Resnick v. Frank (In re Online DVD-Rental Antitrust Litig.)

779 F.3d 934

In re ONLINE DVD–RENTAL ANTITRUST LITIGATION.

Andrea Resnick; Bryan Eastman; Amy Latham; Melanie Miscioscia; Stan Magee; Michael Orozco; Lisa Sivek; Michael Wiener, Plaintiffs–Appellees,

v.Theodore H. Frank, Objector–Appellant,

v.Netflix, Inc.; Wal–Mart Stores, Inc.; Walmart.Com USA LLC, Defendants–Appellees.

In re Online Dvd–Rental Antitrust Litigation.

Andrea Resnick; Bryan Eastman; Amy Latham; Melanie Miscioscia; Stan Magee; Michael Orozco; Lisa Sivek; Michael Wiener, Plaintiffs–Appellees,

v.Jon M. Zimmerman, Objector–Appellant,

v.Netflix, Inc.; Wal–Mart Stores, Inc.; Walmart.Com USA LLC, Defendants–Appellees.

In re Online Dvd–Rental Antitrust Litigation.

Andrea Resnick; Bryan Eastman; Amy Latham; Melanie Miscioscia; Stan Magee; Michael Orozco; Lisa Sivek; Michael Wiener, Plaintiffs–Appellees,

v.Edmund F. Bandas, Objector–Appellant,

v.Netflix, Inc.; Wal–Mart Stores, Inc.; Walmart.Com USA LLC, Defendants–Appellees.

In re Online Dvd–Rental Antitrust Litigation.

Andrea Resnick; Bryan Eastman; Amy Latham; Melanie Miscioscia; Stan Magee; Michael Orozco; Lisa Sivek; Michael Wiener, Plaintiffs–Appellees,

v.Maria Cope, Objector–Appellant,

v.Netflix, Inc.; Wal–Mart Stores, Inc.; Walmart.Com USA LLC, Defendants–Appellees.

In re Online Dvd–Rental Antitrust Litigation.

Andrea Resnick; Bryan Eastman; Amy Latham; Melanie Miscioscia; Stan Magee; Michael Orozco; Lisa Sivek; Michael Wiener, Plaintiffs–Appellees,

v.John Sullivan, Objector–Appellant,

v.Netflix, Inc.; Wal–Mart Stores, Inc.; Walmart.Com USA LLC, Defendants–Appellees.

In re Online Dvd–Rental Antitrust Litigation.

Andrea Resnick; Bryan Eastman; Amy Latham; Melanie Miscioscia; Stan Magee; Michael Orozco; Lisa Sivek; Michael Wiener, Plaintiffs–Appellees,

v.Tracey Klinge Cox, Objector–Appellant,

v.Netflix, Inc.; Wal–Mart Stores, Inc.; Walmart.Com USA LLC, Defendants–Appellees.

Nos. 12–15705, 12–15889, 12–15957, 12–15996, 12–16010, 12–16038.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 13, 2014.

Filed Feb. 27, 2015.

Theodore H. Frank (argued), Center for Class Action Fairness, WA, D.C.; Gary Sibley, Dallas, TX; Joseph Darrell Palmer, Law Offices of Darrell Palmer PC, Solana Beach, CA; Christopher A. Bandas, Bandas Law Firm, P.C., Corpus Christi, TX; Christopher V. Langone and Grenville Pridham, Law Office of Christopher Langone, Ithaca, NY; Joshua R. Furman (argued), Joshua R. Furman Law Corp., Los Angeles, CA, for Objector–Appellants Frank, Cope, Cox, Bandas, Sullivan, and Zimmerman.

Todd A. Seaver, (argued), Joseph J. Tabacco, Jr., and Christopher T. Heffelfinger, Berman DeValerio, San Francisco, CA, for Plaintiffs–Appellees.

Appeal from the United States District Court for the Northern District of California, Phyllis J. Hamilton, District Judge, Presiding. D.C. No. 4:09–md–02029–PJH.

Before: SIDNEY R. THOMAS, Chief Judge, STEPHEN REINHARDT, Circuit Judge, and LLOYD D. GEORGE, Senior District Judge.^*

OPINION

THOMAS, Chief Judge:

In this appeal, class members challenge the district court's approval of a settlement between Walmart ¹ and a class of Netflix DVD subscribers arguing, among other matters, that the gift card portion of the settlement constituted a coupon settlement within the meaning of the Class Action Fairness Act (“CAFA”), Pub.L. No. 109–2, 119 Stat. 4 (2005). We hold that the settlement was fair and that the fee award was proper, and we affirm the district court.

I

Before its focus changed to streaming video, Netflix's primary business was renting DVDs to subscribers online and shipping them out by mail. Other companies, including retail giant Walmart, tried to compete. Netflix reached an agreement with Walmart that divided up DVD-related business between the two companies. Under the agreement, Netflix stopped selling DVDs, and focused solely on its DVD rental business. In return, Walmart wound down its own burgeoning online rental service, but continued to act as a major DVD seller.

In 2009, Andrea Resnick and seven other class representatives (“plaintiffs”) filed a consolidated amended class action complaint against Netflix and Walmart, challenging the agreement as anti-competitive. Plaintiffs assert that as a result of the agreement and Walmart's subsequent departure from the rental business, Netflix charged its customers unfairly high monthly subscription prices.

The district court granted plaintiffs' motion for certification of a litigation class of Netflix subscribers. The court denied approval of an initial settlement agreement between Walmart and a global class of both Netflix subscribers and subscribers to Blockbuster's online DVD rental service. However, a class of just Netflix subscribers then reached a settlement agreement with Walmart. The court conditionally approved the Netflix settlement class and also gave preliminary approval of the settlement, and the form and plan of notice. The court denied a renewed motion by Netflix to decertify the Netflix litigation class.²

In the settlement agreement, Walmart agreed to pay a total amount of $27,250,000, comprising both a “Cash Component” and a “Gift Card Component,” in exchange for dismissal with prejudice of all claims asserted in the complaint. The class consists of:

any person or entity residing in the United States or Puerto Rico that paid a subscription fee to rent DVDs online from Netflix on or after May 19, 2005, up to and including the date the Court grants Preliminary Approval of the Settlement, or some other date to be agreed to by the parties to this Agreement.³

The Cash Component funded attorneys' fees and expenses, costs of notice and administration, and incentive payments to class representatives. The amount remaining constituted the Gift Card Component and was used to provide class memberswith either gift cards or, if they so chose, the cash equivalent of a gift card. The gift card could only be used at the Walmart website and was freely transferrable, although it could not be resold. To receive payment, a class member was required to submit a claim form. A claimant could submit a claim for a gift card via e-mail, the class action website, or regular mail. A claimant could submit a claim for cash by regular mail only, and had to include the last four digits of his or her Social Security Number. Each claimant received an equal share of the Gift Card Component. In other words, the Gift Card Component (the amount remaining after subtracting attorneys' fees and expenses, notice and administration costs, and incentive payments) was split evenly among all valid claimants, regardless of the specific damages each individual claimant incurred.

Initial e-mail notice of the settlement was provided to some 35 million class members. Notice was mailed to more than 9 million class members whose email addresses were invalid such that the email notice “bounced back.” The notice informed class members about the settlement and claims-submission process; stated that class counsel would seek $1.7 million in reimbursement of litigation expenses and fees of 25% of the total settlement fund of $27,250,000 and that Class Representatives would receive $5,000 each in incentive payments; it also set a deadline for filing a claim, leaving the class, or objecting to the settlement of February 14, 2012. The notice encouraged class members to visit the class website for more details. In response to the notice, 1,183,444 claims were submitted. 744,202 requests were for gift cards and 434,253 were for the equivalent value in cash. 722 class members opted out of the class and 30 lodged objections.

The appellants in this consolidated appeal, members of the proposed class, all objected to the settlement. At a March 14, 2012 fairness hearing and in the accompanying March 29, 2012 orders, the court gave final approval to the settlement and settlement class and awarded attorneys' fees. The judge rejected all objections, concluding that not “one objection was sufficient [ ]—singular or in the aggregate—to preclude [her] from approving this settlement.” The court determined that CAFA's coupon—settlement provisions should not apply because the Walmart gift cards were sufficiently different from coupons—especially given the fact that claimants could choose between gift cards and cash, the gift cards were freely transferrable, and they had no expiration date.

The court concluded the attorneys' fees were properly calculated as 25% of the settlement fund, including administration and notice costs. It decided the percentage amount was fair, especially given that the alternative lodestar calculation would have resulted in attorneys' fees three times larger than the amount class counsel requested. The court approved attorneys' fees of $6,812,500 (25% of the total fund of $27,250,000), reimbursement of some litigation expenses totaling $1,700,000, incentive awards of $5,000 each for nine class representatives (totaling $45,000), and payment of notice and administration costs out of the fund. Administration and notice costs totaled roughly $4.5 million, leaving roughly $14.1 million in the settlement fund for the Gift Card Component. Divided among almost 1.2 million claims, the Gift Card Component will provide claimants with roughly $12 each.⁴

Following the court's approval of the settlement, six objectors, Theodore Frank, Tracey Klinge Cox, Maria Cope, Edmund F. Bandas, John Sullivan, and Jon M. Zimmerman (“Objectors”), timely appealed and their cases were consolidated.

We have jurisdiction under 28 U.S.C. § 1291. We review a district court's decision to approve a class action settlement “for clear abuse of discretion.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 940 (9th Cir.2011) (citing Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 963 (9th Cir.2009)). Similarly, we review a court's “award of fees and costs to class counsel, as well as its method of calculation” for abuse of discretion. Id. (citing Lobatz v. U.S. W. Cellular of Cal., Inc., 222 F.3d 1142, 1148–49 (9th Cir.2000)...