Tyler v. Michaels Stores, Inc.

• Decision Date: 09 December 2015
• Docket Number: CIVIL ACTION NO. 11-10920-WGY
• Citation: 150 F.Supp.3d 53
• Parties: Melissa Tyler, on behalf of herself and all others similarly situated, Plaintiff, v. Michaels Stores, Inc., Defendant.
• Court: U.S. District Court — District of Massachusetts

150 F.Supp.3d 53

Melissa Tyler, on behalf of herself and all others similarly situated, Plaintiff,

v.Michaels Stores, Inc., Defendant.

CIVIL ACTION NO. 11-10920-WGY

United States District Court, D. Massachusetts.

Signed December 9, 2015

David J. Fine, Rubin, Hay & Gould, P.C., Framingham, MA, Jeffrey I. Carton, Robert J. Berg, Denlea & Carton LLP, Todd S. Garber, Finkelstein, Blankinship, Frei-Pearson & Garber, LLP, D. Greg Blankinship, Meiselman, Denlea, Packman, Carton & Ebertz, P.C., White Plains, NY, Patrick J. Sheehan, Whatley Drake & Kallas, Boston, MA, for Plaintiff.

Michael J. Burns, Seyfarth Shaw, LLP, San Francisco, CA, Erik W. Weibust, Katherine E. Perrelli, Seyfarth Shaw, LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER

YOUNG

, DISTRICT JUDGE

I. INTRODUCTION

This Court—with a specific exception—approved a settlement agreement of this class action. See Elec. Clerk's Notes 5/21/2014, ECF No. 81; Final Approval Order, ECF No. 89. Thus the Court, consistent with Federal Rule of Civil Procedure 23(e)(2)

, has already determined that the settlement agreement is not collusive and is fair, adequate, and reasonable to the class of consumer-plaintiffs. There was a sticking point, however, preventing the Court's complete approval of the settlement agreement: class counsel's¹ agreed-to request for attorneys' fees and costs in the amount of $425,000. See Uncontested Mot. Final Approval Proposed Settlement and Award Att'ys' Fees and Costs (“Pls.' Mot.”), ECF No. 74; Pls.' Mem. Law Supp. Uncontested Mot. Att'ys' Fees and Costs (“Pls.' Mem.”), ECF No. 76. The Court now turns to that issue.

Class counsel urges this Court to apply Massachusetts law when deciding whether its proffered fees are reasonable. See Pls.' Mem. 2-3 (discussing Mass. Gen. Laws ch. 93A, § 9(4)

). It notes that federal law governs the question of attorneys' fees only if the settlement is one involving “coupons.” See id. at 15-18. This one, it asserts, does not. See id.

Asking the Court for an award of attorneys' fees of $410,994.70, class counsel emphasizes the complexity of the suit and notes that it obtained a “landmark, first-impression ruling” in the Supreme Judicial Court of Massachusetts, and subsequently negotiated a successful settlement on behalf of the Plaintiff class. Id. at 1-2. This settlement consisted of $10 and $25 vouchers to Michaels, Inc. (“Michaels”), mailed to class members, with a combined nominal face value of $418,000. Id. at 2. The value of the vouchers actually redeemed by class members was $138,620.00. Decl. Jane Perelman Redemption Vouchers Distributed Settlement Class Members (“Perelman Decl.”) ¶ 6,² ECF No. 87. Class counsel further points out that the requested amount, based on the lodestar calculation, is only 71% of its actual rates, and that its proposed amount is uncontested by the defendant Michaels. See id.

While the Court agrees with some of class counsel's assertions—class counsel did obtain an important precedent—the Court largely disagrees with class counsel's legal arguments (and certain of its factual arguments as well). Attempting to clarify a tricky area of law, the Court holds as matter of law that because the award to class members consists of non-cash vouchers that have no value to class members unless they transact additional business with Michaels, the award is in the form of “coupons.” Thus federal law, specifically the Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109–2, 119 Stat. 4,

controls the Court's award of reasonable attorneys' fees. The Court further holds that CAFA precludes a percentage-of-recovery award³ to counsel based on the face value of the coupons awarded to class members, but allows the Court discretion to grant either a percentage-of-recovery award based on the percentage of coupons redeemed by class members or an award based on a lodestar calculation.

II. FACTUAL AND PROCEDURAL BACKGROUND

The Plaintiffs brought this class action lawsuit against Michaels for unjust enrichment and violations of the Massachusetts Unfair Trade Practices Act, Mass. Gen. Laws ch. 93, § 105(a)

. Compl. ¶¶ 1-2, 18, ECF No. 1. Specifically, the Plaintiff class claimed that Michaels' practice of collecting customers' zip codes and addresses during credit card transactions to serve its own interests (i.e. , when the banks did not require such data), was unlawful. See id. ¶¶ 1-2. After Michaels moved to dismiss, Def.'s Mot. Dismiss, ECF No. 9, a hearing was held, Elec. Clerk's Notes 10/20/2011, and this Court, while granting Michaels' motion, delayed entering a judgment of dismissal for a week's time, observing that, since this case presented an issue of first impression, it would be appropriate for the parties to request that the Court certify legal questions to the Massachusetts Supreme Judicial Court, Mem. Order 29-30 n.10, ECF No. 21. Thus, the Plaintiffs filed a motion for an order to certify certain legal questions, Mot. Order Certify Legal Questions, ECF No. 22, which Michaels opposed, Def.'s Opp'n Pls.' Mot. Certify Legal Questions, ECF No. 23.

This Court granted the Plaintiffs' motion, Order Certification, ECF No. 27, and administratively closed the case, Order Administrative Closure, ECF No. 28. In March 2013, the Supreme Judicial Court of Massachusetts issued a ruling, Tyler v. Michaels Stores, Inc. , 464 Mass. 492, 984 N.E.2d 737 (2013)

which held specifically:

[T]hat a zip code constitutes personal identification information for the purposes of [Mass. Gen. Laws chapter 93A, section 105(a),] ... that a plaintiff may bring an action for violation ... absent identity fraud ... [and] that the term “credit card transaction form” ... refers equally to electronic and paper transaction forms.

Id. at 506, 984 N.E.2d 737

.⁴

The parties then returned to this Court, and the case was administratively re-opened. See ECF No. 32. The crux of the allegations against Michaels was that it asked customers for their zip codes as part of credit card transactions to “ ‘reverse engineer’ those customers' addresses using commercially available databases,” and then used those addresses to carry out aggressive and unwanted marketing campaigns. Decl. Todd S. Garber Supp. Pls.' Uncontested Mot. Final Approval Class Action Settlement (“Garber Decl.”) ¶ 5, ECF No. 79. Michaels continually denied the illegality of their actions. See id. ¶ 17; Pls.' Mem. 6. After discovery and “consider[ing] [each party's] claims and defenses, [and] the potential for liability,” the parties agreed to settle. Garber Decl. ¶ 19; see Pls.' Mot.

Under the settlement, class members were separated into two subclasses: subclass one and subclass two.⁵ Members of subclass one were to receive vouchers for twenty-five dollars ($25.00), and members of subclass two were to get vouchers for ten dollars ($10.00). Mot. Prelim. Class Certification, Ex. 2, Settlement Agreement & Release (“Settlement Agreement”) § 2.2, ECF No. 64-2. These vouchers contain several restrictions on their use: they expire ninety days after they are received; class members can only “us[e them] on a single, in-store purchase in Massachusetts[,]” with “any remaining balance not used in [that] transaction ... forfeited” (and clever class members cannot use them to buy a gift card of equivalent value); and finally, they are restricted to the physical stores and cannot be used on Michaels.com. Id. § 1.3.

Class counsel maintained that there were approximately 15,000 members in subclass one, and 4,300 members in subclass two. Pls.' Mem. 1 n.1. Class counsel sought an award of attorneys' fees and costs of $425,000 (in cash, not vouchers to Michaels), which it broke down into $410,994.70 in attorneys' fees, and $14,005.30 in costs and expenses. Id. at 2. Michaels agreed to pay the $425,000 fee claim in addition to providing the vouchers.⁶

At the hearing for the final approval of the settlement, this Court provisionally approved the settlement with the exception of the award of attorneys' fees. Elec. Clerk's Notes 5/21/2014, ECF No. 81; Elec. Order, ECF No. 82. This Court stated that it would withhold its determination of attorneys' fees until the vouchers had expired and it could determine the redemption rate. Elec. Clerk's Notes 5/21/2014; Pls.' Supp. Mem. Law Further Supp. Uncontested Mot. Att'ys' Fees and Costs (“Pls.' Supp. Mem.”) 3, ECF No. 88.

The Associate General Counsel of Michaels attested that as of June 2014, vouchers had been mailed to 18,894 class members: 14,633 in subclass one, and 4,261 in subclass two. Perelman Decl. ¶ 3; Pls.' Supp. Mem. 4. The vouchers expired on September 30, 2014, by which date 5,056 $25 vouchers had been redeemed (representing a total dollar amount of $126,400), and 1,222 $10 vouchers had been redeemed (for a dollar amount of $12,220), thus bringing the total redemption amount—in retail value of Michaels' trade goods—to $138,620.00.⁷ Perelman Decl. ¶ 6; Pls.' Supp. Mem. 4. This means that about one in three vouchers were redeemed.

III. ANALYSIS

Before issuing any ruling, this Court must determine the applicable law. Here, it has not received the benefits of adversarial briefing on this issue,⁸ but has exercised its independent judgment, as it must when reviewing a class action settlement agreement. See In re Relafen Antitrust Litig. , 360 F.Supp.2d 166, 192 (D.Mass.2005)

(“Both the United States Supreme Court and the Courts of Appeals have repeatedly emphasized the important duties and responsibilities that devolve upon a district court pursuant to Rule 23(e) prior to final adjudication and settlement of a class action suit.”) (internal citations omitted). For the reasons detailed below, the Court holds that federal law governs its determination of attorneys' fees.

A. This Settlement Awards Coupons to Class Members.

District courts, pursuant to Federal Rule of Civil Procedure 23

, can approve class action settlements only if they are “ ‘fair, reasonable, and adequate.’ ” Nat'l Ass'n of Chain Drug Stores v. New England Carptenters Health Benefits Fund ,...