Kim v. Allison

• Decision Date: 17 August 2021
• Docket Number: No. 19-55807,19-55807
• Citation: 8 F.4th 1170
• Parties: Lisa KIM, individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. Rich ALLISON; Steve Frye, Objectors-Appellants, v. Tinder, Inc., a Delaware corporation; Match Group, LLC, a Delaware limited liability company; Match Group, Inc., a Delaware corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

8 F.4th 1170

Lisa KIM, individually and on behalf of all others similarly situated, Plaintiff-Appellee,

v.Rich ALLISON; Steve Frye, Objectors-Appellants,

v.Tinder, Inc., a Delaware corporation; Match Group, LLC, a Delaware limited liability company; Match Group, Inc., a Delaware corporation, Defendants-Appellees.

No. 19-55807

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 15, 2021 Pasadena, California

Filed August 17, 2021

Danielle Leonard (argued) and Michael Rubin, Altshuler Berzon LLP, San Francisco, California; Kimberly A. Kralowec, Kralowec Law P.C., San Francisco, California; Alfred G. Rava, Rava Law Firm, San Diego, California; for Objectors-Appellants.

Adrian R. Bacon (argued) and Todd M. Friedman, Law Offices of Todd M. Friedman P.C., Woodland Hills, California; John P. Kristensen, Kristensen LLP, Los Angeles, California; for Plaintiff-Appellee.

Donald R. Brown (argued), Robert H. Platt, and Benjamin G. Shatz, Manatt Phelps & Phillips LLP, Los Angeles, California, for Defendants-Appellees.

Before: Consuelo M. Callahan and Paul J. Watford, Circuit Judges, and Jed S. Rakoff,^* District Judge.

Dissent by Judge Callahan

RAKOFF, District Judge:

Beginning in 2015, the dating app Tinder began offering reduced pricing for those under 30, later changed to those under 29. In 2017, plaintiff Lisa Kim purchased a premium version of the Tinder app, but because she was already in her thirties, she paid more for her monthly subscription than those in their twenties. Kim brought suit against Tinder in federal district court pursuant to the Class Action Fairness Act of 2005 ("CAFA") for violations of California's Unruh Civil Rights Act and its unfair competition statute. Over Kim's opposition, Tinder successfully compelled arbitration. After a daylong mediation session with a retired judge, Kim and Tinder reached a settlement, before class certification, that applied to a putative class.

Specifically, the settlement class included all California-based Tinder users who were at least 29 years old when they subscribed to Tinder's premium services and were charged a higher price than younger subscribers. As part of the settlement, Tinder agreed to eliminate age-based pricing in California for new subscribers. Class members who maintained or reactivated their Tinder accounts would automatically receive 50 "Super Likes" (described below), for which Tinder would ordinarily have charged $50. Finally, class members who submitted a valid claim form would also receive their choice of $25 in cash, 25 Super Likes, or a one-month free subscription to the premium Tinder service previously purchased.

Class members Rich Allison and Steve Frye, whose attorneys represent the lead plaintiff in a competing age-discrimination class action against Tinder in California state court, were among six class members who objected to the proposed settlement. These two objectors, in particular, argued that Tinder offered too paltry a cash payout, as well as Super Likes that premium subscribers did not need and subscriptions that former subscribers did not want, all in exchange for releasing valuable claims that had only been strengthened by recent victories in related California actions. Rejecting these objections, the district court certified the class for settlement purposes, granted final approval of the proposed settlement, and awarded Kim a $5,000 incentive payment and her counsel $1.2 million in attorneys’ fees. Allison and Frye now appeal.

We conclude that, while the district court correctly recited the fairness factors under Fed. R. Civ. P. 23(e)(2), it materially underrated the strength of the plaintiff's claims, substantially overstated the settlement's worth, and failed to take the required hard look at indicia of collusion, including a request for attorneys’ fees that dwarfed the anticipated monetary payout to the class. We therefore reverse the district court's approval of the pre-certification class settlement, vacate the judgment and attorneys’ fees award, and remand for the district court to conduct the "more probing inquiry" that a pre-certification class settlement demands. See Hanlon v. Chrysler Corp. , 150 F.3d 1011, 1026 (9th Cir. 1998).

BACKGROUND

Tinder is a dating app operated by Tinder, Inc., Match Group, LLC, and Match Group, Inc. (collectively, "Tinder") that uses computer technology to match users with nearby singles. Users "swipe right" on a dating profile to indicate interest and left to signify a lack of it. If two users both swipe right, the potential couple can message each other through the app. To indicate heightened interest, users can send one another a "Super Like." Users receive one free Super Like daily but can purchase additional Super Likes for $1 each.

In March 2015, Tinder launched Tinder Plus, an ad-free premium service that offered new features: users could swipe right unlimited times, change their minds about matches initially rejected, see dating profiles of users in other cities, and receive more than the one free "Super Like" per day allotted to regular users. Tinder Plus operated on a two-tiered pricing basis: subscribers thirty and under paid $9.99 a month, and subscribers over thirty paid $19.99. In March 2016, Tinder lowered the age cutoff for a reduced subscription price from 30 years old to 29 years old. In 2017, Tinder launched still another premium service, Tinder Gold, which used the same two-tiered pricing scheme for subscribers under and over 29.

To create a Tinder account, a user must agree to the Terms of Use. Since 2014, the Terms of Use have included a ban on class actions and a binding arbitration provision for all disputes arising from or relating to Tinder services that cannot be brought in small claims court. In July 2015, Tinder added a login screen disclosure ("the sign-in wrap agreement") informing users that continued use of the service indicated consent to the Terms of Use.

Kim created her first Tinder account in October 2013 and another in April 2015. She purchased a Tinder Plus subscription on February 21, 2017, paying $19.99 as a user over thirty. Two days later, after being presented with the sign-in wrap agreement, she logged into the account.

On April 12, 2018, Kim sued Tinder, alleging age discrimination in violation of the Unruh Civil Rights Act, Cal. Civ. Code §§ 51 et seq . Kim later amended her complaint to add a claim under California's unfair competition law. See Because the suit was a putative class action, it was brought, pursuant to CAFA, in the U.S. District Court for the Central District of California.

Tinder moved to compel arbitration, which Kim opposed. Kim argued that her Unruh Act claim sought public injunctive relief and that the arbitration agreement was unenforceable to the extent it barred such relief. Kim also sought discovery with respect to the evidence that she had viewed and consented to the arbitration agreement. The district court denied the discovery request as "vague." The court further determined that Kim consented to the sign-in wrap agreement and that the agreement was enforceable, not least because it still permitted Kim to seek injunctive relief through arbitration. The court stayed the case and directed Kim to arbitration.

Kim appealed the district court's arbitration ruling. But while the appeal was pending, Kim and Tinder participated in a full-day mediation with retired Judge Louis Meisinger on November 29, 2018. The parties reached a settlement on December 1, 2018 and entered an agreement memorializing that settlement on December 31, 2018.

The Settlement Agreement

The settlement agreement defines the settlement class to include "every California subscriber to Tinder Plus or Tinder Gold during the Class Period who at the time of the subscription was at least 29 years old and was charged a higher rate than younger subscribers, except those who choose to opt out of the Settlement Class." The class contains about 240,000 members. Under the agreement, every class member who has or reactivates a Tinder account will automatically receive 50 Super Likes, regardless of whether the user files a claim. In addition, class members who file a timely claim will receive their choice of: "(1) $25.00 in cash; (2) 25 Super Likes (but only if the Class Member has a current Tinder account); or (3) a one-month subscription to Tinder Plus or Tinder Gold, depending on which of those services the Class Member had previously purchased (this option is not available to any Class Member who has a current subscription to Tinder Plus or Tinder Gold)." Finally, the settlement contained an injunctive component. Defendants agreed to eliminate age-based pricing for new subscribers in California, but "reserve[d] the right to offer a youth discount to subscribers age 21 or younger."

As part of the settlement, Tinder further agreed not to challenge an award of attorneys’ fees of $1.2 million plus reasonable costs and expenses. Similarly, Tinder agreed not to oppose an incentive award of $5,000 to Kim "for services performed in representing the Settlement Class."

Objections

After the settlement was presented to the district court for approval, Allison and Frye filed objections, arguing that the plaintiff and class counsel were inadequate, that the claims form was burdensome, that the risk to the class posed by further litigation was low, and that the settlement was collusive and of little value.

Allison and Frye also argued that another, almost-identical class action lawsuit better demonstrated the value of the class members’ claims: Candelore v. Tinder, Inc., 19 Cal.App.5th 1138, 228 Cal. Rptr. 3d 336 (2018), review denied (May 9, 2018).¹ In Candelore , as here, the class action plaintiff alleged that Tinder violated the Unruh Act by charging customers over 29 more than it charged younger customers for the same service. Id. at 339. While Tinder initially moved successfully to dismiss the complaint for failure to state a claim, id. at 340, on appeal, Candelore...