Swinton v. Squaretrade, Inc.
| Decision Date | 14 April 2020 |
| Docket Number | Case No. 4:18-cv-00144-SMR-SBJ |
| Citation | 454 F.Supp.3d 848 |
| Parties | David M. SWINTON, on behalf of himself and all others similarly situated, Plaintiff, v. SQUARETRADE, INC., Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
Harley C. Erbe, Erbe Law Firm, Steven P. Wandro, Alison Florence Kanne, Wandro & Associates, P.C., Des Moines, IA, for Plaintiff.
John F. Lorentzen, Nyemaster Goode PC, Des Moines, IA, Carolyn A. Pearce, Pro Hac Vice, Douglas A. Winthrop, Pro Hac Vice, Katelyn Elizabeth Rey, Pro Hac Vice, Michael A. Berta, Pro Hac Vice, Arnold & Porter Kaye Scholer LLP, San Francisco, CA, for Defendant.
ORDER ON SETTLEMENT MOTIONS
This matter is a class action lawsuit related to sales practices of Defendant SquareTrade, Inc. ("SquareTrade"). Defendant and Plaintiff David Swinton reached a tentative settlement for which Plaintiff sought preliminary approval in August 2018. See [ECF No. 22]. On February 14, 2019, the Court issued an Order finding it would likely be able to approve the settlement and certify a settlement class under Federal Rule of Civil Procedure 23 (the "Preliminary Approval Order"), and the Court authorized the parties to give notice of the proposed settlement to the class. See [ECF No. 73]. Presently before the Court are Plaintiff's Motion to Certify Class, [ECF No. 97], and Motion for Attorney's Fees and Incentive Payment, [ECF No. 90]. A fairness hearing was held on June 21, 2019. The matter is fully submitted and ready for decision. For the reasons stated herein, the motions are GRANTED.
The full factual background of this matter is set out in the Preliminary Approval Order and is incorporated by reference. See [ECF No. 73]. On April 19, 2018, Plaintiff commenced this action as a putative class action against Defendant in the Iowa District Court for Polk County. [ECF No. 1-1]. Plaintiff sought damages and equitable relief under an unjust enrichment theory, the Iowa Private Right of Action for Consumer Frauds Act,1 and the Magnuson-Moss Warranty Act ("MMWA"). Defendant removed the case to this Court on May 14, 2018. [ECF No. 1].
Plaintiff alleged Defendant engaged in numerous illegal practices with respect to the marketing and sale of extended warranties, accident protection, and service plans for consumer electronics and appliances ("Protection Plans"). Defendant sells Protection Plans on its website and through other retailers, notably Amazon.com ("Amazon"). Plaintiff alleged Defendant's description on Amazon of the coverage and benefits of its Protection Plans belied the plans' severe coverage limitations, which could only be found in the plans' terms and conditions (the "Pre-Sale Terms and Conditions"). However, Defendant allegedly "designed its sales materials to make it difficult to impossible for the consumer to access [the Pre-Sale Terms and Conditions]." [ECF No. 1-1 ¶ 31]. Exacerbating matters, Plaintiff alleged the Pre-Sale Terms and Conditions differed from the final terms and conditions that Defendant sent to consumers after they purchased a Protection Plan (the "Post-Sale Terms and Conditions").
Notable among Defendant's allegedly deficient disclosures is that Protection Plans purchased on Amazon only cover products that are also purchased on Amazon (the "Channel Restriction"). Thus, if a consumer purchased a product at a physical retail store, a Protection Plan purchased on Amazon would not cover the product.
Shortly after Defendant removed the case to this Court, it filed a Motion to Compel Arbitration based on the arbitration clause found in the Post-Sale Terms and Conditions. [ECF No. 8]. Plaintiff prepared a resistance to the motion, but the parties engaged in settlement discussions before the resistance could be filed. See [ECF No. 11]. The Court eventually denied the Motion to Compel Arbitration without prejudice after the parties reached a settlement. [ECF No. 44].
On July 30, 2018, Adam Starke filed a Motion to Intervene in this case. [ECF No. 18]. Starke is litigating a class action lawsuit against Defendant in the United States District Court for the Eastern District of New York, Starke v. SquareTrade , 1:16-CV-07036-NGG-SBJ (E.D.N.Y.). Starke's claims in that case are nearly identical to those Plaintiff asserted here. Starke sought to intervene so that he could move the Court to transfer this matter to the Eastern District of New York. The Court ultimately denied the Motion to Intervene and declined to transfer the case. [ECF No. 46].2
[ECF No. 73 at 32].3 Individuals within the Settlement Class will hereafter be referred to as "Class Members."
Under the terms of the Settlement, Defendant agrees to: (1) make certain changes to Amazon webpages offering its Protection Plans; (2) provide refunds ("Settlement Refunds") in an amount equal to the purchase price of the product underlying the Protection Plan (the "Covered Product") to Class Members whose Protection Plan claims were denied because of the Channel Restriction (the "Refund Class Members");4 (3) honor Class Members' claims under Protection Plans purchased within the Class Period that would otherwise be denied because of the Channel Restriction; and (4) provide a $10 coupon to all Class Members for use on a Protection Plan for a mobile phone (the "Settlement Coupon"). See [ECF No. 22-1 at 10–13]. As discussed below, the Settlement Agreement contemplates that up to fifteen percent of the Settlement Refunds will be paid to lead class counsel as part of their award of attorney's fees in this matter. Id. at 11. Thus, Settlement Refunds will be the respective purchase price of each Class Member's Covered Product, less up to fifteen percent thereof.
Defendant's original settlement proposal would have offered a $5 coupon to Class Members, but Defendant agreed during settlement negotiations to increase the face value of the coupon to $10. [ECF No. 68 ¶¶ 2–3]. The Settlement Coupon applies only to flat-rate, one-or two-year mobile phone Protection Plans that are generally not available to the public (the "Coupon Plans"). [ECF No. 103-2 ¶¶ 4–5]. After applying the Settlement Coupons, the one-year Coupon Plan costs $79, and the two-year Coupon Plan costs $139. Id. ¶ 5. The Coupon Plans appear to have a deductible of at least $25. Id. at 8. The Settlement Coupons may not be applied to purchases made prior to the coupons' issuance. [ECF No. 22-1 at 13]. They may be combined with other SquareTrade promotions, but not with other Settlement Coupons. Id. The coupons have no cash value, are not transferable, and expire one year from the date they are issued. Id. However, Defendant does not intend to set up a system to allow it to enforce the coupons' non-transferability and thus plans to delete that restriction when distributing the coupons to Class Members. [ECF No. 112 at 19 n.2].
As to changes to Defendant's Amazon webpages, Defendant agreed to move its notice of the Channel Restriction. [ECF No. 22-1 at 10]. That notice will now "appear[ ] to a consumer without scrolling when viewed on a standard computer screen at 100% font size." Id. Defendant also agreed to include language, also accessible without scrolling, that describes where a consumer can access a copy of the Pre-Sale Terms and Conditions. Id. These changes were completed in September 2017. [ECF No. 75 at 1].
In addition, the parties have agreed Plaintiff's counsel, if approved as class counsel, will seek an award of attorney's fees as follows: (1) Defendant will pay up to $25,000 of class counsel's fees, expenses, and costs; and (2) class counsel may recover up to fifteen percent of each Settlement Refund (the "Percentage Payment"). [ECF No. 22-1 at 13–14]. The Percentage Payment will be deducted directly from the Settlement Refunds. Plaintiff's counsel, Harley Erbe and Steven Wandro, seek appointment as class counsel. See id. at 19.5 The parties have also agreed Plaintiff will seek an incentive award of $2,500, to be paid by Defendant. [ECF No. 22-1 at 14]
To identify Refund Class Members, Defendant searched a database that stores, among other things, claim event markers for claims on which coverage under a Protection Plan is denied. [ECF No. 112 at 11]. This database assigns codes to denied claims that broadly identify why the claim was denied ("Denial Reason Codes"). Id. Of the fifteen Denial Reason Codes,6 Defendant determined two of them applied when claims were denied due to the Channel Restriction—"ADP Denial" and "Not Within Terms and Conditions." Id. After reviewing claims bearing those Denial Reason Codes, Defendant determined there were approximately 580 Refund Class Members, and the average purchase price of their Covered Products was approximately $620. [ECF No. 69 ¶ 12]. Therefore, class counsel stand to be awarded approximately $78,940 (the sum of $25,000 and the Percentage Payment).
Class Members do not have to take any action to obtain recovery under the Settlement. Settlement Coupons will automatically be distributed by the third-party claims administrator (the "Administrator") via email. [ECF No. 22-1 at 13]. Defendant will automatically mail to Refund Class Members checks for their Settlement Refunds. Defendant has provided the Administrator with Class Members' last-known email addresses based on Defendant's business records. See id....
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