Francisco Marenco v. Visa Inc

MEMORANDUM in Support of Plaintiff's Motion for Preliminary Approval of Class Action Settlement

C.D. Cal.June 6, 2011

Gregory N. Karasik - State Bar No. 115834 Spiro Moss LLP 11377 W. Olympic Boulevard, 5th Floor Los Angeles, California 90064-1683 Tel. 310) 235-2468, Fax (310) 235-2456 greg spiromoss.com Sahag Majarian, II - State Bar No. 146621 Law °Offices of Sahag Majarian, II 18250 Ventura Blvd. Tarzana, California 91356 Tel. (818) 609-0807, Fax (818) 609-0892 sahagii@aol.corn Attorneys for Plaintiff FRANCISCO MARENCO UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA FRANCISCO MARENCO, individually and on behalf of other persons similarly situated, Case No. CV 10-8022 DMG (VBKa) MEMORANDUM OF POINTS AND Plaintiff, AUTHORITIES IN SUPPORT OF PLAINTIFF'S MOTION FOR vs. PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT VISA INC., a Delaware corporation, Date: July 11, 2011 Time: 9:30 a.m. Defendant. Ctrm: 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 1 of 29 Page ID #:211 TABLE OF CONTENTS INTRODUCTION 1 LITIGATION HISTORY 2 SUMMARY OF SETTLEMENT TERMS 3 THE SETTLEMENT MERITS PRELIMINARY APPROVAL 4 A. Plaintiff's Claims Merit Class Action Treatment 5 1. Numerosity 5 2. Commonality 7 3. Typicality 8 4. Adequate Representation 9 5. Predominance of Common Questions 9 6. Superiority 10 B. The Settlement is Fair, Reasonable and Adequate 12 1. Gross Settlement Amount 13 2. Formula for Allocation of Settle ent Benefits 17 3. Attorney's Fees and Costs 18 4. Incentive Payment 20 5. The Class Notice 21 THE COURT SHOULD SCHEDU,E A FAIRNESS HEARING 23 CONCLUSION 23 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 2 of 29 Page ID #:212 TABLE OF AUTHORITIES CASES Acosta v. Trans Union LLC (C.D. Cal. 2007) 243 F.R.D. 377 5 Amchem Products Inc. v. Woodward (1997) 521 U.S. 591 11 Armstrong v. Board of School Directors of the City of Milwaukee (6th Cir. 1980) 616 F.2d 305 4 Baldwin & Flynn v. Nat'l Safety Associates (N.D. Cal. 1993) 149 F.R.D. 598 5 Blackie v. Barrack (9th Cir. 1975) 524 F.2d 891 5, 7, 9 Battle v. Liberty National Life Ins. Co. (M.D. Ala. 1991 ) 770 F.Supp. 1499 22 Cal. Rural Legal Assistance, Inc. v. Legal Servs. Corp. (9th Cir. 1990) 917 F.2d 1171 8 Deteresa v. American Broadcasting Companies, Inc. (9th Cir. 1997) 121 F.3d 460 10 Eisen v. Carlisle & Jacquelin (1974) 417 U.S. 156 5 Elkins v. Equitable Life Ins. Of Iowa (M.D. Ha. 1998) 1998 WL 133747 12 Flanagan v. Flanagan (2002) 27 Ca1.4th 766 10 Frio v. Superior Court (1988) 203 Cal.App.3d 1480 10 Glass v. UBS Financial Services, Inc. (N.D. Cal. 2007) 2007 WL 221862 19 Hanlon v. Chrysler Corp. (9th Cir. 1998) 15-0 F.3d 1011 4, 7, 9, 10 Hanon v. Dataproducts Corp. (9th Cir. 1992) 976 F.2d 497 8 In re Activision (N.D. Cal. 1985) 621 F.Supp. 415 8 In re Cendant Corp., Derivative Action Litigation (D. N.J. 2002) 232 F.Supp.2d 327 17 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT ii 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 3 of 29 Page ID #:213 Elkins v. Equitable Life Ins. Of Iowa (M.D. Fla. 1998) 1998 WL 133747 6 In re Immune Response Securities Litigation (S.D. Cal. 2007) 497 F.Supp.2d 1166 13 In Re Mercury Interactive Securities Litigation (9th Cir. 2010) 618 F.3d 988 22 In re Mfrs. Life Ins. (S.D. Cal. 1998) 1998 WL 1993385 19 In re Michael Milken & Assocs. §. Litig. (S.D. N.Y. 1993) 150 F.R.D. 57 22 In re Southern Ohio Correctional Facility (S.D. Ohio 1997) 175 F.R.D. 270 20 In re Static Random Access Memory Antitrust Litigation (N.D. Cal. 2009) 264 F.R.D. 603 6 In re Syncor ERISA Litigation (9th Cir. 2008) 516F.3d 1095 19 In re Tableware Antitrust Litigation (N.D. Cal. 2007) 241 FR.D. 644 6 Ingram v. The Coca-Cola Co. (N.D. Ga. 2001) 200 F.R.D. 685 20 Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868 14 Lewis v. Gross (E.D. N.Y. 1986) 663 F.Supp. 1164 6 Lewis v. Starbucks Corn. (E.D. Cal. 2008) 2008 WL 4196690 19 Linney v. Cellular Alaska Partnership (N.D. Cal. 1997) 1997 WL 450064 13 Local Joint Exec. Bd. of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc. (9th Cir. 2001) 244 F.3d 1152 9, 11 Mendoza v. United States (9th Cir. 1980) 623 F.2d 1338 22 Mirfasihi v. Fleet Mortg,age Corp. (7th Cir. 2004) 35-6 1.3d 781 21 Mourning v. Family Publications Service, Inc. (1973) 411 U.S. 356 14 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIM NARY APPROVAL OF CLASS ACTION SETTLE ENT iii Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 4 of 29 Page ID #:214 1 Mullane v. Central Hanover Bank & Trust Co. (1950) 339 U.S. 306 21 2 Murray v. GMAC Mortgage Corp. 3 (N.D. Ill. 2007) 2007 WL 1100608 8 4 Officers for Justice v. Civil Service Commission of City and County of San Francisco (9th Cir. 1982) 688 F.2d 615 12 5 Paul, Johnson, Alston & Hunt v. Graulty 6 (9th Cir. 1989) 886 F.2d 268 18,19 7 Riordan v. Smith Barney (N.D. Ill. 1986) 113 F.R.D. 60 6 8 Silber v. Mabon 9 (9th Cir. 1994) 18 F.3d 1449 21 10 Six Mexican Workers v. Arizona Citrus Growers (9th Cir. 1990) 904 F.2d 1301 18 11 Staton v. Boeing Co. 12 (9th Cir. 21003) 327 F.3d 938 4, 5, 12, 13, 19 13 Strube v. American E uity Inv. Life Ins. Co. (M.D. Fla. 200 226 F.R.D. 688 12 14 Texas v. American Blastfax, Inc. 15 (W.D. Tex. 2000) 121 F.Supp.2d 1085 14 16 Thomasson v. GC Services, Ltd. Partnership (S.D. Cal. 2011) 2011 WL 1339063 15 17 Valentino v. Carter-Wallace 18 (9 th Cir. 1996) 97 F.3d 1227 11 19 Van Bronkhorst v. Safeco Co . (9th Cir. 1976) 529 F.2d 943 4 20 Van Vranken v. Atl. Richfield Co. 21 (N.D. Cal. 1995) 901 F. Supp. 294 20 22 Vizcaino v. Microsoft Corp. (9th Cir. 2002) 290 1.3d 1043 18, 19 23 Wang v. Chinese Daily News 24 (C.D. Cal. 2005) 231 F.R.D. 602 6, 9 25 Zinser v. Accufix Research Institute, Inc. (9th Cir. 2001) 253 F.3d 1188, 1189 9 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT i v Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 5 of 29 Page ID #:215 FEDERAL RULES OF CIVIL PROCEDURE 2 Rule 23 4,5, 6 Rule23a 5 3 Rule23a 1 5 Rule23a 2 7 4 Rule23a 3 8 Rule23a 4 9 5 Rule 23 b 3 5,10,11,12,21 Rule 23 (A) 11 6 Rule23c 21 Rule 23 c (2)(B) 21, 22 7 Rule 23 c (3) 22 Rule 23 e 1,4,12,13 Rule 23 (C) 4 4 8 Rule 23 (CI 9 Rule23h 22 10 STATUTES ii Cal. Penal Code Section 632 2, 7, 14 12 Cal. Penal Code Section 637.2 2, 7, 14 13 Fla. Stat. Ch. 934.03 7 14 Fla. Stat. Ch. 934.10 7 15 N.H. Rev. Stat. Ann. § 570-A.2 7 16 N.H. Rev. Stat. Ann. § 570-A: l 1 7 17 Nev. Rev. Stat Ann. § 200.620 7 18 Nev. Rev. Stat. Ann. § 200.690 7 19 Md. Code Ann., Cts. & Jud. Proc., § 10-402 7 20 Md. Code Ann., Cts. & Jud. Proc., § 10-410 7 21 Wash. Rev. Code Section 9.73.030(1) 7 22 Wash. Rev. Code Section 9.73.060 7 23 OTHER AUTHORITIES 24 Manual for Complex Litigation § 1.46 (West 1977) 4 25 Schwarzer, Tashima & Wagstaffe, Cal. Prac. Guide: Fed. Civ. Pro. Before Trial § 10:573 (The Rutter Group 2006) 5 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 6 of 29 Page ID #:216 INTRODUCTION 2 This class action lawsuit arises out of the allegedly unlawful recording of 3 telephone conversations by defendant Visa Inc. ("Visa"). Plaintiff Franciso Marenco 4 ("Plaintiff') alleges that Visa recorded thousands of telephone calls to customer service 5 representatives, made by consumers in the states of California, Florida, Maryland, 6 Nevada, New Hampshire or Washington (the "Covered States"), who reasonably 7 expected that no one would be recording their conversation with the customer service 8 representative they spoke with, without disclosing that their telephone calls would be 9 recorded. Plaintiff contends that recording of those telephone calls without consent 10 violated the laws of the Covered States and every customer who had a telephone call 11 recorded without their consent is entitled to statutory or liquidated damages. 12 After two mediation sessions before two different mediators, Plaintiff and Visa 13 agreed to the material terms of a class action settlement (the "Settlement"). Pursuant to 14 the Settlement, Visa will transfer Eighteen Million Dollars ($18,000,000) into an 15 interest bearing account after preliminary approval and the amount remaining from the 16 settlement fund (including accrued interest) after deductions for expenses will be 17 distributed to class members who submit claims on a non-reversionary basis. In the 18 event that all class members do not submit claims, the amount of settlement benefits to 19 claimants will be increased to the maximum amount of $5,000 for class members who 20 called an Affected Phone Line from California (the maximum amount of statutory 21 damages recoverable under California law) or $1,000 for class members who called an 22 Affected Phone Line from a Covered State other than California (the maximum amount 23 of statutory damages recoverable under those state laws). If any settlement funds 24 remain thereafter, they will be donated to a mutually agreed on charity such that in no 25 event shall Visa pay less than the full common fund amount of $18,000,000. 26 Plaintiff now moves under Rule 23(e) of the Federal Rules of Civil Procedure for 27 preliminary approval of the settlement and conditional class certification for the 28 purposes of settlement. MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLE ENT 1 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 7 of 29 Page ID #:217 LITIGATION HISTORY On September 23, 2010 Plaintiff filed a class action lawsuit in state court on behalf of himself and other persons in California who had called 1-877-237-4321, a customer service telephone number for an ADP TotalPay Card account, spoke to a customer service representative and whose telephone conversation was recorded. In his initial complaint, Plaintiff stated a single cause of action against ADP on the grounds that confidential telephone calls had been recorded without the consent of all parties in violation of Penal Code section 632 and Plaintiff sought statutory damages pursuant to Penal Code Section 637.2. ADP subsequently removed the case to federal court on the grounds of diversity jurisdiction under CAFA. (Karasik Decl. ¶ 5). At the outset of litigation, the parties agreed to engage in settlement discussions before engaging in formal discovery. To enable meaningful settlement negotiations, Plaintiff requested and ADP supplied Plaintiff with substantial information. Among other things, ADP advised Plaintiff that Visa was responsible for operating the call center service for the ADP TotalPay Card called by Plaintiff. Thereafter, Plaintiff, Visa and ADP participated in an initial mediation session before Martin Quinn with JAMS on February 4, 2011. At this mediation, which initially focused on Visa's alleged liability with respect to the ADP customer service number called by Plaintiff, Plaintiff learned that Visa had recorded telephone calls to numerous other customer service numbers which greatly expanded Visa's potential liability. (Karasik Decl. ¶ 6-8). Plaintiff subsequently requested additional information regarding telephone calls to the other customer service numbers operated by Visa in the Covered States. After Plaintiff received this information, Plaintiff, Visa and ADP participated in a second mediation session, before Jeffrey Krivis of First Mediation, on April 2, 2011. The second mediation concluded with an agreement on the material terms of a settlement. Thereafter, the parties negotiated formal settlement documents and, in accordance with the settlement agreement, Plaintiff filed a First Amended Complaint naming Visa as the defendant in this action. (Karasik Decl. ¶ 9-12). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 2 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 8 of 29 Page ID #:218 SUMMARY OF SETTLEMENT TERMS The full terms of the settlement are set forth in the Class Action Settlement Agreement filed herewith. The material terms are as follows: • The Settlement Class (estimated by Plaintiff to have around 600,000 persons) is defined as: all persons (excluding Visa, its parent, subsidiaries and affiliates, and any officers and directors thereof, as well as any judge presiding over this action, the judge's spouse and immediate family) who called any Affected Phone Line [listed in Exhibit A-1 to the Settlement] prior to October 1, 2010 and spoke with a live person, and who at the time of the call resided or were located in California, Florida, Maryland, Nevada, New Hampshire or Washington. • Visa will pay the sum of Eighteen Million Dollars ($18,000,000) which shall be placed into an interest bearing account following preliminary approval (the $18 million plus accrued interest shall be the "Gross Settlement Amount"). • After settlement administration expenses, attorney's costs and fees, and an enhancement are deducted from the Gross Settlement Amount, settlement benefits will be paid from the remaining funds (the "Net Settlement Amount") to class members who timely submit claims. • Claimants will receive settlement benefits based on a formula that results in Class Members who called an Affected Phone Line in California receiving five times as much as persons who called an Affected Phone Line from a Covered State other than California. • If all Class Members do not submit claims, the amount of settlement benefits per claimant will be increased up to a maximum of $5,000 for Class Members who called from an Affected Phone Line in California and $1,000 for Class Members who called from an Affected Phone Line from another Covered State. • If any settlement funds remain after distributing the maximum amount to claimants, the remainder shall not revert to Visa but shall be donated to a mutually agreed upon charity. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 3 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 9 of 29 Page ID #:219 1 • Visa will not oppose an application by Plaintiff for an award of attorney's fees 2 and costs up to $4.5 million (25% of the $18 million to fund the Settlement); and 3 • Visa will not oppose an application by Plaintiff for an enhancement of up to 4 Eighteen Thousand Dollars ($18,000). 5 THE SETTLEMENT MERITS PRELIMINARY APPROVAL 6 The law favors settlement, particularly in class actions and other complex cases 7 where substantial resources can be conserved by avoiding the time, cost, and rigors of 8 formal litigation. Van Bronkhorst v. Safeco Corp. (9th Cir. 1976) 529 F.2d 943, 950. 9 These concerns apply with particular force in a case such as this where an allegedly 10 illegal practice affected hundreds of thousands of consumers. Rule 23(e)(C)(1) of the ii Federal Rules of Civil Procedures provides that a court may approve a settlement of a 12 class action only when it finds after a hearing that the settlement is "fair, reasonable, and 13 adequate," and Rule 23(e)(C)(4) provides that any class member may object to a 14 proposed settlement. Judicial review of a class action settlement thus entails a two step 15 process. "The first step is a preliminary, pre-notification hearing to determine whether 16 the proposed settlement is 'within the range of possible approval.' This hearing is not a 17 fairness hearing; its purpose, rather is to ascertain whether there is any reason to notify 18 the class members of the proposed settlement and to proceed with a fairness hearing." 19 Armstrong v. Board of School Directors of the City of Milwaukee (6th Cir. 1980) 616 20 F.2d 305, 314 [quoting Manual for Complex Litigation s 1.46, at 53-55 (West 1977)]. 21 At the second stage of the approval process, after class members have had an 22 opportunity to object to the settlement, the court then makes a final determination 23 whether the settlement is "fair, reasonable and adequate" under Rule 23(e). Armstrong, 24 616 F.2d at 314. 25 In reviewing a class action settlement, a court undertakes two fundamental 26 inquiries. "First, the district court must assess whether a class exists." Staton v. Boeing 27 Co. (9th Cir. 2003) 327 F.3d 938, 952. In other words, the court must determine that the 28 lawsuit qualifies as a class action under Rule 23 to begin with. See, e.g., Hanlon v. MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 4 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 10 of 29 Page ID #:220 Chrysler Corp. (9th Cir. 1998) 150 F.3d 1011, 1022 (reviewing settlement to ensure 2 compliance with requirements of Rule 23(a) and Rule 23(b)(3)). Second, the court must 3 determine whether the settlement is "fair, adequate, and reasonable." Staton, 327 F.3d 4 at 952. As summarized by this Court, when parties reach a settlement agreement prior 5 to class certification, "courts must peruse the proposed compromise to ratify both the 6 propriety of the certification and the fairness of the settlement." Acosta v. Trans Union 7 LLC (C.D. Cal. 2007) 243 F.R.D. 377, 383. 8 A. Plaintiff's Claims Merit Class Action Treatment 9 Plaintiff need only make a "prima facie showing" of the requirements under Rule 10 23. See, Schwarzer, Tashima & Wagstaffe, Cal. Prac. Guide: Fed. Civ. Pro. Before ii Trial § 10:573 (The Rutter Group 2006). In determining the propriety of class 12 certification, a court may not delve into the underlying merits of the claims. The 13 fundamental question "is not whether. . . . plaintiffs have stated a cause of action or will 14 prevail on the merits, but rather whether the requirements of Rule 23 are met." Eisen v. 15 Carlisle & Jacquelin (1974) 417 U.S. 156, 178. Accordingly, the Ninth Circuit has 16 established that, when ruling on the propriety of class certification, a district court "is 17 bound to take the substantive allegations of the complaint as true." Blackie v. Barrack 18 (9th Cir. 1975) 524 F.2d 891, 901 n.17. A court "may not require plaintiffs to make a 19 preliminary proof of their claim; it requires only sufficient information to form a 20 reasonable judgment." Baldwin & Flynn v. Nat'l Safety Associates (N.D. Cal. 1993) 21 149 F.R.D. 598, 600. 22 Under these governing standards, this action meets the requirements for class 23 certification under Rule 23(a) and Rule 23(b)(3). 24 1. Numerosity 25 Under Rule 23(a)(1), a class action may be maintained where "the class is so 26 numerous that joinder of all members is impracticable." In determining whether joinder 27 would be impracticable, a court may consider not only the sheer number of class 28 members, but also "the nature of the action, the size of the individual claims, [and] the MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 5 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 11 of 29 Page ID #:221 inconvenience of trying individual suits." Wang v. Chinese Daily News (C.D. Cal. 2 2005) 231 F.R.D. 602, 606. 3 Here, it is estimated that the Settlement Class is composed of no more than 4 approximately 600,000 consumers. (Karasik Decl. ¶ 12). When a class is as large as 5 this one, "numbers alone are dispositive." Riordan v. Smith Barney (N.D. Ill. 1986) 113 6 F.R.D. 60, 62. It makes no difference that Plaintiff cannot provide the precise number 7 of class numbers. "A class action may proceed upon estimates as to the size of the 8 proposed class." Lewis v. Gross (E.D. N.Y. 1986) 663 F.Supp. 1164, 1169. See also, 9 In re Computer Memories Sec. Litig. (N.D. Cal. 1986) 111 F.R.D. 675, 679 (class 10 certified where plaintiffs did not establish exact number of class members, but 11 demonstrated that class would "obviously be sufficiently numerous"). 12 Although Rule 23 does not expressly require an "ascertainable class," some 13 courts have found this to be an implicit requirement for class certification under Rule 14 23. Whether or not required for certification of a settlement class under Rule 23, an 15 ascertainable class exists in this case because the Settlement Class is defined in terms of 16 objective characteristics that makes class membership verifiable by class members 17 themselves. In a consumer class action like this one, self identification by class 18 members is all that is required for an ascertainable class. See, e.g., In re Tableware 19 Antitrust Litigation (N.D. Cal. 2007) 241 F.R.D. 644, 651 (ascertainable class where 20 consumers could determine by reading class definition whether or not they were 21 included in the class); In re Static Random Access Memory Antitrust Litigation (N.D. 22 Cal. 2009) 264 F.R.D. 603, 608 (class ascertainable where class members can identify 23 themselves). Here, both the Long Form Notice to be mailed to potential class members 24 and the Summary Notice to be published provide a full list of all the Affected Phone 25 Lines in this case. Consumers who read either the Summary Notice or the Long Form 26 Notice can determine whether or not they called one of the Affected Phone Lines from 27 one of the Covered States prior to October 1, 2010 and spoke to a customer service 28 representative and thus identify themselves as members of the Settlement Class. MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 6 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 12 of 29 Page ID #:222 2. Commonality Rule 23(a)(2) requires that there be "questions of law or fact common to the class." This commonality requirement must be "construed permissively." Hanlon v. Chrysler Corp. (9th Cir. 1998) 150 F.3d 1011, 1019. Plaintiff need not demonstrate that all questions of fact and law are common. "The existence of shared legal issues with divergent factual predicates is sufficient." Id. Where a class is united by a common interest in determining whether a defendant's broad course of conduct is actionable, commonality is not defeated "by slight differences in class members' positions." Blackie, 524 F.2d at 902. Here, class members share a common factual question - did Visa record a telephone conversation they had with a customer service representative without disclosing that the call would be recorded - and a common legal question -- did Visa violate any of the laws of the Covered States that make it unlawful to record a telephone conversation without the consent of all parties to the conversation.' Any factual variations among class members, such as which Affected Phone Line they called, the precise date or time of day they called, or how many times they called, have no bearing on these common questions. All members of the Settlement Class share the common interest of determining whether they are entitled to statutory or liquidated damages for the unlawful recording of a telephone conversation without their consent. 2 The following laws of the Covered States have substantially similar prohibitions gainst the recording of telephone conversations without the consent of all parties to the onversation: Cal. Penal Code § 632; Fla. Stat. Ch. 934.03; Md. Code Ann., Cts. & Jud. oc., § 10-402;Nev. Rev. Stat Ann. § 200.620; N.H. Rev. Stat. Ann. § 570-A:2-I; Wash. ev. Code § 9.73.030(1). The following laws of the Covered States have substantially similar provisions 1 owing recovery of statutory or liquidated damages for the unlawful recording of elephone conversations: Cal. Penal Code § 637.2; Fla. Stat. Ch. 934.10; Md. Code Ann., ts. & Jud. Proc. § 10-410; Nev. Rev. Stat. Ann. § 200.690; N.H. Rev. Stat. Ann. § 70:A:11; Wash. Rev. Code § 9.73.060. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLE ENT 7 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 13 of 29 Page ID #:223 3. Typicality Rule 23(a)(3) requires that the representative plaintiff have claims "typical of the claims . . . of the class." Representative claims are typical "if they are reasonably co- extensive with those of absent class members; they need not be identical." Hanlon, 150 F.3d at 120. In other words, named plaintiffs need not be "identically situated" with all other class members. "It is enough if their situations share a common issue of law or fact and are sufficiently parallel to insure a vigorous and full presentation of all claims for relief." Cal. Rural Legal Assistance, Inc. v. Legal Servs. Corp. (9th Cir. 1990) 917 F.2d 1171, 1175. Typicality refers to the "nature of the claim . . . of the class representative, and not to the specific facts from which it arose." Hanon v. Dataproducts Corp. (9th Cir. 1992) 976 F.2d 497, 508. The test of typicality is thus "whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Id. Here, Plaintiff is a members of the Settlement Class and alleges the same injuries allegedly suffered by other class members -- violation of their privacy rights by having a telephone conversation recorded without their consent. All class members also seek the same relief Class members seek statutory or liquidated damages. This lawsuit is based on conduct that is not unique to Plaintiff but is common to all class members. See, e.g., Murray v. GMAC Mortgage Corp. (N.D. Ill. 2007) 2007 WL 1100608, *5 (typicality established where, despite minor factual discrepancies, all putative class members had "the same essential characteristics"); see also, In re Activision (N.D. Cal. 1985) 621 F.Supp. 415, 428 (finding that "the only material variation among class members is the amount of damages to which each member is entitled" and that "[s]uch differences are insufficient to defeat class certification"). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ME ORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 8 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 14 of 29 Page ID #:224 4. Adequate Representation 2 Rule 23(a)(4) requires that "the representative parties will fairly and adequately 3 protect the interests of the class." Adequate representation turns on whether the named 4 plaintiffs and their counsel "have any conflicts of interest with other class members," 5 and whether the named plaintiffs and their counsel will "prosecute the action vigorously 6 on behalf of the class." Hanlon, 150 F.3d at 1020. 7 Here, there are no conflicts of interest between Plaintiff and class members. 8 Given the similarity of the claims asserted and remedies sought by class members in this 9 case, it is hard to imagine how there could be any conflicts. To Plaintiff's knowledge, 10 Visa has no basis for asserting against Plaintiff any unique defenses that Visa could not 11 assert against any other class member. Nor does Visa have any basis for suggesting that 12 Plaintiff lacks sufficient zeal or competence. 13 Nor are their any conflicts with Plaintiffs counsel. Visa cannot dispute that 14 Plaintiffs counsel, who have substantial class action experience, can adequately 15 represent the class. See, Local Joint Exec. Bd. of Culinary/Bartender Trust Fund v. Las 16 Vegas Sands, Inc. (9th Cir. 2001) 244 F.3d 1152, 1162 (adequacy established by mere 17 fact that counsel were experienced practitioners). 18 5. Predominance of Common Questions 19 The predominance inquiry focuses on whether the class is "sufficiently cohesive 20 to warrant adjudication by representation." Culinary/Bartender Trust Fund, 244 F.3d at 21 1162. Central to predominance is "the notion that the adjudication of common issues 22 will help achieve judicial economy." Zinser v. Accufix Research Institute, Inc. (9th Cir. 23 2001) 253 F.3d 1188, 1189. "When common questions present a significant aspect of 24 the case and they can be resolved for all members of the class in a single adjudication, 25 there is clear justification for handling the dispute on a representative rather than on an 26 individual basis." Hanlon, 150 F.3d at 1022. It is well settled that the need for 27 determining differing amounts of damages suffered by different class members does not 28 preclude class certification. See, Blackie, 524 F.2d at 905; Wang v. Chinese Daily News MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 9 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 15 of 29 Page ID #:225 1 (C.D. Cal. 2005) 231 F.R.D. 602, 613. 2 The predominance requirement is satisfied in this case because the critical inquiry 3 upon which Visa's liability hinges is whether Visa, by failing to disclose to consumers 4 that their telephone calls with customer service representatives would be recorded, 5 recorded their telephone conversations without their consent. Because lack of consent 6 can be inferred on a class wide basis merely from the lack of disclosure, no individual 7 inquiry is required about any particular call to any of the Affected Phone Lines. For 8 example, under California law, which prohibits the recording of a "confidential" 9 telephone conversation, whether a telephone conversation is "confidential" entails an 10 objective inquiry. See, Flanagan v. Flanagan (2002) 27 Ca1.4th 766, 768; Deteresa v. ii American Broadcasting Companies, Inc. (9th Cir. 1997) 121 F.3d 460, 463. Under 12 California law, confidentiality "requires nothing more than the existence of a reasonable 13 expectation by one of the parties that no one is 'listening in' or overhearing the 14 conversation." Frio v. Superior Court (1988) 203 Cal.App.3d 1480, 1490. A jury can 15 easily decide, for all class members in one lawsuit, whether it was reasonable for any 16 person who called one of the Affected Phone Lines and was not apprised that the call 17 would be recorded to expect that the call would not be recorded. 18 Whether consumers who called an Affected Phone Line had an objectively 19 reasonable expectation that their calls would not be recorded, and thereby did not 20 consent to recording of their conversations, is clearly the central issue in this case that 21 predominates over any individual issues. Considerations of judicial economy obviously 22 favor litigating this common issue once in a class action instead of thousands of times in 23 separate lawsuits. "When common questions present a significant aspect of the case and 24 they can be resolved for all members of the class in a single adjudication, there is clear 25 justification for handling the dispute on a representative rather than on an individual 26 basis." Hanlon, 150 F.3d at 1022. 27 6. Superiority 28 To determine whether the superiority requirements of Rule 23(b)(3) are satisfied, MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 10 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 16 of 29 Page ID #:226 1 a court must compare a class action with alternative method s for adjudicating the 2 parties' claims. Lack of a viable alternative to a class action necessarily means that a 3 class action satisfies the superiority requirement. "[I]f a comparable evaluation of other 4 procedures reveals no other realistic possibilities, [the] superiority portion of Rule 5 23(b)(3) has been satisfied." Local Joint Executive Bd. of Culinary/Bartenders Trust 6 Fund v. Las Vegas Sands, Inc. (9th Cir. 2001) 244 F.3d 1152, 1163. See also, Valentino 7 v. Carter-Wallace (9th Cir. 1996) 97 F.3d 1227, 1235-36 ("a class action is a superior 8 method for managing litigation if no realistic alternative exists"). Here, since Visa 9 allegedly violated the laws of the Covered States on hundreds of thousands of 10 occasions, there are clearly no economical alternatives to a class action. 11 Consideration of the factors listed in Rule 23(b)(3) bolsters this conclusion. 12 Ordinarily, these factors are (A) the interest of members of the class in individually 13 controlling the prosecution or defense of separate actions; (B) the extent and nature of 14 any litigation concerning the controversy already commenced by or against members of 15 the class; (C) the desirability or undesirability of concentrating the litigation of the 16 claims in the particular forum; and (D) the difficulties likely to be encountered in the 17 management of a class action. However, when a court reviews a class action settlement, 18 the fourth factor does not apply. In deciding whether to certify a class for settlement 19 purposes, a district court "need not inquire whether the case, if tried, would present 20 intractable management problems." Amchem Products Inc. v. Woodward (1997) 521 21 U.S. 591, 620. Here, the remaining factors set forth in Rule 23(b)(3)(A), (B) and (C) all 22 favor class certification. 23 First, class members have no particular interest in individually controlling the 24 prosecution of separate actions. Any class member who wants to pursue a claim for an 25 amount greater than a settlement share can opt out of the Settlement. 26 Second, there is no competing litigation regarding the statutory violations at 27 issue. 28 MEMORANDUM IN SUPPORT OF PRELI INARY APPROVAL OF CLASS ACTION SETTLE ENT 11 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 17 of 29 Page ID #:227 1 Finally, it is desirable to concentrate the issues in this forum because the parties 2 reside in California and many Class Members reside in California. Instructively, Visa 3 did not move to transfer venue for these cases to another district. Moreover, the parties 4 have reached a Settlement. "With the settlement in hand, the desirability of 5 concentrating the litigation in one forum is obvious." Elkins v. Equitable Life Ins. Of 6 Iowa (M.D. Fla. 1998) 1998 WL 133747, at *19. See also, Strube v. American Equity 7 Inv. Life Ins. Co. (M.D. Fla. 2005) 226 F.R.D. 688, 697 (third and fourth Rule 23(b)(3) 8 factors are "conceptually irrelevant in the context of a settlement"). The conclusion is 9 inescapable that a class action provides the most efficient mechanism for resolving all 10 the claims of the class members in this case. 11 B. The Settlement is Fair, Reasonable and Adequate 12 No single criterion determines whether a class action settlement meets the 13 requirements of Rule 23(e). The Ninth Circuit has directed district courts to consider a 14 variety of factors without providing an "exhaustive list" or suggesting which factors are 15 most important. See, Staton, 327 F.3d at 959. "The relative degree of importance to be 16 attached to any particular factor will depend upon and be dictated by the nature of the 17 claim(s) advanced, the type(s) of relief sought, and the unique facts and circumstances 18 presented by each individual case." Officers for Justice v. Civil Service Commission of 19 City and County of San Francisco (9th Cir. 1982) 688 F.2d 615, 625. 20 Due to the impossibility of predicting any litigation result with certainty, a district 21 court's evaluation of a settlement essentially amounts to "nothing more than 'an 22 amalgam of delicate balancing, gross approximations and rough justice." Officers for 23 Justice, 688 F.2d at 625 [citation omitted]. The ultimate touchstone, however, is 24 whether "class counsel adequately pursued the interests of the class as a whole." Staton, 25 327 F.3d at 961. As the Ninth Circuit explained in Officers for Justice, the district 26 court's role in evaluating a class action settlement is therefore tailored to meet that 27 narrow objective. Review under Rule 23(e) "must be limited to the extent necessary to 28 reach a reasoned judgment that the agreement is not the product of fraud or MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 12 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 18 of 29 Page ID #:228 overreaching by, or collusion between, the negotiating parties." Accordingly, the Ninth Circuit will not reverse district court approval of a class action settlement "unless the fees and relief provisions clearly suggest the possibility that class interests gave way to self interest." Staton, 327 F.3d at 961. Here, the parties reached a non-collusive settlement after sufficient investigation and informal discovery enabled counsel to form educated opinions about the value of the case. Since obtaining class certification and establishing liability posed difficult hurdles for Plaintiff that justified compromise of his claims, the Settlement falls well within the range of reasonable outcomes and merits approval under Rule 23(e). 1. Gross Settlement Amount The parties reached a Settlement in good faith after negotiating at arms length during two full day mediation sessions, first before Martin Quinn and then before Jeffrey Krivis, both of whom are experienced and well regarded mediators. Although the parties agreed to mediate before completing all possible discovery, approval of a class action settlement does not require that discovery be exhaustive. See, e.g., In re Immune Response Securities Litigation (S.D. Cal. 2007) 497 F.Supp.2d 1166, 1174 (settlement approved where informal discovery gave the parties a clear view of the strength and weaknesses of their cases). The fact that settlement results from arms length negotiations following "relevant discovery" creates "a presumption that the agreement is fair." Linney v. Cellular Alaska Partnership (N.D. Cal. 1997) 1997 WL 450064, at *5. Here, based on the data supplied by ADP and Visa regarding the extent to which calls were made to Affected Phone Lines, callers spoke with a customer service representative, calls with customer service representatives were recorded, and recordings of calls actually exist, the Gross Settlement Amount ($18 million plus interest) achieved by Plaintiff represents a substantial recovery for class members that falls well within the range of reasonable litigation outcomes. This conclusion applies to each component of the Settlement Class and the Settlement as a whole. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELI INARY APPROVAL OF CLASS ACTION SETTLE ENT 13 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 19 of 29 Page ID #:229 Calls to the ADP Customer Service Number 2 Plaintiff attributes $9 million from the Gross Settlement Amount to calls made to 3 the ADP customer service number called by Plaintiff Based on the information 4 supplied by ADP, Plaintiff estimated at mediation that approximately 18,000 calls to 5 that number were unlawfully recorded. The portion of the Settlement attributable to 6 these calls thus represents a value of $500 per recorded call. In the opinion of Plaintiffs 7 counsel, this reflects an exceptionally good result. (Karasik Decl. ¶ 14-18). 8 Under Penal Code Section 637.2, violation of Penal Code Section 632 exposes 9 the defendant to liability for statutory damages in the amount of $5,000 per unlawfully 10 recorded call. For several reasons, however, it was not realistic for Plaintiff to expect 11 recovery of the maximum amount of statutory damages under Section 637.2. 12 First, ADP (or Visa) had a strong argument that the amount of statutory damages 13 under Section 637.2 was constitutionally excessive in light of the fact that none of the 14 unlawfully recorded phone calls resulted in any actual damages or economic harm. 15 Courts have rejected constitutional challenges to statutes providing for statutory 16 damages of $1,000 or less in the absence of economic harm. See, e.g., Mourning v. 17 Family Publications Service, Inc. (1973) 411 U.S. 356 (statutory damages of $100 to 18 $1,000 under Truth in Lending Act); Texas v. American Blastfax, Inc. (W.D. Tex. 2000) 19 121 F.Supp.2d 1085, 1090 ($500 penalty under Telephone Consumer Protection Act). 20 Penal Code Section 637.2, however, provides for a much higher amount of statutory 21 damages. Moreover, the amount of statutory damages under Section 637.2 far exceeds 22 the amount of statutory damages recoverable under the comparable laws of the Covered 23 States. Plaintiff faced a serious risk that no court would ever award the full amount of 24 statutory damages theoretically available under Section 637.2. 25 Second, ADP (or Visa) had a strong argument that a one year statute of 26 limitations applies to claims for violation of Section 632. See, Ion Equipment Corp. v. 27 Nelson (1980) 110 Cal.App.3d 868. Although Plaintiff maintains that language in Ion 28 supporting a one year limitations period is non-binding dicta and a three year limitations MEMORANDUM IN SUPPORT OF' PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 14 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 20 of 29 Page ID #:230 period governs, Plaintiff faced a significant risk that a court would find a one year limitations period applicable and Plaintiffs claims based on calls to the ADP customer service number (or other Affected Phone Lines in California) would therefore have been substantially reduced. Based on the data supplied by ADP, Plaintiff estimated that there were approximately 6,000 unlawfully recorded calls to the ADP customer service number called by Plaintiff within a one year limitations period. In addition to the above, Plaintiff faced substantial risks that class certification would not have been granted. Plaintiff believes that he would have prevailed on class certification and the fact that class certification has been granted in other cases based on a failure to disclose that telephone calls were being recorded supports Plaintiffs position about the propriety of class certification. See, e.g., Thomasson v. GC Services, Ltd. Partnership (S.D. Cal. 2011) 2011 WL 1339063. Nevertheless, courts have discretion when it comes to determining whether or not to certify a class and ADP (or Visa) would have vigorously contested a motion for class certification. In sum, this case presented Plaintiff with substantial litigation risks. The value of $500 per recorded call achieved by Plaintiff with respect to the ADP customer service number reflects an incredibly good result. (Karasik Decl. ¶ 18). Calls to Other Customer Service Numbers in California Plaintiff attributes $3 million from the Gross Settlement Amount to calls made to Affected Phone Lines in California other than the ADP customer service number called by Plaintiff. Based on the information from Visa, Plaintiff estimates that approximately 30,000 calls to those numbers were unlawfully recorded. The portion of the Settlement attributable to these calls thus represents a value of S100 per recorded call. In the opinion of Plaintiffs counsel, this too was a very good result. (Karasik Decl. ¶ 19-21). In addition to all the litigation risks discussed above, Plaintiff faced a separate hurdle that would have made it more difficult to prevail on claims based on the recording of calls to Affected Phone Lines other than the ADP customer number called by Plaintiff. Whereas Visa had retained recordings of a significant number calls made 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLE ENT 15 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 21 of 29 Page ID #:231 to the ADP customer service number called by Plaintiff, according to Visa it had only had a limited number of recordings of calls to the other Affected Phone Lines. While Visa had actual or estimated data regarding the number of calls made to Affected Phone Lines, the percentage of such calls involving a conversation with a customer service representative, and the percentage of those calls recorded, the absence of actual recordings of calls presented Plaintiff with potential proof problems that would have made it more difficult to obtain a judgment in favor of class members. This potential proof problem warranted a lower settlement value for claims based on calls to Affected Phone Lines in California. In the opinion of Plaintiffs counsel, however, the amount of $100 per recorded call still represents a very good settlement value for these claims in light of the fact that none of the unlawfully recorded calls involved any actual economic harm or injury. (Karasik Decl. ¶ 21). Calls to Customer Service Numbers in States Other than California Plaintiff attributes $6 million from the Gross Settlement Amount to calls made to Affected Phone Lines in Covered States other than California. Based on the information from by Visa, Plaintiff estimates that approximately 600,000 calls to those numbers were unlawfully recorded. The portion of the Settlement attributable to these calls thus represents a value of $10 per recorded call. In the opinion of Plaintiffs counsel, this was a good result because, apart from all the litigation risks and proof problems discussed above, the laws of the Covered States other than California provide for a much lower amount of statutory or liquidated damages. The laws of Florida, Maryland, Nevada and New Hampshire allow for recovery of the greater of $100 a violation or $1,000 while Washington law allows for recovery of $100 for each day of violation not to exceed $1,000. (Karasik Decl. gi 22-25). In light of the lower amounts of statutory or liquidated damages recoverable under these laws, Plaintiff achieved a good value per recorded call with respect to the Affected Phone Lines in states other than California. Indeed, the value per call achieved by Plaintiff is much higher than other plaintiffs have achieved in comparable cases. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 16 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 22 of 29 Page ID #:232 1 Prior to the second mediation, Plaintiff obtained the following information about 2 settlements in other cases involving the unlawful recording of telephone calls: 3 a) Batmanghelich v. Sirius XM Radio, Inc., United States District Court, 4 Central District of California, Case No. 09-9190 -- 3.5 million potential 5 class member settled for $9.48 million (approximately $2.70 per call); and 6 b) Greenberg v. E-Trade Financial Corporation, Los Angeles County 7 Superior Court Case No. BC 360152 -- 1.4 potential class members settled 8 for $7.50 million (approximately $5.36 per call). 9 The value of $10 per recorded call achieved by Plaintiff with respect to calls to 10 Affected Phone Lines in states other than California is much higher than the value per ii call achieved by the plaintiff in the Sirius or the E-Trade case. This component of the 12 Settlement reflects a very good result. (Karasik Decl. ¶ 25). 13 Summary 14 In sum, with respect to all three components of the settlement class, Plaintiff 15 obtained excellent value for his claims in the face of substantial litigation risks that, 16 absent a settlement, may have resulted in class members getting absolutely nothing. 17 Plaintiff clearly achieved a fair settlement well within the range of reasonable outcomes 18 that merits approval. See, In re Cendant Corp., Derivative Action Litigation (D. N.J. 19 2002) 232 F.Supp.2d 327 (approving settlement which provided 2% value compared to 20 maximum possible recovery). 21 2. Formula for Allocation of Settlement Benefits 22 The formula for allocating settlement benefits provides that Class Members who 23 called from an Affected Phone Line in California will receive five times as much as 24 Class Members who called an Affected Phone Line from a Covered State other than 25 California. This formula is reasonable because it corresponds to the fact that the 26 maximum amount recoverable under California law ($5,000) is five times as much as 27 the maximum amount recoverable under the laws of the other Covered States ($1,000). 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 17 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 23 of 29 Page ID #:233 The Settlement further provides that, in the event not all Class Members submit claims, the amount of settlement benefits per claimant will be increased up to the maximum amount recoverable under the state law applicable to the claimant. In light of this provision and the historical fact that claim rates in consumer cases are typically low, the settlement will most likely result in claimants receiving an extremely high value (if not 100%) for their claims. (Karasik Decl. ¶ 26). A settlement that ultimately provides full or close to full value for claims is unquestionably fair and reasonable. 3. Attorney's Fees and Costs The compensation sought for Plaintiff's counsel is also fair and reasonable. The Ninth Circuit has directed that, to determine what constitutes a fair and reasonable percentage of the settlement for purposes of calculating common fund attorneys' fees, the courts should use a "benchmark" percentage of 25% of the total fund. Paul, Johnson, Alston & Hunt v. Graulty (9th Cir. 1989) 886 F.2d 268, 272; Vizcaino v. Microsoft Corp. (9th Cir. 2002) 290 F.3d 1043, 1047; Six Mexican Workers v. Arizona Citrus Growers (9th Cir. 1990) 904 F.2d 1301, 1311. Here, the Gross Settlement Amount obtained through the efforts of Plaintiffs counsel is $18,000,000 (plus interest). Adhering to the benchmark established by the Ninth Circuit, Plaintiffs counsel intends to seek no more than $4.5 million in fees and costs combined (25% of the Gross Settlement Amount before interest). (Karasik Decl. ¶ 29). An attorney's fee award based on a lodestar calculation would not be appropriate in this case because Plaintiff achieved an extremely good settlement at an early stage of litigation. The Ninth Circuit has recognized that the lodestar method "creates incentives for counsel to spend more hours than may be necessary on litigating a case so as to recover a reasonable fee, since the lodestar method does not reward early settlement." Vizcaino v. Microsoft Corp. (9th Cir. 2002) 290 F.3d 1043, 1050, n.5. The Ninth Circuit has thus cautioned that, while a lodestar method can be used as a cross check on the reasonableness of fees based on a percentage of recovery method if a district court in its discretion chooses to do so, a lodestar calculation is not required and it did "not 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PREL MINARY APPROVAL OF CLASS ACTION SETTLEMENT 18 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 24 of 29 Page ID #:234 mean to imply that class counsel should necessarily receive a lesser fee for settling a case quickly." Id. In accordance with Ninth Circuit precedents, district courts within the Ninth Circuit have often recognized that a lodestar cross check need not be performed where plaintiff's counsel achieves a significant result through an early settlement. See, e.g., Lewis v. Starbucks Corp. (E.D. Cal. 2008) 2008 WL 4196690 (appropriate to calculate attorney's fees on basis of common fund theory and not lodestar where settlement achieved at relatively early stage of litigation); Glass v. UBS Financial Services, Inc. N.D. Cal. 2007) 2007 WL 221862 (court declined to conduct a lodestar cross check, and approved a request for fees based only on the percentage of recovery method, because it recognized that premising attorney's fees on a lodestar calculation would have unfairly penalized plaintiff's counsel for settling the case without protracted litigation); In re Mfrs. Life Ins. (S.D. Cal. 1998) 1998 WL 1993385 (court concluded that lodestar analysis was unnecessary and attorney's fee was reasonable solely on percentage-recovery method). In this case, a lodestar calculation would penalize Plaintiffs counsel for achieving a stellar result with maximum efficiency and thus conflict with the "strong judicial policy that favors settlements, particularly where complex class action litigation is concerned." In re Syncor ERISA Litigation (9th Cir. 2008) 516 F.3d 1095, 1101. Moreover, a lodestar calculation under these circumstances would undermine the equitable considerations that dictate the percentage of recovery method for calculating attorney's fees in common fund cases. The percentage of recovery method "rests on the presumption that persons who obtain benefits of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant's expense." Staton v. Boeing (9th Cir. 2003) 327 F.3d 938, 967. This rule, known as the "common fund doctrine," is designed to prevent unjust enrichment by distributing the costs of litigation among those who benefit from the efforts of others. Paul, Johnson, Alston & Hunt v. Graulty (9th Cir. 1989) 886 F.2d 268, 271. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 19 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 25 of 29 Page ID #:235 It is only fair that every class member who benefits from the opportunity to claim a share of the settlement pay his or her pro rata share of attorney's fees, and Plaintiffs request for fees at the benchmark rate of 25% means that Plaintiff seeks an amount of fees less than the amount Plaintiffs' counsel would be entitled to receive if they represented each class member individually. The regular contingent fee contract of Plaintiffs counsel provides for attorney's fees between 35% and 40% of any recovery obtained for the client (Karasik Decl. ¶ 29). It would be unfair to compensate Plaintiffs counsel at a lesser rate because they obtained relief for hundreds of thousands of class members. To the contrary, equitable considerations dictate that Plaintiffs counsel be rewarded for achieving a settlement that confers benefits among so many people, especially without protracted litigation. The excellent result achieved by Plaintiffs counsel merits an award of attorney's fees equal to 25% of the common fund in this case without any lodestar consideration or cross check. 4. Incentive Payment Incentive payments serve to reward named plaintiffs for the time and effort expended on behalf of the class, and for exposing themselves to the significant risks of litigation. "Courts routinely approve incentive awards to compensate named plaintiffs for the services they provided and the risks they incurred during the course of the class action litigation." Ingram v. The Coca-Cola Co. (N.D. Ga. 2001) 200 F.R.D. 685, 694; In re Southern Ohio Correctional Facility (S.D. Ohio 1997) 175 F.R.D. 270, 272. In Coca-Cola, for example, the court approved incentive awards of $300,000 to each named plaintiff in recognition of the services they provided to the class by responding to discovery, participating in the mediation process and taking the risk of stepping forward on behalf of the class. Coca-Cola, 200 F.R.D. at 694; see also Van Vranken v. Atl. Richfield Co. (N.D. Cal. 1995) 901 F. Supp. 294, 300 (approving $50,000 participation award). Here, Plaintiff seeks an incentive award that may not exceed $18,000. This amount is comparable to the amount of incentive payments awarded to named plaintiffs 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 20 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 26 of 29 Page ID #:236 in other class action cases. (Karasik Decl. ¶ 28, Ex. 2). Moreover, compared to the Gross Settlement Amount, the amount of the incentive payment sought by Plaintiff is relatively small and will not appreciably diminish the amount of settlement funds available for distribution to absent class members. Also, Plaintiff participated in not just one but two separate mediation sessions. Especially in light of the exceptional result achieved by Plaintiff, his dedication to ensuring a fair and reasonable settlement merits significant reward. 5. The Class Notice Rule 23(c)(2)(B) provides that, in any case certified under Rule 23(b)(3), the court must direct to class members the "best notice practicable" under the circumstances. Rule 23(c)(2)(B) does not require "actual notice" or that a notice be "actually received." Silber v. Mabon (9th Cir. 1994) 18 F.3d 1449, 1454. Notice need only be given in a manner "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank & Trust Co. (1950) 339 U.S. 306, 314. Here, the parties have agreed to a Notice Plan with several components. First, a Long Form Notice will be mailed to approximately 500,000 potential class members whose name and address are known to VISA (persons with a registered debit card account). Second, a Summary Notice will be published in a variety of publications in the Covered States, including Parade magazine, USA Today, and People magazine. Third, notice of the settlement, including links to a dedicated settlement website on the internet, will be given through online advertising on AOL, Yahoo, 24/7 Network, Univision.com, MSN Hotmail, Facebook and the Top Class Actions website. The comprehensive Notice Plan, designed to reach at least 73% of all potential class members (Finegan Decl. ¶ 13) clearly satisfies the requirements of Rule 23(c) and due process. See, Mirfasihi v. Fleet Mortgage Corp. (7th Cir. 2004) 356 F.3d 781, 786 (notice by publication and website adequate where individual notice impossible); see 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 21 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 27 of 29 Page ID #:237 also, Battle v. Liberty National Life Ins. Co. (M.D. Ala. 1991 ) 770 F.Supp. 1499, 1515, n. 47 (individual notice not required where absent members are not identified and cannot be located through diligent efforts) gird, (11th Cir. 1992) 874 F.2d 1279. Rule 23(c)(2)(B) also sets forth requirements regarding the content of the notice. The notice must concisely and clearly state in plain, easily understood language: • the nature of the action; • the definition of the class certified; • the class claims, issues, or defenses; • that class member may enter an appearance through counsel if the member so desires; • that the court will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded; and • the binding effect of a class judgment on class members under Rule 23(c)(3). The proposed Long Form Notice and Summary Notice comply fully with Rule 23(c)(2)(B). Courts routinely approve class notices even when they provide only general information about a settlement. See, e.g., Mendoza v. United States (9th Cir. 1980) 623 F.2d 1338, 1351 ("very general description of the proposed settlement" sufficient); In re Michael Milken & Assocs. Sec. Litig., (S.D. N.Y. 1993) 150 F.R.D. 57, 60 (notice "need only describe the terms of the settlement generally.") The class notices in this case provides more than adequate notice about the Settlement. The Settlement also provides that Plaintiffs motion for attorney's fees will be made available to Class Members prior to final approval. Under Rule 23(h), class members must be given notice of the plaintiffs fee application separate and apart from the general notice given to the class after preliminary approval. See, In Re Mercury Interactive Securities Litigation (9th Cir. 2010) 618 F.3d 988. To comply with this requirement, the Settlement provides that the motion for attorney's fees filed by Plaintiff will posted on the settlement website at least 35 days before the final approval hearing and Class Members will have until 21 days before the final approval hearing to file 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ME ORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT 22 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 28 of 29 Page ID #:238 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 objections to the motion. The Long Form Notice and Summary Notice explains the objection process and further advise that a copy of the motion for attorney's fees filed by Plaintiff can also be obtained from settlement website. This notice procedure satisfies the due process requirements of Rule 23(h) established by the Ninth Circuit in Mercury Interactive. THE COURT SHOULD SCHEDULE A FAIRNESS HEARING The last step in the settlement approval process is the fairness hearing, where the court makes a final determination about the propriety of settlement. In accordance with the timetables set forth in the Settlement for giving notice to Class Members and submitting claims or requests for exclusion, Plaintiff requests that the fairness hearing in this case be scheduled on or after November 14, 2011 (at least 126 days after preliminary approval). CONCLUSION Plaintiff obtained a Settlement that provides hundreds of thousands of consumers extremely good value on claims that would be extremely difficult and risky to litigate. Since the Settlement is fair, reasonable and adequate in all respects, the Court should grant Plaintiff s motion for preliminary approval of the Settlement in its entirety and adopt the proposed order submitted herewith. Dated: June 3, 2011 SPIRO MOSS LLP By: /s/ Gregory N. Karasik Gregory N. Karasik Attorneys for Plaintiff FRANCISO MARENCO MEMORANDUM IN SUPPORT OF PRELIMINARY APPROVAL OF CLASS ACTION SETT EMENT 23 Case 2:10-cv-08022-DMG-VBK Document 27 Filed 06/06/11 Page 29 of 29 Page ID #:239