Richardson v. L'Oreal USA, Inc. , 991 F. Supp. 2d 181 ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ALEXIS RICHARDSON, et al.,
Plaintiffs,
v. Civil Action No. 13-508 (JDB)
L’OREAL USA, INC.,
Defendant.
MEMORANDUM OPINION
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
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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
1
After preliminary approval and notice, the parties stipulated to an amendment of the class definition, in an
apparent response to an objection. [ECF No. 22]. Previously, the class was open-ended: it was defined as all those
who purchased the products after August 30, 2008. This new end date, June 27, 2013, is the date that the Court
preliminarily approved the settlement.
2
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 for which 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:
2
The class is defined as: “[a]ll consumers nationwide who purchased the L’Oréal Products for personal,
family or household use from August 30, 2008, up to and including June 27, 2013. The Settlement Class excludes:
(i) purchasers of the L’Oréal Products for re-sale, stylists and salon owners; (ii) L’Oréal, its officers, directors and
employees; and its affiliates and affiliates’ officers, directors and employees; (iii) Plaintiffs’ Counsel and their
employees; and (iv) judicial officers and their immediate family members and associated court staff assigned to the
D.C. Action.” Stipulation [ECF No. 22].
3
From the settlement agreement: “The settlement provides for injunctive relief only. L’Oréal will remove
the contested claims from U.S. advertising and from labeling on products for U.S. distribution, except for certain
products also sold or distributed in European countries using the same packaging; L’Oréal will not use the claims for
at least five years, and, after five years, it may resume using the claims in markets with a 60% reduction from 2012
levels of non-salon sales; L’Oréal will cease manufacturing labels for U.S. products that carry the claims and will
remove the claims from websites and promotion materials shortly after the agreement becomes effective, but it will
not destroy products or product packaging in its inventory.” Settlement Agreement [ECF No. 9-2] ¶ 2.4.
4
Id. ¶ 4.6.
5
“Attorneys’ Fees: L’Oréal will not oppose an application by plaintiffs’ counsel for attorneys’ fees, costs,
and expenses up to $950,000. The Agreement provides that the award of fees is separate from settlement; if the
Court approves only a lower fee award, the remainder of the settlement will remain binding.” Id. ¶ 2.6.
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“Treatment of Class Representatives: Class representatives will petition for an incentive award of no more
than $1000 each.” Id. ¶ 2.5.
3
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. See Radosti 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 (1997)). Class actions seeking class
certification and settlement at the same time, however, require “closer judicial scrutiny” than
settlements that are reached after class certification. Manual for Complex Litigation, Fourth,
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[ECF No. 14]; Settlement Agreement [ECF No. 9-2] ¶¶ 3.2, 3.5.
8
The Court permitted the late filing of Gabi Canales Morgan’s objection. [ECF No. 21]. Her two-page list of
objections covered much of the same ground as Melissa Holyoak’s filing, albeit in less detail. Although the Court
will not separately address Ms. Morgan’s objections, the substance will be addressed through analysis of Ms.
Holyoak’s objections. Joseph Lee Jones also objected to the settlement, claiming entitlement to $200,000. Reply at
3. But he did not make any particular objection to the settlement, and he did not timely file his objection with the
Court. Id. Thus, his objection will not be considered.
9
Plaintiffs do not dispute Ms. Holyoak’s standing to object.
4
§ 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 (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.
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
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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 (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
(1992). A plaintiff must also establish standing for each form of relief sought. Summers v. Earth
Island Inst., 555 U.S. 488, 493 (2009). When seeking prospective relief, such as an injunction, a
plaintiff’s standing “depend[s] on whether he [is] likely to suffer future injury” from the
challenged conduct. City of L.A. v. Lyons, 461 U.S. 95, 102, 105 (1983) (“injury or threat of
injury must be both ‘real and immediate,’ not ‘conjectural’ or ‘hypothetical’”). Moreover, “[p]ast
exposure to illegal conduct does not in itself show a present case or controversy regarding
injunctive relief . . . if unaccompanied by any continuing, present adverse effects.” O’Shea v.
6
Littleton, 414 U.S. 488, 495-96 (1974); see Summers, 555 U.S. at 493 (“To seek injunctive
relief, a plaintiff must show that he is under threat of suffering ‘injury in fact’”); Tucker v.
Phyfer, 819 F.2d 1030, 1034-35 (11th Cir. 1987) (noting, in rejecting class certification under
Rule 23(b)(2), that “a plaintiff who has standing to bring a damages claim does not automatically
have standing to litigate a claim for injunctive relief arising out of the same set of operative
facts”). In the class action context, standing depends on the representative plaintiffs: at least one
must be able to show that she is likely to suffer future injury because of the defendant’s conduct.
McNair v. Synapse Grp., Inc., 672 F.3d 213, 223 (3d Cir. 2012). In other words, plaintiffs here
cannot establish standing by relying on the likelihood of future injury to absent class members.
Id.; O’Shea, 414 U.S. at 495-96.
CCAF raises two reasons that plaintiffs do not have standing to seek injunctive relief
here. Those arguments both relate to a purported failure by the named plaintiffs to establish that
they are likely to suffer future injury. For several reasons, though, the Court finds that plaintiffs
have established the required likelihood of a particularized future injury.
CCAF first argues that plaintiffs have not sufficiently alleged that they are likely to
purchase the products at issue in the future. Instead, emphasizing the language in the complaint
(“Plaintiffs were deceived and misled . . . and therefore suffered injury”), CCAF urges that
plaintiffs have alleged only that they have suffered discrete harm in the past. Objections [ECF
No. 19] 13. In similar cases involving past purchasers seeking injunctive relief, courts have
differed on the showing plaintiffs must make to have standing. For example, courts have reached
different conclusions about whether plaintiffs who disclaim any intent to purchase the product at
issue in the future have standing. Compare Delarosa v. Boiron, Inc., No. 10-1569, 2012 WL
8716658, at *5 (C.D. Cal. Dec. 28, 2012) (no threat of future injury because plaintiff would not
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purchase ineffective homeopathic product again); Bohn v. Boiron, Inc., No. 11-8704, 2013 WL
3975126, at *4 (N.D. Ill. Aug. 1, 2013) (same); Wang v. OCZ Tech. Grp., Inc., 276 F.R.D. 618(N.D. Cal. 2011) (no threat of future injury because plaintiff already purchased electronics and
did not allege he would purchase again); Robinson v. Hornell Brewing Co., No. 11-2183, 2012
WL 1232188, at *4 (D.N.J. Apr. 11, 2012) (no threat of future injury because plaintiff stated
intent never to purchase product again); with Larsen v. Trader Joe’s Co., No. 11-5188, 2012 WL
5458396, at *4 (N.D. Cal. June 14, 2012) (plaintiffs had standing even though they would not
purchase the products again); Henderson v. Gruma Corp., No. 10-4173, 2011 WL 1362188, at
*7-8 (C.D. Cal. Apr. 11, 2011) (plaintiffs had standing even though they likely would not
purchase the products again). Where plaintiffs affirmatively state that they intend to purchase the
products in the future, courts have found standing to seek injunctive relief. See, e.g., Ries v.
Arizona Beverages USA LLC, 287 F.R.D. 523, 533-34 (N.D. Cal. 2012) (“[T]he record is devoid
of any grounds to discount plaintiffs’ stated intent to purchase in the future, thereby satisfying
the requisites for standing.”). In this context, an ongoing subscriber relationship is the clearest
analogue to the prototypical (b)(2) class seeking injunctive relief for employment discrimination.
See McNair, 672 F.3d at 223-27. But a subscriber relationship is not the only way for plaintiffs
to demonstrate that they have standing. After all, plaintiffs’ standing depends on whether they
are “likely to suffer future injury,” and allegations that plaintiffs intend to purchase the products
in the future may establish that likelihood. Lyons, 461 U.S. at 105 (emphasis added). Such
allegations provide concrete indications that plaintiffs are likely to be harmed in the future, rising
above mere speculation about possible future purchases. See Lujan, 504 U.S. at 563-64 (no
standing for plaintiff with no current plans to return to site of alleged injury).
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Here, plaintiffs have not indicated that they do not intend to purchase the products in the
future. Cases where plaintiffs make such statements usually involve products that do not work as
advertised—for example, certain homeopathic products, Delarosa, 2012 WL 8716658 at *5;
Bohn, 2013 WL 3975126 at *4—or plaintiffs who affirmatively proclaim their resolve never to
purchase the product again, Robinson, 2012 WL 1232188 at *4.10 By contrast, this case involves
representations not about the product’s performance, but about its pedigree. See Tr. of Fairness
Hr’g [ECF No. 25] 8 (arguing that this is not a case where “[plaintiffs have] been duped and
[they are] not going to buy this again. That’s not what we have here.”). As a result, the named
plaintiffs may have good reasons, unrelated to the salon-only labels, for not swearing off L’Oréal
products. In any event, the Court need not resolve whether disclaiming any intent to purchase
L’Oréal products in the future defeats standing, because plaintiffs here have not done so.
But CCAF insists that plaintiffs have not sufficiently alleged that they will purchase the
products in the future—that the injunctive relief “at most benefits future purchasers of L’Oréal
products.” Objections [ECF No. 19] 10. Because the class is defined as past purchasers, argues
CCAF, a fatal discontinuity stands between the relief sought and those who will benefit. Id. True,
plaintiffs frame much of their complaint in the past tense, starting with the definition of the class:
those who “purchased” L’Oréal’s products between August 30, 2008 and June 27, 2013.
Settlement Agreement [ECF No. 9-2] ¶ 2.4. And most of the named plaintiffs identify
10
The chief argument that such plaintiffs can have standing appears to be solicitude for the public policy
expressed by state consumer fraud statutes. See, e.g., Henderson, 2011 WL 1362188 at *7-8. As other courts in the
Ninth Circuit have noted, however, standing is a jurisdictional requirement demanded by Article III, which plainly
trumps the will of a state legislature that consumers have injunctive remedies in federal court for false or misleading
representations. See Mason v. Nature’s Innovation, Inc., No. 12-3019, 2013 WL 1969957, at *5 (S.D. Cal. May 13,
2013). And as at least one court has pointed out, consumers may be able to meet lower thresholds for standing in
certain state courts, such as in California. Bohn, 2013 WL 3975126 at *4. Thus, finding that plaintiffs who will
never purchase the product in the future do not have standing to obtain injunctive relief would not thwart consumer
fraud statutes. See id. at *4 n.4 (“[Plaintiff] is not without recourse. If she wishes to prevent an allegedly deceptively
advertised product from remaining on the shelves, she can notify a number of state and federal regulatory agencies
and ask for them to take action.”). And plaintiffs are not automatically entitled to a federal forum. See, e.g., Lee v.
Am. Nat’l Ins. Co., 260 F.3d 997, 1001-02 (9th Cir. 2001) (“[A] plaintiff whose cause of action is perfectly viable in
state court under state law may nonetheless be foreclosed from litigating the same cause of action in federal court.”).
9
themselves as having “purchased” the products at some point in the past. Compl. [ECF No. 1] ¶
9 (“Ms. Ligon purchased [the products] . . . on June 19, 2012, and . . . on April 19, 2012”); id. ¶
10 (“Ms. Richardson purchased [the products] . . . in or about 2012”), id. ¶ 11 (“Ms. Bertrand
purchased [the products] . . . in or about 2011”), id. ¶ 12 (“Mr. Sandler purchased [the products] .
. . multiple times in 2012”), id. ¶ 14 (“Ms. Krengel purchased [the products] . . . in or about
2012”). As is often the case in complaints, factual allegations mainly appear in the past tense.
See, e.g., id. ¶ 15 (“[w]hen Plaintiffs purchased”; “they reasonably relied”; “they understood,”;
“Plaintiffs paid a premium price”; “Plaintiffs were deceived and misled . . . and therefore
suffered injury”); id. ¶ 56 (“Plaintiffs and all Class members have suffered injury”; “Plaintiffs’
claims are typical of the claims of the Class, in that Plaintiffs, like all Class members, purchased
[the products] believing . . .”).
The allegations relating to one of the named plaintiffs, however, can fairly be read to
mean that she continues to purchase the products. Id. ¶ 13 (“Ms. Peshimam has been purchasing
[the products] . . . for the past nine years”; and “[i]n 2012, she began purchasing [other L’Oréal
products at issue].”). Plaintiffs also include other allegations of continuing and future harm based
on the “salon-only” representations. Id. ¶ 58 (“Plaintiffs and Class members would be left with
no effective remedy for the damages they suffered and continue to suffer.”); id. ¶ 73 (“The
above-described unlawful business acts and practices of Defendant present a threat and
reasonable likelihood of continued deception to Plaintiff Ligon and other members of [the class]
. . .”); id. ¶ 93 (“Defendant’s acts were and are likely to deceive reasonable consumers . . .”); id.
¶ 110 (“If Defendant is not restrained from engaging in these types of practices in the future,
Plaintiff Ligon and other members of the [class] will continue to suffer harm.”). In addition to
the allegations of continuing purchases and future injury in the complaint, plaintiffs have
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consistently represented the risk of future harm during litigation. See Tr. of Fairness Hr’g [ECF
No. 25] 9 (distinguishing cases involving ineffective homeopathic remedies “because [those
purchasers are] not going to buy [the products] again” and that “[t]his is a case where purchasers
are buying these products”); id. 12 (arguing that “[w]e have past purchasers who have . . . a
likelihood of buying [the products] again and then a likelihood of being deceived again if [the
offending labels are] not removed”); Plaintiffs’ Reply [ECF No. 23] (“Reply”) 14 (arguing that if
the Court orders the injunction, “Ms. Peshiman and the other Plaintiffs will be able to purchase
L’Oréal products again without [reservations about the allegedly false labeling]”). Plaintiffs also
filed a declaration from a salon owner that purchasers of hair products, such as those at issue
here, frequently exhibit strong brand loyalty, bolstering the likelihood of future injury. Decl. of
Andrea Kuhn [ECF No. 23-6] ¶ 7. And at least four of the named plaintiffs—as well as the
objector herself—are repeat purchasers of some of the products, consistent with the evidence of
brand loyalty. Compl. ¶¶ 9, 12, 13; Kuhn Decl. 2. Moreover, the record is devoid of evidence
suggesting that plaintiffs are not likely to purchase the products again and thus not likely to
suffer future harm. See Ries, 287 F.R.D. at 533.
CCAF argues next that, because the named plaintiffs necessarily know of L’Oréal’s
alleged deception through their involvement in this case, the named plaintiffs cannot possibly
suffer future injury. See Objections [ECF No. 19] 13 (named plaintiffs “are now aware, and were
aware at the time the suit was filed, that the L’Oréal products are not exclusively sold in high-
end salons”). Put differently, CCAF maintains that the named plaintiffs are not at risk of being
fooled by the “salon-only” labels into purchasing L’Oréal’s products, and that this precludes a
finding of standing for injunctive relief. Id. CCAF finds some support for this position. See, e.g.,
McNair, 672 F.3d at 225 (rejecting argument that plaintiffs had standing because they might be
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tricked by deceptive offer in future); Stoneback v. ArtsQuest, No. 12-3287, 2013 WL 3090714,
at *12 (E.D. Pa. June 20, 2013) (no standing because “plaintiffs now know the origin” of the
deceptively labeled products); Cattie v. Wal-Mart Stores, Inc., 504 F. Supp. 2d 939, 951 (S.D.
Cal. 2007) (noting that it is “unclear how prospective relief will redress [plaintiff’s] injury, since
she is now fully aware” of the truth behind the advertisement). Plaintiffs counter that if, upon
uncovering deception in advertising, a consumer could not get a court order enjoining the
deception precisely because she had already uncovered the deception, no plaintiff could ever
have standing to seek injunctive relief for deceptive marketing. Reply 14.
At first, the power of this syllogism seems undeniable. But this Court declines to
conclude—as some other courts have—that public policy requires plaintiffs to have standing
here, notwithstanding the requirements of Article III. Instead, the Court concludes that plaintiffs
have standing despite their knowledge of the “salon-only” misrepresentation because of the
likelihood of future harm. In some cases, knowing about the deceptive nature of marketing will
stop consumers from purchasing the deceptively marketed products. This is particularly true
where the misrepresentation relates to the effectiveness of the product: once someone knows that
a flu remedy is a placebo, they are not likely to be fooled into purchasing it again. But this is not
such a case. See Mason v. Nature’s Innovation, Inc., No. 12-3019, 2013 WL 1969957 (S.D. Cal.
May 13, 2013) (“In these types of cases that do not involve claims that a product does not work
or perform as advertised, injunctive relief may still be available.”). Here, the misrepresentation
relates to the exclusivity of the product; it is a representation that the product is so high-end that
it can only be purchased in certain locations. Once the veil is lifted on that misrepresentation,
however, a consumer might rationally continue to purchase the product for any number of
reasons—cost, effectiveness, convenience, brand loyalty, and so on. That is even more likely
12
where, as here, consumers may not be paying a premium for the misrepresentation. See infra Part
II.
To the extent the named plaintiffs purchased the products strictly because of the “salon-
only” misrepresentations, the risk of future harm may not be identical to that suffered in the past.
It is unlikely that the named plaintiffs will purchase the products again because they believe that
they are only sold in salons. But they will be harmed—without an injunction—by not being able
to rely on the “salon-only” label with any confidence. Ries, 287 F.R.D. at 533 (“[Inability to rely
on label’s representation] is the harm California’s consumer protection statutes are designed to
redress.”). Put another way, the named plaintiffs will have no way of knowing whether L’Oréal’s
ongoing “diversion awareness” campaign is having any effect in deterring mass-market sales and
boosting the label’s veracity. And given the diversity of products L’Oréal offers, the Court does
not need to assume that named plaintiffs will remember the list of products for which the labels
are deceptive. Hence, the Court finds that even the named plaintiffs, knowledgeable about the
misrepresentations, are likely to suffer future harm in the absence of an injunction.
On this record, then, the Court finds that plaintiffs have established the requisite
likelihood of future harm. Two practical considerations support this result. First, plaintiffs could
not have defined the class to include future purchasers. See, e.g., Saur v. Snappy Apple Farms,
Inc., 203 F.R.D. 281, 285-86 (W.D. Mich. 2001); Mueller v. CBS, Inc., 200 F.R.D. 227, 236
(W.D. Pa. 2001). Indeed, when they at first left open the class definition to include future
purchasers, CCAF objected, prompting plaintiffs to close the class by amending it to exclude
those who purchased the products after June 27, 2013. Objections [ECF No. 19] 22-24;
Stipulation [ECF No. 22]. Rather than permitting classes defined to include future purchasers,
courts require that plaintiffs demonstrate that they will probably benefit from the requested
13
future relief. See Lyons, 461 U.S. at 105. For example, former employees in employment
discrimination cases cannot benefit from an injunction prohibiting future discrimination by the
employer. See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2559-60 (2011). But there is no
certainty that current employees in those cases will not quit tomorrow, and hence courts require
only that plaintiffs show that future injury is likely, for which current employment is enough. See
id. Similarly here, repeat past purchases, brand loyalty, allegations of ongoing purchases, and an
injury unconnected to the performance of the product combine to show that future injury is
likely. Second, although it is possible to conclude that plaintiffs should have alleged more clearly
their intent to continue purchasing the products, requiring them to amend their complaint to
strengthen those allegations would waste the resources of the parties and of this Court. Because
on this record the Court is able to infer that the named plaintiffs intend to purchase the products
in the future, it is unnecessary to reject the proposed settlement simply to order that plaintiffs
fortify the indications of that intent. Accordingly, the Court concludes that plaintiffs have
standing to seek injunctive relief.
II. THE PROPOSED CLASS DOES NOT SATISFY RULE 23
To certify a class for settlement, a court must consider whether the proposed class meets
the requirements of Federal Civil Rule 23. For the reasons discussed below, the Court concludes
that final class certification is inappropriate.
A. The Proposed Class Meets The Rule 23(a) Requirements
The proponent for class certification has the burden of establishing that each of the
prerequisite elements of Rule 23(a) are satisfied: (1) the class is so numerous that joinder of all
members is impractical (“numerosity”), (2) there are questions of law or fact common to the
class (“commonality”), (3) claims/defenses of representative parties are typical of the claims
14
common to the class (“typicality”) and (4) the representative parties will fairly and adequately
protect the interests of the class (“adequacy”). All of these requirements are satisfied here.
1. Numerosity
Rule 23(a)(1) only requires that the class be “so numerous that joinder of all members is
impracticable.” Fed. R. Civ. P. 23(a)(1). In this district, courts have found that numerosity is
satisfied when a proposed class has at least forty members—a point not contested by any party
here. See Vista Healthplan v. Warner Holdings Co. III Ltd., 246 F.R.D. 349, 357 (D.D.C. 2007)
(citing Bynum v. District of Columbia, 214 F.R.D. 27, 32 (D.D.C. 2003)). It is undisputed that
L’Oréal has sold the products at issue to thousands of members of the putative settlement class.
Hence, the numerosity requirement is met. See Bynum, 214 F.R.D. at 32-33.
2. Commonality
Questions of law and fact must be common to the class under Rule 23(a)(2).
“Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the
same injury,’” which “does not mean merely that they have all suffered a violation of the same
provision of law.” Wal-Mart, 131 S. Ct. at 2551 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457
U.S. 147, 157 (1982)). The “claims must depend on a common contention . . . [which] must be of
such a nature that it is capable of classwide resolution—which means that determination of its
truth or falsity will resolve an issue that is central to the validity of each one of the class claims
in one stroke.” Wal-Mart, 131 S. Ct. at 2551. And “[w]hat matters to class certification . . . is not
the raising of common ‘questions’—even in droves—but, rather the capacity of a classwide
proceeding to generate common answers apt to drive the resolution of the litigation.” Id. In this
case, commonality is satisfied because the claims are based on the common contention that
15
L’Oréal has sold each class member one or more products with false or misleading “salon-only”
labels. The class therefore satisfies the “commonality” requirement.
3. Typicality
Rule 23(a)(3) requires a finding that the representative parties’ claims or defenses “are
typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). The requirement for
“typicality” is satisfied “if each class member’s claim arises from the same course of events that
led to the claims of the representative parties and each class member makes similar legal
arguments to prove the defendant’s liability.” Trombley v. Nat’l City Bank, 826 F. Supp. 2d 179,
192–93 (D.D.C. 2011). The facts and claims of each class member do not have to be identical.
See Daskalea v. Wash. Humane Soc’y, 275 F.R.D. 346, 358 (D.D.C. 2011). Instead, courts have
found the “typicality” requirement satisfied when class representatives “suffered injuries in the
same general fashion as absent class members.” See In re Vitamins Antitrust Litig., 209 F.R.D.
251, 260 (D.D.C. 2002) (internal quotations omitted). Here, typicality is satisfied because the
claims of named plaintiffs and of absent class members are based on the same core set of facts
and underlying legal theories: whether the “salon-only” labels on the products purchased by
members of the class were false or misleading.
4. Adequacy
Under Rule 23(a)(4), the class representative must fairly and adequately protect the
interests of the class. Two criteria are generally recognized for determining the adequacy of class
representation—(1) the interests of the named representative must not be antagonistic to or
compete with the interests of the unnamed class members; and (2) the representative must appear
able to vigorously prosecute the interests of the class through qualified counsel. Twelve John
Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997) (internal quotations and
16
citations omitted); Vista Healthplan, 246 F.R.D. at 358. The Court finds that, while the class
representatives may have some conflicting interests due to the incentive awards, those conflicts
are not so great here as to defeat a finding of adequacy. See In re Lorazepam, 205 F.R.D. at 375
(approving substantial incentive awards without expressing any adequacy concerns). And
because among the class representatives are both mass-market purchasers and salon purchasers,
the intra-class conflict discussed below does not render the representatives inadequate. Nothing
indicates that counsel are not qualified or experienced. Hence, the Court finds that the proposed
class meets all of the requirements under Rule 23(a).
B. The Proposed Class Does Not Meet The Rule 23(b)(2) Requirements
The bulk of CCAF’s objections focus on whether certification of the settlement class is
proper under Rule 23(b)(2). “In addition to satisfying Rule 23(a)’s prerequisites, parties seeking
class certification must show that the action is maintainable under Rule 23(b)(1), (2), or (3).”
Amchem, 521 U.S. at 614. CCAF offers several arguments why this action is not. Certification
of a (b)(2) class is proper where the Rule 23(a) requirements are satisfied and if “the party
opposing the class has acted or refused to act on grounds that apply generally to the class, so that
final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a
whole.” Fed. R. Civ. P. 23(b)(2). Again, this burden is no lighter in the context of a settlement-
only class certification, though the Court need not worry about manageability of the action at
trial. Amchem, 521 U.S. at 620. And it “may be necessary for the court to probe behind the
pleadings before coming to rest on the certification question.” Comcast Corp. v. Behrend, 133 S.
Ct. 1426, 1432 (2013) (internal quotation marks omitted).
17
1. The release of class-wide damages claims is improper under Rule
23(b)(2).
Rule 23(b)(2) is unlike Rule 23(b)(3) in that it is “mandatory”: absent class members do
not have the right to opt out of the class and they are not entitled to the best notice practicable. In
Phillips Petroleum v. Shutts, 472 U.S. 797 (1985), the Supreme Court held that absent class
members have a due process right to opt out of class actions seeking predominantly monetary
damages, such as those certified under Rule 23(b)(3). Id. at 811-12. The Court left open the
question whether due process compelled opt-out in actions not seeking predominantly monetary
damages. Id. And in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), the Court held that
claims for monetary relief may not be certified under (b)(2) where the monetary relief sought is
not incidental to the injunctive or declaratory relief. Id. at 2557 (Rule 23(b)(2) “does not
authorize class certification when each class member would be entitled to an individualized
award of monetary damages”). The Court again declined to reach the question whether (b)(2)
allows class certification of any monetary claims, but it held that “at a minimum, claims for
individualized relief (like the backpay at issue [in Wal-Mart]) do not satisfy the Rule.” Id. That is
because “[t]he key to the (b)(2) class is ‘the indivisible nature of the injunctive or declaratory
remedy warranted—the notion that the conduct is such that it can be enjoined or declared
unlawful only as to all of the class members or as to none of them.” Id. Thus, “individualized
monetary claims belong in Rule 23(b)(3).” Id. at 2558; Richards v. Delta Air Lines, Inc., 453
F.3d 525, 530 (D.C. Cir. 2006) (“If recovery of damages is at the heart of the complaint,
individual class members must have a chance to opt out of the class and go at it alone—or not at
all—without being bound by the class judgment.”). When a class seeks “an individual injunction
benefitting all its members at once,” the procedural protections afforded by (b)(3) are
unnecessary. Wal-Mart, 131 S. Ct. at 2558. The defendant will be enjoined whether or not any
18
particular class member opts out. But to bind absent class members as to their individualized
monetary damages claims, courts must provide more notice and the right to opt out.
CCAF’s primary concern with the settlement here is the release. The release preserves the
individual claims of class members for damages relating to the “salon-only” labels. Settlement
Agreement [ECF No. 9-2] ¶ 2.4. But it purports to release L’Oréal from liability for all class-
wide damages claims. Id. In other words, upon settlement, class members can bring individual
claims for damages based on the “salon-only” labels, but cannot maintain a Rule 23(b)(3) class
action or any other type of class action seeking damages. As a result, CCAF argues that the
parties are trying—improperly—to certify damages claims under Rule 23(b)(2).
Analysis of CCAF’s argument requires a more detailed understanding of the facts here.
To begin with, plaintiffs do not seek any damages in their complaint. It is true that, as CCAF
points out, plaintiffs’ original complaint sought damages. See Ligon v. L’Oréal USA, Inc., No.
12-4585 (N.D. Cal. Aug. 30, 2012). But once the plaintiffs made an assessment that recovering
damages on a class-wide basis was not possible, Reply [ECF No. 23] 12, they refiled their suit,
dropping the damages claims. In addition, the settlement does not release individualized claims
for damages. In a normal (b)(3) damages class action settlement, plaintiffs release not only class-
wide damages claims but individual damages claims too: the defendant often seeks “global
peace.” Here, there is a release for class-wide damages claims, but not individual damages
claims. The explanation is simple, at least from the defendant’s perspective: the possible
recovery on an individual damages claim is too small for any rational consumer to file a case.
The claims here relate to consumer purchases for relatively low dollar amounts, and
compensatory damages would likely be similarly low. Yet the aggregation procedure provided
by Rule 23 is critical in cases that involve relatively trivial individual damages. Giving up the
19
class-wide damages claims effectively releases L’Oréal from all monetary liability for the
“salon-only” labels.
Under Shutts, this Court cannot bind absent class members “concerning claims wholly or
predominantly for money damages” without providing the notice and opt-out of Rule 23(b)(3).
472 U.S. at 811 n.3. In Wal-Mart, the Supreme Court expressed doubts about whether even
monetary claims that do not predominate could be certified in the absence of notice and opt-out.
If this Court certifies the settlement class and enters judgment approving the settlement, the
release of class-wide damages claims would bind absent class members. The question, then, is
whether that judgment concerns claims for money damages that are more than “incidental.”
Damages claims are incidental when class members would “automatically . . . be entitled [to
damages] once liability to the class (or subclass) as a whole is established.” Allison v. Citgo
Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998). In contrast, damages predominate when the
damages that class members could recover would be “dependent . . . on the intangible, subjective
differences of each class member’s circumstances” and would “entail complex individualized
determinations.” Id.Plaintiffs argue that because they do not seek any damages in this complaint, the Court
would not be binding absent class members concerning even incidental damages claims. But
Shutts is, at bottom, about the preclusive effect of a judgment. It does not comport with due
process to bind a plaintiff who is not before a court, and who is perhaps even unaware of a
judgment, as to money damages claims, without notifying her of the suit and giving her the
chance to opt out. 472 U.S. at 811-12. Otherwise, that plaintiff might be surprised to learn that
someone else has bargained away her damages claim without her knowing about it or having any
say in it. For example, perhaps the plaintiff’s individual claim is far more valuable than the
20
compensation she would receive if she stayed in the class. Thus, the focus here is not, as
plaintiffs contend, whether plaintiffs seek any damages. Rather, it is whether the judgment will
bind absent class members as to their damages claims. And here, omitting damages claims from
the complaint but agreeing to release damages claims on a class-wide basis is tantamount to
asserting damages claims but agreeing to compromise the ability to bring them as a class in
return for nothing. Either way, absent class members will be precluded from bringing a class
action for damages in the future, all without knowing about it or without being given the chance
to opt out.
The plaintiffs in Wal-Mart attempted a similar strategy. There, plaintiffs left
compensatory damages out of the complaint and argued that certification under (b)(2) was proper
because the backpay claims did not “predominate” over the injunctive relief sought. 131 S. Ct. at
2559. The Court rejected that argument, noting that it would “create perverse incentives for class
representatives to place at risk potentially valid claims for monetary relief.” Id. The possibility
that compensatory claims might be precluded “underscore[d] the need for plaintiffs with
individual monetary claims to decide for themselves whether to tie their fates to the class
representatives’ or go it alone—a choice Rule 23(b)(2) does not ensure that they have.” Id. Just
as here, the Wal-Mart plaintiffs argued that because they did not assert compensatory damages
claims, those claims should not affect the (b)(2) calculus. As the Supreme Court explained,
though, the possibility of preclusion is the pertinent concern, and even the claims left out are
therefore relevant to the (b)(2) analysis.
Preserving individual damages claims here does not help plaintiffs. “[M]ost of the
plaintiffs would have no realistic day in court if a class action were not available.” Shutts, 472
U.S. at 809. In consumer actions such as this, damages are typically far too low for a rational
21
plaintiff to pursue an individual action, greatly increasing the value of the aggregation procedure
in Rule 23. See id. The class-action claim is essentially the only way absent class members could
ever recover any damages here. See id.; Felix, 290 F.R.D. at 408 (rejecting argument that
exception in release for trivial individual claims cures fairness problem as to release of class-
wide damages). As a result, while it is true that absent class members retain the legal right to
bring individual claims, plaintiffs have bargained away the only practical means of asserting
those claims. It is not necessary here to determine whether permitting plaintiffs to settle a class-
action damages claim, while leaving individual damages claims intact, can ever be proper under
Rule 23(b)(2). On this record, the Court is simply unable to determine that certifying the class
and approving the settlement would bind absent class members as to what are only incidental
damages claims.
For one thing, any damages that plaintiffs might recover on a class-wide basis, were
damages claims to be asserted, would not be incidental in this case that is focused on alleged
overcharging. See Kottaras v. Whole Foods Mkt., Inc., 281 F.R.D. 16, 27 (D.D.C. 2012) (“It is
clear that money damages are at the heart of this case. The injury alleged is a financial loss due
to overcharges resulting from the [mislabeling]. This is economic harm.”). Plaintiffs do not now
seek damages, but it is necessary to consider what plaintiffs seek to bargain away in practice.
Class members would not “automatically . . . be entitled [to damages] once liability to the class
(or subclass) as a whole is established.” Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415
(5th Cir. 1998). Instead, any damages that class members could recover would be “dependent . . .
on the intangible, subjective differences of each class member’s circumstances” and would
“entail complex individualized determinations.” Id. Unlike, for example, entitlement to a
statutorily mandated damage award on a finding of liability, class members here would have to
22
establish several different elements to show their entitlement to damages. See Tr. of Fairness
Hr’g [ECF No. 25] at 32. These types of individualized determinations indicate that, were
plaintiffs to assert damages claims, they could not seek them in a (b)(2) class action because they
would predominate over the injunctive relief. See Wal-Mart, 131 S. Ct. at 2258-59. Instead, they
would be the proper subject of a (b)(3) damages class.
The parties counter that the Court should not be concerned about certifying the class
because, in their view, there are no viable class-wide damages claims. In other words, absent
class members would only be precluded from bringing a class action that would never be
certified under (b)(3). Thus, the parties urge that where class damages claims are absolutely
meaningless, see generally Tr. of Fairness Hr’g [ECF No. 25] at 24-28, releasing them without
notice or opt-out cannot, as a matter of law, violate absent class members’ due process rights.
The parties cite no authority for this novel proposition. In the only two cases located by the Court
involving similarly structured settlements, courts have rejected the settlements based on fairness
grounds and have not reached the due process issue. See Crawford v. Equifax Payment Servs.,
201 F.3d 877, 882 (7th Cir. 2000); Felix v. Northstar Location Servs., 290 F.R.D. 397, 408
(W.D.N.Y. 2013). And in effect, the parties are asking this Court to prejudge the merits of claims
not before it; to conclude that those as-yet-unfiled claims are meritless; and hence to preclude
those claims from ever being asserted, all without the putative claimants’ participation. But
assuming even that would be appropriate, this case is not the proper vehicle. For on the record
before the Court, it is impossible to determine with any level of certainty that the class damages
claims to be surrendered by class members are valueless.11
11
Valueless to potential claimants, that is. L’Oréal naturally places a high value on the release, and the Court
does not dispute its value to L’Oréal.
23
At the outset, proving a universal negative—that there is no possibly viable class action
for damages—is inherently problematic. See Vieth v. Jubelirer, 541 U.S. 267, 311 (2004)
(Kennedy, J., concurring) (“[P]roving a negative is a challenge in any context.”). More
fundamentally, it is not the role of this Court to speculate as to whether a hypothetical class can
be certified. And it would be even more troublesome to base a decision that strips procedural
rights from absent class members, without their knowledge or consent, on that speculation. See
Shutts, 472 U.S. at 811-12. This is not a case where the parties have briefed the issue of
certification of a damages class and asked the Court to make a decision about whether
certification is proper. Instead, the parties—in a non-adversarial litigating position—ask the
Court to make a blanket determination that, based on a relatively thin record, (b)(3) certification
could never be proper. Hypothesizing about every possible set of potential class members and
engaging in the complex analysis of class certification, all without the aid of adversarial briefing,
is not an appropriate task for the Court.
In any event, plaintiffs’ argument about the impossibility of certification is not
persuasive. Plaintiffs cite an intensive factual investigation and assessment to represent that, in
their judgment as experienced counsel, no class action for damages could ever be maintained.
Reply [ECF No. 23] 11 (“[C]ertification of a class seeking monetary relief was impossible. There
were no classwide claims for monetary relief.”). The Court does not question counsel’s
experience or motives, but once discussions focus around settlement, the incentives of the parties
are aligned, and plaintiffs have less motivation to zealously advocate for certification of a (b)(3)
class. As a result, the Court approaches the parties’ representations with some caution. Plaintiffs
aver that their investigation revealed the following: that L’Oréal did not charge a premium for
the products based on the “salon-only” representation; that L’Oréal has never sought to
24
determine whether it was able to charge such a premium; that on average, class members paid
slightly more for the products in mass-market retailers than in salons; and that prices charged by
mass-market retailers varied tremendously both within and between geographic markets. Motion
[ECF No. 23] 4-5. The conclusion that counsel draws from this investigation is that the
variations in the prices, along with the determination that salon purchasers on average paid less
than mass-market purchasers, rendered any (b)(3) action impossible to maintain. Motion [ECF
No. 17] 5 (“Plaintiffs concluded that it would have been difficult to ascertain a principled
formula for assessing the value of an individual consumer’s monetary damages claim”); Reply
[ECF No. 23] 5 (“[C]lasswide monetary relief claims have no value.”).
An initial problem with plaintiffs’ conclusions is a factual deficiency. Specifically, when
plaintiffs determined that class members paid slightly more for the products when purchasing in
mass-market retailers instead of salons, plaintiffs compared sample prices from mass-market
retailers all over the country against a single data point: the manufacturer’s suggested retail price
(“MSRP”). Motion [ECF No. 17] 4. Plaintiffs have not compared what mass-market retailers
charged with what salons actually charged; rather, they compared what mass-market retailers
charged with how much L’Oréal suggested the salons should charge. L’Oréal represents that it
has no statistical data whatsoever on the prices that salons charge. Decl. of Christopher Lyden
[ECF No. 9-4] 4. It further represents that it believes that the MSRP is a good proxy—“at least
for purposes of comparing prices charged by salons to prices charged by non-salon retailers.” Id.But at bottom, plaintiffs represent that no class-wide damages claims exist based on a proxy for
the actual price charged in salons that may or may not be reliable, without any corroboration that
the proxy is remotely accurate. The Court simply cannot conclude on this record that there are no
viable class-wide claims. If a sampling of salons revealed that, in fact, salons charge
25
considerably more than the MSRP, for example, there may indeed be class-wide damages. And
there may be ways to define the class (or subclasses) with reference to particular geographic
locales in which salon customers did pay a premium. Even if it is true that nationally consumers
paid no premium on average, there may be pockets where they did.
It is not hard to imagine adventurous or avaricious counsel taking advantage of this novel
settlement structure to the detriment of absent class members. For example, imagine a putative
consumer class action where damages determinations would be relatively complex or speculative
on a nationwide basis, but perhaps not so on a state-to-state basis. Calculating that a piece of a
state-wide class would not be very rewarding to pursue, the hypothetical plaintiffs build a record
showing that a broad nationwide class seeking damages could never be certified. Then, plaintiffs
seek to file a suit for injunctive relief only and seek to settle with the defendant. Because
releasing all damages claims in a (b)(2) settlement class would almost certainly be improper, the
defendant agrees that plaintiffs need not release individual damages claims—the value of which
is trivial, as in many consumer class actions. But plaintiffs agree to release class-wide damages
claims, under the auspices of an impossible-to-certify nationwide class. Plaintiffs get attorney’s
fees, defendant gets a near-bulletproof release, and class members get . . . an injunction.
In the end, stripping the procedural right to bring a damages class action from absent
class members without their knowledge or consent—and effectively precluding their damages
claims—is not proper. Whether or not that procedural right is valuable is not for this Court to
determine, and even if it were, the record here is far from conclusive that class-wide claims are
meaningless. Otherwise, the Court would effectively be denying all hypothetical motions to
certify a (b)(3) class (however framed) based on this conduct. Under Shutts and Wal-Mart,
26
before giving up monetary claims, absent class members are entitled to a level of due process
that is missing here.
2. The proposed class lacks cohesiveness
CCAF argues that, in addition to the problems related to certifying monetary damages
claims in a (b)(2) class, the class lacks cohesiveness. “[A]ssumptions of homogeneity and class
cohesiveness . . . underlie (b)(2) certification.” Eubanks v. Billington, 110 F.3d 87, 94 (D.C. Cir.
1997); Blackman v. District of Columbia, 633 F.3d 1088, 1094 (D.C. Cir. 2011)
(“[C]ohesiveness is a significant touchstone of a (b)(2) class.”). The main issue affecting the
cohesiveness of the proposed class here is an intra-class conflict: as CCAF points out, the
interests of mass-market purchasers differ from the interests of salon purchasers. “[I]ntraclass
equity” is a “requirement.” Ortiz v. Fibreboard Corp., 527 U.S. 815, 862 (1999). Plaintiffs
concede the heterogeneity of the mass-market purchasers, explaining at length how they may
have paid more or less for the products than salon purchasers did, depending on geographic
location and retailer.12 Motion [ECF No. 17] 4-5. Indeed, whether mass-market purchasers were
harmed at all is questionable, considering the self-evident nature of the “salon-only”
misrepresentation when the products were purchased outside of salons. Although it is unclear on
this record whether salon purchasers have valid claims, mass-market purchasers face a more
difficult path to recovery. Accordingly, their interests diverge from the salon purchasers’
interests. See Melong v. Micronesian Claims Comm’n, 643 F.2d 10, 13-14 (D.C. Cir. 1980)
(certification of class with both strong and weak claims inappropriate). Salon-only purchasers
have an interest in maximizing their possible damages recovery, while mass-market purchasers
have an interest, if any at all, in getting an injunction. Most mass-market purchasers are likely to
be uninterested in the result, because they probably could not obtain any money damages on
12
As explained above, plaintiffs make these comparisons using the MSRP.
27
these facts.13 Hence, mass-market purchasers are not likely to mind a release of class-wide
monetary claims. Salon-only purchasers, on the other hand, theoretically could be harmed by
such a release. Intra-class conflicts such as this demonstrate that certifying the class under (b)(2)
would be inappropriate because of the lack of cohesiveness of the class. Eubanks, 110 F.3d at 94.
Intra-class conflicts are more problematic in the (b)(2) context because in the (b)(3) context class
members with stronger claims can opt out. Broussard v. Meineke Disc. Muffler Shops, 155 F.3d
331, 338 (4th Cir. 1998). Where conflicts between class members with strong claims and those
with weak claims arise, courts require either that the plaintiffs create subclasses represented by
separate counsel or that those with weak claims be excised from the class.14 Ortiz, 527 U.S. at
856. Plaintiffs have not done either here.
III. THE SETTLEMENT IS NOT FAIR, REASONABLE, AND ADEQUATE
To approve the settlement, the Court must find that it is “fair, reasonable, and adequate”
under Rule 23(e)(2). The burden of proving fairness is on the proponents of the settlement. In re
Dry Max Pampers Litig., No. 11-4156, 2013 WL 3957060, at *4 (6th Cir. Aug. 2, 2013)
(collecting cases). Some circuits hold that pre-certification settlement requires heightened
scrutiny. See In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 946-47 (9th Cir. 2011)
(citing cases from Second, Third, Seventh, and Ninth Circuits). “There is no single test for
settlement approval in this jurisdiction; rather, courts have considered a variety of factors.” In re
13
The Court does not opine on the propriety of releasing, on a class-wide basis, completely worthless
damages claims without the due process described in Shutts.
14
Objectors also argue that because an adequate remedy at law exists—namely, monetary damages—and that
the usual remedy for both unjust enrichment and breach of warranty (the only two claims asserted on behalf of the
nationwide class) is monetary damages, plaintiffs are not entitled to injunctive relief. “The general rule is that
injunctive relief will not issue when an adequate remedy at law exists.” Richards, 453 F.3d 525, 531 n.6. Because
the class cannot be certified, and thus the injunction will not issue, it is unnecessary to reach this argument.
28
LivingSocial Mktg. & Sales Practice Litig., No. 11-472, 2013 WL 1181489, at *23 (D.D.C. Mar.
22, 2013) (listing five factors).15
CCAF raises several reasons why the proposed settlement is not fair, reasonable, or
adequate. To start with, objectors simply describe overall benefits of the settlement. Class
members receive injunctive relief, and in return they surrender any class-wide claims for
damages; meanwhile, plaintiffs’ counsel receive almost a million dollars in attorney’s fees and
class representatives receive $1,000 each. See Crawford, 201 F.3d at 882 (rejecting similarly
structured settlement as unfair). Viewing the settlement as a whole also reveals allocation
problems: that is, the division of the settlement proceeds between the class, class representatives,
and class counsel is not fair. Allocation problems often arise with class-action settlements
because the defendant “will usually have no interest in how the fund is divided between the
plaintiffs and class counsel”; the defendant is interested only in the bottom line. Hubbard v.
Donahoe, No. 03-1062, 2013 WL 3943495, at *7 (D.D.C. July 31, 2013). Here, there is no
apparent indication of collusion between plaintiffs’ counsel and the defendant. Negotiations
regarding the terms of the settlement and the fee award appear to have been properly
segregated—though that does not necessarily cure any allocation problems. See In re Cmty.
Bank of N. Va. & Guar. Nat’l Bank of Tallahassee Second Mort. Litig., 418 F.3d 277, 308 (3d
Cir. 2005). At least one circuit has cautioned that “when the class receives no monetary
distribution but class counsel are amply rewarded,” the settlement may be inequitable as between
class counsel and the class. Bluetooth, 654 F.3d at 947.
15
Because the Court reaches the conclusion that the settlement is fundamentally unfair, it is unnecessary to
consider some of the other fairness factors often examined by courts, such as arm’s length negotiations and the
status of the litigation at the time of settlement. See, e.g., Trombley v. Nat’l City Bank, 826 F. Supp. 2d 179, 194-
200 (D.D.C. 2011).
29
Because the settlement creates no common fund to divide between class members and
class counsel, determining attorney’s fees by the lodestar method is likely appropriate.16 Swedish
Hosp. Corp. v. Shalala, 1 F.3d 1261, 1268 (D.C. Cir. 1993) (where no fund results, using a
percentage-of-the-fund method to calculate attorney’s fees “is not necessarily available”) (citing
Newberg, Attorney Fee Awards § 1.10, at 17 (1986)). Setting aside the issue of the proper
amount to award in attorney’s fees, the agreement on fees is itself a sign that the settlement may
not be fair to the class. The settlement provides no monetary relief while rewarding counsel
handsomely. Where counsel initially seek damages and end up obtaining injunctive relief only,
rewarding counsel with a full 1.0 multiplier may be unfair. Sobel v. Hertz, No. 06-545, 2011 WL
2559565, at *14 (D. Nev. June 27, 2011). Plaintiffs go so far as to argue that counsel “obtained
the precise relief they sought in the Complaint, and now ask to be reasonably compensated for
achieving that benefit.” Reply [ECF No. 23] 21. This is misleading. Counsel originally filed this
case in California, seeking monetary damages. Upon realizing the difficulty—though perhaps not
impossibility—of that goal, counsel refiled in order to settle for injunctive relief and a hefty fee
award. “In other words, the class is being asked to ‘settle,’ yet Class Counsel has applied for fees
as if it had won the case outright.” Sobel, 2011 WL 2559565 at *14. Moreover, the result
achieved here could be characterized as worse than “settling”: counsel seeks to release class
members’ (originally asserted) class-wide damages claims for precisely nothing. Regardless of
the implications for calculating attorney’s fees, the amount requested by plaintiffs and agreed to
by L’Oréal creates the impression of unfairness.
The incentive awards to class representatives buttress that impression of unfairness.
“[T]he fact that one class member receives $2,000 and the other 200,000+ [class members
16
Although the lodestar method seems proper here, because the Court will deny the motion for certification
and final approval, it need not decide the issue.
30
receive] nothing is quite enough to demonstrate that the terms should not [be] approved under
Rule 23(e).” Crawford, 201 F.3d at 882. Plaintiffs are correct that “courts routinely approve
incentive awards to compensate named plaintiffs for the services they provided and the risks they
incurred during the course of the class action litigation.” In re Lorazepam, 205 F.R.D. at 400
(internal quotation marks omitted). Indeed, about 30% of class actions include incentive awards.
Theodore Eisenberg & Geoffrey Miller, Incentive Awards to Class Action Plaintiffs: An
Empirical Study, 53 U.C.L.A. L. Rev. 1303, 1303 (2006). But here, the involvement of the
representative plaintiffs does not justify such awards, particularly in light of the result obtained
for all other plaintiffs. Cobell v. Salazar, 679 F.3d 909, 922-23 (D.C. Cir. 2012) (courts have
discretion to approve incentive awards). The allegations on behalf of the representative plaintiffs
are relatively sparse, consisting of allegations that they purchased the products at some point
during the class period. See, e.g., Compl. [ECF No. 1] ¶¶ 9-15. This is not a case where the
representative plaintiffs had to spend significant amounts of time helping counsel to prepare a
detailed factual complaint; instead, the burden on the representative plaintiffs was relatively low.
Set against the recovery obtained on behalf of the absent class members, incentive awards of
$1,000 are unfair.
Plaintiffs counter that several factors support a finding that the settlement is fair. First,
they argue that the low objection rate demonstrates that this settlement is fair. See LivingSocial,
2013 WL 1181489 at *23. But this proves little. Although the D.C. Circuit has approved
consideration of the objection rate as a factor, it has noted that “caution . . . should be exercised
in inferring support from a small number of objectors to a sophisticated settlement.” Cobell, 679
F.3d at 923 (quoting GM Trucks, 55 F.3d at 812). Moreover, the objections filed here, though
not numerous, were comprehensive and sophisticated. One good objector may be worth many
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frivolous objectors in ascertaining the fairness of a settlement. Plaintiffs also argue that the
opinion of experienced counsel shows that it is fair. But this factor never weighs against
settlement: “the lawyers who negotiated the settlement will rarely offer anything less than a
strong, favorable endorsement.” ALI Principles § 3.05, cmt. A at 206; see also Kakani v. Oracle
Corp., No. 06-6493, 2007 WL 1793774, at *3 (N.D. Cal. June 19, 2007) (“Once the named
parties reach a settlement in a purported class action, they are always solidly in favor of their
own proposal.”). And the experienced counsel representing one of the objectors holds a less-
than-charitable opinion of the settlement’s fairness. Accordingly, this factor also proves very
little.
Plaintiffs also contend that the value of the settlement, set against the strength of the case,
shows that it is fair—their assessment of the low value of the class-wide damages claim indicates
that getting even the injunction is a good result. See LivingSocial, 2013 WL 1181489 at *23. But
this argument rests on the accuracy of the assessment of the class-wide damages claims, and the
Court cannot determine on this record whether counsel’s assessment is accurate. If redefinition
of the class could result in a viable (b)(3) class, then plaintiffs have achieved a poor result by
bargaining away valuable monetary claims in return for purely forward-looking nonmonetary
relief. Hence, because of the difficulty in assessing on this record the proper value of the class-
wide damages claim negotiated away by plaintiffs, this factor does not weigh in favor of the
settlement’s fairness.
Similarly, plaintiffs argue that the class members are better off with something rather
than nothing, and that this settlement is the best possible result obtainable. If the Court approves
the settlement, class members get the injunction, but if the Court disapproves the settlement they
get nothing. An equally accurate description would be that if the Court approves the settlement,
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class members lose any possible monetary recovery and get an injunction of limited value, but if
the Court disapproves the settlement perhaps some class members may get a monetary recovery.
It may be that no court would certify a (b)(3) class on any definition of the class, or perhaps the
evidence would not support monetary damages. But making that determination without a full
airing of the issues and without a record on which to base that conclusion disserves absent class
members and may deprive them of their due process rights. And this settlement may not be the
best result obtainable. For example, by litigating this case through class certification and through
final judgment, plaintiffs may be able to obtain the injunction without ceding the class-wide
damages claim. Overall, the arguments raised by plaintiffs to show that this settlement is fair are
unconvincing, particularly when weighed against the indications of unfairness raised by the
objectors. Accordingly, the Court finds that the settlement is not fair, reasonable, and adequate.
CONCLUSION
Upon consideration of the briefs, the fairness hearing, applicable law, and the entire
record herein, the Court will deny plaintiffs’ motion for conditional class certification and for
final approval of the class settlement. Because the Court declines to certify the class, the Court
will also deny plaintiffs’ pending motion for attorney’s fees as moot. See Fed. R. Civ. P. 23(h)
(“In a certified class action, the court may award reasonable attorney’s fees and nontaxable costs
that are authorized by law or by the parties’ agreement.”) (emphasis added). A separate order has
issued on this date.
/s/
JOHN D. BATES
United States District Judge
Dated: November 6, 2013
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