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Keil v. Lopez

United States Court of Appeals, Eighth Circuit

July 5, 2017

Alexia Keil; Nick Hutchison; Jason Davis, individually and on behalf of all others similarly situated; Rachael D. Stone; Maja Mackenzie; Brian Andacky; Melissa Baggett; David Delre; Christopher Renna; Kimberly Lemon; Joshua Teperson; Jonathon Fisher; Cindi Inman; Beth Cox; Victoria Lyman; Stephanie Douglas; Sarah Jacobs, on behalf of herself and others similarly situated Plaintiffs - Appellees
v.
Paul Lopez Objector - Appellant Blue Buffalo Company, Ltd. Defendant-Appellee Alexia Keil; Nick Hutchison; Jason Davis, individually and on behalf of all others similarly situated; Rachael D. Stone; Maja Mackenzie; Brian Andacky; Melissa Baggett; David Delre; Christopher Renna; Kimberly Lemon; Joshua Teperson; Jonathon Fisher; Cindi Inman; Beth Cox; Victoria Lyman; Stephanie Douglas; Sarah Jacobs, on behalf of herself and others similarly situated Plaintiffs - Appellees Blue Buffalo Company, Ltd. Defendant-Appellee
v.
Pamela McCoy Objector - Appellant Alexia Keil; Nick Hutchison; Jason Davis, individually and on behalf of all others similarly situated; Rachael D. Stone; Maja Mackenzie; Brian Andacky; Melissa Baggett; David Delre; Christopher Renna; Kimberly Lemon; Joshua Teperson; Jonathon Fisher; Cindi Inman; Beth Cox; Victoria Lyman; Stephanie Douglas; Sarah Jacobs, on behalf of herself and others similarly situated Plaintiffs - Appellees Blue Buffalo Company, Ltd. Defendant-Appellee
v.
Caroline Nadola Objector - Appellant Alexia Keil; Nick Hutchison; Jason Davis, individually and on behalf of all others similarly situated; Rachael D. Stone; Maja Mackenzie; Brian Andacky; Melissa Baggett; David Delre; Christopher Renna; Kimberly Lemon; Joshua Teperson; Jonathon Fisher; Cindi Inman; Beth Cox; Victoria Lyman; Stephanie Douglas; Sarah Jacobs, on behalf of herself and others similarly situated Plaintiffs - Appellees Blue Buffalo Company, Ltd. Defendant-Appellee
v.
Gary W. Sibley Objector - Appellant

          Submitted: April 5, 2017

         Appeals from United States District Court for the Eastern District of Missouri - St. Louis

          Before GRUENDER, MURPHY, and KELLY, Circuit Judges.

          GRUENDER, Circuit Judge.

         Paul Lopez, Pamela McCoy, Caroline Nadola, and Gary Sibley ("objectors") appeal the district court's[1] orders approving a class action settlement and awarding attorneys' fees. They raise various objections regarding the adequacy of the district court's explanation, the fairness of the settlement, the reasonableness of the attorneys' fees, and the district court's scheduling orders. For the following reasons, we affirm.

         I. BACKGROUND

         Blue Buffalo Company, Ltd. ("Blue Buffalo") is a manufacturer of pet foods. In January 2015, plaintiffs brought this class action challenging Blue Buffalo's representations about the ingredients in its pet foods. Plaintiffs alleged that Blue Buffalo broke its "True Blue Promise" that its products contained no chicken or poultry by-product meals. As a result, they asserted (1) violations of the Magnuson-Moss Warranty Act ("MMWA"); (2) breach of express and implied warranties; (3) unjust enrichment; and (4) violations of the consumer protection acts of eight states: Missouri, New York, California, New Jersey, Illinois, Florida, Ohio, and Massachusetts. The MMWA, warranty, and unjust-enrichment claims were brought on behalf of a proposed nationwide class, whereas the consumer protection claims were brought on behalf of eight proposed subclasses. Class counsel estimated that the potential class size consisted of 3.5 million households.

         Initially, Blue Buffalo denied all of the material allegations. However, Blue Buffalo subsequently discovered that some of its suppliers had sent mislabeled ingredients to manufacturing facilities that produced certain Blue Buffalo products. Blue Buffalo continued to deny liability, but it filed a third-party complaint against two of its suppliers in June 2015, seeking indemnification and contribution in the event it was found liable.

         In October 2015, class counsel and Blue Buffalo began to engage in settlement talks with a mediator. Less than two months later, the parties reached a settlement agreement. According to the settlement agreement, Blue Buffalo agreed to pay $32 million into a settlement fund. From this amount, class counsel would request $8 million for attorneys' fees and expenses, the settlement administrator would request $1.4 million to cover administrative costs, and the remaining $22.6 million would be available to pay class members. To receive a portion of this amount, class members would have two options. Under option 1, class members without pet-food receipts would receive $5 for every $50 of purchases they made, and they could claim up to $100 of eligible purchases. Under option 2, class members with receipts would receive the same $5 for every $50 of purchases, but they could claim up to $2000 in eligible purchases. Thus, the anticipated maximum recovery was $10 for option 1 members and $200 for option 2 members. However, the payment amounts were subject to a pro rata adjustment to ensure that all available funds would be distributed to class members who submitted claims. No amount of the fund would revert to Blue Buffalo, and a cy pres recipient would receive funds remaining only from uncleared checks. In addition to monetary relief, the agreement would provide injunctive relief: Blue Buffalo would ensure that it no longer represents that its products do not contain chicken or poultry by-product meal until it has reviewed its supplier relationships and has instituted practices designed to ensure that all ingredients provided by its suppliers are consistent with its packaging claims.

         On December 18, 2015, the district court conditionally certified the class and preliminarily approved both the settlement and a proposed notice plan. The court set April 14, 2016 as the deadline for both claims and objections from class members, set May 12, 2016 as the deadline for class counsel's motion for attorneys' fees, and set a fairness hearing for May 19, 2016. The court also approved Heffler Claims Group ("HCG") as settlement administrator.

         Using information gathered from Blue Buffalo's rewards program, HCG sent direct notice by e-mail or postcard to nearly two million class members. The notices directed class members to a settlement website containing more information and a claim form. HCG also directed potential class members to the settlement website though an advertisement in People magazine, online advertisements, and a press release. The direct notices and settlement website explained how to receive funds under options 1 and 2 and mentioned the possibility of a pro rata increase in the amount received. They further informed class members that class counsel would request attorneys' fees of no more than $8, 000, 000. HCG estimated that the notice program as a whole had reached more than 87 percent of the class members.

         Shortly before the fairness hearing, HCG informed the district court that, as of May 9, 2016, it had received 105, 173 claims from class members. This number represented only about 3 percent of the class, and the total amount of valid claimed purchases was $20, 228, 797.98. Because $22, 600, 000 was expected to be available to pay these claims, claimants would not be limited to the originally anticipated maximum recovery. Rather, claimants who submitted a valid claim form would receive the full amount of their claimed purchases, plus a pro rata increase of approximately 11 percent over the claimed purchase amount. For example, a class member who submitted a valid claim for $100 of purchases under option 1 would receive $111 instead of the originally anticipated maximum payment of $10. Likewise, a class member who submitted a valid claim for $2000 of purchases under option 2 would receive $2, 220 instead of the originally anticipated maximum payment of $200. This process would exhaust the anticipated $22, 600, 000 available to pay class members.

         Fourteen class members submitted written objections to the settlement by the April 14 deadline. Eight of them also objected to class counsel's proposed fee. On May 12, class counsel submitted their motion requesting $8, 000, 000 in attorneys' fees and expenses. In their memorandum in support of the motion, class counsel explained why they were entitled to such a fee, and they provided information regarding the work they performed and their hourly rates. On May 18, one day before the fairness hearing, one objector, Gary Sibley, filed a supplemental objection alleging that the district court erred by not requiring class counsel to file the motion until after the deadline for class members to submit written objections had passed.

         The district court held the fairness hearing on May 19, 2016. During the hearing, the court announced that it was approving the settlement, awarding attorneys' fees, and overruling all objections. The court later issued two written orders. The first order certified the settlement class, approved the settlement, and approved the payment of $1, 400, 000 in administrative expenses to HCG. When approving the settlement, the court stated that "[t]he factors identified in this circuit for assessing fairness of the Settlement have all been considered, " but it did not expressly discuss each factor. The second order awarded attorneys' fees and expenses in the amount requested by class counsel. Four of the objectors who submitted written objections now appeal these two orders.

         II. DISCUSSION

         Objectors raise a total of six issues. Three of these issues relate to the district court's approval of the settlement. First, Lopez and McCoy argue that the district court abused its discretion by failing to explain its basis for approving the settlement. Second, Lopez and McCoy argue that the relevant factors weigh against approving the settlement. Third, Nadola argues that the court erred by approving a settlement that provides everyone in the country with the opportunity to receive the same amount regardless of the consumer protection laws of the states in which they purchased Blue Buffalo products. The remaining three issues relate to the award of attorneys' fees. First, Lopez, McCoy, and Sibley argue that the amount of attorneys' fees was excessive in light of the allegedly poor outcome for the class. Second, Lopez argues that the court should not have included administrative costs as a benefit to the class when calculating attorneys' fees. Third, Sibley argues that the court violated Federal Rule of Civil Procedure 23(h) by scheduling the deadline for class members to submit written objections on a date before the deadline for class counsel to file their motion for attorneys' fees. We address each of these arguments in turn.

         A. Settlement Approval

         We review a district court's order approving a class action settlement for abuse of discretion. Marshall v. Nat'l Football League, 787 F.3d 502, 508 (8th Cir. 2015). "The court's role in reviewing a negotiated class settlement is . . . to ensure that the agreement is not the product of fraud or collusion and that, taken as a whole, it is fair, adequate, and reasonable to all concerned." Id. at 509 (quotations omitted). Objectors do not contend that the settlement agreement is the product of fraud or collusion. Rather, they argue that it is not fair, reasonable, and adequate. To determine whether a settlement is "fair, reasonable, and adequate, " district courts must analyze the four factors from Van Horn v. Trickey: "[(1)] the merits of the plaintiff's case, weighed against the terms of the settlement; [(2)] the defendant's financial condition; [(3)] the complexity and expense of further litigation; and [(4)] the amount of opposition to the settlement." 840 F.2d 604, 607 (8th Cir. 1988). On appeal, "we ask whether the District Court considered all relevant factors, whether it was significantly influenced by an irrelevant factor, and whether in weighing the factors it committed a clear error of judgment." Marshall, 787 F.3d at 508 (citation and alternations omitted).

         1. District Court's Explanation of Its Decision

         Lopez and McCoy first argue that the district court abused its discretion because its final order approving the settlement contained no analysis of two of the Van Horn factors. On this basis alone, they ask that we vacate the district court's order and remand for reconsideration. Indeed, as we noted in Van Horn, "Although in approving a settlement the district court need not undertake the type of detailed investigation that trying the case would involve, it must nevertheless provide the appellate court with a basis for determining that its decision rests on well-reasoned conclusions and not mere boilerplate." 840 F.2d at 607 (citations and quotations omitted). However, we also explained that "if the record contains facts supporting the district court's approval of the settlement, a reviewing court would be properly reluctant to attack that action solely because the court failed adequately to set forth its reasons or the evidence on which they were based." Id. (quotations omitted).

         In Van Horn, the district court "summarily concluded, in a three-page opinion, that . . . '[t]he Court has carefully reviewed the written analysis made by the experts and agrees with those experts that the proposed consent decree does provide sufficient framework for the resolution of the complaints made by the class of plaintiffs.'" Id. (alterations in original). We observed that "[t]his analysis fails to address sufficiently the [necessary] factors" and stated that "[t]he district court's unexplained failure to follow the clearly expressed procedural law of this circuit gives us some concern." Id. Nevertheless, we affirmed the district court's order approving the settlement because the record contained facts demonstrating that the settlement provided "substantial benefits to the class" and thus was "fair, reasonable, and adequate." Id. at 607-08 (citation omitted). We also followed this approach in In re Flight Transportation Corp. Securities Litigation, in which we affirmed the approval of a settlement agreement despite the lack of an explanation by the district court because "the record reflect[ed] that the District Court had before it the information necessary to consider the fairness of the [settlement agreement]." 730 F.2d 1128, 1136 (8th Cir. 1984).

         Lopez responds that we should no longer follow this approach. Rather, he asserts that we should follow the approach taken in a recent class-certification case, In re Target Corp. Customer Data Security Breach Litigation, 847 F.3d 608 (8th Cir. 2017). There, we remanded the case solely because "the district court failed to articulate its analysis of the numerous disputed issues of law and fact regarding the propriety of class certification." Id. at 615. Lopez acknowledges that the instant case involves settlement approval rather than class certification but maintains that this distinction does not warrant a different approach.

         On the contrary, this distinction fully explains the less forgiving approach applied in the class-certification context. Specifically, "[a] district court may not certify a class until it 'is satisfied, after a rigorous analysis, ' that Rule 23(a)'s certification prerequisites are met." Id. at 612 (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011)). As we noted in Target, "[t]hough the Supreme Court has not articulated what, specifically, a 'rigorous analysis' of class certification prerequisites entails, at a minimum the rule requires a district court to state its reasons for certification in terms specific enough for meaningful appellate review." Id. Hence, a court's failure to state its reasons for class certification constitutes a failure to conduct the "rigorous analysis" specific to class certification. See id. The same "rigorous analysis" standard simply does not apply to settlement approvals, and so we will not remand solely on the basis of an inadequate explanation.

         That said, we cannot disagree with Lopez's contention that the district court failed to discuss two of the Van Horn factors adequately. Other courts tend to list the factors and proceed systematically to analyze each one, devoting at least one paragraph to each factor. See, e.g., Huyer v. Wells Fargo & Co., 314 F.R.D. 621, 626-28 (S.D. Iowa 2016); Khoday v. Symantec Corp., No. 11-cv-180, 2016 WL 1637039, at *5-6 (D. Minn. April 5, 2016). Here, in contrast, the district court simply asserted that "[t]he factors identified in this circuit for assessing fairness of the Settlement have all been considered." To be sure, in the same paragraph, the court briefly discussed Blue Buffalo's financial condition and the amount of opposition to the settlement. However, it provided no analysis of the other two factors: the merits of the plaintiff's case weighed against the terms of the settlement; and the complexity and expense of further litigation. Although the court may have alluded to these two factors later in the order when it stated that "[t]he relief obtained here, when weighed against the complexities and uncertainties of the litigation and the certainty of lengthy litigation in the absence of a settlement, support the Settlement, which avoids significant risk and delay and affords meaningful relief to Settlement Class Members, " it did not explain how it made this evaluation. Rather, "[t]hese remarks are conclusions, not reasons." See Target, 847 F.3d at 612.

         Thus, as in Van Horn, "[t]he district court's unexplained failure to follow the clearly expressed procedural law of this circuit gives us some concern." See 840 F.2d at 607. Nevertheless, "the record reflects that the District Court had before it the information necessary to consider the fairness of the [settlement agreement], " and thus "we shall review the District Court's action on the basis of the record before us." See Flight Transp. Corp., 730 F.2d at 1136. As explained below, we find sufficient facts in the record to conclude that the settlement in this case is fair, reasonable, and adequate.

         2. Analysis of the ...


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