McDonough v. Toys “R” US, Inc.

• Citation: 80 F.Supp.3d 626
• Decision Date: 21 January 2015
• Docket Number: 2:09–cv–06151–AB.,Nos. 2:06–cv–0242–AB,s. 2:06–cv–0242–AB
• Parties: Carol M. McDONOUGH, et al., Plaintiffs, v. TOYS “R” US, INC., d/b/a Babies “R” US, et al., Defendants. Ariel Elliott, et al., Plaintiffs, v. Toys “R” US, Inc., d/b/a Babies “R” US, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

80 F.Supp.3d 626

Carol M. McDONOUGH, et al., Plaintiffs

v.TOYS “R” US, INC., d/b/a Babies “R” US, et al., Defendants.

Ariel Elliott, et al., Plaintiffs

v.Toys “R” US, Inc., d/b/a Babies “R” US, et al., Defendants.

Nos. 2:06–cv–0242–AB

2:09–cv–06151–AB.

United States District Court, E.D. Pennsylvania.

Signed Jan. 21, 2015.

Ann D. White, Arp Foundation Lit., Jason D. Cruise, Margaret M. Zwisler, Latham & Watkins LLP, Jeffrey I. Zuckerman, Curtis Mallet–Prevost Colt & Mosle LLP, Washington, DC, William J. Murray, Jr., Law Offices of William J. Murray, Jr., Ellen Meriwether, Cafferty Clobes Meriwether & Sprengel LLP, Eugene A. Spector, Jeffrey J. Corrigan, William G. Caldes, Jeffrey L. Kodroff, Jeffrey L. Spector, Spector Roseman Kodroff & Willis, Samuel W. Silver, Dennis R. Suplee, Schnader Harrison Segal and Lewis, L.L.P., Jonathan Shub, Seeger Weiss LLP, Carolyn M. Hazard, George G. Gordon, Kristina C.E. Cole, Joseph A. Tate, Dechert LLP, Harry J. Giacometti, Jr., Flaster Greenberg PC, Krishna B. Narine, Meredith & Narine, Melissa Rubenstein, Reed Smith LLP, Michael Conley, Offit Kurman PA, Peter F. Vaira, Greenblatt Pierce Engle Funt Flores, Ralph J. Kelly, McShea Law Firm PC, Philadelphia, PA, Mary Jane Edelstein Fait, Mary Jane Fait, Esquire, Theodore B. Bell, Wolf, Haldenstein, Adler, Freeman& Herz, LLC, Chicago, IL, William R. Kane, David B. Smith Law Group, LLC, Malvern, PA, Daniel R. Gravelyn, Barnes & Thornberg, Grand Rapids, MI, David R. Martin, D.R. Martin LLC, Atlanta, GA, Douglas S. Eakeley, Lowenstein Sandler PC, Roseland, NJ, Garrett Dennis Blanchfield, Jr., Reinhardt Wendorf & Blanchfield, St. Paul, MN, Isaac Jaime Mitrani, Mitrani Rynor & Adamsky PA, Miami Beach, FL, Jayne A. Goldstein, Pomeranz LLP, Weston, FL, Jennifer A. Bagnato, Curtis Mallet–Prevost Colt & Mosle LLP, Lawrence Kill, Harry H. Rimm, Marisa J. Steel, Anderson, Kill, Olick, P.C., Mark L. Weyman, Reed Smith LLP, Thomas H. Burt, Wolf, Haldenstein, Neil E. McDonell, Dorsey & Whitney, LLP, New York, NY, Kendall Millard, Barnes & Thornburg, LLP, Indianapolis, IN, Lisa Levine Kempner, Levine Kempner Law, Wyndmoor, PA, Mark S. Kittaka, Barnes and Thornburg, Ft. Wayne, IN, Michael J. Hahn, Sarah Blaine, Lowenstein Sandler PC, Roseland, NJ, Patrick T. Henigan, Eckell Sparks Levy Auerbach Monte Rainer Sloane Matthews & A, Media, PA, Peter R. Kohn, Faruqi & Faruqi, LLP, Jenkintown, PA, Elizabeth A. Fegan, Hagens Berman Sobol Shapiro LLP, Oak Park, IL, George W. Sampson, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Marc H. Edelson, Edelson & Associates, LLC, Doylestown, PA, for Plaintiffs.

Melissa Rubenstein, Reed Smith LLP, Nilam A. Sanghvi, Pennsylvania Innocence Project AT Temple Univer, Samuel W. Silver, Evan W. Davis, Schnader Harrison Segal & Lewis LLP, Willie Pollins, Pollins Law Firm LLC, Carolyn M. Hazard, George G. Gordon, Dechert LLP, Ralph J. Kelly, McShea Law Firm PC, Philadelphia, PA, Donald E. Knebel, Kendall Millard, Barnes & Thornburg, LLP, Indianapolis, IN, Valerie B. Mullican, Barnes & Thompson, Grand Rapids, MI, Roger A. Raimond, Robinson Brog, Mark L. Weyman, Reed Smith LLP, New York, NY, Margaret M. Zwisler, Marguerite M. Sullivan, Latham Watkins LLP, Washington, DC, Michael J. Hahn, Lowenstein Sandler PC, Roseland, NJ, for Defendants.

MEMORANDUM¹

ANITA B. BRODY, District Judge.

I.	Background & Initial Settlement	634
II.	Third Circuit Appeal	635
III.	Post–Appeal Settlement	636

A.	Settlement Terms	636
B.	Preliminary Approval	638
C.	Exclusion Requests and Objections	638

IV. Final Approval of the Post–Appeal Settlement 639

A.	Factors for Considering Final Approval	639
B.	Girsh Factors	640
C.	Prudential Considerations	646
D.	Baby Products Considerations	647

V. Plan of Allocation 648

A.	Standard of Review	648
B.	Proposed Plan	648
C.	Modification	648

VI. Attorneys' Fees & Expenses for Class Counsel 649

A.	Common Fund	650
B.	Lodestar	656
C.	Class Counsel's Fee Award	657
D.	Costs	658

VII. Attorneys' Fees for Objectors 658

A.	Authority for Granting Attorneys' Fees to Objectors	658
B.	Common Fund Award for Objector Young	659
C.	Lodestar Cross–Check for Objector Young	662
D.	Attorneys' Fees for Other Objectors	663

VIII.	Incentive Awards for Class Representatives and Objectors	665
IX.	Conclusion	665

Following eight years of antitrust class action litigation between consumers, a baby product retailer, and baby product manufacturers, class counsel have filed petitions for final approval of the Post–Appeal Settlement Agreement (“P–A Settlement”) (ECF No. 864);² for attorneys' fees, expenses, and special incentive awards for class representatives (ECF No. 863); and for final approval of the plan of allocation (ECF No. 865). After holding a final fairness hearing on October 6, 2014, I will now approve the final settlement agreement and a modified allocation plan. I will also grant in part and deny in part class counsel's request for attorneys' fees, reimbursement of expenses and incentive awards for class representatives. Finally, I will grant in part and deny in part Objector Kevin Young's request for attorneys' fees and an incentive award.

I. Background & Initial Settlement

On January 19, 2006, a group of consumers (collectively, “Plaintiff Consumers”) brought this putative consumer class action for violations of Sections 1 and 2 of the Sherman Anti–Trust Act, 15 U.S.C. §§ 1, 2, against Babies “R” Us, Inc. (“BRU”), a leading national retail chain in the baby products market, and against a number of manufacturers of baby products (collectively, “Defendant Manufacturers”).³ Plaintiff Consumers alleged that BRU conspired with Defendant Manufacturers to restrict competition by requiring all retailers to sell their goods at or above a minimum resale price. Plaintiff Consumers alleged that as a result they paid inflated prices for baby products manufactured by Defendant Manufacturers.⁴

On July 15, 2009, I granted class certification under Federal Rule of Civil Procedure 23(b)(3) and created subclasses based on the different products the consumers purchased and the timeframe of those purchases. ECF No. 585. I restricted the subclass periods to the date when the case was first filed. This restriction prompted additional consumers to file a related suit on December 28, 2009 (Elliott, et al. v. Toys “R” Us, Inc., et al. (09–cv–6151)).

Shortly before trial was set to begin, the parties announced that they had reached a settlement (the “Initial Settlement”). The Initial Settlement created a $35.5 million common fund. The parties estimated that after deduction of administrative expenses and attorneys' fees, the net settlement fund available to the class would total $21.5 million. The settlement established claim procedures for class members and provided that any funds not claimed by class members would be distributed cy pres to charities of the parties' choosing, subject to the court's final approval. On January 31, 2011, I issued an order preliminarily approving the Initial Settlement that defined the Elliott subclasses, consolidated the two cases, and set August 1, 2011 as the claims deadline. ECF No. 706. On July 6, 2011, I held a final fairness hearing. Ten members of the class filed objections to various aspects of the settlement, and two objectors made oral presentations at the hearing. Following the hearing, I ordered class counsel to provide legal bills and other documentation in support of their pending motions for in camera review. ECF No. 775. After considering the fairness, reasonableness, and adequacy of the settlement and reviewing class counsel's fee request, I approved the Initial Settlement agreement and related motions on December 21, 2011. ECF No. 788. I issued an amended opinion on January 4, 2012. ECF No. 793.

At the close of the Initial Settlement claims process in August 2011, class members' claims, trebled, totaled approximately $3 million. ECF No. 857 at 1–2 (Pls.' Mem. in Support of Mot. for Prelim. Approval of P–A Settlement). This meant that an estimated $15.5 million would be distributed to cy pres beneficiaries. Id. Because the final fairness hearing for the Initial Settlement was held before the claims deadline passed, the parties and I were unaware that the claims rate would be so low and therefore the value of direct benefit going to class members would also be low in comparison to the approximately $18.5 million net settlement fund.

II. Third Circuit Appeal

In January 2012, after I approved the Initial Settlement and class counsel's fee request, three class members who objected to the Initial Settlement—Kevin Young, Allison Lederer, and Clark Hampe—appealed final approval of the Initial Settlement to the Third Circuit.⁵ Young raised three issues relating to cy pres on appeal: (1) that the settlement should distribute all of the funds to class members, rather than to cy pres recipients, to ensure full compensation for their losses; (2) that the court should have discounted the value of the cy pres distribution in determining class counsel's fee award; and (3) that the class notice was deficient because it did not identify the cy pres recipients. Young's main concern was the significant and unanticipated size of the cy pres award.

On February 19, 2013, the Third Circuit vacated approval of the Initial Settlement. In re Baby Prods. Litig., 708 F.3d 163, 169 (3d Cir.2013) ( “Baby Prods. ”). The Third Circuit's primary reasoning was that at the time of final approval of the Initial Settlement, “the amount of compensation that [would] be distributed directly to the class” was unknown. Id. at 175. Thus, the Third Circuit concluded that in addition to the Girsh and Prudential analysis of the fairness of a class action settlement, a district court must consider “the degree of direct benefit provided to the class.”⁶ Id. at 174 (citing Girsh v. Jepson, 521 F.2d 153 (3d Cir.1975) ; In re Prudential Ins. Co. America Sales Practice Litig.,

148 F.3d 283 (3d Cir.1998) ). Additionally, the Third Circuit vacated the fee award because it was based on the vacated final...