Tyler v. Michaels Stores, Inc., 2015 WL 8484421 (D. Mass. Dec. 9, 2015).
In this action, the United States District Court, District of Massachusetts (the “District Court”), approved a settlement reached between the parties. Thereafter, the District Court determined the attorneys’ fees to be awarded class counsel (the “Class Counsel”) after giving due consideration to the discretion given under the Class Action Fairness Act (“CAFA”). The District Court chose between using a percentage-of-coupons-redeemed method or the lodestar method, and it ultimately chose to employ the lodestar method.
The plaintiffs brought a putative class action alleging the defendant’s practice of collecting customers’ zip codes and addresses during credit card transactions served defendant’s own interests, was unlawful, and such actions violated Massachusetts’ Unfair Trade Practices Act. The plaintiffs specifically alleged the defendant asked its customers for their zip codes as part of credit card transactions to reverse engineer those customers’ addresses using commercially available databases. Then, defendant would use those addresses to carry out aggressive and unwanted marketing campaigns.
After the completion of discovery and after having considered each other’s claims, defenses, and the potential for liability, the parties agreed to settle. The settlement divided the class members into two subclasses and proposed to provide one subclass with vouchers for twenty-five dollars ($25) and the other subclass with vouchers for ten dollars ($10). The Class Counsel sought an award of attorneys’ fees and costs totalling $425,000 ($410,994.70 for attorney’s fees, and $14,005.30 in costs and expenses), which the defendant agreed to pay in addition to providing the vouchers.
At the hearing for the final approval of the settlement, the District Court provisionally approved the settlement with the exception of the award of attorney’s fees, stating that it would withhold its determination of attorney’s fees until the vouchers had expired and the redemption rate could be determined. The vouchers expired on September 30, 2014, by which date 5,056 $25 vouchers and 1,222 $10 vouchers had been redeemed, bringing the total redemption amount, in retail value of the defendant’s trade goods, to $138,620.00. The Class Counsel moved for an award of attorneys’ fees basing the request on a modified lodestar calculation using its customary hourly rates and time records.
The District Court noted CAFA imposes additional requirements on the district courts when evaluating certain proposed class settlements; namely providing for recovery of coupons to a class member. Given that CAFA imposes more onerous restrictions on settlements that award class members coupons, the District Court remarked it was unsurprising that Class Counsel argued the vouchers the proposed settlement agreement awarded to the class members were not coupons for the purposes of CAFA. The District Court disagreed with this conclusion, and held as matter of law that the vouchers were coupons.
In deciding what is, or what is not a coupon, the District Court remarked it would first look at the statute’s text. The District Court remarked various circuits have defined coupons in differing ways. The District Court, however, defined a coupon settlement as when class members must transact business with the defendant in order to obtain the benefit of the settlement, then the settlement provides for a recovery of coupons under 28 U.S.C. § 1712. In other words, if an award has to be redeemed, the District Court concluded that, under CAFA, such a settlement is a coupon settlement.
Noting its discretion under CAFA to choose between using a percentage-of-coupons-redeemed method or the lodestar method in coupon-only settlements, the District Court decided to employ the lodestar method to calculate the attorneys’ fees reasoning that using the percentage-of-recovery method would result in a substantial reduction of attorneys’ fees from what Class Counsel requested.
In applying the lodestar method, the District Court independently determined the reasonable rates for the counsel and awarded the Class Counsel a reduced fee of $312,895.00. The District Court found the Class Counsel’s assertion that partners ought to be compensated at the rate of $650 an hour as unreasonable and held that $350 per hour would be the appropriate hourly rate for partners in this action. The District Court, thus, calculated the lodestar amount using an hourly rate of $350 for partners for a total of 916.35 hours, and reached a lodestar of $312,895.00 in attorneys’ fees. Accordingly, the Court granted in part the Class Counsel’s request for attorneys’ fees and costs, awarding attorneys’ fees in the amount of $312,895.00 and costs in the amount of $14,005.30.