In re Canon U.S.A. Data Breach Litig.

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IN RE CANON U.S.A. DATA BREACH LITIGATON

Nos. 20-CV-6239-AMD-SJB, 20-CV-6380-AMD-SJB, 21-CV-414-AMD-SJB

United States District Court, E.D. New York

August 5, 2024

MEMORANDUM AND ORDER

BULSARA, UNITED STATES MAGISTRATE JUDGE

On November 15, 2023, this Court granted preliminary approval of the settlement in this data breach class action. In re Canon U.S.A. Data Breach Litig., No. 20-CV-6239, 2023 WL 7936207 (E.D.N.Y. Nov. 15, 2023). The Honorable Ann M Donnelly held a final approval hearing, (Minute Entry dated Apr. 25, 2024), and granted the motion for final approval (Final Approval Order & J. dated May 9, 2024, Dkt. No 77). On March 15, 2024, Plaintiffs' counsel filed the present motion for attorney's fees, incentive awards, and costs. (Mot. for Att'y's Fees dated Mar. 15, 2024, Dkt. No. 69). Defendants oppose only the attorney's fees portion of the motion. As explained herein, the Court grants the fee application and the unopposed relief for costs and incentive awards in full.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY^[1]

In 2020, Plaintiffs filed this data breach class action against Canon U.S.A., Inc., Canon Solutions America, Inc., Canon Software America, Inc., Canon Information and Imaging Solutions, Inc., Canon Financial Services, Inc., Canon Medical Components U.S.A., Inc., Canon Information Technology Services, Inc., and NT-ware USA, Inc. (collectively, the “Defendants” or “Canon”), alleging that they failed to properly secure and safeguard Plaintiffs' personally identifiable information. Canon, 2023 WL 7936207, at *1. Plaintiffs are former and current employees of Canon whose information was allegedly compromised during intrusions into Canon's network between July 20 and August 6, 2020 (the “Data Breach”). Id.

After employees received notice of the Data Breach from Canon, three separate class action complaints were filed in this District by four law firms.^[2] The cases were consolidated on January 25, 2021, and the Court appointed interim class counsel on March 9, 2021. (See Dkt. Nos. 9, 19). On April 23, 2021, Plaintiffs' counsel filed a Consolidated Class Action Complaint, (Consolidated Am. Compl., Dkt. No. 22), which is the operative pleading. Defendants moved to dismiss the case in full, and on March 15, 2022, Judge Donnelly granted the motion in part and denied it in part. In re Canon U.S.A. Data Breach Litig., No. 20-CV-6239, 2022 WL 22248656, at *14 (E.D.N.Y. Mar. 15, 2022). In relevant part, Judge Donnelly dismissed some of Plaintiffs' negligence, breach of confidence, and statutory unfair competition claims, but denied the motion as to some of Plaintiffs' breach of implied contract and third-party beneficiary claims. Id. Judge Donnelly also affirmed that the Plaintiffs had standing. Id. at *3-*6.

The parties agreed to participate in private mediation with Bennett J. Picker. (Mem. of Law in Supp. of Pls.' Mot. for Att'ys' Fees (“Pls.' Mem. of Law”), Dkt. No. 69-1 at 5).

After attending a full-day mediation session, the parties continued engaging in negotiations over the next several weeks, before reaching a settlement. (Id.). The operative settlement agreement was memorialized on June 29, 2023 (the “Settlement Agreement”). (Am. Settlement Agreement dated June 29, 2021 (“Settlement Agreement”), Dkt. No. 61-1).

The settlement covers a class of “all individuals residing in the United States who received the Notice of Data Breach from Canon regarding the Data [Breach] dated November 24, 2020” (the “Settlement Class”). Canon, 2023 WL 7936207, at *3. They were eligible for both equitable and monetary relief, including reimbursements of up to $300 for an “Ordinary Expense” and up to $7,500 for an “Extraordinary Expense.” Id. at *4. The monetary relief available to class members is not capped: Canon agreed to pay all valid claims submitted. (See Settlement Agreement ¶¶ 2.1-2.2). Each class member is also eligible for two years of free credit monitoring services. Canon, 2023 WL 7936207, at *4. And Canon also agreed to maintain, for a minimum of one year following final approval, “enhanced security practices and procedures” to protect their employees' personal data. (Settlement Agreement ¶ 2.5).

Under the terms of the Settlement Agreement, Canon agreed to pay “reasonable attorneys' fees, costs, [and] expenses,” determined by the Court in a fee application. (Id. ¶¶ 7.2-7.3). In addition, Canon agreed to pay an incentive award to each Named Plaintiff of $1,000 each, or in an amount determined by the Court. (Id. ¶ 7.1). Canon agreed to pay the fees, costs, and incentive awards separately, and in addition to amounts paid to class members, meaning that any award stemming from this Court's order does not diminish the class recovery. (Id. ¶ 7.2); see Canon, 2023 WL 7936207, at *5.

Plaintiffs now seek an award of $626,985.58, consisting of $600,000 in attorney's fees, $17,985.58 in costs, and $9,000 in incentive awards, based upon $1,000 for each Named Plaintiff. (See Pls.' Mem. of Law at 25).

DISCUSSION

As noted, the only dispute is about the amount of attorney's fees. And that dispute boils down to a dispute about methodology-how the Court should go about determining a “reasonable fee” for the results achieved in the class settlement. Plaintiffs argue that the Court should use a percentage-of-recovery method to determine the fee award. (Id. at 9-10). Plaintiffs contend that a “conservative” estimate of $2,233,199 is appropriate for the total value of the settlement, consisting of an anticipated 5% participation of the cash payments (totaling $630,000), an anticipated 10% participation of the credit monitoring (totaling $907,200), $95,999 in claims administration costs, and the requested $600,000 in attorney's fees. (Id. at 12). Under that calculation, the fees would constitute 21.1% of the total amount paid by Defendants.

Defendants contend that a $600,000 fee award is “not commensurate with the actual value of the settlement,” and separately, the request is based on inflated and duplicative hours. (Defs.' Mem. of Law in Opp'n to Pls.' Mot for Att'ys' Fees (“Defs.' Opp'n”), Dkt. No. 70 at 7). As an alternative, Defendants argue that the Court should use a lodestar method to calculate a reasonable fee, because it is more appropriate for the “claims-made” nature of the settlement here. (Id. at 3).^[3]

I. Attorney's Fees

Rule 23(h) provides that “the court may award reasonable attorney's fees . . . that are authorized by law or by the parties' agreement.” Fed.R.Civ.P. 23(h). In a class action settlement, a court “must examine whether the attorneys' fees arrangement shortchanges the class.” Moses v. N.Y. Times Co., 79 F.4th 235, 244 (2d Cir. 2023) (quoting Briseno v. Henderson, 998 F.3d 1014, 1024 (9th Cir. 2021)). “[T]he relief actually delivered to the class can be a significant factor in determining the appropriate fee award.” Id. (quoting Fed.R.Civ.P. 23(e)(3) advisory committee's note to 2018 amendment).

Under the percentage-of-recovery method, “the court calculates the fee award as some percentage of the funds made available to the Settlement Class.” Hesse v. Godiva Chocolatier, No. 19-CV-972, 2022 U.S. Dist. LEXIS 72641, at *33 (S.D.N.Y. Apr. 20, 2022) (citing Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 F.3d 229, 249 (2d Cir. 2007)). Under the lodestar method, the court “scrutinizes the fee petition to ascertain the number of hours reasonably billed to the class and then multiplies that figure by an appropriate hourly rate.” Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47 (2d Cir. 2000).^[4] Any fee “may not exceed what is reasonable under the circumstances,” id. (quotations omitted), to “prevent unwarranted windfalls for attorneys.” Id. at 49.

District courts are guided by six Goldberger factors in determining reasonableness: “(1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of litigation; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations.” Rosenfeld v. Lenich, No. 18-CV-6720, 2022 WL 2093028, at *3 (E.D.N.Y. Jan. 19, 2022) (quoting Dial Corp. v. News Corp., 317 F.R.D. 426, 433 (S.D.N.Y. 2016)); see Goldberger, 209 F.3d at 50.

The core disagreement here is whether the percentage approach is affected by the nature of the settlement, and specifically, whether the percentage should be calculated as a portion of the monies made available to class members or instead the monies actually claimed by class members. (See Pls.' Mem. of Law at 11-14; Defs.' Opp'n at 47).

In Masters v. Wilhelmina Model Agency, Inc., the Second Circuit held that because an “entire” settlement fund “is created through the efforts of counsel at the instigation of the entire class,” the “allocation of fees by percentage should therefore be awarded on the basis of the total funds made available, whether claimed or not.” 473 F.3d 423, 437 (2d Cir. 2007) (emphasis added). Defendants contend that Masters does not apply where the result is an inflated fee, or in a claims-made settlement, and only to those cases where a segregated pool of money (an actual “fund”) for settlement exists. (Defs.' Opp'n at 4-7); e.g., Parker v. Time Warner Ent. Co., L.P. 631 F.Supp.2d 242, 265 (E.D.N.Y. 2009) (“In the typical common fund case such as Masters, there is an actual fund, or at least a fixed amount of money representing the extent of the defendant's liability. Here, the Settlement Agreement establishes neither; it simply provides that Time Warner will satisfy those claims that are made by eligible class members, while retaining any unclaimed benefits.”), aff'd sub nom. Lobur v. Parker, 378 Fed.Appx. 63, 65 (2d Cir. 2010); Bodon v. Domino's Pizza,...