Richardson v. L'Oreal United States, Inc.

• Decision Date: 06 November 2013
• Docket Number: Civil Action No. 13–508 (JDB)
• Citation: 991 F.Supp.2d 181
• Parties: Alexis Richardson, et al., Plaintiffs, v. L'Oreal USA, Inc., Defendant.
• Court: U.S. District Court — District of Columbia

991 F.Supp.2d 181

Alexis Richardson, et al., Plaintiffs,

v.L'Oreal USA, Inc., Defendant.

Civil Action No. 13–508 (JDB)

United States District Court, District of Columbia.

November 6, 2013

Melissa W. Wolchansky, Clayton D. Halunen, Halunen & Associates, Minneapolis, MN, Michael D. Lieder, Mehri & Skalet, PLLC, Washington, DC, for Plaintiffs.

Daniel Seth Ruzumna, Frederick B. Warder, III, Patterson Belknap Webb & Tyler, LLP, New York, NY, for Defendant.

MEMORANDUM OPINION

JOHN D. BATES, United States 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'Oréal hair product brands. Namely, L'Oréal 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'Oréal falsely and deceptively labeled its Matrix Biolage, Redken, Kérastase, 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'Oréal to demand a premium price. See id. ¶ 27. L'Oréal claims that the products are sold outside of salons without its permission. Plaintiffs acknowledge that L'Oréal 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'Oréal's efforts, the products are available in non-salon establishments, and they argue that L'Oréal'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'Oréal 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'Oréal agrees to remove the offending terms from the labels of certain brands, for a minimum period of five years.³ After five years, L'Oréal can resume using the terms on products forwhich mass-market sales (in other words, non-salon sales) have been reduced by 60%. If the settlement is approved, the injunction gives L'Oréal some time to remove the offending terms to allow for manufacturing to catch up.

The release contained in the settlement agreement would release L'Oréal from all class actions arising out of the conduct at issue, including damages class actions, but it would not release L'Oréal with respect to individual actions arising out of the conduct at issue.⁴ As part of the settlement, L'Oréal 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'Oréal 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. SeeRadosti 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, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)). Class actions seeking class certificationand 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, 117 S.Ct. 2231 (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, 117 S.Ct. 2231.

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, 95 S.Ct. 2197, 45 L.Ed.2d 343 (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, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). A plaintiff must also establish standing for each form of relief sought. Summers v. Earth Island Inst....