Court Opinion

ID: 9945055
Source: CourtListenerOpinion
Date Created: 2024-02-26 22:01:11.437163+00
Date Added: 2024-06-11T14:25:21.321064
License: Public Domain

USCA11 Case: 22-10663     Document: 141-1       Date Filed: 02/26/2024   Page: 1 of 12

                                                                 [PUBLISH]
                                       In the
                 United States Court of Appeals
                           For the Eleventh Circuit

                             ____________________

                                   No. 22-10663
                             ____________________

        TROY SMITH,
        individually and on behalf of all others similarly situated,
        BRENDAN C. HANEY,
        individually and on behalf of all others similarly situated,
        GERALD E. REED, IV,
        individually and on behalf of all others similarly situated,
                                                         Plaintiﬀs-Appellees,
        COSTA DEL MAR, INC.,
        a Florida corporation,
                                                        Defendant-Appellee,
        versus
        MITCHELL GEORGE MIORELLI,
        AUSTIN VALLS,
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        2                      Opinion of the Court                22-10663

        JOHN W. DAVIS,

                                              Interested Parties-Appellants.

                             ____________________

                   Appeal from the United States District Court
                        for the Middle District of Florida
                     D.C. Docket No. 3:18-cv-01011-TJC-LLL
                            ____________________

        Before BRANCH, LUCK, and TJOFLAT, Circuit Judges.
        BRANCH, Circuit Judge:
               This is an appeal from a district court order approving a
        class-action settlement that resolved three different lawsuits
        against Costa Del Mar, Inc. (“Costa”) for its allegedly deceptive
        warranty and repair policies on its sunglasses. The district court
        determined that the settlement provides over $32 million in
        monetary relief—over $27 million in product vouchers and $5
        million in injunctive relief—to four classes of consumers of Costa’s
        sunglasses.
                For obvious reasons, Costa and the named plaintiffs do not
        argue that the district court erred in approving the settlement.
        Instead, three unnamed class members—Mitchell Miorelli, John
        Davis, and Austin Valls (hereinafter, “Objectors”)—appeal the
        district court’s approval order. In essence, Objectors argue that the
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        22-10663                Opinion of the Court                          3

        district court erred in approving the settlement because it
        incorrectly determined that the settlement was not a coupon
        settlement, thereby failing to apply the heightened standard of
        scrutiny as required under the Class Action Fairness Act (“CAFA”),
        28 U.S.C. § 1712(e).
               We do not reach the merits of the CAFA argument,
        however, because, as Objectors argue on appeal, the named
        plaintiffs lacked Article III standing to pursue their claims for
        injunctive relief. As a result, the district court necessarily abused
        its discretion in approving the settlement because the court’s
        holistic review of the settlement’s fairness included relief that it had
        no jurisdiction to award. Accordingly, we VACATE the district
        court’s order and REMAND for proceedings consistent with this
        opinion.
                                     I.     Background
               Costa is a sunglasses manufacturer that represented to
        buyers that their sunglasses were backed by lifetime warranties.
        According to the named plaintiffs, these lifetime warranties
        required Costa to repair their sunglasses either free-of-charge or for
        a nominal fee. Each of the named plaintiffs purchased Costa
        sunglasses and, after the sunglasses became damaged, sent them to
        Costa for repair. Instead of repairing the sunglasses free-of-charge
        or for a nominal fee, however, Costa charged the named plaintiffs
        up to $105.18 to repair their sunglasses. Accordingly, the named
        plaintiffs initiated three separate class action lawsuits against Costa
        asserting various claims.
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        4                         Opinion of the Court                       22-10663

              Troy Smith initiated a class-action lawsuit in the U.S. District
        Court for the Middle District of Florida (hereinafter the “Smith
        lawsuit”), bringing a one-count Magnuson-Moss Warranty Act
        (“MMWA”) claim against Costa. 1 Smith’s complaint alleged that
        he and unnamed class members suffered past injuries in the form
        of an $11.95 payment to have their sunglasses repaired when
        Costa’s warranty allegedly required repairs “without charge.”
        Smith did not allege that he was likely to suffer any future injury.
        Despite not alleging any threat of future injury, however, Smith
        requested both monetary damages as well as injunctive relief in the
        form of “[a]n [o]rder enjoining Costa from violating the MMWA.”
               Gerald Reed also initiated a class-action lawsuit in the
        Middle District of Florida (hereinafter the “Reed lawsuit”), bringing
        a Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”)
        claim. Reed alleged that when he sent his sunglasses to Costa for
        repair, Costa charged him “$100.95 in repair and shipping costs,
        which was far more than the ‘nominal fee’ promised by Costa.”
        Accordingly, Reed alleged that he and other class members were

        1 The MMWA vests federal district courts with subject matter jurisdiction to

        hear claims brought under the Act. 15 U.S.C. § 2310(d)(1)(B). However,
        Congress imposed limits on this jurisdictional grant, including limitations on
        the maintenance of class actions. Id. § 2310(d)(3). Specifically, a class action
        brought under the MMWA is not cognizable in federal court if “the number
        of named plaintiffs is less than one hundred.” Id. § 2310(d)(3)(C). Smith,
        however, was the lone named plaintiff in his class action lawsuit and could not
        rely on the federal question jurisdiction provided by the MMWA. His initial
        complaint invoked the federal court’s diversity jurisdiction under
        28 U.S.C. § 1332(d)(2).
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        22-10663               Opinion of the Court                        5

        injured by Costa because they “[d]id not receive the benefit of the
        repair warranty made by Costa” and “[p]aid more than a ‘nominal’
        fee for repairs.” Like Smith, Reed did not allege that he was likely
        to suffer any future injury. However, Reed also requested not only
        monetary damages but injunctive relief.
               Nicholas Howland initiated a class-action lawsuit in the
        Circuit Court, Fourth Judicial Circuit in and for Duval County,
        Florida, bringing both a FDUTPA and a MMWA claim against
        Costa. Brendan Haney later replaced Howland as the named
        plaintiff in that lawsuit (hereinafter the “Haney lawsuit”). Haney
        alleged that Costa charged him “a total of $105.18 in repair and
        shipping costs” despite its warranty that it would repair glasses for
        a “nominal fee.” Like the named plaintiffs in the other two
        lawsuits, Haney did not allege that he faced any threat of future
        injury by Costa’s warranty practices, only past harm. However, in
        addition to requesting actual damages, Haney requested—just like
        the plaintiffs in the other two lawsuits—injunctive relief.
                On February 25, 2020, after extensive litigation in all three
        lawsuits, Smith moved to file an Amended Complaint to facilitate
        a settlement agreement that would resolve the claims in all three
        cases by providing payment in the form of product vouchers as
        well as injunctive relief requiring Costa to change its label and
        warranty practices. The district court granted the motion, and
        Smith filed an Amended Complaint, consolidating all of the claims
        from the Smith, Haney, and Reed lawsuits. The Amended
        Complaint in Smith continued to reference only past, not future,
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        6                        Opinion of the Court                     22-10663

        injuries. 2 It made no allegations that any of the named plaintiffs
        faced the prospect of future injury by needing to have their
        sunglasses repaired again. Despite the lack of allegations regarding
        the threat of future harm, the named plaintiffs again requested the
        court to grant injunctive relief in the form of an order “enjoining
        [Costa] from falsely promising to repair or replace its
        sunglasses . . . for a nominal fee” as well as “enjoining [Costa] from
        violating the MMWA.”
               On May 1, 2020, the named plaintiffs filed an unopposed
        motion for preliminary approval of the class settlement pursuant
        to Rule 23(e) of the Federal Rules of Civil Procedure. They argued
        that the proposed settlement would result in “over $60 million of
        value to the [c]lass” in the form of product vouchers and attorneys’
        fees, as well as non-monetary injunctive relief requiring Costa to
        change “certain consumer-facing marketing materials and product
        packaging” to remove language regarding the strength of Costa’s
        warranties. Additionally, the plaintiffs emphasized that product
        vouchers that were not redeemed would result in a cy pres payment
        of up to $1,000,000 to an unnamed charity.

        2 With respect to Smith, the Amended Complaint alleged that “Smith and the

        members of the class have paid $11.95 plus tax per warranty claim to Costa,
        when the MMWA required that Costa honor its warranty ‘without charge’”
        and “Costa failed to comply with its obligations under the MMWA, and each
        of the members of the class were harmed by Costa’s failures.” As to Reed and
        Haney, the Amended Complaint alleged “[a]s an immediate, direct, and
        proximate result of Costa’s false warranty, Costa injured Plaintiffs Reed and
        Haney, and the class members.”
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        22-10663                  Opinion of the Court                              7

                The district court granted preliminary approval of the
        settlement, noting “it [was] satisfied that the settlement [was] not
        a coupon settlement.” It instructed the parties to disseminate the
        class notice and set a final fairness hearing. After the class notice
        was disseminated, Objectors filed individual objections arguing
        that the settlement was a coupon settlement and subject to
        heightened scrutiny as required by CAFA, 28 U.S.C. § 1712. 3 They
        argued that pursuant to 28 U.S.C. § 1712(a) any award of attorneys’
        fees to class counsel must be based on the value of product
        vouchers that are actually redeemed, not the value of vouchers that
        would be distributed. Thus, they asserted that the district court
        should have determined the value of the vouchers likely to actually
        be redeemed and awarded class counsel attorneys’ fees based on
        that figure.
               The district court considered the objections but ultimately
        overruled them. Relying on the Ninth Circuit’s decision in In re
        Online DVD-Rental Antitrust Litigation, 779 F.3d 934 (9th Cir. 2015),

        3 Pursuant to 28 U.S.C. § 1712, “[i]n a proposed settlement under which class

        members would be awarded coupons, the court may approve the proposed
        settlement only after a hearing to determine whether, and making a written
        finding, that the settlement is fair, reasonable, and adequate for class
        members.” 28 U.S.C. § 1712(e). Additionally, “the court may, in its discretion
        upon the motion of a party, receive expert testimony from a witness qualified
        to provide information on the actual value to the class members of the
        coupons that are redeemed.” 28 U.S.C. § 1712(d). Objectors argue that this
        statute required the district court to determine the actual value of product
        vouchers that would be redeemed before approving the settlement as fair,
        reasonable, and adequate.
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        8                          Opinion of the Court                       22-10663

        the district court concluded that the settlement was not a coupon
        settlement and thus based the settlement’s value on the face value
        of the product vouchers to be distributed along with the
        settlement’s injunctive relief. Accordingly, it determined that the
        face value of these vouchers totaled $27.2 million and that the value
        of the settlement’s injunctive relief was worth $5 million, making
        the settlement’s value approximately $32 million. The district
        court then awarded class counsel 25% of the settlement’s value,
        which amounted to $8 million.4
                At bottom, the district court approved the settlement,
        including the injunctive relief, determining that the settlement was
        fair, reasonable, and adequate. Objectors timely appealed the
        district court’s approval of the settlement, arguing that the district
        court erred in (1) determining that the settlement agreement was
        not a coupon settlement; (2) calculating the attorneys’ fees owed
        to class counsel, including by awarding attorneys’ fees based on the
        face value of the vouchers as opposed to the number of vouchers
        redeemed; (3) approving the potential cy pres payment; (4) failing
        to adequately consider what Objectors alleged was evidence of a
        collusive settlement;5 (5) awarding Objectors a relatively low

        4 Because this $8 million figure was $4 million less than class counsel
        requested, and per the terms of the settlement this difference was to benefit
        the class, the district court requested additional briefing on how the $4 million
        should be distributed to the class. The district court ultimately decided that
        this $4 million would be distributed to the class in the form of cash payments.
        5 Objectors argued that a “clear-sailing” provision proves that the settlement

        agreement was the result of collusion. This provision called for the settlement
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        22-10663                   Opinion of the Court                                 9

        amount because it determined that Objectors provided little value
        to the class; and (6) considering the value of the injunctive relief in
        the Settlement because the named plaintiffs lacked Article III
        standing to pursue injunctive relief. Because we agree that named
        plaintiffs lacked Article III standing for injunctive relief, we need
        not reach Objectors’ other arguments.
                                    II.     Standard of Review
               “Questions of the litigants’ standing may be raised at any
        time, and are reviewed de novo.” Williams v. Reckitt Benckiser LLC,
        65 F.4th 1243, 1251 (11th Cir. 2023). We review a district court’s
        decision to approve a class-action settlement for abuse of
        discretion. Johnson v. NPAS Sols., LLC, 975 F.3d 1244, 1251 n.2 (11th
        Cir. 2020). “A district court abuses its discretion if it applies an
        incorrect legal standard, follows improper procedures in making
        the determination, or makes findings of fact that are clearly
        erroneous.” Williams, 65 F.4th at 1251 (quotation omitted). “An
        error of law is an abuse of discretion per se.” Id. (quotation
        omitted).
                                          III.    Discussion
               Objectors argue that the district court erred in assigning a $5
        million value to the injunctive relief in the settlement because none

        agreement to become null and void in the event that the district court
        determined that the settlement was a coupon settlement. Objectors argued
        that the only reason that the parties included this provision was to benefit class
        counsel who would otherwise receive less money if the settlement were
        deemed a coupon settlement.
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         10                       Opinion of the Court                     22-10663

         of the named plaintiffs had Article III standing to pursue injunctive
         relief. 6 Article III limits federal courts to deciding “Cases” and
         “Controversies.” U.S. Const. art. III, § 2. “The doctrine of standing
         is one of several doctrines that reflect this fundamental limitation.”
         Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). “The
         requisite elements of Article III standing are well-established[.]”
         Fed. Election Comm’n v. Cruz, 596 U.S. 289, 296 (2022). A plaintiff
         “must show (1) that he suffered an injury in fact that is concrete,
         particularized, and actual or imminent, (2) that the injury is
         traceable to—that is, was likely caused by—the defendant’s legal
         violation, and (3) that the injury would likely be redressed by
         judicial relief.” Walters v. Fast AC, LLC, 60 F.4th 642, 647 (11th Cir.
         2023) (quotations omitted). A plaintiff must demonstrate he has
         standing to sue “throughout all stages of litigation.” United States
         v. Amodeo, 916 F.3d 967, 971 (11th Cir. 2019) (quotation omitted).
         Additionally, “a plaintiff must demonstrate standing separately for
         each form of relief sought.” TransUnion LLC v. Ramirez, 594 U.S.
         413, 436 (2021) (quotation omitted). “Thus, even if a plaintiff can
         establish standing to pursue separate claims for monetary relief
         based on allegations of past harm, before a court may grant that

         6 The main argument that Objectors raised was that the district court abused

         its discretion in approving the settlement because it incorrectly determined
         that the settlement was not a coupon settlement. Because the named plaintiffs
         lacked Article III standing to pursue injunctive relief, and because of the
         MMWA jurisdiction issue we raise in footnote 8, we do not address the merits
         of whether the damages portion of the settlement was a coupon settlement
         subject to CAFA requirements.
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         22-10663                  Opinion of the Court                               11

         plaintiff injunctive relief, the plaintiff must separately establish a
         threat of ‘real and immediate,’ as opposed to ‘conjectural or
         hypothetical,’ future injury.” Williams, 65 F.4th at 1253 (emphasis
         in original) (quoting City of L.A. v. Lyons, 461 U.S. 95, 102 (1983)). 7
                Here, none of named plaintiffs alleged any threat of future
         injury, let alone a threat that was real and immediate. For example,
         the Amended Complaint does not allege that any of the named
         plaintiffs have sunglasses that are broken and need to be repaired
         such that that the named plaintiffs are at an imminent risk of being
         harmed by Costa’s alleged misrepresentations. Rather, the
         Amended Complaint alleged past harm only. Accordingly, neither
         Smith, Haney, nor Reed had Article III standing to pursue
         injunctive relief when the district court approved the settlement.
                As our recent decision in Williams makes clear, a district
         court abuses its discretion in approving a class action settlement
         when the named plaintiffs lack Article III standing to pursue
         injunctive relief, yet the district court considers the injunctive relief
         when determining whether the settlement is fair, reasonable, and
         adequate. Williams, 65 F.4th at 1253–57. “This is because . . . the
         decision whether to approve a class-action settlement is a holistic
         one; the various parts of a settlement must be considered in concert

         7 In Williams, we noted that “[t]he movant’s burden of proof” to establish

         standing “at the class-certification stage is unclear” and assumed, for purposes
         of that appeal, “that the applicable standard [was] a pleading standard.”
         Williams, 65 F.4th at 1254. We do the same here, because “[t]he [n]amed
         [p]laintiffs fail to satisfy even that low burden.” Id.
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         12                         Opinion of the Court                         22-10663

         to determine whether the Settlement as a whole provides relief to
         the [c]lass that is ‘fair, reasonable, and adequate.’” Id. at 1256–57
         (italics in original) (quoting Fed. R. Civ. P. 23(e)(2)). Thus, when a
         district court “lack[s] the power to grant [the requested] injunctive
         relief, its [approval of a settlement] [is] based on a legal error, and
         must be set aside as an abuse of discretion.” Id. at 1257.
                Because the district court lacked the power to grant the
         injunctive relief in the parties’ settlement agreement, it abused its
         discretion by considering the injunctive relief’s value in its
         determination that the settlement was fair, reasonable, and
         adequate. We thus VACATE the district court’s order and
         REMAND for proceedings consistent with this opinion.
                 VACATED AND REMANDED.8

         8 The parties have raised other jurisdictional issues that the district court

         should consider in the first instance. For example, on remand, the district
         court should consider whether it had subject matter jurisdiction over the Smith
         lawsuit—the lawsuit into which the others were consolidated. The Smith
         lawsuit brought a MMWA claim only. Some of our sister circuits have held
         that when the jurisdictional requirements of the MMWA are not met, CAFA
         does not provide an alternative basis for a federal court to exercise subject
         matter jurisdiction over a case brought under the MMWA. See Rowland v.
         Bissell Homecare, Inc., 73 F.4th 177 (3d Cir. 2023); Floyd v. Am. Honda Motor Co.,
         966 F.3d 1027 (9th Cir. 2020). If after consideration of the jurisdictional issues,
         the district court determines it has subject matter jurisdiction, it “should
         account only for relief that the Named Plaintiffs have standing to pursue and
         that it has jurisdiction to grant when assessing the overall fairness of any
         settlement (assuming, of course, that the parties reach a new settlement
         agreement and submit it for the district court’s approval).” Williams, 65 F.4th
         at 1258.