers aged thirty years and younger
paid $9.99 a month, and subscribers over thirty paid $19.99).

1
 The price of a Super Like has increased from $1 each to $1.59 each
during the course of this litigation. Cf. Kim I, 8 F.4th at 1175 (discussing
$1 Super Likes).
6                     KIM V. TINDER, INC.

Tinder later lowered the age cutoff from thirty to twenty-
nine.
    II. The Parallel Litigation
     Tinder’s pricing model triggered two parallel class
actions: (1) Candelore v. Tinder, which was filed in
California Superior Court in May 2015, and (2) Kim v.
Tinder, which was filed in the United States District Court
for the Central District of California in April 2018.
Although this case is only an appeal of the latter, assessment
of its merits requires an understanding of both actions.
       A. The Candelore Litigation
    In May 2015, Allan Candelore filed a class action lawsuit
against Tinder in state court, alleging that its age-
discriminatory pricing scheme violated California’s Unruh
Civil Rights Act, Cal. Civ. Code §§ 51 et seq. (Unruh Act),
and California’s unfair competition law, Cal. Bus. & Prof.
Code §§ 17200 et seq. See Candelore v. Tinder, Inc., 228
Cal. Rptr. 3d 336, 339–40 (Cal. App. 2018), review denied,
No. S247527 (Cal. May 9, 2018).
    Shortly after Candelore filed his suit, on July 31, 2015,
Tinder began using a “sign-in wrap” method of requiring
users to assent to its Terms of Use (TOU) before they could
log in. The TOU agreement contained a Texas choice-of-
law provision, a limited liability provision, an arbitration
clause, and a waiver of participation in class actions.
    Tinder never filed a motion to compel arbitration in the
Candelore action. Instead, Tinder filed a demurrer, which
the Superior Court sustained. The California Court of
Appeal reversed. The Court of Appeal held that Candelore’s
allegations stated a claim for age discrimination under the
Unruh Act and the unfair competition law, rejecting as a
                           KIM V. TINDER, INC.                            7

matter of law the argument that discrimination was justified
“by public policies that promote (a) increased access to
services for the general public and (b) profit maximization
by [a] vendor.” Id. at 348 (quotation marks omitted); see
also Kim I, 8 F.4th at 1176 (characterizing the Candelore
opinion as standing for the proposition that “if [Candelore’s]
allegations were true, Tinder’s age-based distinction would
not be justified by public policy as a matter of law”). On
May 9, 2018, the California Supreme Court denied review
of the Court of Appeal’s decision. See Candelore, 228 Cal.
Rptr. 3d at 351. That same day, Tinder issued an updated
TOU to its users which purported to retroactively waive
users’ rights to join pending lawsuits, including the
Candelore action. 2
     Having survived demurrer, Candelore continued to
litigate his action in the Superior Court. In January 2022,
Candelore sought to certify the class, proposing to break the
class into subclasses. The subclasses would distinguish
between those class members who may have agreed to
Tinder’s TOU through its July 31, 2015 sign-in wrap process
and those who had not, “to facilitate a carveout . . . with
respect to Tinder’s [TOU] defense, if necessary.” 3 The
Superior Court denied the certification motion, but did so

2
    The waiver was subject to a 30-day opt-out period.
3
 We grant the parties’ motions to take judicial notice of the publicly filed
documents in the Candalore litigation. See United States ex rel.
Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248
(9th Cir. 1992) (noting that courts “may take notice of proceedings in
other courts, both within and without the federal judicial system, if those
proceedings have a direct relation to matters at issue” (quoting St. Louis
Baptist Temple, Inc. v. FDIC, 605 F.2d 1169, 1172 (10th Cir. 1979));
Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (noting that
courts may take judicial notice of undisputed “matters of public record”).
8                        KIM V. TINDER, INC.

“without prejudice to renewal following the Ninth Circuit’s
ruling” in this case. 4
      B. This Action: Kim v. Tinder
    In April 2018, approximately three years after Candelore
filed his action in state court, Kim sued Tinder in the Central
District of California, alleging the same Unruh Act and
Unfair Competition claims as had Candelore in his state
court case. Unlike in the Candelore litigation, however,
Tinder did move to compel arbitration of Kim’s claims. The
district court granted the motion, because Kim had “on
multiple occasions after [Tinder implemented its sign-in
wrap method on] July 31, 2015, [] logged in to her Tinder
account.” The district court stayed the case pending the
outcome of the arbitration.
    Kim appealed the arbitration order. While the appeal
was pending, however, Kim and Tinder reached a
settlement, and the district court lifted the stay so that the
parties could submit their settlement papers. Unlike the
proposed class in Candelore, the proposed settlement class
in Kim was not (and is not) divided into any subclasses. The
single class is defined to include “every California
subscriber to Tinder Plus or Tinder Gold during the Class
Period who at the time of the subscription was at least 29
years old and was charged a higher rate than younger
subscribers . . . .” The settlement agreement defines the
Class Period as starting on March 2, 2015—almost two
months before the Candelore litigation began.
   Allison and Frye—whose counsel also represents
Candelore—objected to the settlement. The district court

4
 The Candelore action is currently stayed “until a ruling by [our court]
as to whether the settlement” in this action “was properly approved.”
                        KIM V. TINDER, INC.                      9

approved the settlement over their objections, and the
Objectors appealed. A panel of our court reversed the
district court’s order. Kim I, 8 F.4th at 1175. Without
reaching the Objectors’ challenges to class certification, the
panel held that the district court had erred in evaluating the
settlement. Id. at 1179. Our court explained that “while the
district court correctly recited the fairness factors under Fed.
R. Civ. P. 23(e)(2), it materially underrated the strength of
the plaintiff’s claims, substantially overstated the
settlement’s worth, and failed to take the required hard look
at indicia of collusion, including a request for attorneys’ fees
that dwarfed the anticipated monetary payout to the class.”
Id. at 1174–75. The panel therefore remanded the case back
to the district court to “conduct the ‘more probing inquiry’
that a pre-certification class settlement demands.” Id. at
1175 (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011,
1026 (9th Cir. 1998)).
    On remand, Kim and Tinder again settled, and entered
into an Amended Class Action Settlement Agreement.
Candelore and another 978 members of the class opted out;
Allison and Frye again objected. Among other things, the
Objectors argued that Kim was an inadequate class
representative because, unlike the remainder of the class, she
was subject to a binding arbitration order. The district court
nonetheless certified the class and approved the settlement.
The Objectors now appeal. 5

5
  The district court also awarded attorneys’ fees to the Objectors’
counsel, and Kim appeals that award. Because we vacate the district
court’s approval of the settlement, Kim’s appeal regarding fees is
dismissed as moot.
10                    KIM V. TINDER, INC.

     JURISDICTION AND STANDARD OF REVIEW
    We have jurisdiction pursuant to 28 U.S.C. § 1291.
While we review class certification for an abuse of
discretion, Castillo v. Bank of Am., NA, 980 F.3d 723, 728
(9th Cir. 2020), we pay “heightened attention” where, as
here, the district court certified a class for settlement
purposes only. Ortiz v. Fibreboard Corp., 527 U.S. 815, 849
(1999).
                         ANALYSIS
    Before certifying a class, a district court must ensure that
the class satisfies the prerequisites of Rule 23, including that
“the representative parties will fairly and adequately protect
the interests of the class.” Fed. R. Civ. P. 23(a)(4); In re
Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prods.
Liab. Litig., 895 F.3d 597, 606 (9th Cir. 2018). In addition,
adequacy of representation is relevant to the court’s inquiry
into whether a proposed class settlement is fair under the
revised Rule 23(e). See Fed. R. Civ. P. 23(e)(2)(A). The
adequacy inquiry is addressed by answering two questions:
“(1) do the named plaintiffs and their counsel have any
conflicts of interest with other class members and (2) will
the named plaintiffs and their counsel prosecute the action
vigorously on behalf of the class?” Hanlon, 150 F.3d at
1020. Here, both inquiries lead to the conclusion that Kim is
not an adequate class representative.
 I. Conflict of Interest
    The initial inquiry in assessing adequacy of
representation is whether “the named plaintiffs and their
counsel have any conflicts of interest with other class
members.” Id. “That general standard must be broken down
for specific application; conflicts within classes come in
                      KIM V. TINDER, INC.                   11

many guises.” Volkswagen, 895 F.3d at 607. “Only
conflicts that are fundamental to the suit and that go to the
heart of the litigation prevent a plaintiff from meeting the
Rule 23(a)(4) adequacy requirement.” In re Online DVD-
Rental Antitrust Litig., 779 F.3d at 942 (quoting 1 William
B. Rubenstein et al., Newberg on Class Actions § 3:58 (5th
ed. 2011)).
    The district court disposed of the Objectors’ adequacy
argument in the following two sentences: “Plaintiff and
Class Counsel have no conflicts of interest with other Class
Members because, for purposes of the Settlement, Plaintiff’s
claims are typical of those of other Class Members. Plaintiff
and other Class Members share the common goal of
protecting and improving consumer and privacy rights
throughout California, and there is no conflict among them.”
    As a threshold matter, the district court conflated a class
representative’s adequacy with her typicality.            “The
adequacy inquiry under Rule 23(a)(4) serves to uncover
conflicts of interest between named parties and the class they
seek to represent.” Amchem Prods., Inc. v. Windsor, 521
U.S. 591, 625 (1997). The typicality inquiry, on the other
hand, involves a more “permissive standard,” simply asking
whether a representative’s claims “are reasonably co-
extensive with those of absent class members.” See Castillo,
980 F.3d at 729 (quoting Hanlon, 150 F.3d at 1120). While
a lack of typicality can indicate that a class representative
may be inadequate, see Hesse v. Sprint Corp., 598 F.3d 581,
589 (9th Cir. 2010), the two inquiries are not the same.
    The landmark case discussing adequacy and conflicts of
interest is Amchem Products. In that case, the Supreme
Court held that a group of named plaintiffs who included
those with present injuries from their exposure to asbestos
12                    KIM V. TINDER, INC.

could not adequately represent a class that included members
who could not yet show injury, but who might develop
exposure-related injuries in the future. 521 U.S. at 625–27.
The interests of the presently injured plaintiffs conflicted
with those of the exposure-only class members because the
former had an interest in maximizing immediate payouts,
while the latter had an interest in preserving the settlement
funds for future claims. Id. at 626. Thus, by maximizing
their own interests, the putative representatives who already
had injuries would necessarily undercut the interests of
another portion of the class. Id.
    Similarly, in Hesse v. Sprint Corp., 598 F.3d 581 (9th
Cir. 2010), we held that a class representative who had
settled his Kansas state and federal regulatory claims with
Sprint could not adequately represent class members who
alleged that Sprint violated Washington state laws in a
follow-on suit in federal court. Id. at 585, 588–89. The
settlement in the Kansas state court action, which preceded
the federal court action, purported to release Sprint from
future, broader claims such as the Washington claims. Id. at
586. We explained that interpreting the Kansas judgment to
encompass the Washington plaintiffs’ claims would violate
Rule 23(a)(4) as well as due process, because the Kansas
plaintiff’s “interest in settling his federal [] claims, even at
the cost of a broad release of other claims he did not possess,
was in conflict with the Washington [p]laintiffs’
unrepresented interest in prosecuting their [state law]
claims.” Id. at 589. We therefore held that the Kansas
plaintiff’s representation of the Washington plaintiffs was
inadequate as to those claims. Id. at 588.
    In this case, Kim faces a conflict of interest similar to
those found in Amchem and Hesse. As discussed above, the
district court already held that Kim is subject to arbitration
                         KIM V. TINDER, INC.                       13

because there was evidence that she signed into her Tinder
account multiple times after Tinder began using its sign-in
wrap method of notifying users of the TOU. However,
Tinder concedes that—at least at this point in the litigation—
it lacks any evidence of an agreement to arbitrate as to over
7,000 members of the class that was certified for settlement.
Therefore, like the Kansas Plaintiff in Hesse, Kim has a
strong “interest in settling” her claim, “even at the cost of a
broad release of other claims” that are not subject to
arbitration, because unlike the 7,000 or more members who
may not be bound by arbitration at all, she has no chance of
going to trial. See id. at 589.
    Kim’s conflict is exacerbated by other provisions of the
TOU. Not only is Kim’s claim subject to arbitration; her
entire dispute may be governed by Texas law, in which case
she may not be able to assert an Unruh Act claim at all. And
even if she could assert such a claim, the TOU’s limitation
on liability would limit her recovery to “the amount paid, if
any, by [Kim] to Tinder” during the twenty-four-month
period prior to this litigation, which no one disputes is
significantly less than what the Unruh Act provides. See Cal.
Civ. Code § 52(a) (providing for damages “in no case less
than four thousand dollars” for each count). 6
    Kim argues that any conflict between herself and the
class is insignificant because the district court concluded that
the 7,000-plus members for which there is no evidence of an
agreement to arbitrate would only constitute five percent of
the 240,000-member class. But there may be even more
class members who are not subject to an arbitration

6
 At the same time, Kim (and only Kim) would receive a $5,000 incentive
award for her role as class representative, pursuant to the revised
agreement approved by the district court.
14                        KIM V. TINDER, INC.

agreement. As the Objectors note, an additional 24,000
members agreed to the May 9, 2018 version of the TOU—a
retroactive waiver of rights that may be invalid under
California law. 7 But even if the district court’s estimate is
correct, we have never determined adequacy by deferring to
a percentage-of-the-class formula. And even assuming that
could be a proper approach in some case, it does not make
sense to adopt that approach for the first time here, where
five percent of a class represents a sizeable number of
potential class members. Ultimately, Kim and her counsel’s
willingness to put even a minority of class members’ claims
at risk for a fee is precisely the kind of conflict Rule 23(a)(4)
was designed to avoid.
    II. Vigorous Advocacy
    To meet Rule 23’s adequacy requirement, “plaintiffs and
their counsel [must have also] prosecute[d] the action
vigorously on behalf of the class.” In re Online DVD-Rental
Antitrust Litig., 779 F.3d at 943 (quoting Hanlon, 150 F.3d
at 1020). “Although there are no fixed standards by which
‘vigor’ can be assayed, considerations include competency
of counsel and, in the context of a settlement-only class, an

7
  See Cobb v. Ironwood Country Club, 183 Cal. Rptr. 3d 282, 286–87
(Cal. App. 2015). Tinder argues that the TOU is governed by Texas,
rather than California, law, but that is not immediately apparent from the
TOU’s terms, which state only that “the laws of Texas . . . shall apply”
unless “[the] arbitration agreement is prohibited by law.” And while the
district court noted that Kim logged in to her account “multiple times”
after Tinder implemented its sign-in wrap system, it is unclear whether
she ever agreed to the May 9, 2018 version of the TOU. Notably, the
record does not provide answers because Kim herself never made any
formation or unconscionability challenge to the TOU when opposing the
motion to compel. See Section II infra.
                      KIM V. TINDER, INC.                   15

assessment of the rationale for not pursuing further
litigation.” Hanlon, 150 F.3d at 1021.
    In certifying the class, the district court stated that
“Plaintiff and Class Counsel have been prosecuting this
action vigorously on behalf of the Class,” but did not
elaborate. The Objectors argue that the district court erred
in reaching this conclusion. We agree.
    First, the Objectors argue that although the district court
stated that the parties “conducted extensive informal and
formal discovery . . . prior to engaging in the settlement
talks,” Kim actually conducted “no discovery.” The
Objectors argue that the district court’s statement to the
contrary is not supported by the record evidence, because the
entries submitted in support of Kim’s proposed fee award
“do not contain any entries referring to any review of any
documents, discovery, or informational exchange with
Tinder before the original mediation” on November 29,
2018.
    The Objectors refer to two entries (totaling five and a
half hours) for “drafting” and “finalizing” written discovery
and one 30-minute entry for “discuss[ing] informal
exchange of class data and information for settlement
purposes” in June 2018, prior to the date of the first
mediation. A month later, in its July 12, 2018 order granting
Tinder’s motion to compel, the district court rejected Kim’s
“vague request for unspecified discovery.” Although this is
not “no discovery,” it is certainly not “extensive.” Cf. id. at
1022 (concluding that “document request[s] and production,
interrogatories, and the taking and defending of depositions”
supported a determination that “counsel’s prosecution was
sufficiently vigorous” under Rule 23(a)(4)); Fed. R. Civ. P.
23(e)(2) advisory committee note to 2018 amendment
16                      KIM V. TINDER, INC.

(noting that fairness of a settlement can include
consideration of “the nature and amount of discovery,”
which “may indicate whether counsel negotiating on behalf
of the class had an adequate information base”). Kim claims
that she did “engage[] in discovery,” but the portion of her
brief asserting that she vigorously litigated the case does not
provide any citations to the record and her counsel similarly
failed to provide citations at oral argument.
     Second, Kim’s approach to opposing Tinder’s motion to
compel is not suggestive of vigor. The only argument Kim
made to oppose Tinder’s motion to compel is that the motion
would have prevented imposition of a public injunction and
would therefore violate McGill v. Citibank, N.A., 393 P.3d
85, 90 (Cal. 2017). Although Kim and Tinder attribute this
briefing to “strategy,” that too is not borne out by the record,
which shows that Kim belatedly raised formation challenges
in a motion to file a supplemental brief. Of course, there is
no strategic benefit to waiving objections to arbitration by a
plaintiff who desires to maximize her leverage at the
negotiating table. Class representatives will often need to
choose which arguments to pursue, and ordinarily they will
not be rendered inadequate simply because they failed to
raise an argument that appears strong in hindsight. But
Kim’s failure to make obvious arguments until after they
were forfeited calls into question whether she vigorously
litigated this case on behalf of the class. In all, it is clear that
Kim did not “vigorously” litigate this case on behalf of the
putative class.
                        CONCLUSION
    In light of Kim’s conflict of interest and failure to
vigorously litigate the case, the district court abused its
discretion in holding that Kim was an adequate
                     KIM V. TINDER, INC.                  17

representative of the class. We therefore vacate the district
court’s order approving the revised settlement, which had
certified the class for settlement purposes only. On remand,
the only matter before the district court will be Kim’s
individual action against Tinder, which has been compelled
to arbitration.
   ORDER VACATED; REVERSED and REMANDED.