Court Opinion

ID: 2780617
Source: CourtListenerOpinion
Date Created: 2015-02-19 21:00:54.938272+00
Date Added: 2024-06-11T11:28:16.543944
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                 FEB 19 2015

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

In re: GROUPON MARKETING AND                     No. 13-55118
SALES PRACTICES LITIGATION,
                                                 D.C. No. 3:11-md-02238-DMS-
                                                 RBB
ANTHONY FERREIRA; HEATHER
KIMEL; BRIAN ZARD; SARAH
GOSLING; ASHLEY CHRISTENSEN;                     MEMORANDUM*
WILLIAM EIDENMULLER; JASON
COHEN; CARLOS VAZQUEZ; ELI R.
JOHNSON; JULIE BUCKLEY; SARAH
MEHEL; NEVIN BOOTH; BARRIE
ARLISS; JEFF LAWRIE; MICHAEL
MCPHERSON; ERIC TERRELL;
KENNETH HINTON; E.G. JOHNSON;
NICHOLAS SPENCER, individually and
on behalf of all others similarly situated,

              Plaintiffs - Appellees,

  v.

PADRAIGIN BROWNE,

              Objector - Appellant,

  v.

GROUPON, INC.; NORDSTROM INC.;

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FUN TIME, LLC, DBA Wheel Fun
Rentals; YMCA OF METROPOLITAN
WASHINGTON; WHIRLY WEST INC.,
DBA WhirlyBall; SPA BLIX, INC., a
Washington corporation; FULL CIRCLE
FARMS, INC., a Washington corporation;
CHARLES RIVERBOAT COMPANY,
INC.; BEAUTY & BLISS, LLC; THE
GAP, INC.,

             Defendants - Appellees.

In re: GROUPON MARKETING AND                  No. 13-55128
SALES PRACTICES LITIGATION,
                                              D.C. No. 3:11-md-02238-DMS-
                                              RBB
ANTHONY FERREIRA; HEATHER
KIMEL; BRIAN ZARD; SARAH
GOSLING; ASHLEY CHRISTENSEN;
WILLIAM EIDENMULLER; JASON
COHEN; CARLOS VAZQUEZ; ELI R.
JOHNSON; JULIE BUCKLEY; SARAH
MEHEL; NEVIN BOOTH; BARRIE
ARLISS; JEFF LAWRIE; MICHAEL
MCPHERSON; ERIC TERRELL;
KENNETH HINTON; E.G. JOHNSON;
NICHOLAS SPENCER, individually and
on behalf of all others similarly situated,

             Plaintiffs - Appellees,
 v.

SEAN HULL,

             Objector - Appellant,

                                         2
  v.

GROUPON, INC.; NORDSTROM INC.;
FUN TIME, LLC, DBA Wheel Fun
Rentals; YMCA OF METROPOLITAN
WASHINGTON; WHIRLY WEST INC.,
DBA WhirlyBall; SPA BLIX, INC., a
Washington corporation; FULL CIRCLE
FARMS, INC., a Washington corporation;
CHARLES RIVERBOAT COMPANY,
INC.; BEAUTY & BLISS, LLC; THE
GAP, INC.,

              Defendants - Appellees.

                    Appeal from the United States District Court
                       for the Southern District of California
                     Dana M. Sabraw, District Judge, Presiding

                      Argued and Submitted February 2, 2015
                               Pasadena California

Before: REINHARDT and GOULD, Circuit Judges, and MOTZ, Senior District
Judge.**

       This dispute arises from the district court’s approval of a class action

settlement between Defendants-Appellees Groupon and other merchants

(“Groupon”) and a nationwide class of customers (collectively, the “settling

parties”). On appeal, Objectors-Appellants Sean Hull and Padraigin Browne

       **
             The Honorable J. Frederick Motz, Senior District Judge for the U.S.
District Court for the District of Maryland, sitting by designation.

                                           3
contend that notice of the settlement was inadequate, and that the district court

made several errors when it approved the settlement and awarded attorneys’ fees to

class counsel. Mindful of the high procedural standard that we have set for

settlements that, like the one at issue here, occur before certification of the class,

we vacate approval and remand to the district court so that it can conduct a “more

searching inquiry into the fairness of the negotiated distribution of funds, as well as

consider the substantive reasonableness of the attorneys’ fee request in light of the

degree of success attained.” In re Bluetooth Headset Products Liab. Litig., 654
F.3d 935, 938 (9th Cir. 2011) (“Bluetooth”).

      As an initial matter, we conclude that the de minimis changes made to the

settlement in response to the district court’s initial disapproval did not require

sending a new notice to the class, or holding another fairness hearing. Before

approving settlement, a district court must “must direct notice in a reasonable

manner to all class members who would be bound by the proposal.” Fed. R. Civ.

P. 23(e)(1). “Notice is satisfactory if it generally describes the terms of the

settlement in sufficient detail to alert those with adverse viewpoints to investigate

and to come forward and be heard.” Rodriguez v. W. Publ’g Corp., 563 F.3d 948,

962 (9th Cir. 2009) (internal quotation marks omitted). There is no dispute that the

original notice satisfied this requirement for the originally proposed settlement.

                                            4
Because the settling parties merely excised a single cy pres provision, representing

a negligible part of the overall monetary relief ($75,000 cy pres out of an $8.5

million fund), we conclude that the original notice described a settlement nearly

identical in material respects to the final settlement. Further, Objectors do not

show that their objections were not considered by the district court at the fairness

hearing.

      Objectors also contend that a component of the settlement, called the Second

Settlement Fund, functions as a reverter to Groupon, provides illusory relief to the

class, and serves to inflate the purported value of the fund for purposes of

calculating class counsel’s fee. We take no position on the fairness of the Second

Settlement Fund. We rarely overturn a district court’s conclusions on substantive

fairness, see Stanton v. Boeing Co., 327 F.3d 938, 960 (9th Cir. 2003), but we have

made clear that a more searching inquiry is required procedurally when a

settlement comes before a class is certified. See Bluetooth, 654 F.3d 946–947.

      Here, our review of whether the district court made an adequately searching

inquiry on the settlement’s fairness is hampered by a lack of factual findings

relating to this Second Settlement Fund. The district court accepted the settling

parties’ contention that Second Settlement Fund was a dollar-for-dollar benefit to

the class. It made no findings as to: 1) the probable size, scope and impact of the

                                          5
Second Settlement Fund, to the extent such determinations are feasible; and 2)

whether the benefits of the Second Settlement Fund were in any way duplicative of

preexisting relief available to class members via Groupon’s customer satisfaction

policy, under which it conceded that it paid refunds to customers. But both issues

appear to have been points of significant dispute between Objectors and the settling

parties. Such findings will aid our proper review of the proposed settlement and so

we remand.

      As in Bluetooth, “we express no opinion on the ultimate fairness of what the

parties have negotiated, for we have no business substituting our notions of

fairness for those of the district judge.” 654 F.3d at 950 (internal quotation marks

and alterations omitted). The settlement relief as a whole, including the changes to

Groupon’s business practices, undoubtedly yields values to the class, to the

company and to the public. But on this record, and given the complexity of the

settlement, it is hard to quantify, or even to have a basis for fairly estimating, the

value of the relief to the class. And while we do not require a precise calculation,

we must have some basis, beyond the assertions of the settling parties, upon which

to calculate a value and compare the relationship of that benefit to the amount of

fees approved for class counsel as part of the settlement. On remand, the parties

and the district court may explore the extent to which values may be quantified by

                                           6
reference to factual or expert testimony, or reliably bounded within a specific range

of values that are expected, or illustrated by proxy evidence.1 After appropriately

supplementing the record, the district court may exercise its discretion to reapprove

the settlement and class counsels’ fee, reapprove the settlement but modify class

counsels’ fee, to disapprove the settlement, or take other appropriate actions

depending on its inquiry, findings, and evaluation of whether the settlement is fair,

reasonable, and adequate.2

      VACATED and REMANDED with instructions.

      The parties shall bear their own cost.

      1
        For example, the costs to Groupon of changes in company policy as part of
the settlement may or may not be a reasonable proxy for benefit to class members.
      2
       Because we do not reach questions of substantive fairness, we do not
address Objectors’ various other contentions of error, including their substantive
arguments regarding the scope and benefits of the Second Settlement Fund.
Objectors may raise such arguments again if there is a subsequent appeal.

                                          7
                                                                                FILED
Browne v. Groupon, No. 13-55118                                                  FEB 19 2015

                                                                             MOLLY C. DWYER, CLERK
MOTZ, Senior District Judge, concurring:                                      U.S. COURT OF APPEALS

I concur in the memorandum disposition. I write separately only to say that (1) I

believe the district judge has done an admirable job, (2) our memorandum

disposition does not reflect on the ultimate issue that the District Court must decide

– the fairness, reasonableness, and adequacy of the settlement, (3) some appellate

courts may not fully understand how eleventh-hour objectors may interfere with

the proper resolution of MDL proceedings, and (4) we risk diminishing the role of

lawyers in forging a settlement that is in the interest of the class, the defendant, and

the public by second-guessing a settlement resulting from a mediated settlement.

All of that said, the reasoned memorandum disposition is consistent with circuit

precedent.