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Linneman v. Vita-Mix Corp.

United States District Court, S.D. Ohio, Western Division

June 25, 2019

Vicki Linneman, et al., Plaintiffs,
v.
Vita-Mix Corporation, et al., Defendants.

          ORDER GRANTING IN PART CLASS COUNSEL'S MOTION FOR ATTORNEYS' FEES, COSTS, AND CLASS REPRESENTATIVE AWARDS, GRANTING REQUEST TO RECEIVE EXPERT TESTIMONY, AND GRANTING REQUEST FOR STATUS CONFERENCE

          Susan J. Dlott United States District Court Judge.

         This matter is before the Court on Class Counsel's Motion for Attorneys' Fees, Costs, and Class Representative Service Awards. (Doc. 42.) Plaintiffs request approval of $7, 188, 846.25 in attorneys' fees, $41, 194.77 in expenses, [1] and $3, 000 in service awards for each of the two named Plaintiffs. Although Defendants Vita-Mix Corporation, Vita-Mix Management Corporation, and Vita-Mix Manufacturing Corporation (collectively, “Vita-Mix”) do not object to expenses or service awards, they strongly oppose the request for attorneys' fees. For the reasons that follow, the Court will approve an award of expenses and service awards. Although the Court will award reasonable attorneys' fees in this case, it is unable to issue a final ruling on fees until it receives supplemental filings as detailed herein.

         I. Background and Procedural History

         A. Case History and Settlement

         This consumer class action was filed on November 19, 2015. Plaintiffs alleged that Vitamix[2] blenders were defective because a seal in the container deposited tiny black polytetrafluoroethylene (“PTFE”) flecks into the blended food and drink. (Doc. 1.) Plaintiffs filed a First Amended Class Action Complaint on February 26, 2016, seeking certification of a nationwide class of purchasers of Vitamix blenders and asserting the following claims: (1) breach of express warranty; (2) breach of implied warranty of merchantability; (3) negligent design, engineering, and manufacture; (4) fraud and fraudulent concealment; (5) unjust enrichment; (6) breach of contract; and (7) violation of the Ohio Consumer Sales Practices Act. (Doc. 18.)

         In April 2016, Defendants filed a motion for partial dismissal of this action (Doc. 20) as well as an answer with a jury demand (Doc. 21). The parties also engaged in substantial discovery, which included written discovery, the production of thousands of pages of documents, discovery from third parties, product testing, a corporate representative deposition, and depositions of several fact witnesses. (Doc. 35-2 at PageID 471.)

         While the dismissal motion was pending, the parties began settlement negotiations and attended a settlement conference before United States District Court Judge Michael R. Barrett on August 3, 2016. Although no settlement was reached, ongoing negotiations continued. The parties met for an additional conference with the Honorable Michael R. Barrett on November 30, 2016, at which the parties negotiated a Memorandum of Understanding of substantive terms for a settlement. The parties spent the early part of 2017 negotiating the details of a Class Action Settlement Agreement and Release (“Settlement Agreement”) (Doc. 35-2). However, as set forth in the Settlement Agreement, the parties did not reach an agreement on the amount of attorneys' fess and expenses Vita-Mix would pay to class counsel, except that the parties agreed class counsel is entitled to an award of attorneys' fees and expenses and that Defendants have a right to object to and contest a fee application. (Id. at 471.)

         In September 2017, Plaintiffs filed an amended motion for preliminary approval of the Class Action Settlement. (Doc. 35.) Section 3.8 of the Settlement Agreement identified the following Class for purposes of a settlement:

All Persons domiciled within the United States and its territories who: (a) own a Vita-mix household blender with a blade assembly dated on or after January 1, 2007 but before October 1, 2016; or (b) own a Vita-mix commercial blender that was (i) purchased on or after September 15, 2015 but before August 9, 2016 or before April 7, 2017 in the case of a commercial blender from the XL product line, (ii) never used in connection with the Replacement Seal, and (iii) purchased through a third-party, such as a dealer, distributor, or restaurant supply store and not acquired directly from Vita-Mix. Excluded from the Class are Defendants and their officers and directors; Class Counsel and their partners, associates, lawyers, and employees; and the judicial officers and their immediate family members and associated Court staff assigned to this case. Also excluded from the Class are persons who own one or more of the blenders described in this Section received as a benefit, gift, award, or compensation directly from Vita-Mix in connection with such person's work for Vita-Mix unless such person separately purchased any blender(s) described in this Section, in which case their eligibility for class membership and benefits is limited to any such purchased blender(s).

(Doc. 35-2 at PageID 476.) Those Class Members described under Section 3.8(a), the consumer class, may select either a Gift Card, subject to terms and conditions, or a Replacement Blade Assembly subject to terms and conditions. (Id. at PageID 494, § 6.3(a).) All other Class Members, or those who purchased commercial blenders, are eligible for a Replacement Blade Assembly. (Id. at PageID 494, § 6.3(b).) A Replacement Blade Assembly is a “blade assembly containing a Replacement Seal” and “does not include a container, lid, or anything else for use with a Vita-Mix blender.” (Id. at PageID 481.) A “Replacement Seal” is a “blade assembly top seal employing different materials and technology from the seal incorporated into Vita-Mix household and commercial blenders beginning in January 2007” for which independent testing indicates does not produce black flecks that prompted the lawsuit. (Id.)

         A Gift Card is defined as “an electronic gift card subject to the terms and conditions set forth in Section 6.4[.]” (Id. at PageID 478.) Gift Cards are subject to the following terms and conditions:

a. Each Gift Card will be issued in the face amount of $70, except as described in Section 6.4(b) below.
b. Class Members described in Section 3.8(a) above who own multiple blenders within their household or at the same address are eligible for a Gift Card in the face amount of $140.
c. Defendants together with the Settlement Administrator will design electronic Gift Cards. Class Counsel will review and approve the form of Gift Card before they are provided to any Class Member. Class Counsel's approval will not be unreasonably withheld.
d. Each Gift Card will include a unique authorization code identifying the Gift Card as valid.
e. Each Gift Card or unique authorization code may be used one time for or toward the purchase of any Vita-Mix blender or container. Any unused amount will be forfeited and will not be refunded or credited to the user or any account affiliated with the user.
f. Gift Cards may only be used at the Vita-Mix website (www.vitamix.com) or any Vita-Mix Store.
g. Gift Cards are transferable, have no expiration date, and may be used in connection with any promotion. However, no more than two (2) Gift Cards each with a face amount of $70 or one (1) Gift Card with a face amount of $140 may be used in a single transaction or by a single household or address.
h. Within sixty (60) days of the Effective Date, Defendants will directly deliver by mail or electronic mail Gift Cards to Class Members who selected them as a benefit and who submit Valid Claims.

(Id. at PageID 494-95.) On May 3, 2018, the Court entered an Order Granting Final Approval of Class Action Settlement, but reserved the issue of attorneys' fees, costs, and service awards for a separate ruling. (Doc. 91).

         B. Litigation of Attorneys' Fees, Costs, and Class Representative Awards

         The parties' dispute over an award of attorneys' fees has dominated the docket of this case since Plaintiffs' Motion for Attorneys' Fees, Costs, and Class Representative Service Awards (Doc. 42) was filed on January 31, 2018. Initially, the Motion was filed without the support of time sheets and the professional background information of its billing attorneys so as to understand the requested billing rates of counsel. After the Court ordered that this additional information be supplied, Class Counsel filed a Supplemental Brief in Support of Motion for Attorneys' Fees, Costs, and Class Representative Service Awards (Doc. 47) as well as supporting affidavits from the attorneys and paralegals who worked on this case (Doc. 48) and affidavits of the named plaintiffs (Doc. 49). Class Counsel also filed time entries from July 14, 2015 to February 22, 2018 with a privilege log (Doc. 50) and submitted an unredacted version for in chambers review (Doc. 53). Class Counsel subsequently filed an amended and corrected version of their time entries (Doc. 51).

         On March 14, 2018, Defendants filed a Response in Opposition to Class Counsel's Motion for Attorneys' Fees (Doc. 72), supported by 230 pages of exhibits (Doc. 70). Defendants also moved the Court pursuant to 28 U.S.C. § 1712(d) to consider expert testimony by Stephen L. Buffo.[3] (Doc. 69).

         On April 10, 2018, Class Counsel filed a Reply in Support of their Motion for Attorneys' Fees, Costs, and Class Representative Service Awards (Doc. 87), which included an updated lodestar calculation from January 27, 2018 through April 6, 2018 (Doc. 87-3). They also filed redacted time entries (Doc. 88), unredacted time entries for in camera review by the Court (Doc. 89), and amended redacted time entries (Doc 90).

         With leave of Court, on June 19, 2018, Defendants filed a Surreply Opposing Class Counsel's Motion for Attorneys' Fees (Doc. 109), with over 250 pages of supporting exhibits (Docs. 104, 105). On June 28, 2018, the Court held a hearing on the matter of attorneys' fees, expenses, and service awards (Doc. 115). At the conclusion of the hearing, the Court requested that Class Counsel submit time records and claims data through mid-November 2018 when claims data was expected to be more complete. That deadline was subsequently extended at the request of the parties.

         On November 30, 2018, Class Counsel filed unredacted detailed time entries from April 7, 2018 through November 23, 2018 with a privilege log (Doc. 131), redacted time entries and supporting affidavits (Doc. 132), updated claims data (Docs. 133, 134), and a supplemental brief (Doc. 135). On December 21, 2018, Defendants filed a Notice of a year-old Offer of Judgment of attorneys' fees and expenses “up to $3, 100, 000.00[.]” (Doc. 137-1 at PageID 4993.) Defendants also filed a supplemental brief (Doc. 142) supported by over 400 pages of affidavits and exhibits (Doc. 141). Despite lengthy continued settlement negotiations, in May 2019, the Court was advised that the parties were unable to resolve the dispute over attorneys' fees through mediation.

         C. Objections

         The following Class Members filed objections relating to an award of attorneys' fees in this case: Kamala Bennett, Chris Brenn, Richard Burlingame, Elizabeth M. Cosin, Thomas L. Cox, Jr., Esq., Franklin DeJulius, Ryan Gibbs, Jon Lorenzo, Avigail Ruth Short, and Todd A. Thomas. Gibbs also objected to service awards. These objections will be addressed infra.

         II. Request for Attorneys' Fees, Expenses, and Service Awards

         A. Authority to Award Fees and Expenses

         Class Counsel move the Court to approve an award of attorneys' fees in the amount of $7, 188, 846.25 and expenses in the amount of $41, 194.77 under Fed.R.Civ.P. 23(h) and section 5.2(b) of the Settlement Agreement. “In a certified class action, the court may award reasonable attorney's fees and costs that are authorized by law or by the parties' agreement upon motion under Fed.R.Civ.P. 54(d)(2) and 23(h).” Lowther v. AK Steel Corp., No. 1:11-cv-877, 2012 WL 6676131, at *1 (S.D. Ohio Dec. 21, 2012).

         When assessing the reasonableness of a fee petition, the district court has the discretion to select the method by which it calculates an award of fees: either the percentage-of-the-fund approach or the lodestar approach. In re Cardinal Health Inc. Sec. Litig., 528 F.Supp.2d 752, 760 (S.D. Ohio 2007). The “lodestar” is the number of hours reasonably expended on litigation multiplied by a reasonable hourly rate, and it is presumed to yield a reasonable fee. City of Burlington v. Dague, 505 U.S. 557, 562 (1992); Gonter v. Hunt Valve Co., Inc., 510 F.3d 610, 616 (6th Cir. 2007). The percentage-of-the-fund method is when the Court determines a percentage of the settlement to award to class counsel. In re Telectronics Pacing Sys., Inc., 137 F.Supp.2d 1029, 1041 (S.D. Ohio 2001). District courts typically have discretion to select the more appropriate method for calculating attorneys' fees in light of the circumstances of the actual case before it. Id. at 1044.

         The Court must ensure that the fee ultimately awarded is reasonable under the circumstances in consideration of six factors: (1) the value of the benefit to the class; (2) the value of the services on an hourly basis; (3) whether attorneys took the case on contingency; (4) rewarding attorneys who produce societal benefits in order to maintain an incentive for others; (5) the litigation's complexity; and (6) the professional skill and standing of class and defense counsel. Chapman v. Tristar Prods., Inc., Nos. 16-cv-1114, 17-cv-2298, 2018 WL 3752228, at *3 (N.D. Ohio Aug. 3, 2018) (Gwinn, J.) (citing Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th Cir. 1996)).

         The Court finds that it has sufficient authority per the agreement of the parties in the Settlement Agreement to award attorneys' fees, expenses, and service awards. Rule 23(h) states that “[i]n a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement.” Fed.R.Civ.P. 23(h). Under Section 5.2(b) of the Settlement Agreement, the parties agreed that by January 31, 2018, Class Counsel shall file their Fee Application. (Doc. 35-2 at PageID 511.) The “Fee Application” is defined as “the application to be filed by Class Counsel no later than January 31, 2018 by which they will seek an award to be paid by Defendants of attorneys' fees and reimbursement of costs incurred by them in prosecuting the Lawsuit, as well as Service Awards to be paid to the Class Representatives and reimbursement by Defendants for Administration and Notice Expenses.” (Id. at PageID 478.) Section X governs the Fee Application as follows:

10.1 Class Counsel shall file a Fee Application for an award of Attorneys' Fees and Expenses, including Administration and Notice Expenses, no later than January 31, 2018 pursuant to Rule 23(h), Rule 54(d)(2), [4] and the Court's Local Rules.
10.2 The Parties have not reached any agreement on the amount of Attorneys' Fees and Expenses Defendants will pay to Class Counsel, except that the Parties agree Class Counsel is entitled to an award of Attorneys' Fees and Expenses and that Defendants have the right to object to and to contest Class Counsel's Fee Application. Defendants have no liability or obligation with respect to any Attorneys' Fees and Expenses, Administration and Notice Expenses, or Service Award to the Named Plaintiffs except as awarded by the Court. Class Counsel agree that upon payment to Class Counsel of any amounts awarded by the Court, Defendants' obligations to Class Counsel with respect to any Attorneys' Fees and Expenses or Service Award to the Named Plaintiffs shall be fully satisfied and discharged. It is not a condition of the Settlement or this Agreement that the Court award any particular amount of Attorneys' Fees and Expenses or any particular amount as a Service Award. Either Party has the right to appeal a Court award of Attorneys' Fees and Expenses.
10.3 If the Court makes an award of Attorneys' Fees and Expenses, Defendants will pay such award within ten (10) business days following the Effective Date or following the entry of a final, non-appealable order relating to Service Awards or to Attorneys' Fees and Expenses, whichever is later.

(Id. at PageID 511-12.) “Attorneys' Fees and Expenses” is defined as “the amount of any attorneys' fees and reimbursement of litigation costs awarded to Class Counsel under their Fee Application.” (Id. at PageID 475.)

         B. Authority to Award Service Awards

         Class Counsel also seek $3, 000 service awards for each of the two named Plaintiffs. In an addition to addressing the matter of attorneys' fees and expenses, the Settlement Agreement carves out authority for the Court to issue Service Award payments to the named Plaintiffs:

Subject to approval by the Court, Defendants will also pay each of the Named Plaintiffs a Service Award pursuant to the provisions of this Section. Each Service Award will consist of a $3, 000.00 payment to each of the Named Plaintiffs solely as compensation for their time and effort associated with their participation in this Lawsuit.

(Id. at PageID 510.) “Service Award” is defined as “a reasonable payment, subject to Court approval, made to each of the Named Plaintiffs to compensate for his or her efforts in pursuing the Lawsuit.” (Id. at PageID 481.) Having found that the Court has authority to consider and award attorneys' fees, expenses, and service awards per the agreement of the parties, the Court will turn to the merits, starting with the matter of attorneys' fees and expenses.

         C. Effect of Class Action Fairness Act on Attorneys' Fee Calculation

         As the Settlement Agreement establishes, there are two classes to the settlement, a commercial class, eligible only for a Replacement Blade Assembly, and a household/consumer class, eligible for either a Replacement Blade Assembly or the Gift Card. Defendants argue that the Gift Card option is a “coupon, ” and the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1712 therefore controls the manner by which an award of attorneys' fees is to be calculated. Plaintiffs argue that this is not a coupon settlement because the primary benefit is a Replacement Blade Assembly, not a Gift Card, and that CAFA does not control calculation of attorneys' fees. The Court will address this threshold dispute before considering the merits of the fee request.

         “Congress passed CAFA ‘primarily to curb perceived abuses of the class action device.'” In re HP Inkjet Printer Litig., 716 F.3d 1173, 1177 (9th Cir. 2013) (citing Tanoh v. Dow Chem. Co., 561 F.3d 945, 952 (9th Cir. 2009)). “One such perceived abuse is the coupon settlement, where defendants pay aggrieved class members in coupons or vouchers but pay class counsel in cash.” Id. (citing generally Sarah S. Vance, A Primer on the Class Action Fairness Act of 2005, 80 Tul. L. Rev. 1617, 1632-33 (2006); Geoffrey P. Miller & Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp. Probs. 97, 102, 107-12 (1997)). CAFA codifies Congress's effort to regulate coupon settlements through increased judicial scrutiny of coupon settlements generally and rules governing the award of attorneys' fees in coupon cases. Id. at 1178; 28 U.S.C. §§ 1712(a)-(e).

         The term “coupon” is undefined by CAFA. In Tyler v. Michaels Stores, Inc., 150 F.Supp.3d 53, 60 (D. Mass. 2015), the district court held that a “coupon” under 28 U.S.C. § 1712 is “when class members must transact business with the defendant to obtain the benefit of the settlement.” For those Class Members who elect a Gift Card benefit under the Settlement Agreement, the definition is apt here, as Gift Cards may only be used to purchase a blender or container directly from the Vita-Mix website or Vita-Mix store. (Doc. 35-2 at PageID 495.) It is undisputed that Class Members will have to spend money to utilize their Gift Card, as Vita-Mix containers and blenders generally exceed the $70 Gift Card face value. A quick review of the vitamix.com website confirms that blenders start at list price of $289.95 and blender containers start at a list price of $144.95. Vitamix.com, https://www.vitamix.com/us/enus/shop/Blenders (last visited May 23, 2019). In addition to having to spend money to utilize the Gift Cards, other limitations restrict their use. Gift Cards are good for one-time use and unused funds are forfeited; Gift Cards may only be redeemed directly with Vita-Mix and not third-party retailers; such as Costco; and no more than two Gift Cards may be stacked. The Court is satisfied that these attributes considered together render the Gift Cards coupons under 28 U.S.C. § 1712. See also Chapman, 2018 WL 3752228, at *4 (finding “credits” to be coupons under CAFA).

         28 U.S.C. § 1712 controls calculation of attorneys' fees involving a coupon settlement. The language of the statute, widely agreed to be confusingly drafted, [5] states:

(a) Contingent fees in coupon settlements. -- If a proposed settlement in a class action provides for a recovery of coupons to a class member, the portion of any attorney's fee award to class counsel that is attributable to the award of the coupons shall be based on ...

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