Custom LED, LLC v. eBay, Inc et al, No. 3:2012cv00350 - Document 75 (N.D. Cal. 2013)
Court Description: ORDER ORDER DENYING JOINT MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT AND VACATING HEARING by Judge Jon S. Tigar, denying 72 Motion for Settlement. Signed by Judge Jon S. Tigar on August 27, 2013. REDACTED VERSION. (wsn, COURT STAFF) (Filed on 8/27/2013)
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Custom LED, LLC v. eBay, Inc et al Doc. 75 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CUSTOM LED, LLC, Case No. 12-cv-00350-JST Plaintiff, 8 v. 9 10 EBAY, INC, et al., Defendants. ORDER DENYING JOINT MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT AND VACATING HEARING Re: ECF No. 72 United States District Court Northern District of California 11 In this putative class action for breach of contract and related claims, the parties move 12 13 jointly for preliminary approval of a proposed settlement. As the motion is suitable for 14 determination without oral argument, the hearing scheduled for August 29, 2013, is VACATED. 15 See Civil L.R. 7-1(b). For the reasons set forth below, the motion is DENIED WITHOUT 16 PREJUDICE. 17 I. BACKGROUND 18 A. The Parties and Claims 19 Custom LED filed this class action on January 23, 2012, asserting claims against eBay, 20 Inc. (“eBay”), eBay Europe, and eBay International AG, for alleged breach of contract and fraud 21 in connection with eBay’s “Featured Plus!” listings. 22 Custom LED alleges that eBay is an “integrated” online marketplace that utilizes various 23 “entry points,” including www.ebay.com (“Core eBay”), www.motors.ebay.com (“eBay Motors”) 24 and stores.ebay.com (“eBay Stores”). Compl. ¶ 6. All of these websites are interconnected such 25 that a search for an item listed on eBay Motors can be initiated from any of eBay’s sites, including 26 Core eBay and eBay Stores. Id. Because of the common web design, format, and 27 interconnectedness of the eBay sites, buyers cannot readily discern whether they are on Core 28 eBay, eBay Motors, or eBay Stores when they conduct searches for products. Id. Dockets.Justia.com 1 Before listing items for sale, sellers must agree to eBay’s User Agreement. Id. ¶ 7. Sellers 2 also must agree to eBay’s fees schedules. Id. ¶ 8. eBay generally charges two types of fees to 3 sellers: (1) an “insertion fee,” which a seller pays when listing an item and generally does not 4 exceed $1; and (2) a “final value fee,” which the seller pays if the item is sold. Mot. at 2. eBay 5 offers optional listing upgrades to sellers, which increase the listings’ visibility and likelihood that 6 items will be sold. Compl. ¶ 12. One such upgrade is Featured Plus!, which is included in the 7 eBay Motors fees schedule and costs as much as $39.95 per listing. Id. ¶ 10. The eBay Motors 8 fees schedule describes Featured Plus! as: 9 10 United States District Court Northern District of California 11 12 Featured Plus!: Your item appears in the Featured Items section at the top of the search results list page. Id. & Ex. E (emphasis in original). Custom LED alleges that this language constitutes a promise to display any listings for 13 which sellers have paid “Features Plus!” fees in a “Featured Items section” at the top of any search 14 list, regardless of the eBay site on which those searches were conducted and the way in which the 15 search results were sorted. Id. ¶ 14. Custom LED further alleges that eBay did not abide by this 16 promise, because the listings for which sellers paid Featured Plus! fees were not displayed in this 17 manner. Id. Instead, a Features Plus! listing appeared at the top of the search results list only 18 when three conditions were met: (1) the search was conducted on eBay Motors; (2) the search was 19 limited to eBay Motors listings; and (3) the search results were sorted by “Best Match.” Id. ¶ 14. 20 Based on these allegations, Custom LED has asserted the following claims on behalf of a 21 putative class: breach of contract; unfair competition in violation of California’s Unfair 22 Competition Law (“UCL”); violations of California’s False Advertising Law (“FAL”); fraud and 23 deceit; unjust enrichment; and declaratory judgment. 24 B. Procedural History 25 On May 24, 2012, the Court granted in part and denied in part eBay’s motion to dismiss. 26 ECF No. 41. The Court dismissed with prejudice Custom LED’s claims for fraud and deceit, 27 unjust enrichment, and declaratory judgment. Additionally, the Court dismissed with prejudice 28 Custom LED’s claims against eBay Europe and eBay International without leave to amend on the 2 1 ground that no contract exists between Custom LED and these entities. Accordingly, the only claims currently at issue are those for breach of contract, unfair 2 3 competition in violation of the UCL, and false advertising in violation of the FAL. 4 C. Settlement Agreement 5 After engaging in “extensive research, investigation, discovery[,] and motion practice,” 6 the parties participated in a mediation conducted by the Honorable Ellen Sickles James on June 6, 7 2013, during which they reached a settlement. Mot. at 5; Verges Decl. ¶ 21. eBay has agreed to pay $4,750,000 to settle the claims at issue (“Gross Settlement Fund”). 9 Mot., Ex. 1 ¶ 2.1. The following amounts will be subtracted from the Gross Settlement Fund: (1) 10 $7,500 for Custom LED’s “enhancement award;” (2) attorney’s fees of “up to 25%” of the Gross 11 United States District Court Northern District of California 8 Settlement Fund, plus costs and expenses, which counsel for Custom LED estimates to be $1.1875 12 million; and (3) the costs of administering the settlement, which are not itemized in the proposed 13 settlement but counsel for Custom LED estimates to be “approximately $300,000.” Id.; Verges 14 Decl. ¶ 18. After subtracting these amounts, any remaining funds (“Net Settlement Fund”), which the 15 16 Court calculates to be approximately $3,355,000, will be distributed to the class, which Custom 17 LED defines as: 1 18 [A]ll natural persons and entities who are United States residents and who, from January 23, 2008 to the present listed items for sale on eBay’s websites with the Featured Plus! upgrade, and incurred Featured Plus! Fees in connection with such listings. 2 19 20 21 Mot., Ex. 1 ¶ 1.4. 22 Before distribution, the Net Settlement Fund first will be bifurcated by time period. One- 23 third of the fund will be allocated to the time period ranging from January 23, 2008, to September 24 28, 2009, and the remaining two-thirds will be allocated to the period ranging from September 29, 25 2009, to February 4, 2013. Mot. at 7; Mot., Ex. 1 ¶ 2.1(d). Each class member will receive an 26 27 28 1 2 The parties do not provide an estimate of the Net Settlement Fund. The location of the putative class members will be determined based on whether the primary contact information they gave to eBay is “an address in the United States.” Mot. at 5. 3 1 amount based on the percentage of the disputed fees that she paid during each of the time periods 2 relative to the total fees that all class members paid during each of the time periods. Id. The 3 parties provide the following example to illustrate their distribution scheme: if all class members 4 incurred $10,000 in disputed fees in period 1 and $10,000 in period 2, and a class member 5 incurred $100 in disputed fees in period 1 and $200 in period 2, then that class member would 6 receive 1% of the Net Settlement Fund allocated to period 1 and 2% of the Net Settlement Fund 7 allocated to period 2. Id. The total distribution to this class member would equal the sum of these 8 two amounts. 9 10 In their motion, the parties provide some information, albeit with little background or explanation, pertaining to the disputed fees: United States District Court Northern District of California 11 There are [Redacted] unique user IDs in the Settlement Class (a person could have more than one user ID, so there may be fewer class members). There were [Redacted] unique listing IDs during the Class Period. The average fee at issue was $17.11 per unique listing ID (re-listed items can have the same listing ID, so the average fee for each original listing may have been smaller). The average paid per User ID during the Settlement Class Period was [Redacted]; of that, the average paid for items that did not sell was [Redacted]. Most of the Featured Plus! fees were paid prior to September 29, 2009, and of those fees, over [Redacted] of the listings results [sic] in at least one sale. Only 13% of the Featured Plus! fees were paid for items (1) that did not sell; and (2) were listed after September 29, 2009. 12 13 14 15 16 17 18 Mot. at 5. 19 Counsel for Custom LED estimates that “the average net recovery” will be $4.71 for the 20 first period and $46 for the second period, but he does not explain what the term “net recovery” 21 means or how it was calculated. Verges Decl. ¶ 18. The parties also do not state the total fees 22 paid in each period or provide an estimate of the number of individuals who fall within the class 23 definition. 24 The default method for distributing funds to class members with active eBay accounts will 25 be to give them account credits. Credits will be reduced by any “outstanding amounts due to 26 eBay” and any “Disputed Fees incurred by Class Members for which Class Members already 27 received a refund, as determined by eBay’s records.” Mot., Ex. 1 ¶ 2.1(d). Class members who 28 4 1 receive credits “can apply for a refund” in accordance with eBay’s refund policy. Id. 2 Additionally, any class member “with an Active eBay Account” who does not want to receive a 3 credit may choose to receive a check instead by providing notice to the claims administrator no 4 later than the deadline for filing objections. Id. ¶ 2.1(e). The amount of the check, which must 5 exceed $1, will be determined in accordance with the same formula used to calculate credits, 6 except that any check amount will not be reduced based on “any amounts due to eBay.” Id. 7 The default method for distributing funds to class members with closed eBay accounts will 8 be to send them checks to the name and address in eBay’s records or to any other name or address 9 that the class members provide to the claims administrator. Id. ¶ 2.1(f). 10 The amounts owed to the class members will be calculated by the claims administrator United States District Court Northern District of California 11 based on data provided by eBay. Mot. at 7. Class members will not have the right to contest the 12 accuracy of the calculations performed by the claims administrator. Mot., Ex. 1 ¶ 2.1(g). 13 Any funds remaining in the Net Settlement fund after distribution will be given to the 14 National Cyber-Forensics & Training Alliance (“NCFTA”), a nonprofit organization that protects 15 consumers against cyber crime and fraud; and the National Consumer Law Center (“NCLC”), a 16 nonprofit organization that focuses on low-income consumer law issues. Id. ¶ 2.1(h). 17 The parties agree that the claims administrator will provide notice to the putative class 18 members in the following four ways: (1) by setting up a website (“the notice website”) within 30 19 days after the preliminary approval order is issued, which will contain the proposed class notice; 20 (2) by email to the email address that eBay has for each class member; the email will contain the 21 domain name of the notice website, the mailing address of the claims administrator, and the 22 proposed class notice; (3) by first-class mail to the mailing address currently in eBay’s records 23 with respect to class members whose email notice is returned as undeliverable; and (4) by press 24 release, which will contain a link to the notice website. Id. ¶ 3.3. 25 26 As part of the settlement, Custom LED and any putative class members who do not opt out of the action would release all claims, “known or unknown,” 27 28 arising out of or relating in any way to Featured Plus! including but not limited to any and all claims for breach of contract, breach of the 5 implied covenant of good faith and fair dealing, fraud, unjust enrichment, negligence, or violations of California’s Unfair Competition Law, California’s False Advertising Law, the California Consumer Legal Remedies Act or any other claims that could potentially have been alleged arising from the alleged facts in the Action relating to Featured Plus! 1 2 3 4 Id. ¶ 4.2 (emphasis added). 5 eBay retains the right to terminate the settlement agreement within seven days of the 6 deadline for filing a motion for final approval of the settlement if more than 100 class members 7 opt out of the action. Id. ¶ 3.7(c). 8 D. 9 The Court has jurisdiction over this action under 28 U.S.C. § 1332(d). 10 II. LEGAL STANDARD The Ninth Circuit maintains a “strong judicial policy” that favors the settlement of class 11 United States District Court Northern District of California Jurisdiction 12 actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). The settlement of 13 a certified class action must be fair, adequate, and reasonable. Fed. R. Civ. P. 23(e)(2). But, 14 where the “parties reach a settlement agreement prior to class certification, courts must peruse the 15 proposed compromise to ratify both the propriety of the certification and the fairness of the 16 settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). In these situations, 17 settlement approval “requires a higher standard of fairness and a more probing inquiry than may 18 normally be required under Rule 23(e).” Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 19 2012) (citation and internal quotation marks omitted). 20 III. DISCUSSION 21 A. Class Certification 22 A district court may certify a class action under Federal Rule of Civil Procedure 23 if the 23 parties seeking certification satisfy the four requirements identified in Rule 23(a) as well as one of 24 the three subdivisions of Rule 23(b). Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997). 25 When determining whether to certify a class for settlement purposes, a court must pay 26 “heightened” attention to the requirements of Rule 23. Id. at 620. Indeed, “[s]uch attention is of 27 vital importance, for a court asked to certify a settlement class will lack the opportunity, present 28 when a case is litigated, to adjust the class, informed by the proceedings as they unfold.” Id. 6 1 (citations omitted). As discussed below, the parties show that Rule 23’s requirements for certification of the 2 3 putative class for settlement purposes are met. 1. 4 Rule 23(a) contains four threshold requirements: (1) numerosity; (2) commonality; 5 6 (3) typicality; and (4) adequacy of representation. Id. at 613. a. 7 Numerosity The numerosity requirement is satisfied when a plaintiff shows that “the class is so 8 9 Rule 23(a) numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). Here, the parties assert that “the Class consists of holders of approximately 250,000 unique 10 United States District Court Northern District of California 11 eBay user IDs.” Mot. at 12. The parties admit that the number of persons who fall within the 12 scope of the class definition may not be equivalent to the number of User IDs they have provided. 13 Nevertheless, the size of the putative class appears to be very large, such that joinder of all class 14 members would be impracticable. Accordingly, this requirement is met. b. 15 Commonality The commonality requirement is satisfied when a plaintiff shows that “there are questions 16 17 of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). Commonality exists when the 18 plaintiff’s claims “depend upon a common contention” of “a nature that it is capable of classwide 19 resolution,” such that “determination of its truth or falsity will resolve an issue that is central to the 20 validity of each one of the claims in one stroke.” Dukes, 131 S. Ct. at 2551. Here, Custom LED argues that commonality exists because the putative class members’ 21 22 claims arise out of “various web pages that describe the User Agreement, the Featured Plus! fees, 23 the functionality of Featured Plus!, and the operation of the search feature, among other things.” 24 Mot. at 13. The Court concludes that the existence of these common questions, whose answers 25 will resolve issues central to the validity of Custom LED’s claims, is sufficient to find 26 commonality. 27 // 28 // 7 c. 1 2 Typicality Typicality exists if “the claims or defenses of the representative parties are typical of the 3 claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “The test of typicality is whether other 4 members have the same or similar injury, whether the action is based on conduct which is not 5 unique to the named plaintiffs, and whether other class members have been injured by the same 6 course of conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (citation and 7 internal quotation marks omitted). 8 9 Here, Custom LED argues that typicality is satisfied because it and the putative class members were injured by the same course of conduct, namely eBay’s search algorithm, which uniformly failed to display the Featured Plus! listings as advertised. Mot. at 14. The Court 11 United States District Court Northern District of California 10 concludes that this is sufficient to find typicality. d. 12 13 Adequacy of Representation A plaintiff may bring claims on behalf of a class only if she “will fairly and adequately 14 protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). “Resolution of two questions 15 determines legal adequacy: (1) do the named plaintiffs and their counsel have any conflicts of 16 interest with other class members, and (2) will the named plaintiffs and their counsel prosecute the 17 action vigorously on behalf of the class?” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th 18 Cir. 1998) (citation omitted). 19 Here, Custom LED and its counsel assert that they are adequate representatives because 20 they have “no conflict” with the putative class members and because counsel have “extensive 21 experience” in litigating class actions. Mot. at 15-16. Because there is nothing on the record 22 indicating that Custom LED or his counsel have any conflicts of interest with the putative class 23 members or that their interests in this case are insufficient to ensure vigorous representation of the 24 class, this requirement is met. 25 26 2. Rule 23(b)(3) This provision requires the Court to find that: (1) “the questions of law or fact common to 27 class members predominate over any questions affecting only individual members,” and (2) “a 28 class action is superior to other available methods for fairly and efficiently adjudicating the 8 1 2 controversy.” Fed. R. Civ. P. 23(b)(3). Here, the parties have established superiority by arguing that a class action would achieve 3 the resolution of the putative class members’ claims at a lower cost and would reduce the 4 likelihood of inconsistent determinations. 5 With respect to predominance, the parties assert that “the proposed settlement intrinsically 6 presents predominantly common questions” because the operation of Featured Plus! was the same 7 with respect to each class member. Mot. at 13-14. Though several individual questions exist, 8 such as the amount of money that each class member spent on Featured Plus! listings, the Court is 9 persuaded that the common questions pertaining to the functionality of Featured Plus! predominate over these individual inquiries. Id. at 22-25. Accordingly, this requirement also is 11 United States District Court Northern District of California 10 satisfied. 12 B. Fairness of the Settlement 13 In examining a pre-certification settlement agreement, a district court “must be particularly 14 vigilant not only for explicit collusion, but also for more subtle signs that class counsel have 15 allowed pursuit of their own self-interests and that of certain class members to infect the 16 negotiations.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011). “It 17 is the settlement taken as a whole, rather than the individual component parts, that must be 18 examined for overall fairness.” Hanlon, 150 F.3d at 1026 (citation omitted). A court may not 19 “delete, modify or substitute certain provisions” of the settlement; rather “[t]he settlement must 20 stand or fall in its entirety.” Id. 21 Preliminary approval of a settlement and notice to the proposed class is appropriate if “the 22 proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has 23 no obvious deficiencies, does not improperly grant preferential treatment to class representatives 24 or segments of the class, and falls with the range of possible approval.” In re Tableware Antitrust 25 Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007) (citation omitted). 26 Here, the proposed settlement has obvious deficiencies, appears to grant preferential 27 treatment to segments of the class, and does not appear to fall within the range of possible 28 approval. Accordingly, the parties’ motion for approval of the settlement must be DENIED. 9 1 2 1. The Settlement Process The stipulated settlement was reached after the parties participated in private mediation, 3 which suggests that the settlement process was not collusive. Moreover, the parties assert that 4 they “had the benefit of development of the facts, evidence, and legal issues relating to [Custom 5 LED’s] claims” prior to reaching the settlement. Mot. at 9. Finally, the parties contend that they 6 have taken into account the “substantial expense” and time that litigating this action until final 7 judgment would require, as well as “the difficulties and risks inherent in the trial” of this action. 8 Id. These facts support the conclusion that the parties were sufficiently informed about the 9 strengths and weaknesses of Custom LED’s claims when negotiating the settlement. 10 United States District Court Northern District of California 11 12 2. Obvious Deficiencies a. Scope of the Releases The Court concludes that the scope of the release is overly broad, because it improperly 13 releases any claim, known or unknown, “arising out of or relating in any way to Featured Plus!” 14 and regardless of whether any such claim is based on the allegations in the complaint. See Hesse 15 v. Sprint Corp., 598 F.3d 581, 590 (9th Cir. 2010) (“A settlement agreement may preclude a party 16 from bringing a related claim in the future even though the claim was not presented and might not 17 have been presentable in the class action, but only where the released claim is based on the 18 identical factual predicate as that underlying the claims in the settled class action.”) (citations and 19 internal quotation marks omitted) (emphasis added); cf. Collins v. Cargill Meat Solutions Corp., 20 274 F.R.D. 294, 303 (E.D. Cal. 2011) (holding that release of claims was not overly broad because 21 the “released claims appropriately track the breadth of Plaintiffs’ allegations in the action and the 22 settlement does not release unrelated claims that class members may have against defendants”). 23 24 25 26 27 28 b. Notice The proposed notice is deficient in four ways. First, the notice does not adequately inform the putative class members of the scope of the release. The notice states that In exchange for the payments above, the Settlement Class members will release all claims they have against eBay related to the allegations in the Lawsuit . . . The scope of the release is quite broad and is specified in the Settlement Agreement[.] 10 1 Mot., Ex. 1, Ex. C. 2 The scope of the release is much broader than what the notice discloses, as it includes all 3 claims “related to” Featured Plus! regardless of whether or not they arise out of the allegations in 4 the complaint, as discussed above. This deficiency may be cured by narrowing the scope of the 5 release in a manner that tracks the breadth of the allegations in the complaint. 6 Second, the notice does not inform class members of the key difference between receiving 7 payment via an account credit and receiving payment via check, which is that only the former is 8 subject to reductions based on any amounts owed to eBay. Compare Mot., Ex. 1 ¶ 2.1(d) with 9 Mot., Ex. 1 ¶ 2.1(e). 10 Third, the notice does not contain a range of the potential recovery that the class members United States District Court Northern District of California 11 can expect to receive under the settlement. Thus, it is not possible for a member of the proposed 12 class to determine even approximately what percentage of the fees paid to eBay he or she will 13 recover under the settlement. 14 Finally, and most importantly, the notice does not contain sufficient information as to how 15 to receive payment, opt out of the settlement, or object to the settlement. The proposed notice 16 merely instructs class members to “follow the specific details” listed in the notice website, a link 17 to which is provided in the notice. See Mot., Ex. 1, Ex. C at 2. The notice itself must contain this 18 crucial information. 19 c. Credits as Default Method of Payment 20 The parties have not established that the issuance of eBay account credits, which is the 21 default method for distributing funds to class members with active eBay accounts, is fair to the 22 class. Indeed, the parties do not explain how these credits, which can be applied only “pursuant to 23 the normal terms and conditions that govern the use of credits by eBay users,” are consistent with 24 the “cash” settlement they describe in their motion. See Mot., Ex. 1 ¶ 2.1(d)(vi); Mot. at 2 (“If 25 approved by the Court, the settlement, which provides for the establishment of a cash Settlement 26 Fund of . . .”) (emphasis added). They also do not explain why it would be fair to the class to 27 reduce the credits by any amounts owed to eBay, even if such liabilities are unrelated to Featured 28 Plus! fees. Mot., Ex. 1 ¶ 2.1(d)(vi) (“For Class Members who have an outstanding balance due to 11 1 eBay at the time of the issuance of the Credit, the Credit will be reduced by or applied to that 2 negative balance.”). d. 3 4 Cy Pres Award “A cy pres award must be guided by (1) the objectives of the underlying statute(s) and (2) 5 the interests of the silent class members, and must not benefit a group too remote from the plaintiff 6 class.” Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012) (citation and internal quotation 7 marks omitted). “To ensure that the settlement retains some connection to the plaintiff class and 8 the underlying claims . . . a cy pres award must qualify as the next best distribution to giving the 9 funds directly to class members.” Id. (citation and internal quotation marks omitted). 10 Here, the parties have not established that the National Cyber-Forensics & Training United States District Court Northern District of California 11 Alliance and the National Consumer Law Center have a nexus to the putative class members and 12 their claims. Accordingly, the Court cannot conclude that the parties’ proposed cy pres award 13 complies with the Ninth Circuit’s standard for such distributions. 14 3. a. 15 16 Preferential Treatment Bifurcation by Time Period The Court is not convinced that the proposed scheme for distributing funds to the class 17 members, which is bifurcated by time period, would not unfairly benefit some class members at 18 the expense of others. 19 The parties assert that “most of the Featured Plus! fees were paid during [the first] period.” 20 Mot. at 20. Yet, under the terms of the settlement, only one-third of the Net Settlement Fund will 21 be distributed to claims arising in that period. This uneven allocation appears to be the 22 consequence of the parties’ belief “that the claims during [the first] time period are much less 23 significant than the claims [in the second period].” Id. The Court is not persuaded that this belief 24 is correct given that the claims and defenses pertaining to each period, as described by the parties 25 in their motion, appear to be substantially similar. 26 The claims in the first period are based on the theory that eBay’s description of Featured 27 Plus! was “misleading” and that eBay exclusively displayed Featured Plus! listings in search 28 results sorted by Best Match even though it was supposed to display them in all search results, 12 1 regardless of how they were sorted. Id. at 19. eBay’s defenses are that the functionality of 2 Featured Plus! was “apparent” to users and that it always displayed Featured Plus! listings in the 3 Featured Items section regardless of the manner in which search results were sorted. Id. 4 The claims in the second period are based on the theory that eBay’s limitation on 5 September 29, 2009, of Featured Plus! listings to Best Match searches conducted on eBay Motors 6 was “misleading” in light of eBay’s prior representations with respect to Feature Plus!, which 7 “suggested that Featured Plus! would work for all searches no matter where they were initiated or 8 whether the results were organized by price, time, or location.” Id. eBay’s defenses are that (1) 9 the modifications to Featured Plus! did not create confusion, (2) sellers could easily discern how Featured Plus! worked post-modifications, and (3) eBay’s internal data shows that the 11 United States District Court Northern District of California 10 modifications had no effect on the usage of the Featured Plus! listings. Mot. at 20-21. 12 The bare summary of the claims and defenses with respect to each period that the parties 13 provide in their motion, which is devoid of any analysis of the relevant evidence, is insufficient to 14 justify bifurcating the distribution of the Net Settlement Fund such that claims in the second 15 period will receive twice the payout as claims in the first period. Without an evaluation of the 16 evidence material to the claims in each period, the Court cannot conclude that the proposed 17 bifurcation is fair to the putative class members, especially those whose claims fall exclusively 18 within the first period. 19 20 b. Credits vs. Checks The parties have not established that class members who receive checks would not receive 21 special treatment vis-à-vis class members who receive account credits. Credits are subject to 22 reductions based on any amounts owed to eBay, regardless of whether any such liabilities are 23 related to Featured Plus!. See Mot., Ex. 1 ¶ 2.1(d)(vi) (“For Class Members who have an 24 outstanding balance due to eBay at the time of the issuance of the Credit, the Credit will be 25 reduced by or applied to that negative balance.”). On the other hand, class members who receive 26 checks will not have their distribution reduced by any amounts due to eBay. See Id. ¶ 2.1(d)(iii) 27 (“The amount of a Settlement Check due to each Class Member will be determined by the Claims 28 Administrator based on existing eBay records. The Claims Administrator shall not, however, be 13 1 required to determine any balance due to eBay or offset against the check amount any amounts 2 due to eBay.”). 4. 3 Range of Possible Approval 4 To determine whether a settlement “falls within the range of possible approval,” a court 5 must focus on “substantive fairness and adequacy,” and “consider plaintiffs’ expected recovery 6 balanced against the value of the settlement offer.” In re Tableware Antitrust Litig., 484 F. Supp. 7 2d at 1080. Here, the parties have provided the Court with no information as to the class members’ 8 9 potential range of recovery. They also do not provide any data as to the number of claimants (as opposed to User IDs) in each period or the total amount of Featured Plus! fees paid in each period. 11 United States District Court Northern District of California 10 Accordingly, the Court cannot evaluate the adequacy and fairness of the proposed settlement. 12 IV. 13 CONCLUSION The parties’ joint motion for preliminary approval of the proposed settlement is DENIED 14 WITHOUT PREJUDICE. The parties may file a new motion for preliminary approval of the 15 proposed settlement that cures each of the deficiencies identified in this Order within sixty days of 16 the date this Order is filed. 17 18 19 20 IT IS SO ORDERED. Dated: August 27, 2013 ______________________________________ JON S. TIGAR United States District Judge 21 22 23 24 25 26 27 28 14
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