In re Lumber Liquidators Chinese-Manufactured Flooring Prods. Mktg., Sales Practices & Prods. Liab. Litig.

• Decision Date: 10 March 2020
• Docket Number: 1:15-md-02627-AJT-TRJ,1:16-md-02743-AJT-TRJ,No. 18-2351, No. 19-1231, No. 18-2490,18-2351
• Parties: IN RE: LUMBER LIQUIDATORS CHINESE-MANUFACTURED FLOORING PRODUCTS MARKETING, SALES PRACTICES AND PRODUCTS LIABILITY LITIGATION In re: Lumber Liquidators Chinese-Manufactured Flooring Durability Marketing And Sales Practices Litigation. Diana Cantu-Guerrero, Party-in-Interest – Appellant, v. Lumber Liquidators, Inc., a Delaware corporation, Defendant – Appellee, and Laura Washington, Lila Washington, Maria Ronquillo, Romualdo Ronquillo, Joseph Michael Balero, Ryan Brandt, Kristin Brandt, Devin Clouden, Sara Clouden, Kevin Parnella, Julie Parnella, Shawn Burke, and Tanya Burke, on behalf of themselves and all others similarly situated, Formaldehyde MDL Plaintiffs – Appellees, and Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel, on behalf of themselves and all others similarly situated, Durability MDL Plaintiffs – Appellees. In re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices And Products Liability Litigation In re: Lumber Liquidators Chinese-Manufactured Flooring Durability Marketing And Sales Practices Litigation Brice M. Johnston, Party-In-Interest – Appellant, v. Lumber Liquidators, Inc., a Delaware corporation, Defendant – Appellee, and Laura Washington, Lila Washington, Maria Ronquillo, Romualdo Ronquillo, Joseph Michael Balero, Ryan Brandt, Kristin Brandt, Devin Clouden, Sara Clouden, Kevin Parnella, Julie Parnella, Shawn Burke, and Tanya Burke, on behalf of themselves and all others similarly situated, Formaldehyde MDL Plaintiffs – Appellees, and Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel, on behalf of themselves and all others similarly situated, Durability MDL Plaintiffs – Appellees. In re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices And Products Liability Litigation In re: Lumber Liquidators Chinese-Manufactured Flooring Durability Marketing And Sales Practices Litigation Diana Cantu-Guerrero, Party-In-Interest – Appellant, v. Lumber Liquidators, Inc., a Delaware corporation, and Laura Washington, Lila Washington, Maria Ronquillo, Romualdo Ronquillo, Joseph Michael Balero, Ryan Brandt, Kristin Brandt, Devin Clouden, Sara Clouden, Kevin Parnella, Julie Parnella, Shawn Burke, and Tanya Burke, on behalf of themselves and all others similarly situated, Formaldehyde MDL Plaintiffs – Appellees, and Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel, on behalf of himself and all others similarly situated, Durability MDL Plaintiffs – Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

952 F.3d 471

IN RE: LUMBER LIQUIDATORS CHINESE-MANUFACTURED FLOORING PRODUCTS MARKETING, SALES PRACTICES AND PRODUCTS LIABILITY LITIGATION

In re: Lumber Liquidators Chinese-Manufactured Flooring Durability Marketing And Sales Practices Litigation.

Diana Cantu-Guerrero, Party-in-Interest – Appellant,

v.Lumber Liquidators, Inc., a Delaware corporation, Defendant – Appellee,andLaura Washington, Lila Washington, Maria Ronquillo, Romualdo Ronquillo, Joseph Michael Balero, Ryan Brandt, Kristin Brandt, Devin Clouden, Sara Clouden, Kevin Parnella, Julie Parnella, Shawn Burke, and Tanya Burke, on behalf of themselves and all others similarly situated, Formaldehyde MDL Plaintiffs – Appellees,

and

Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel, on behalf of themselves and all others similarly situated, Durability MDL Plaintiffs – Appellees.

In re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices And Products Liability Litigation

In re: Lumber Liquidators Chinese-Manufactured Flooring Durability Marketing And Sales Practices Litigation

Brice M. Johnston, Party-In-Interest – Appellant,

v.Lumber Liquidators, Inc., a Delaware corporation, Defendant – Appellee,andLaura Washington, Lila Washington, Maria Ronquillo, Romualdo Ronquillo, Joseph Michael Balero, Ryan Brandt, Kristin Brandt, Devin Clouden, Sara Clouden, Kevin Parnella, Julie Parnella, Shawn Burke, and Tanya Burke, on behalf of themselves and all others similarly situated, Formaldehyde MDL Plaintiffs – Appellees,

and

Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel, on behalf of themselves and all others similarly situated, Durability MDL Plaintiffs – Appellees.

In re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices And Products Liability Litigation

In re: Lumber Liquidators Chinese-Manufactured Flooring Durability Marketing And Sales Practices Litigation

Diana Cantu-Guerrero, Party-In-Interest – Appellant,

v.Lumber Liquidators, Inc., a Delaware corporation,andLaura Washington, Lila Washington, Maria Ronquillo, Romualdo Ronquillo, Joseph Michael Balero, Ryan Brandt, Kristin Brandt, Devin Clouden, Sara Clouden, Kevin Parnella, Julie Parnella, Shawn Burke, and Tanya Burke, on behalf of themselves and all others similarly situated, Formaldehyde MDL Plaintiffs – Appellees,

and

Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel, on behalf of himself and all others similarly situated, Durability MDL Plaintiffs – Appellees.

No. 18-2351

No. 18-2490

No. 19-1231

1:15-md-02627-AJT-TRJ

1:16-md-02743-AJT-TRJ

United States Court of Appeals, Fourth Circuit.

Argued: January 29, 2020

Decided: March 10, 2020

ARGUED: Robert William Clore, BANDAS LAW FIRM, PC, Corpus Christi, Texas; N. Albert Bacharach, Jr., N. ALBERT BACHARACH, JR. PA, Gainesville, Florida, for Appellants. Steven J. Toll, COHEN MILSTEIN SELLERS & TOLL PLLC, Washington, D.C., for Appellees. ON BRIEF: Christopher A. Bandas, BANDAS LAW FIRM, PC, Corpus Christi, Texas, for Appellant Diana Cantu-Guerrero. Diane P. Flannery, Matthew Allen Fitzgerald, Andrew F. Gann, Jr., MCGUIREWOODS LLP, Richmond, Virginia; Daniel K. Bryson, Patrick M. Wallace, WHITFIELD BRYSON & MASON LLP, Raleigh, North Carolina; Douglas J. McNamara, COHEN MILSTEIN SELLERS & TOLL PLLC, Washington, D.C.; Niall McCarthy, Burlingame, California, Alexander E. Barnett, COTCHETT, PITRE & MCCARTHY, LLP, New York, New York; Steve W. Berman, Robert F. Lopez, HAGENS BERMAN SOBOL SHAPIRO LLP, Seattle, Washington; Alexander Robertson, IV, Mark Uyeno, ROBERTSON & ASSOCIATES, LLP, Westlake Village, California, for Appellees.

Before GREGORY, Chief Judge, and KING and QUATTLEBAUM, Circuit Judges.

KING, Circuit Judge:

Diana Cantu-Guerrero and Brice Johnston (the "Objectors") pursue these consolidated appeals from the district court's October 9, 2018 order approving a class-action settlement and November 15, 2018 order awarding attorney's fees to the lawyers for the class members ("Class Counsel"). See In re Lumber Liquidators Chinese-Manufactured Flooring Prods. Mktg., Sales Practices & Prods. Liab. Litig. , No. 1:15-md-02627 (E.D. Va. Oct. 9, 2018), ECF No. 1705 (the "Settlement Approval Order"); id. (E.D. Va. Nov. 15, 2018), ECF No. 1726 (the "Attorney's Fees Order"). The Settlement Approval Order resolves two Multidistrict Litigation ("MDL") proceedings related to Lumber Liquidators, Inc.'s sale of allegedly dangerous and defective laminate flooring to more than 760,000 customers from 2009 to 2015. The settlement required Lumber Liquidators to pay $22 million in cash and provide store vouchers with a face value of $14 million. Pursuant to the Attorney's Fees Order, Class Counsel received about $10 million of the $22 million in cash.

As explained below, we conclude that the district court did not abuse its discretion in approving the settlement and thus affirm the Settlement Approval Order. We are obliged, however, to vacate the Attorney's Fees Order because the court erred by not applying to the store vouchers the "coupon" settlement provisions of the Class Action Fairness Act of 2005 ("CAFA"). We remand for the district court to apply — in the first instance — those CAFA provisions in recalculating the attorney's fees award.

I.

A.

1.

Lumber Liquidators is "one of the largest specialty retailers of hardwood flooring and laminates in the United States." See J.A. 14.¹ The settlement prompting these appeals relates to Lumber Liquidators' sale of Chinese-manufactured laminate flooring to more than 760,000 customers from 2009 to 2015. In March 2015, purchasers of the laminate flooring began filing class-action lawsuits against Lumber Liquidators in federal courts across the country. The plaintiffs in those lawsuits alleged that the company had falsely represented to consumers that the flooring complied with the California Air Resource Board's ("CARB") formaldehyde emission limits, which are some of the strictest in the country. According to those plaintiffs, Lumber Liquidators uses formaldehyde to make its laminate flooring, and — as a result of excess levels of the chemical therein — the flooring releases dangerous amounts of formaldehyde gas into the air. Those plaintiffs further alleged that short-term exposure to formaldehyde causes eye, nose, throat, and skin irritation, plus coughing, headaches, and nausea, and that long-term exposure to formaldehyde increases the risk of developing cancer

.

In June 2015, the United States Judicial Panel on Multidistrict Litigation consolidated the federal lawsuits and transferred them to the Eastern District of Virginia, where they proceeded as an MDL under case number 1:15-md-02627 (the "Formaldehyde MDL"). About three months later, in September 2015, the plaintiff class members in the Formaldehyde MDL filed an amended representative class-action complaint.² After the district court denied in part and granted in part Lumber Liquidators' motion to dismiss the complaint in December 2015, the Formaldehyde MDL proceeded to discovery. During discovery, the parties reviewed hundreds of thousands of documents and deposed twenty-six fact witnesses and ten expert witnesses. The parties completed fact discovery in early 2016. In August 2016, Lumber Liquidators moved for summary judgment in the Formaldehyde MDL, and the court — by a lengthy written opinion issued in June 2017 — granted in part and denied in part that motion.

2.

In May 2015 — about two months after the initiation of the lawsuits that would become the Formaldehyde MDL — purchasers of the same Lumber Liquidators laminate flooring began filing lawsuits against the company, alleging that it had falsely represented to consumers that the flooring satisfied various industry durability standards. In October 2016, the Judicial Panel on Multidistrict Litigation consolidated those lawsuits and transferred them to the Eastern District of Virginia, where they were assigned to the district judge presiding over the Formaldehyde MDL and proceeded as an MDL under case number 1:16-md-02743 (the "Durability MDL").

In February 2017, the plaintiffs in the Durability MDL filed a representative class-action complaint. Five months later, in July 2017, the district court granted in part and denied in part Lumber Liquidators' motion to dismiss that complaint. Discovery thereafter commenced, during which the parties conducted thirteen depositions and reviewed vast quantities of documents. The court stayed discovery in the Durability MDL for purposes of settlement negotiations in August 2017.

B.

1.

After mediations between the parties in the Formaldehyde MDL in December 2015 and July 2016, and combined settlement discussions relating to both MDLs during most of 2017, the parties eventually agreed to key settlement terms, as reflected in an October 23, 2017 Memorandum of Understanding. The parties thereafter submitted the settlement terms to the district court for preliminary approval on March 15, 2018.

The terms of the proposed settlement agreement were as follows. In exchange for a release of all claims by class members in both the Formaldehyde MDL and the Durability MDL, Lumber Liquidators would create a non-reversionary "common fund" consisting of $22 million in cash, plus Lumber Liquidators vouchers with a face value of $14 million.³ Because CARB's 2015 formaldehyde emission standards were different from its 2009 standards, the settlement would place the class members into two groups. The first group (the "CARB1 Class") would be composed of customers who purchased the flooring from Lumber Liquidators between January 1, 2009, and December 31, 2010. And the second group (the "CARB2/Durability Class") would consist of customers who purchased the same type of flooring between January 1, 2011, and May 31, 2015.

As a result of the different CARB standards for formaldehyde emissions, the proposed benefits for the classes differed. Members of the CARB1 Class could make a claim for an expected $50 cash award,...