McKnight v. Hinojosa

54 F.4th 1069

Byron MCKNIGHT; Julian Mena; Todd Schreiber ; Nate Coolidge; Ernesto Mejia, individually and on behalf of all others similarly situated, Plaintiffs-Appellees,

v.Jennifer HINOJOSA, Objector-Appellant,

v.Uber Technologies, Inc., a Delaware Corporation; Rasier, LLC, a Delaware Limited Liability Company, Defendants-Appellees.

Byron McKnight; Julian Mena; Todd Schreiber ; Nate Coolidge; Ernesto Mejia, individually and on behalf of all others similarly situated, Plaintiffs-Appellees,

v.Gordon B. Morgan, Objector-Appellant,

v.Uber Technologies, Inc., a Delaware Corporation; Rasier, LLC, a Delaware Limited Liability Company, Defendants-Appellees.

Byron Mcknight; Julian Mena; Todd Schreiber ; Nate Coolidge; Ernesto Mejia, individually and on behalf of all others similarly situated, Plaintiffs-Appellees,

v.Robert Hudson, Objector-Appellant,

v.Uber Technologies, Inc., a Delaware Corporation; Rasier, LLC, a Delaware Limited Liability Company, Defendants-Appellees.

No. 21-16623

No. 21-16625

No. 21-16626

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 18, 2022 San Francisco, California

FILED NOVEMBER 30, 2022

Theodore W. Maya (argued) and Robert R. Ahdoot, Ahdoot & Wolfson PC, Burbank, California; Alredo Torrijos, Arias Sanguinetti Stahle & Torrijos LLP, Los Angeles, California; for Plaintiffs-Appellees Byron McKnight, Julian Mena, Todd Schreiber, Nate Coolidge, and Ernesto Mejia.

N. Albert Bacharach Jr. (argued), N. Albert Bacharach Jr., Gainesville, Florida, for Objector-Appellant Jennifer Hinojosa.

Michael David Harbour (argued), Irell & Menalla LLP, Los Angeles, California; A. Matthew Ashley and Andra Barmash Greene, Irell & Manella LLP, Newport Beach, California; for Defendants-Appellees.

Before: J. Clifford Wallace, Sidney R. Thomas, and Milan D. Smith, Jr., Circuit Judges.

S.R. THOMAS, Circuit Judge:

In this consolidated appeal, we consider whether a class action settlement is a "coupon settlement" and therefore subject to the restrictions on the award of attorney fees to class counsel imposed by the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1712. We conclude the settlement is not a coupon settlement, and we affirm the judgment of the district court.¹

I

In the underlying case, McKnight and other Plaintiffs-Appellees ("Plaintiffs") represent a class that brought breach of contract and consumer law claims against Uber Technologies, Inc. and Rasier, LLC ("Uber") alleging Uber misrepresented "its ‘Safe Rides Fee’ and the safety measures, background checks, and other efforts it takes to provide safety for its customers."

The parties reached an initial settlement in early 2016. However, the district court found that the proposed class included Uber customers who had not been charged the allegedly misrepresented fee and that the proposed settlement failed to distribute funds appropriately to class members. The district court therefore denied both certification of the proposed class and preliminary approval of the proposed settlement.

The parties reached a revised settlement in June 2017 (the "Settlement"). In August 2017, the district court granted preliminary approval and certified a settlement class of approximately 22.4 million members—essentially anyone who used Uber ridesharing services in the United States between January 1, 2013 and January 31, 2016 and was charged a Safe Rides Fee. The district court granted final approval of the Settlement in August 2019.

The Settlement provides both monetary and injunctive relief. Uber will pay $32.5 million into a "non-reversionary settlement fund." Class members will receive $0.25 from the fund for the first Safe Rides Fee they were charged and $0.05 for each subsequent fee. The average class member is expected to receive $1.07.

Settlement funds will be paid out to class members in several ways and stages.

First, class members had the option to submit a claim form and receive their share in cash, via PayPal or eCheck. Out of more than 22 million estimated class members, only 82,375 submitted a claim form by the deadline and elected this up-front cash payment. Second, any class member who has an Uber account and did not submit a claim form for an up-front cash payment will have their Settlement share credited to their Uber account. If a class member no longer has an Uber account, that share will be distributed cy pres to the National Consumer Law Center. Third, after one year, Uber will make a one-time attempt to remit any unused credit, minus an estimated $0.07 transaction fee charged by the payment processor, to the class member's payment account on file with Uber. Three days before attempting this payment, the settlement administrator will email a notice to all class members who have not redeemed their credit. The notice will inform the class member of the need for accurate and current credit card or other payment account information for the attempted payment to succeed. Finally, any leftover Settlement funds that are not distributed to class members will be distributed cy pres to the National Consumer Law Center.

As for injunctive relief, the Settlement prohibits Uber from charging a Safe Rides Fee and generally limits the representations Uber may make as to its driver background check policies and the safety of its services.

In its August 2019 order granting final approval to the Settlement, the district court stated "the settlement is sufficiently coupon-like to warrant application of 28 U.S.C. § 1712." Because Plaintiffs' first motion for attorney fees did not comply with CAFA's restrictions on the calculation of fee awards in coupon settlements, the district court ordered Plaintiffs to file an amended motion for fees.

After further briefing, the district court concluded "that it erred in its previous order in determining that [the Settlement] is a coupon settlement" for two reasons. First, the court stated it had previously over-emphasized the small size of the average award and under-emphasized the availability of the cash option. Reconsidering, the district court found "there was nothing coercive about the amount of the credit" because "class members could have chosen to receive cash instead of a coupon." Second, the district court decided it had erred by considering that few class members would take the time to submit a claim due to the small size of the average award. This fact "may have some bearing on the fairness and adequacy of the settlement," the district court reasoned, "but it is irrelevant to the coupon analysis because the Court already determined that the amount itself represented a reasonable compromise."

Having held that CAFA's attorney fee restrictions did not apply, the district court reconsidered Plaintiffs' first fee request "unburdened by the coupon requirements of CAFA." Plaintiffs had requested $8.125 million in fees—25% of the face value of the fund and a 4.14 multiplier on their lodestar of $1,961,905. The district court, applying the percentage-of-fund method, granted fees but reduced the award to $5,689,440, which is approximately 17.5% of the face value of the fund and 2.9 times the lodestar. While recognizing that 25% of the fund is a "presumptively reasonable amount," the district court reduced the award because the Settlement amount fell near the bottom of the "range of possible approval," and because, on a lodestar cross-check, even the reduced fee award granted a healthy multiplier on the fees actually incurred. The district court also awarded Plaintiffs their costs. Three objectors to the Settlement now appeal the district court's fee award. The Objector-Appellants principally contend the district court erred by not applying CAFA's attorney fee provisions. They also argue the district court abused its discretion in several ways when calculating the award.

II

We review the applicability of CAFA's coupon provisions to a class action settlement agreement de novo. McKinney-Drobnis v. Oreshack , 16 F.4th 594, 603 (9th Cir. 2021). We conclude the Settlement here is not a coupon settlement.

Congress enacted CAFA in part out of "concern about settlements when class members receive little or no value, including settlements in which ‘counsel are awarded large fees, while leaving class members with coupons or other awards of little or no value.’ " In re Online DVD-Rental Antitrust Litig. , 779 F.3d 934, 950 (9th Cir. 2015) (quoting Class Action Fairness Act of 2005, Pub. L. No. 109-2, § 2, 119 Stat. 4 (2005) ). Section 1712 addresses this concern in two ways. First, under § 1712(e), courts must apply "heightened scrutiny" when approving settlement agreements awarding coupon relief. Id. at 949. Second, courts must apply "a series of specific rules" to attorney fee awards in coupon settlements under § 1712(a) – (c). In re HP Inkjet Printer Litig. , 716 F.3d 1173, 1178 (9th Cir. 2013). Where a settlement awards both coupon and non-coupon relief, such as monetary or injunctive relief, "the total fee award ... is the sum of: (i) ‘a reasonable contingency fee based on the actual redemption value of the coupons’ " and "(ii) ‘a reasonable lodestar amount to compensate class counsel for any non-coupon relief obtained.’ " Chambers v. Whirlpool Corp. , 980 F.3d 645, 659, 660 (9th Cir. 2020) (quoting HP Inkjet , 716 F.3d at 1184–85 ). Courts may use the lodestar approach in these "mixed settlements" if they do so "without reference to the dollar value of the [coupon relief]" or if they account for redemption values. Id. (quoting In re Easysaver Rewards Litig. , 906 F.3d 747, 759 (9th Cir. 2018) ). Courts may not "approximate the ultimate value of a settlement"; they must use the actual "redemption value of the coupons." Easysaver , 906 F.3d at 759.

Section 1712 only applies here if the Settlement is a "coupon settlement." Online DVD , 779 F.3d at 950. The term "coupon" is undefined in the statute. We apply the three factors identified in Online DVD to determine whether a particular instance of class relief is a coupon: "(1)...