FILED
NOT FOR PUBLICATION FEB 19 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: GROUPON MARKETING AND No. 13-55118
SALES PRACTICES LITIGATION,
D.C. No. 3:11-md-02238-DMS-
RBB
ANTHONY FERREIRA; HEATHER
KIMEL; BRIAN ZARD; SARAH
GOSLING; ASHLEY CHRISTENSEN; MEMORANDUM*
WILLIAM EIDENMULLER; JASON
COHEN; CARLOS VAZQUEZ; ELI R.
JOHNSON; JULIE BUCKLEY; SARAH
MEHEL; NEVIN BOOTH; BARRIE
ARLISS; JEFF LAWRIE; MICHAEL
MCPHERSON; ERIC TERRELL;
KENNETH HINTON; E.G. JOHNSON;
NICHOLAS SPENCER, individually and
on behalf of all others similarly situated,
Plaintiffs - Appellees,
v.
PADRAIGIN BROWNE,
Objector - Appellant,
v.
GROUPON, INC.; NORDSTROM INC.;
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FUN TIME, LLC, DBA Wheel Fun
Rentals; YMCA OF METROPOLITAN
WASHINGTON; WHIRLY WEST INC.,
DBA WhirlyBall; SPA BLIX, INC., a
Washington corporation; FULL CIRCLE
FARMS, INC., a Washington corporation;
CHARLES RIVERBOAT COMPANY,
INC.; BEAUTY & BLISS, LLC; THE
GAP, INC.,
Defendants - Appellees.
In re: GROUPON MARKETING AND No. 13-55128
SALES PRACTICES LITIGATION,
D.C. No. 3:11-md-02238-DMS-
RBB
ANTHONY FERREIRA; HEATHER
KIMEL; BRIAN ZARD; SARAH
GOSLING; ASHLEY CHRISTENSEN;
WILLIAM EIDENMULLER; JASON
COHEN; CARLOS VAZQUEZ; ELI R.
JOHNSON; JULIE BUCKLEY; SARAH
MEHEL; NEVIN BOOTH; BARRIE
ARLISS; JEFF LAWRIE; MICHAEL
MCPHERSON; ERIC TERRELL;
KENNETH HINTON; E.G. JOHNSON;
NICHOLAS SPENCER, individually and
on behalf of all others similarly situated,
Plaintiffs - Appellees,
v.
SEAN HULL,
Objector - Appellant,
2
v.
GROUPON, INC.; NORDSTROM INC.;
FUN TIME, LLC, DBA Wheel Fun
Rentals; YMCA OF METROPOLITAN
WASHINGTON; WHIRLY WEST INC.,
DBA WhirlyBall; SPA BLIX, INC., a
Washington corporation; FULL CIRCLE
FARMS, INC., a Washington corporation;
CHARLES RIVERBOAT COMPANY,
INC.; BEAUTY & BLISS, LLC; THE
GAP, INC.,
Defendants - Appellees.
Appeal from the United States District Court
for the Southern District of California
Dana M. Sabraw, District Judge, Presiding
Argued and Submitted February 2, 2015
Pasadena California
Before: REINHARDT and GOULD, Circuit Judges, and MOTZ, Senior District
Judge.**
This dispute arises from the district court’s approval of a class action
settlement between Defendants-Appellees Groupon and other merchants
(“Groupon”) and a nationwide class of customers (collectively, the “settling
parties”). On appeal, Objectors-Appellants Sean Hull and Padraigin Browne
**
The Honorable J. Frederick Motz, Senior District Judge for the U.S.
District Court for the District of Maryland, sitting by designation.
3
contend that notice of the settlement was inadequate, and that the district court
made several errors when it approved the settlement and awarded attorneys’ fees to
class counsel. Mindful of the high procedural standard that we have set for
settlements that, like the one at issue here, occur before certification of the class,
we vacate approval and remand to the district court so that it can conduct a “more
searching inquiry into the fairness of the negotiated distribution of funds, as well as
consider the substantive reasonableness of the attorneys’ fee request in light of the
degree of success attained.” In re Bluetooth Headset Products Liab. Litig., 654
F.3d 935, 938 (9th Cir. 2011) (“Bluetooth”).
As an initial matter, we conclude that the de minimis changes made to the
settlement in response to the district court’s initial disapproval did not require
sending a new notice to the class, or holding another fairness hearing. Before
approving settlement, a district court must “must direct notice in a reasonable
manner to all class members who would be bound by the proposal.” Fed. R. Civ.
P. 23(e)(1). “Notice is satisfactory if it generally describes the terms of the
settlement in sufficient detail to alert those with adverse viewpoints to investigate
and to come forward and be heard.” Rodriguez v. W. Publ’g Corp., 563 F.3d 948,
962 (9th Cir. 2009) (internal quotation marks omitted). There is no dispute that the
original notice satisfied this requirement for the originally proposed settlement.
4
Because the settling parties merely excised a single cy pres provision, representing
a negligible part of the overall monetary relief ($75,000 cy pres out of an $8.5
million fund), we conclude that the original notice described a settlement nearly
identical in material respects to the final settlement. Further, Objectors do not
show that their objections were not considered by the district court at the fairness
hearing.
Objectors also contend that a component of the settlement, called the Second
Settlement Fund, functions as a reverter to Groupon, provides illusory relief to the
class, and serves to inflate the purported value of the fund for purposes of
calculating class counsel’s fee. We take no position on the fairness of the Second
Settlement Fund. We rarely overturn a district court’s conclusions on substantive
fairness, see Stanton v. Boeing Co., 327 F.3d 938, 960 (9th Cir. 2003), but we have
made clear that a more searching inquiry is required procedurally when a
settlement comes before a class is certified. See Bluetooth, 654 F.3d 946–947.
Here, our review of whether the district court made an adequately searching
inquiry on the settlement’s fairness is hampered by a lack of factual findings
relating to this Second Settlement Fund. The district court accepted the settling
parties’ contention that Second Settlement Fund was a dollar-for-dollar benefit to
the class. It made no findings as to: 1) the probable size, scope and impact of the
5
Second Settlement Fund, to the extent such determinations are feasible; and 2)
whether the benefits of the Second Settlement Fund were in any way duplicative of
preexisting relief available to class members via Groupon’s customer satisfaction
policy, under which it conceded that it paid refunds to customers. But both issues
appear to have been points of significant dispute between Objectors and the settling
parties. Such findings will aid our proper review of the proposed settlement and so
we remand.
As in Bluetooth, “we express no opinion on the ultimate fairness of what the
parties have negotiated, for we have no business substituting our notions of
fairness for those of the district judge.” 654 F.3d at 950 (internal quotation marks
and alterations omitted). The settlement relief as a whole, including the changes to
Groupon’s business practices, undoubtedly yields values to the class, to the
company and to the public. But on this record, and given the complexity of the
settlement, it is hard to quantify, or even to have a basis for fairly estimating, the
value of the relief to the class. And while we do not require a precise calculation,
we must have some basis, beyond the assertions of the settling parties, upon which
to calculate a value and compare the relationship of that benefit to the amount of
fees approved for class counsel as part of the settlement. On remand, the parties
and the district court may explore the extent to which values may be quantified by
6
reference to factual or expert testimony, or reliably bounded within a specific range
of values that are expected, or illustrated by proxy evidence.1 After appropriately
supplementing the record, the district court may exercise its discretion to reapprove
the settlement and class counsels’ fee, reapprove the settlement but modify class
counsels’ fee, to disapprove the settlement, or take other appropriate actions
depending on its inquiry, findings, and evaluation of whether the settlement is fair,
reasonable, and adequate.2
VACATED and REMANDED with instructions.
The parties shall bear their own cost.
1
For example, the costs to Groupon of changes in company policy as part of
the settlement may or may not be a reasonable proxy for benefit to class members.
2
Because we do not reach questions of substantive fairness, we do not
address Objectors’ various other contentions of error, including their substantive
arguments regarding the scope and benefits of the Second Settlement Fund.
Objectors may raise such arguments again if there is a subsequent appeal.
7
FILED
Browne v. Groupon, No. 13-55118 FEB 19 2015
MOLLY C. DWYER, CLERK
MOTZ, Senior District Judge, concurring: U.S. COURT OF APPEALS
I concur in the memorandum disposition. I write separately only to say that (1) I
believe the district judge has done an admirable job, (2) our memorandum
disposition does not reflect on the ultimate issue that the District Court must decide
– the fairness, reasonableness, and adequacy of the settlement, (3) some appellate
courts may not fully understand how eleventh-hour objectors may interfere with
the proper resolution of MDL proceedings, and (4) we risk diminishing the role of
lawyers in forging a settlement that is in the interest of the class, the defendant, and
the public by second-guessing a settlement resulting from a mediated settlement.
All of that said, the reasoned memorandum disposition is consistent with circuit
precedent.