Reibstein v. Rite Aid Corp..

761 F.Supp.2d 241

Dianne REIBSTEIN, Plaintiff,

v.RITE AID CORPORATION, et al., Defendants.

Civil Action No. 09–2734.

United States District Court, E.D. Pennsylvania.

Jan. 18, 2011.

David A. Searles, Donovan Searles, LLC, Philadelphia, PA, for Plaintiff.Stephen G. Harvey, Raphael Cunniff, Pepper Hamilton LLP, Philadelphia, PA, for Defendant Rite Aid Corp.Jeffrey S. Saltz, Law Office of Jeffrey S. Saltz P.C., Philadelphia, PA, Michelle C. Doolin, Leo P. Norton, Cooley LLP, San Diego, CA, for Defendant Asteres, Inc. MEMORANDUMEDUARDO C. ROBRENO, District Judge.

TABLE OF CONTENTS

I. INTRODUCTION

II. BACKGROUND

A.

Plaintiff's Complaint and Basis for Legal Relief

B.

The Proposed Settlement

III.

LEGAL STANDARD

A.

Legal Standard for Class Certification

B.

Legal Standard for Fairness

IV.

MOTION FOR FINAL APPROVAL OF THE CLASS ACTION SETTLEMENT

A.

Class Certification

1.

Rule 23(a)

2.

Rule 23(b)

B.

Fairness of the Settlement

1.

The Complexity, Expense and Likely Duration of the Litigation

2.

The Reaction of the Class to the Settlement

3.

The Stage of the Proceedings and Amount of Discovery Completed

4.

The Risks of Establishing Liability

5.

The Risks of Establishing Damages

6.

The Risks of Maintaining the Class Action Through Trial

7.

The Ability of the Defendants to Withstand a Greater Judgment

8.

The Range of Reasonableness of the Settlement Fund in Light of the Best Possible Recovery

9.

The Range of Reasonableness of the Settlement Fund in Light of the Attendant Risks of Litigation

10.

Attorneys' Fees and the Representative Plaintiff Award

V.

MOTION FOR ATTORNEYS' FEES

A.

The Nature of the Court's Review

B.

Methods to Determine Whether to Award Attorneys' Fees

C.

Application

VI. CONCLUSION

I. INTRODUCTION

On June 16, 2009, Plaintiff Dianne Reibstein (“Plaintiff”) initiated this class action suit against Rite Aid Corp. under the Fair Credit Reporting Act (the “FCRA”) as amended by the Fair and Accurate Credit Transactions Act (the “FACTA”). Thereafter, Plaintiff amended her complaint to add Asteres, Inc. as a defendant.¹ On April 28, 2010, the parties entered into a settlement agreement. The Court preliminarily approved the parties' settlement and provisionally certified the class for settlement purposes only. Plaintiff then moved for final approval of the class action settlement and for an award of attorneys' fees. On August 31, 2010, the Court held a fairness hearing pursuant to Federal Rule of Civil Procedure 23(e).

After reviewing the parties' briefing and considering the arguments advanced at the hearing, the Court finds that the settlement class meets the requirements for class certification and that the proposed settlement is fair. In reaching this conclusion, the Court observes that the Girsh/ Prudential ² factors deemed instructive to the fairness inquiry largely miss the mark in consumer cases and may imply a fairer settlement than is warranted.

Indeed, the governing test de-emphasizes (or entirely fails to account for) the facts most probative of fairness in this case. In the Court's view, these facts include that: (1) the class is to receive an award in the form of gift cards; (2) the individual award the named plaintiff seeks is 3.75 times greater than the maximum statutory recovery of $1,000 where she acknowledges performing little work for the class; and (3) the requested attorneys' fees exceed the total recovery for the class. While some of these facts warrant close scrutiny, the Court ultimately finds the settlement to be fair. However, the Court concludes the individual award to Plaintiff is excessive and must be reduced.

Thus, as set forth more fully below, Plaintiff's motion for final approval of the class action settlement will be granted, except that the award to Plaintiff sought by way of that motion will be reduced. Plaintiff's motion for attorneys' fees will also be granted.

II. BACKGROUNDA. Plaintiff's Complaint and Basis for Legal Relief

Plaintiff's complaint alleges Defendants violated the FCRA by failing to truncate electronic receipts in accordance with the FCRA. The FCRA, as amended by the FACTA, provides in relevant part that, as of December 4, 2006, “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale of the transaction.” 15 U.S.C. §§ 1681c(g)(1), (3) (2010). Individuals who “willfully fail[ ] to comply” with this requirement are subject to civil liability for:

(1)(A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or ...

(2) such amount of punitive damages as the court may allow; and

(3) in the case of any successful action to enforce any liability ... the costs of the action together with reasonable attorney's fees as determined by the court.

15 U.S.C. § 1681n(a).

In 2008, however, Congress amended the damages provision to provide a limitation on a plaintiff's potential to recover for a violation. See Ehrheart v. Verizon Wireless, 609 F.3d 590, 598 (3d Cir.2010) (Smith, J., dissenting) (outlining legislative development of the civil damages section of the FACTA). Namely, it provided that “any person who printed an expiration date on any receipt ... between December 4, 2004, and June 3, 2008, but otherwise complied with [Section 1681c(g)'s requirements] ... shall not be in willful noncompliance” such that liability could lie. 15 U.S.C. § 1681n(d).

Here, Plaintiff's complaint states a cognizable claim for damages because she seeks relief for a violation of the FACTA that occurred after June 3, 2008. More specifically, Plaintiff avers that Plaintiff purchased medicine by credit card at a Rite Aid location on April 5, 2009 and was given a receipt that included the card's expiration date. (Am. Compl. ¶ 23.) Plaintiff seeks to represent all individuals who were provided “receipt(s) by Defendant[s] that failed to comply with the FACTA truncation provisions” after June 3, 2008. ( Id. ¶ 44; see also id. ¶ 43.)

B. The Proposed Settlement

Promptly after Plaintiff filed her suit, Rite Aid “took steps to stop the practice complained of.” (Pl.'s Mot. For Final Approval of Class Action Settlement, at 5.) On April 28, 2010, after a period of discovery, the parties entered into a settlement agreement. The settlement agreement provides that the settlement class should be certified as follows:

All persons who, on or after June 3, 2008 and continuing through June 18, 2009, made a credit card or debit card purchase from the pharmacy self-service dispenser at Rite Aid store number 1320, located at 640 Montgomery Avenue, Narberth, Pennsylvania 19072 and whose electronically printed receipt from the dispenser contained the expiration date of the person's credit or debit card.

(Doc. no. 27, App. I.) The settlement agreement states that, per Defendants' representations and supporting documentation, this class “consists of approximately 369 individuals who engaged in a total of approximately 2,442 credit or debit card transactions during the relevant time period.” ( Id.) The parties have since clarified that the settlement class actually consists of 366 individuals. ( See, e.g., Pl.'s Additional Mem. Of Law, at 1; see also Pl.'s Mot. For Final Approval of Class Action Settlement, at 7.)

The settlement provides the proposed class members with the following benefits:

4. Rite Aid will provide a gift card, with a value of $20.00, for each credit or debit card receipt provided to a member of the Settlement Class during the Class Period that contained the expiration date of the person's credit or debit card as reflected by Defendants' records....

8. Asteres shall pay for all costs of notice and settlement administration....

9. Rite Aid and Asteres agree that in connection with the Lawsuit, they took prompt steps to assure the cessation of the practice of providing consumers with electronically printed receipts containing the expiration date of the person's credit card or debit card at the pharmacy self-service dispenser at [the relevant Rite Aid store].

(Doc. no. 27, App. I.) The gift cards contemplated by the settlement agreement are “subject to the same terms and conditions as a Rite Aid standard gift card.” ( Id.) They “cannot be used on items excluded by law, are not redeemable for cash, and will not be replaced if lost or stolen.” ( Id.) They are, however, freely transferrable, have no expiration date, and will be sent directly to class members upon approval of the settlement. ( See Pl.'s Additional Mem. Of Law, at 2.)

The settlement agreement also contemplates a financial award for Plaintiff and attorneys' fees for her lawyer:

10. Class Counsel intends to apply to the Court for an award of attorneys' fees and out-of-pocket expenses not to exceed $65,000.00. Class Counsel also intends to apply to the Court for an award to the representative plaintiff in settlement of her individual claims and also for services performed on behalf of the Settlement Class not to exceed $3,750.00. Rite Aid and Asteres agree not to oppose the foregoing applications for attorneys' fees and expenses and individual settlement award....

(Doc. no. 27, App. I.) The settlement is not contingent on these awards being approved, however. It clearly provides that “a reduction by the Court or by an appellate court of attorneys' fees and/or out-of-pocket expenses or the individual settlement award sought by the Plaintiff and Class Counsel shall not affect any of the parties' other rights and obligations under this Settlement Agreement.” ( Id.)

In preliminarily approving the settlement, the Court directed the parties to provide notice of the class action settlement to all members of the settlement class. Such notice was properly provided. ( See docs. no. 29, 30; see also Pl.'s Mot. For Final Approval of Class Action Settlement, at 14.) No members of the...