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Radosti v. Envision EMI

June 8, 2010

BINA RADOSTI, ET AL., PLAINTIFFS,
v.
ENVISION EMI, LLC, DEFENDANT.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

This is a class action lawsuit arising out of a series of youth conferences sponsored by Defendant Envision EMI, LLC ("Envision") in and around Washington, D.C. surrounding the inauguration of President Barack Obama in January 2009. Plaintiffs Bina Radosti, Joshua Rottman, Sally Rife, Heather Kern, Zachary Johnson Burton, and Latiana Carter (collectively, "Plaintiffs") bring this action on behalf of themselves and all those similarly situated alleging breach of contract, negligent misrepresentation, and violations of state consumer protection laws by Envision. After a successful mediation, the parties reached a settlement, which they have submitted to this Court for approval pursuant to Federal Rule of Civil Procedure 23(e). On December 17, 2009, the Court preliminarily approved the settlement agreement, conditionally certified the settlement class, and approved procedures to notify members of the settlement class of their right to object to or opt out of the settlement. After objections and opt-out notices were received, the parties filed their [24] Joint Motion for Final Approval of Class Action Settlement, which is presently pending before the Court. Plaintiffs also filed a [25] Motion for Attorneys' Fees, Expenses, and Class Representative Service Awards. The Attorneys General of twenty-two different states (including the District of Columbia) filed a [35] Brief Amicus Curiae Opposing Final Approval of the Proposed Settlement Agreement, to which the parties filed a joint response. On May 25, 2010, the Court held a Fairness Hearing to consider whether the proposed settlement agreement is "fair, reasonable, and adequate." The arguments and representations made on the record during that Fairness Hearing are expressly incorporated and made a part of this Memorandum Opinion.

Upon a searching review of the parties' preliminary and final motions for approval of the settlement agreement and certification of the settlement class, the filings submitted in connection with the objections and opt-outs, the brief amicus curiae of the Attorneys General and the response thereto, the arguments and representations made during the Fairness Hearing, the relevant statutes and case law, and the entire record herein, the Court finds that the terms of the settlement agreement, excluding the potential cy pres fund for later evaluation, are fair, reasonable, and adequate and should be approved. As explained below, the Court makes the following findings: the Court has jurisdiction over this action; the class may be certified for settlement purposes; the settlement agreement was negotiated at arms-length by experienced counsel with the assistance of an experienced mediator after an appropriate amount of investigation and informal discovery, and it is the opinion of the experienced counsel and mediator that the settlement is fair, adequate, and reasonable; the vouchers to be awarded under the settlement agreement provide meaningful value to class members because of their high face value, their transferability, and their seven-year duration; choice-of-law issues and Envision's financial condition significantly undermine Plaintiffs' likelihood of obtaining meaningful class-wide relief at trial; the settlement is supported by the class, as demonstrated by the low number of objectors and opt-outs; and the cy pres fund established by the settlement agreement-if properly administered-will ensure that Envision substantially disgorges the profits from its alleged misconduct. Accordingly, the Court shall GRANT the parties' [24] Joint Motion for Final Approval of the Settlement Agreement, HOLD IN ABEYANCE approval of the proposed cy pres fund, and HOLD IN ABEYANCE Plaintiffs' [25] Motion for Attorneys' Fees,Expenses, and Class Representative Service Awards.

I. BACKGROUND

A. Factual and Procedural Background

Envision is a Virginia limited liability company*fn1 that sponsors educational conferences for youth. This lawsuit pertains to three student conferences sponsored by Envision in connection with the inauguration of President Barack Obama in Washington, D.C. in January 2009. The three conferences were designated by age group: (1) the Junior Presidential Youth Inaugural Conference, for students in the fifth through eighth grades at the time of the inauguration; (2) the Presidential Youth Inaugural Conference, for high school students; and (3) the University Presidential Inaugural Conference, for college students over the age of 18 (collectively, the "Conferences"). Envision began soliciting participation in the Conferences in January 2008. Plaintiffs allege that Envision represented to potential participants that they would be present for the inauguration of the President and Vice President, witness the inaugural parade, and attend a black tie gala inaugural ball. See First Am. Compl. ¶ 41. Plaintiffs also allege that Envision represented that participants would, among other things, have "private access" to the Smithsonian Institution on the National Mall, hear a keynote speech from famed cyclist Lance Armstrong, and meet historians, political experts, leading decision makers, and White House officials. See id. ¶¶ 41-42. Envision also allegedly informed invitees that they were among a "few select students" invited to attend one of the Conferences. See id. ¶ 43. Approximately 15,000 students paid between $2380 and $2729 in tuition costs to attend the Conferences.

Plaintiffs allege that the many of the promises made by Envision were not delivered during the Conferences. They claim that Envision "uniformly failed to provide access to witness the inauguration and/or provide special access to the Mall for the inauguration and instead told students they were 'on their own.'" First Am. Compl. ¶ 53. They also claim that Envision failed to provide tickets to the inaugural parade or to an official Black Tie Gala inaugural ball, deliver many of the promised speakers, and provide adequate housing and transportation to the over 15,000 students who attended the Conferences. Id. ¶¶ 54-57. Envision also allegedly failed to disclose material facts regarding the Conferences, including: that Envision had made no arrangements to provide tickets so that Conference attendees could actually witness the inauguration or the inaugural parade; that the "Black Tie Gala Inaugural Ball" had no affiliation with any of the official inaugural balls held in Washington, D.C. and would be held in school gymnasium-style facilities where no formal wear was required; and that the Conferences were not "selective" or "exclusive." Id. ¶ 60. Plaintiffs contend that if they had known these facts, they would not have made the decision to pay Envision to attend the Conferences.

After many Conference attendees complained about their experiences, Envision established an informal claims procedure. Envision sent a claim form to approximately 2000 individuals who had contacted Envision to express a concern about the Conferences. The claim form allowed each attendee to indicate which events they had missed during the Conferences, and Envision assigned a reimbursement value to each missed event. On average, each claimant received about $400 in cash compensation. Each claimant also received a voucher worth $750 that could be applied toward tuition at future Envision programs.*fn2 In addition, Envision paid cash settlements (ranging from approximately $500 to full refunds) to about 150 individuals, some of whom had filed lawsuits in small claims courts. Two individuals also received settlements worth approximately $6000, one of whom allegedly suffered from physical injuries and emotional trauma and the other of whom filed a lawsuit in New York Supreme Court. Envision spent approximately $900,000 on all of these claims and settlements and issued vouchers worth approximately $1,458,000.*fn3 No determination as to liability has ever been made.

On March 19, 2009, several attendees at the Conferences brought a class action lawsuit in the United States District Court for the Northern District of Illinois against Envision and Congressional Youth Leadership Council ("CYLC"), an entity whose assets were purchased by Envision in 2007, alleging breach of contract. See Complaint, Bowman v. Cong. Youth Leadership Council, Civ. No. 09-1727 (N.D. Ill. filed Mar. 19, 2009). After Envision made offers of judgment under Rule 68 to the named plaintiffs in that action, Envision and CYLC moved to dismiss the class action as moot.*fn4 The plaintiffs then filed an amended complaint substituting four other class members as class representatives. Envision filed an answer to the amended complaint, and the parties made Rule 26 initial disclosures and began discussing the timing and logistics of discovery. In addition, the plaintiffs filed a motion for class certification, which was opposed by Envision.

The instant action was brought separately by Bina Radosti, on her own behalf and as next friend of Dash Radosti, and Joshua Rottman on May 13, 2009, against Envision and CYLC, alleging three causes of action: (1) violations of the D.C. Consumer Protection Procedures Act ("CPPA"), D.C. Code §§ 28-3901 et seq.; (2) negligent misrepresentation; and (3) breach of contract. See Compl. ¶¶ 91-109. The Radosti plaintiffs filed a motion before the Judicial Panel on Multidistrict Litigation seeking to transfer the Bowman case to this Court, and Envision filed a separate motion to transfer the Bowman case to this Court for consolidated proceedings.

B. Settlement Negotiations

Shortly after this action was filed, the parties in both this case and the Bowman case began to engage in formal and informal settlement negotiations. The parties held in-person meetings in Washington, D.C. and Chicago, Illinois and participated in numerous telephone conference calls. In addition, Envision provided informal discovery to Plaintiffs regarding its insurance coverage, the number of complaints it had received and resolved, the nature of the Conferences, and the current financial condition of the company.

On August 4, 2009, the parties conducted a formal mediation session before the Honorable Daniel Weinstein (Ret.) of Judicial Arbitration and Mediation Services. See Joint Mot. for Final Approval, Aff. of Hon. Daniel Weinstein ¶ 3. The mediation lasted for approximately 14 hours, during which time the parties engaged in extensive and sometimes contentious negotiations. See id. ¶ 6. Although the mediator believed at several times that no settlement would be reached, the parties ultimately reached an agreement to compromise the litigation. Id. The parties fully negotiated and agreed to the relief to be afforded the class members prior to beginning any discussions about attorneys' fees, costs, or class representative incentive awards. Id. ¶ 8.

Following the mediation, the Bowman plaintiffs agreed to voluntarily dismiss their pending case and consolidate their claims in this action. On August 13, 2009, the Bowman action was dismissed without prejudice pursuant to the settlement agreement. On November 19, 2009, the Plaintiffs filed an Amended Complaint against Envision incorporating the remaining class representatives from the Bowman action (Sally Rife, on her own behalf and as next friend of Franchesca Rife, Heather Kern, Zachary Johnson Burton, and Latiana Carter). The parties engaged in detailed negotiations and exchanged numerous drafts of the settlement agreement before presenting it to this Court for preliminary approval on December 10, 2009.

C. The Terms of the Settlement Agreement

The settlement agreement provides relief to the settlement class in the form of vouchers that can be used towards tuition at future Envision programs.*fn5 The settlement class is defined as all individuals who attended one of the Conferences (or, for those individuals under 18 years of age, their parent or legal guardian) who have not, prior to the certification of the settlement class, received from Envision any refund, voucher, or other compensation in settlement of a claim arising out of the Conferences. See Joint Mot. for Prelim. Approval, Class Action Settlement Agreement ("Settlement Agreement") at 3-4. The settlement agreement establishes a settlement claims procedure in which class members may apply for a settlement payment consisting of two vouchers worth $625 each (for a total value of $1250). The vouchers may be used within seven years of the date of issuance toward payment of tuition for a future Envision conference or program. The vouchers must be used one at a time unless tuition for a program is $3500 or more, in which case both vouchers may be used together.*fn6 The vouchers are fully assignable and transferable to anyone, but they may only be redeemed by (a) a family member*fn7 of a class member or (b) any other student who has a 3.5 or higher grade point average or who receives a teacher recommendation at the time of enrollment in the Envision conference or program.*fn8 In a First Amendment to the Settlement Agreement, Envision agreed to maintain a page on its website that describes how to redeem the vouchers and further explains that vouchers are fully transferable. See Joint Response to Br. Amicus Curiae, First Amendment to Class Action Settlement Agreement ("Settlement Agreement Amendment")*fn9 at 2. As amended, the settlement agreement also provides that at least ten percent of all attendees enrolling in any future Envision conference or program may use such vouchers. Id. at 1.

In the original settlement agreement, a class member seeking to qualify for the vouchers would have to complete and submit to Envision (within 90 days of the effective date of the settlement agreement) a verification form indicating that the student who attended one of the Conferences involuntarily missed one or more of the three key inaugural events (i.e., the inauguration, the inaugural parade, and the black tie inaugural ball). As amended in response to objections, the Settlement Agreement requires each class member to verify only that the student who attended one of the Conferences was "unsatisfied" with his or her experience. See Settlement Agreement Amendment at 2. Envision will provide monthly reports to class counsel indicating the number of claims received, Envision's determination on each claim, and the reasons supporting each determination during the claims period; Envision will also provide a final report within 30 days after the claims period. Id. at 3-4. In the event that a dispute arises as to whether a class member properly submitted a verification, Envision shall indicate that information in its monthly report, and Envision will attempt to resolve the dispute in good faith with class counsel. Id. at 2. If the dispute cannot be resolved, class counsel may seek intervention from this Court. Id.

The settlement agreement also provides that if Envision does not distribute at least $8 million worth of vouchers to class members, Envision shall establish a "Class Settlement Scholarship Fund" ("CSSF") in an amount equivalent to the difference between the voucher payments and $8 million. In effect, this provision creates a potential cy pres*fn10 fund and ensures that Envision will distribute at least $8 million in discounts off future programs. As amended, the settlement agreement provides that Envision shall award partial or total scholarships from the CSSF to an academically qualified applicant to attend an Envision program based on economic or other considerations. Envision shall be required to distribute scholarships totaling at least 15% of the CSSF each year until the CSSF is depleted, which must occur within seven years of its creation. In order to deplete the CSSF, the scholarships must not only be distributed but actually redeemed by individuals attending Envision programs. Envision may, in its discretion, distribute additional scholarships each year totaling up to 5% of the CSSF to independent, nationally recognized organizations that focus on education and/or leadership skills such as the National 4-H Council, Boy Scouts of America, and the Girl Scouts of the USA. Envision shall include on all program websites information about how students may apply for scholarships, and class members will be eligible for these scholarships. Envision shall administer the CSSF separately from any other tuition assistance or scholarship program, and Envision will not be required to include in or add to the CSSF any amounts for unused vouchers distributed to class members. The settlement agreement calls for Envision to provide semiannual reports to class counsel on the administration of the CSSF, including amounts awarded and redeemed and an accounting of any balance remaining until the CSSF is depleted.

As part of the settlement agreement, class members agree to unconditionally release any and all claims against Envision, whether known or unknown, arising out of the Conferences and the allegations in the Radosti and Bowman complaints. Class members further agree that the voucher payments are their exclusive remedy for their claims. The agreement provides that in addition to the voucher payments, Envision agrees to provide $2500 to each of the six named class representatives, subject to court approval. Envision also agrees to pay, subject to court approval, a total award to class counsel*fn11 of $1,455,000 for expenses and fees. The agreement states that no portion of the settlement payments shall be reduced in any way to pay class representatives or class counsel.

C. Form and Manner of Notice to the Class, Objections & Opt-Outs

On December 17, 2009, this Court granted preliminary approval of the settlement agreement and conditionally certified the settlement class. Pursuant to the settlement agreement, notice was provided to 13,415 class members by electronic mail and 343 class members by mail. See Joint Mot. for Final Approval, Aff. of Jennifer M. Keough ¶ 3. Envision's notice provider also hosted a website with information regarding the settlement agreement that received 1125 hits through March 11, 2010. See id. Class members were informed of their opportunity to request exclusion from the settlement class, i.e., opt out, or object to the terms of the settlement agreement. Objections and opt-outs were due within 45 days after notice was sent.

Class counsel received 15 total objections, one of which was untimely.*fn12 This represents approximately one tenth of one percent of the settlement class. Many of the objectors indicated that they were dissatisfied with their experience at the Conferences and would never attend another Envision program. Several objectors indicated that it would be impossible or impractical to attend a future Envision program, either because they would no longer be eligible students or because international travel would be required in order to attend.*fn13 These objectors generally expressed a preference for a cash settlement in lieu of a voucher that they would be unlikely to use. Several objectors also expressed concern that the vouchers would only cover a portion of the tuition at future programs, so they would be required, by their calculations, to spend hundreds, if not thousands, of additional dollars in order to take advantage of the vouchers. Several objectors complained that even though the vouchers would be transferable to family members or other qualified attendees, they did not have eligible family members and it would be difficult or burdensome for them to locate other qualified individuals who might be interested in purchasing a voucher. One objector expressed concern that named class representatives and Class Counsel receive cash while class members only qualify for tuition vouchers. Several objectors complained that the settlement agreement did not sufficiently punish Envision for its misconduct and suggested that Envision be required to provide at least a partial refund.

Class counsel also received 25 total opt-outs.*fn14 Several of the individuals seeking exclusion from the settlement class indicated that they enjoyed their experience at the Conferences and did not want to be a part of this litigation, while others gave no reason for opting out. Only two of the opt-outs indicated that they were displeased with the settlement.

D. Joint Motion for Final Approval and Fairness Hearing

On March 12, 2010, after the objections and opt-outs were received, the parties filed their Joint Motion for Final Approval of the Class Action Settlement. On March 16, 2010, Plaintiffs filed a Motion for Attorneys' Fees, Expenses, and Class Representative Service Awards. On April 14, 2010, the Attorneys General of twenty-two states (including the District of Columbia) filed a Brief Amicus Curiae Opposing Final Approval of the Proposed Settlement Agreement. The Attorneys General contend that the settlement agreement should be subjected to heightened scrutiny as a coupon settlement pursuant to the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of title 28 of the United States Code) ("CAFA"). The Attorneys General also argue that the voucher payments offer low value compared to disproportionate attorney and incentive fees and do not represent a reasonable settlement in light of the strength of Plaintiffs' case. The Attorneys General also criticize the Class Settlement Scholarship Fund because unlike a true cy pres fund, Envision retains control over the fund and has nearly complete discretion over how to disperse the funds.

The Court ordered the parties to file a brief in response to the Attorneys General's opposition, which they filed on April 30, 2010. In their response brief, the parties noted that they had amended the settlement agreement so as to provide that any class member who was dissatisfied could obtain vouchers, whether or not he or she missed any of the three key inaugural events. The amended settlement agreement also clarified some aspects of how the CSSF would be administered to address some of the Attorneys General's concerns. The response brief also addressed other arguments raised by the Attorneys General, which shall be addressed below.

The Court held a Fairness Hearing on May 25, 2010, with counsel for the parties as well as a legal representative of the Attorneys General present. None of the potential class members ...


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