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Richardson v. L'Oreal USA, Inc.

United States District Court, District Circuit

November 6, 2013

ALEXIS RICHARDSON, et al., Plaintiffs,
v.
L'OREAL USA, INC., Defendant.

MEMORANDUM OPINION

JOHN D. BATES, District Judge.

Before the Court is [17] plaintiffs' motion for conditional class certification for the purposes of settlement and motion for final approval of the class settlement. On June 27, 2013, this Court entered an Order preliminarily approving the settlement and preliminarily certifying the settlement class. [ECF No. 14]. Pursuant to that Order, the parties disseminated notice to the settlement class. Declaration of Compliance With Class Notice Procedures [ECF No. 15]. Several class members, including Melissa Holyoak, filed objections to the settlement under Federal Rule of Civil Procedure 23(e)(5), and plaintiffs filed a reply in opposition to those objections. [ECF Nos. 19, 21, 23]. The fairness hearing was held on October 11, 2013, at which time the Court heard argument from the parties and from one of the objectors. For the reasons explained below, the Court concludes that final certification of the class and final approval of the settlement are not warranted.

BACKGROUND

This case is about purportedly misleading labels on several L'Oreal hair product brands. Namely, L'Oreal described some of its products as "salon-only" when in fact the products were also sold in mass-market retail stores. Plaintiffs filed this action on April 15, 2013, alleging that defendant L'Oreal falsely and deceptively labeled its Matrix Biolage, Redken, Kerastase, and Pureology products as available only in salons when the products can be purchased in non-salon retail establishments including Target, Kmart, and Walgreens. See Compl. [ECF No. 1] ¶¶ 1, 29. Plaintiffs allege that the salon-only label implies a superior quality product and builds a cachet that allows L'Oreal to demand a premium price. See id. ¶ 27. L'Oreal claims that the products are sold outside of salons without its permission. Plaintiffs acknowledge that L'Oreal has developed a campaign to fight the diversion-i.e., the sale of salon-only products through stores that do not have a salon-for each of the product lines at issue in this litigation. See id. ¶¶ 30-37. But plaintiffs allege that, despite L'Oreal's efforts, the products are available in non-salon establishments, and they argue that L'Oreal's labeling and advertising for these products is hence deceptive and misleading. See id. ¶ 46. This case was originally filed last year in the Northern District of California, at which point it related only to one product and one plaintiff. See Ligon v. L'Oreal USA, Inc., No. 12-4585 (N.D. Cal. Aug. 30, 2012). After five plaintiffs were added, the plaintiffs voluntarily dismissed that action and refiled here in April on behalf of all six representative plaintiffs and with respect to more products. Plaintiffs originally sought damages, but upon refiling they seek only an injunction.

TERMS OF THE SETTLEMENT

Soon after filing this case, the parties filed a motion for preliminary approval of their proposed settlement, which this Court granted. [ECF No. 14]. The nationwide settlement class includes all consumer purchasers from August 30, 2008 to June 27, 2013, [1] and excludes retail purchasers, stylists, and the usual interested parties.[2] The only relief for class members provided in the settlement agreement is injunctive: L'Oreal agrees to remove the offending terms from the labels of certain brands, for a minimum period of five years.[3] After five years, L'Oreal can resume using the terms on products for which mass-market sales (in other words, non-salon sales) have been reduced by 60%. If the settlement is approved, the injunction gives L'Oreal some time to remove the offending terms to allow for manufacturing to catch up.

The release contained in the settlement agreement would release L'Oreal from all class actions arising out of the conduct at issue, including damages class actions, but it would not release L'Oreal with respect to individual actions arising out of the conduct at issue.[4] As part of the settlement, L'Oreal agreed not to object to an award of attorney's fees of up to $950, 000- including fees, costs, and expenses-which is the amount requested by plaintiffs' counsel.[5] The settlement agreement also provides for incentive awards of $1, 000 to each class representative.[6] The parties disseminated notice in the form approved in the Court's preliminary approval order: L'Oreal published a notice in USA Today for four days and made a website available for a month.[7]

OBJECTIONS

Class counsel identified three objections that had been received as of October 2, 2013. One of those objections was timely filed with the Court-Melissa Holyoak's objection-and it was comprehensive enough that it covered the substance of the potentially meritorious objections by the other two objectors.[8] Melissa Holyoak ("CCAF"), a class member, [9] is represented by her colleague at the Center for Class Action Fairness, Adam Schulman. Mr. Schulman appeared at the fairness hearing to object to plaintiffs' standing to seek injunctive relief, conditional class certification, the fairness of the settlement, the requested amount and distribution of attorney's fees, and the amount of the incentive award requested for each of the class representatives. See generally Objection of Melissa Holyoak [ECF No. 19] ("Objections"). Ms. Holyoak's objections are addressed in further detail in the Court's discussion of whether final class certification and settlement approval is warranted.

STANDARD OF REVIEW

A class can be certified for "settlement purposes only" and such practice has become increasingly common. See Radosti v. Envision EMI, LLC , 717 F.Supp.2d 37, 50 (D.D.C. 2010) (citing Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 614 (1997)). Class actions seeking class certification and settlement at the same time, however, require "closer judicial scrutiny" than settlements that are reached after class certification. Manual for Complex Litigation, Fourth, § 21.612 (2004). Class actions that settle early in the case "sometimes make meaningful judicial review more difficult and more important." Id .; see also Amchem , 521 U.S. at 620 (observing that "settlement-only class certification" requires "undiluted, even heightened" attention that is "of vital importance"); D'Amato v. Deutsche Bank , 236 F.3d 78, 85 (2d Cir. 2001) (calling for "a higher degree of scrutiny in assessing [the] fairness" of settlements negotiated prior to class certification and the need to examine the "negotiating process leading up to the settlement as well as the settlement's substantive terms"). Manageability of the action at trial is the only variable removed from the class certification equation when assessing certification for settlement purposes; plaintiffs bear the burden of showing that all other requirements of Rule 23 are satisfied. Amchem Prods. , 521 U.S. at 620.

A proposed class action settlement requires the Court's approval. Fed.R.Civ.P. 23(e). The Court has the discretion to approve or reject the proposed settlement. In re Lorazepam & Clorazepate Antitrust Litig. , 205 F.R.D. 369, 375 (D.D.C. 2002). When deciding whether to grant approval, the Court must strike a balance between a rubber-stamp approval and "the detailed and thorough investigation that it would undertake if it were actually trying the case." Meijer, Inc. v. Warner Chilcott Holdings Co. III, Ltd. , 565 F.Supp.2d 49, 54 (D.D.C. 2008) (internal citation omitted). Although the Court should undertake careful scrutiny of the settlement terms, the discretion to reject a settlement is "restrained by the principle of preference' that encourages settlements." In re Lorazepam , 205 F.R.D. at 375 (quoting Pigford v. Glickman , 185 F.R.D. 82, 103 (D.D.C. 1999)); see also United States v. District of Columbia , 933 F.Supp. 42, 47 (D.D.C. 1996) ("The trial court in approving a settlement need not inquire into the precise legal rights of the parties nor reach and resolve the merits of the claims or controversy, but need only determine that the settlement is fair, adequate, reasonable and appropriate under the particular facts and that there has been valid consent by the concerned parties.") (internal quotations omitted).

DISCUSSION

CCAF's objections fall into three broad categories: CCAF argues that plaintiffs do not have standing under Article III to seek injunctive relief, that the class cannot be certified under Rule 23(b)(2), and that the settlement is not fair, reasonable, or adequate. The Court will address each argument in turn.

I. PLAINTIFFS HAVE STANDING TO OBTAIN INJUNCTIVE RELIEF

CCAF's objection that the named plaintiffs do not possess Article III standing to seek injunctive relief must be addressed first. Objections [ECF No. 19] 12. Standing is a "threshold question in every federal case." Warth v. Seldin , 422 U.S. 490, 498 (1975). To have Article III standing, a plaintiff must establish: that "[she has] suffered an injury in fact-an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical"; that "there [is] a causal connection between the injury and the conduct complained of"; and that "it [is] likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Lujan v. Defenders of Wildlife , 504 U.S. 555, 560-61 (1992). A plaintiff must also establish standing for each form of relief sought. Summers v. Earth Island Inst. , 555 U.S. 488, 493 (2009). When seeking prospective relief, such as an injunction, a plaintiff's standing "depend[s] on whether he [is] likely to suffer future injury" from the challenged conduct. City of L.A. v. Lyons , 461 U.S. 95, 102, 105 (1983) ("injury or threat of injury must be both real and immediate, ' not conjectural' or hypothetical'"). Moreover, "[p]ast exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief... if unaccompanied by any continuing, present adverse effects." O'Shea v. Littleton , 414 U.S. 488, 495-96 (1974); see Summers , 555 U.S. at 493 ("To seek injunctive relief, a plaintiff must show that he is under threat of suffering injury in fact'"); Tucker v. Phyfer , 819 F.2d 1030, 1034-35 (11th Cir. 1987) (noting, in rejecting class certification under Rule 23(b)(2), that "a plaintiff who has standing to bring a damages claim does not automatically have standing to litigate a claim for injunctive relief arising out of the same set of operative facts"). In the class action context, standing depends on the representative plaintiffs: at least one must be able to show that she is likely to suffer future injury because of the defendant's conduct. McNair v. Synapse Grp., Inc. , 672 F.3d 213, 223 (3d Cir. 2012). In other words, plaintiffs here cannot establish standing by relying on the likelihood of future injury to absent class members. Id .; O'Shea , 414 U.S. at 495-96.

CCAF raises two reasons that plaintiffs do not have standing to seek injunctive relief here. Those arguments both relate to a purported failure by the named plaintiffs to establish that they are likely to suffer future injury. For several reasons, though, the Court finds that plaintiffs have established the required likelihood of a particularized future injury.

CCAF first argues that plaintiffs have not sufficiently alleged that they are likely to purchase the products at issue in the future. Instead, emphasizing the language in the complaint ("Plaintiffs were deceived and misled... and therefore suffered injury"), CCAF urges that plaintiffs have alleged only that they have suffered discrete harm in the past. Objections [ECF No. 19] 13. In similar cases involving past purchasers seeking injunctive relief, courts have differed on the showing plaintiffs must make to have standing. For example, courts have reached different conclusions about whether plaintiffs who disclaim any intent to purchase the product at issue in the future have standing. Compare Delarosa v. Boiron, Inc., No. 10-1569, 2012 WL 8716658, at *5 (C.D. Cal. Dec. 28, 2012) (no threat of future injury because plaintiff would not purchase ineffective homeopathic product again); Bohn v. Boiron, Inc., No. 11-8704, 2013 WL 3975126, at *4 (N.D. Ill. Aug. 1, 2013) (same); Wang v. OCZ Tech. Grp., Inc. , 276 F.R.D. 618 (N.D. Cal. 2011) (no threat of future injury because plaintiff already purchased electronics and did not allege he would purchase again); Robinson v. Hornell Brewing Co., No. 11-2183, 2012 WL 1232188, at *4 (D.N.J. Apr. 11, 2012) (no threat of future injury because plaintiff stated intent never to purchase product again); with Larsen v. Trader Joe's Co., No. 11-5188 , 2012 WL 5458396, at *4 (N.D. Cal. June 14, 2012) (plaintiffs had standing even though they would not purchase the products again); Henderson v. Gruma Corp., No. 10-4173 , 2011 WL 1362188, at *7-8 (C.D. Cal. Apr. 11, 2011) (plaintiffs had standing even though they likely would not purchase the products again). Where plaintiffs affirmatively state that they intend to purchase the products in the future, courts have found standing to seek injunctive relief. See, e.g., Ries v. Arizona Beverages USA LLC , 287 F.R.D. 523, 533-34 (N.D. Cal. 2012) ("[T]he record is devoid of any grounds to discount plaintiffs' stated intent to purchase in the future, thereby satisfying the requisites for standing."). In this context, an ongoing subscriber relationship is the clearest analogue to the prototypical (b)(2) class seeking injunctive relief for employment discrimination. See McNair , 672 F.3d at 223-27. But a subscriber relationship is not the only way for plaintiffs to demonstrate that they have standing. After all, plaintiffs' standing depends on whether they are "likely to suffer future injury, " and allegations that plaintiffs intend to purchase the products in the future may establish that likelihood. Lyons , 461 U.S. at 105 (emphasis added). Such allegations provide concrete indications that plaintiffs are likely to be harmed in the future, rising above mere speculation about possible future purchases. See Lujan , 504 U.S. at 563-64 (no standing for plaintiff with no current plans to return to site of alleged injury).

Here, plaintiffs have not indicated that they do not intend to purchase the products in the future. Cases where plaintiffs make such statements usually involve products that do not work as advertised-for example, certain homeopathic products, Delarosa, 2012 WL 8716658 at *5; Bohn, 2013 WL 3975126 at *4-or plaintiffs who affirmatively proclaim their resolve never to purchase the product again, Robinson, 2012 WL 1232188 at *4.[10] By contrast, this case involves representations not about the product's performance, but about its pedigree. See Tr. of Fairness Hr'g [ECF No. 25] 8 (arguing that this is not a case where "[plaintiffs have] been duped and [they are] not going to buy this again. That's not what we have here."). As a result, the named plaintiffs may have good reasons, unrelated to the salon-only labels, for ...


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