Radosti v. Envision Emi, LLC ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
BINA RADOSTI, et al.,
Plaintiffs,
v. Civil Action No. 09-887 (CKK)
ENVISION EMI, LLC,
Defendant.
MEMORANDUM OPINION
(June 8, 2010)
This is a class action lawsuit arising out of a series of youth conferences sponsored by
Defendant Envision EMI, LLC (“Envision”) in and around Washington, D.C. surrounding the
inauguration of President Barack Obama in January 2009. Plaintiffs Bina Radosti, Joshua
Rottman, Sally Rife, Heather Kern, Zachary Johnson Burton, and Latiana Carter (collectively,
“Plaintiffs”) bring this action on behalf of themselves and all those similarly situated alleging
breach of contract, negligent misrepresentation, and violations of state consumer protection laws
by Envision. After a successful mediation, the parties reached a settlement, which they have
submitted to this Court for approval pursuant to Federal Rule of Civil Procedure 23(e). On
December 17, 2009, the Court preliminarily approved the settlement agreement, conditionally
certified the settlement class, and approved procedures to notify members of the settlement class
of their right to object to or opt out of the settlement. After objections and opt-out notices were
received, the parties filed their [24] Joint Motion for Final Approval of Class Action Settlement,
which is presently pending before the Court. Plaintiffs also filed a [25] Motion for Attorneys’
Fees, Expenses, and Class Representative Service Awards. The Attorneys General of twenty-two
different states (including the District of Columbia) filed a [35] Brief Amicus Curiae Opposing
Final Approval of the Proposed Settlement Agreement, to which the parties filed a joint response.
On May 25, 2010, the Court held a Fairness Hearing to consider whether the proposed settlement
agreement is “fair, reasonable, and adequate.” The arguments and representations made on the
record during that Fairness Hearing are expressly incorporated and made a part of this
Memorandum Opinion.
Upon a searching review of the parties’ preliminary and final motions for approval of the
settlement agreement and certification of the settlement class, the filings submitted in connection
with the objections and opt-outs, the brief amicus curiae of the Attorneys General and the
response thereto, the arguments and representations made during the Fairness Hearing, the
relevant statutes and case law, and the entire record herein, the Court finds that the terms of the
settlement agreement, excluding the potential cy pres fund for later evaluation, are fair,
reasonable, and adequate and should be approved. As explained below, the Court makes the
following findings: the Court has jurisdiction over this action; the class may be certified for
settlement purposes; the settlement agreement was negotiated at arms-length by experienced
counsel with the assistance of an experienced mediator after an appropriate amount of
investigation and informal discovery, and it is the opinion of the experienced counsel and
mediator that the settlement is fair, adequate, and reasonable; the vouchers to be awarded under
the settlement agreement provide meaningful value to class members because of their high face
value, their transferability, and their seven-year duration; choice-of-law issues and Envision’s
financial condition significantly undermine Plaintiffs’ likelihood of obtaining meaningful class-
wide relief at trial; the settlement is supported by the class, as demonstrated by the low number of
2
objectors and opt-outs; and the cy pres fund established by the settlement agreement—if properly
administered—will ensure that Envision substantially disgorges the profits from its alleged
misconduct. Accordingly, the Court shall GRANT the parties’ [24] Joint Motion for Final
Approval of the Settlement Agreement, HOLD IN ABEYANCE approval of the proposed cy
pres fund, and HOLD IN ABEYANCE Plaintiffs’ [25] Motion for Attorneys’ Fees, Expenses,
and Class Representative Service Awards.
I. BACKGROUND
A. Factual and Procedural Background
Envision is a Virginia limited liability company1 that sponsors educational conferences
for youth. This lawsuit pertains to three student conferences sponsored by Envision in
connection with the inauguration of President Barack Obama in Washington, D.C. in January
2009. The three conferences were designated by age group: (1) the Junior Presidential Youth
Inaugural Conference, for students in the fifth through eighth grades at the time of the
inauguration; (2) the Presidential Youth Inaugural Conference, for high school students; and (3)
the University Presidential Inaugural Conference, for college students over the age of 18
(collectively, the “Conferences”). Envision began soliciting participation in the Conferences in
January 2008. Plaintiffs allege that Envision represented to potential participants that they would
be present for the inauguration of the President and Vice President, witness the inaugural parade,
and attend a black tie gala inaugural ball. See First Am. Compl. ¶ 41. Plaintiffs also allege that
Envision represented that participants would, among other things, have “private access” to the
1
Although Plaintiffs allege in the First Amended Complaint that Envision is
headquartered in the District of Columbia, the parties agreed during the Fairness Hearing that
Envision is based in Vienna, Virginia.
3
Smithsonian Institution on the National Mall, hear a keynote speech from famed cyclist Lance
Armstrong, and meet historians, political experts, leading decision makers, and White House
officials. See id. ¶¶ 41-42. Envision also allegedly informed invitees that they were among a
“few select students” invited to attend one of the Conferences. See id. ¶ 43. Approximately
15,000 students paid between $2380 and $2729 in tuition costs to attend the Conferences.
Plaintiffs allege that the many of the promises made by Envision were not delivered
during the Conferences. They claim that Envision “uniformly failed to provide access to witness
the inauguration and/or provide special access to the Mall for the inauguration and instead told
students they were ‘on their own.’” First Am. Compl. ¶ 53. They also claim that Envision failed
to provide tickets to the inaugural parade or to an official Black Tie Gala inaugural ball, deliver
many of the promised speakers, and provide adequate housing and transportation to the over
15,000 students who attended the Conferences. Id. ¶¶ 54-57. Envision also allegedly failed to
disclose material facts regarding the Conferences, including: that Envision had made no
arrangements to provide tickets so that Conference attendees could actually witness the
inauguration or the inaugural parade; that the “Black Tie Gala Inaugural Ball” had no affiliation
with any of the official inaugural balls held in Washington, D.C. and would be held in school
gymnasium-style facilities where no formal wear was required; and that the Conferences were
not “selective” or “exclusive.” Id. ¶ 60. Plaintiffs contend that if they had known these facts,
they would not have made the decision to pay Envision to attend the Conferences.
After many Conference attendees complained about their experiences, Envision
established an informal claims procedure. Envision sent a claim form to approximately 2000
individuals who had contacted Envision to express a concern about the Conferences. The claim
4
form allowed each attendee to indicate which events they had missed during the Conferences,
and Envision assigned a reimbursement value to each missed event. On average, each claimant
received about $400 in cash compensation. Each claimant also received a voucher worth $750
that could be applied toward tuition at future Envision programs.2 In addition, Envision paid
cash settlements (ranging from approximately $500 to full refunds) to about 150 individuals,
some of whom had filed lawsuits in small claims courts. Two individuals also received
settlements worth approximately $6000, one of whom allegedly suffered from physical injuries
and emotional trauma and the other of whom filed a lawsuit in New York Supreme Court.
Envision spent approximately $900,000 on all of these claims and settlements and issued
vouchers worth approximately $1,458,000.3 No determination as to liability has ever been made.
On March 19, 2009, several attendees at the Conferences brought a class action lawsuit in
the United States District Court for the Northern District of Illinois against Envision and
Congressional Youth Leadership Council (“CYLC”), an entity whose assets were purchased by
Envision in 2007, alleging breach of contract. See Complaint, Bowman v. Cong. Youth
Leadership Council, Civ. No. 09-1727 (N.D. Ill. filed Mar. 19, 2009). After Envision made
offers of judgment under Rule 68 to the named plaintiffs in that action, Envision and CYLC
moved to dismiss the class action as moot.4 The plaintiffs then filed an amended complaint
2
Alternatively, claimants could elect to forego their cash compensation and receive
double the value of their settlement as a voucher. Roughly twenty percent of claimants opted for
a voucher-only settlement.
3
The facts in this paragraph are derived from representations made by Envision’s counsel
during the Fairness Hearing, as well as from information provided by the parties and the
objectors.
4
Envision paid $5000 to each of the Bowman class representatives to settle their claims.
5
substituting four other class members as class representatives. Envision filed an answer to the
amended complaint, and the parties made Rule 26 initial disclosures and began discussing the
timing and logistics of discovery. In addition, the plaintiffs filed a motion for class certification,
which was opposed by Envision.
The instant action was brought separately by Bina Radosti, on her own behalf and as next
friend of Dash Radosti, and Joshua Rottman on May 13, 2009, against Envision and CYLC,
alleging three causes of action: (1) violations of the D.C. Consumer Protection Procedures Act
(“CPPA”), D.C. Code §§ 28-3901 et seq.; (2) negligent misrepresentation; and (3) breach of
contract. See Compl. ¶¶ 91-109. The Radosti plaintiffs filed a motion before the Judicial Panel
on Multidistrict Litigation seeking to transfer the Bowman case to this Court, and Envision filed a
separate motion to transfer the Bowman case to this Court for consolidated proceedings.
B. Settlement Negotiations
Shortly after this action was filed, the parties in both this case and the Bowman case
began to engage in formal and informal settlement negotiations. The parties held in-person
meetings in Washington, D.C. and Chicago, Illinois and participated in numerous telephone
conference calls. In addition, Envision provided informal discovery to Plaintiffs regarding its
insurance coverage, the number of complaints it had received and resolved, the nature of the
Conferences, and the current financial condition of the company.
On August 4, 2009, the parties conducted a formal mediation session before the
Honorable Daniel Weinstein (Ret.) of Judicial Arbitration and Mediation Services. See Joint
Mot. for Final Approval, Aff. of Hon. Daniel Weinstein ¶ 3. The mediation lasted for
approximately 14 hours, during which time the parties engaged in extensive and sometimes
6
contentious negotiations. See id. ¶ 6. Although the mediator believed at several times that no
settlement would be reached, the parties ultimately reached an agreement to compromise the
litigation. Id. The parties fully negotiated and agreed to the relief to be afforded the class
members prior to beginning any discussions about attorneys’ fees, costs, or class representative
incentive awards. Id. ¶ 8.
Following the mediation, the Bowman plaintiffs agreed to voluntarily dismiss their
pending case and consolidate their claims in this action. On August 13, 2009, the Bowman
action was dismissed without prejudice pursuant to the settlement agreement. On November 19,
2009, the Plaintiffs filed an Amended Complaint against Envision incorporating the remaining
class representatives from the Bowman action (Sally Rife, on her own behalf and as next friend
of Franchesca Rife, Heather Kern, Zachary Johnson Burton, and Latiana Carter). The parties
engaged in detailed negotiations and exchanged numerous drafts of the settlement agreement
before presenting it to this Court for preliminary approval on December 10, 2009.
C. The Terms of the Settlement Agreement
The settlement agreement provides relief to the settlement class in the form of vouchers
that can be used towards tuition at future Envision programs.5 The settlement class is defined as
all individuals who attended one of the Conferences (or, for those individuals under 18 years of
age, their parent or legal guardian) who have not, prior to the certification of the settlement class,
received from Envision any refund, voucher, or other compensation in settlement of a claim
arising out of the Conferences. See Joint Mot. for Prelim. Approval, Class Action Settlement
5
Although the parties use the term “tuition” in the settlement agreement, Envision has
explained that for most of its programs, the tuition fee includes lodging and meals for program
attendees.
7
Agreement (“Settlement Agreement”) at 3-4. The settlement agreement establishes a settlement
claims procedure in which class members may apply for a settlement payment consisting of two
vouchers worth $625 each (for a total value of $1250). The vouchers may be used within seven
years of the date of issuance toward payment of tuition for a future Envision conference or
program. The vouchers must be used one at a time unless tuition for a program is $3500 or
more, in which case both vouchers may be used together.6 The vouchers are fully assignable and
transferable to anyone, but they may only be redeemed by (a) a family member7 of a class
member or (b) any other student who has a 3.5 or higher grade point average or who receives a
teacher recommendation at the time of enrollment in the Envision conference or program.8 In a
First Amendment to the Settlement Agreement, Envision agreed to maintain a page on its
website that describes how to redeem the vouchers and further explains that vouchers are fully
transferable. See Joint Response to Br. Amicus Curiae, First Amendment to Class Action
Settlement Agreement (“Settlement Agreement Amendment”)9 at 2. As amended, the settlement
agreement also provides that at least ten percent of all attendees enrolling in any future Envision
6
The cost of tuition for Envision programs ranges from approximately $1400 to $5200,
meaning that the discount value of the vouchers toward any particular program ranges from
approximately 18% to 45%.
7
The Settlement Agreement does not define “family member,” although the parties
explained at the Fairness Hearing that they intended the term to apply only to immediate family
members, such as siblings or stepsiblings, and not to more distant relatives such as cousins.
8
Envision avers that this is a standard eligibility requirement for attendance at its
programs.
9
The Settlement Agreement Amendment strikes paragraphs 10-14 of the original
Settlement Agreement and substitutes new paragraphs 10-14. Except where otherwise noted, the
Court’s discussion of the settlement incorporates the language of the Settlement Agreement
Amendment.
8
conference or program may use such vouchers. Id. at 1.
In the original settlement agreement, a class member seeking to qualify for the vouchers
would have to complete and submit to Envision (within 90 days of the effective date of the
settlement agreement) a verification form indicating that the student who attended one of the
Conferences involuntarily missed one or more of the three key inaugural events (i.e., the
inauguration, the inaugural parade, and the black tie inaugural ball). As amended in response to
objections, the Settlement Agreement requires each class member to verify only that the student
who attended one of the Conferences was “unsatisfied” with his or her experience. See
Settlement Agreement Amendment at 2. Envision will provide monthly reports to class counsel
indicating the number of claims received, Envision’s determination on each claim, and the
reasons supporting each determination during the claims period; Envision will also provide a
final report within 30 days after the claims period. Id. at 3-4. In the event that a dispute arises as
to whether a class member properly submitted a verification, Envision shall indicate that
information in its monthly report, and Envision will attempt to resolve the dispute in good faith
with class counsel. Id. at 2. If the dispute cannot be resolved, class counsel may seek
intervention from this Court. Id.The settlement agreement also provides that if Envision does not distribute at least $8
million worth of vouchers to class members, Envision shall establish a “Class Settlement
Scholarship Fund” (“CSSF”) in an amount equivalent to the difference between the voucher
payments and $8 million. In effect, this provision creates a potential cy pres10 fund and ensures
10
The cy pres doctrine, as used in the class action context, permits unclaimed funds to be
distributed to the “next best” class, thus maximizing the number of individuals compensated.
See Democratic Cent. Comm. v. Wash. Metro. Area Transit Comm’n, 84 F.3d 451, 455 (D.C. Cir.
9
that Envision will distribute at least $8 million in discounts off future programs. As amended,
the settlement agreement provides that Envision shall award partial or total scholarships from the
CSSF to an academically qualified applicant to attend an Envision program based on economic
or other considerations. Envision shall be required to distribute scholarships totaling at least
15% of the CSSF each year until the CSSF is depleted, which must occur within seven years of
its creation. In order to deplete the CSSF, the scholarships must not only be distributed but
actually redeemed by individuals attending Envision programs. Envision may, in its discretion,
distribute additional scholarships each year totaling up to 5% of the CSSF to independent,
nationally recognized organizations that focus on education and/or leadership skills such as the
National 4-H Council, Boy Scouts of America, and the Girl Scouts of the USA. Envision shall
include on all program websites information about how students may apply for scholarships, and
class members will be eligible for these scholarships. Envision shall administer the CSSF
separately from any other tuition assistance or scholarship program, and Envision will not be
required to include in or add to the CSSF any amounts for unused vouchers distributed to class
members. The settlement agreement calls for Envision to provide semiannual reports to class
counsel on the administration of the CSSF, including amounts awarded and redeemed and an
accounting of any balance remaining until the CSSF is depleted.
As part of the settlement agreement, class members agree to unconditionally release any
and all claims against Envision, whether known or unknown, arising out of the Conferences and
the allegations in the Radosti and Bowman complaints. Class members further agree that the
voucher payments are their exclusive remedy for their claims. The agreement provides that in
1996).
10
addition to the voucher payments, Envision agrees to provide $2500 to each of the six named
class representatives, subject to court approval. Envision also agrees to pay, subject to court
approval, a total award to class counsel11 of $1,455,000 for expenses and fees. The agreement
states that no portion of the settlement payments shall be reduced in any way to pay class
representatives or class counsel.
C. Form and Manner of Notice to the Class, Objections & Opt-Outs
On December 17, 2009, this Court granted preliminary approval of the settlement
agreement and conditionally certified the settlement class. Pursuant to the settlement agreement,
notice was provided to 13,415 class members by electronic mail and 343 class members by mail.
See Joint Mot. for Final Approval, Aff. of Jennifer M. Keough ¶ 3. Envision’s notice provider
also hosted a website with information regarding the settlement agreement that received 1125
hits through March 11, 2010. See id. Class members were informed of their opportunity to
request exclusion from the settlement class, i.e., opt out, or object to the terms of the settlement
agreement. Objections and opt-outs were due within 45 days after notice was sent.
Class counsel received 15 total objections, one of which was untimely.12 This represents
approximately one tenth of one percent of the settlement class. Many of the objectors indicated
that they were dissatisfied with their experience at the Conferences and would never attend
another Envision program. Several objectors indicated that it would be impossible or impractical
11
In its Order Preliminarily Approving Class Action Settlement Agreement,
Conditionally Certifying Settlement Class and Approving Class Action Notice Plan, the Court
appointed James Pizzirusso, Esq., and Robert Coleman, Esq., as class counsel to represent the
settlement class. See Docket No. [19] ¶ 11.
12
The Court has considered all of the objections, but the Court notes that the untimely
objection was substantially similar to the views expressed by timely objectors.
11
to attend a future Envision program, either because they would no longer be eligible students or
because international travel would be required in order to attend.13 These objectors generally
expressed a preference for a cash settlement in lieu of a voucher that they would be unlikely to
use. Several objectors also expressed concern that the vouchers would only cover a portion of
the tuition at future programs, so they would be required, by their calculations, to spend
hundreds, if not thousands, of additional dollars in order to take advantage of the vouchers.
Several objectors complained that even though the vouchers would be transferable to family
members or other qualified attendees, they did not have eligible family members and it would be
difficult or burdensome for them to locate other qualified individuals who might be interested in
purchasing a voucher. One objector expressed concern that named class representatives and
Class Counsel receive cash while class members only qualify for tuition vouchers. Several
objectors complained that the settlement agreement did not sufficiently punish Envision for its
misconduct and suggested that Envision be required to provide at least a partial refund.
Class counsel also received 25 total opt-outs.14 Several of the individuals seeking
exclusion from the settlement class indicated that they enjoyed their experience at the
Conferences and did not want to be a part of this litigation, while others gave no reason for
opting out. Only two of the opt-outs indicated that they were displeased with the settlement.
13
Some of the students attending the Conferences were from overseas, and two objections
came from individuals in the United Kingdom.
14
The parties indicated that one of the opt-out notices was untimely filed; however, the
parties confirmed at the Fairness Hearing that they will accept the untimely opt-out and exclude
that individual from the settlement class.
12
D. Joint Motion for Final Approval and Fairness Hearing
On March 12, 2010, after the objections and opt-outs were received, the parties filed their
Joint Motion for Final Approval of the Class Action Settlement. On March 16, 2010, Plaintiffs
filed a Motion for Attorneys’ Fees, Expenses, and Class Representative Service Awards. On
April 14, 2010, the Attorneys General of twenty-two states (including the District of Columbia)
filed a Brief Amicus Curiae Opposing Final Approval of the Proposed Settlement Agreement.
The Attorneys General contend that the settlement agreement should be subjected to heightened
scrutiny as a coupon settlement pursuant to the Class Action Fairness Act of 2005, Pub. L. No.
109-2, 119 Stat. 4 (codified in scattered sections of title 28 of the United States Code) (“CAFA”).
The Attorneys General also argue that the voucher payments offer low value compared to
disproportionate attorney and incentive fees and do not represent a reasonable settlement in light
of the strength of Plaintiffs’ case. The Attorneys General also criticize the Class Settlement
Scholarship Fund because unlike a true cy pres fund, Envision retains control over the fund and
has nearly complete discretion over how to disperse the funds.
The Court ordered the parties to file a brief in response to the Attorneys General’s
opposition, which they filed on April 30, 2010. In their response brief, the parties noted that they
had amended the settlement agreement so as to provide that any class member who was
dissatisfied could obtain vouchers, whether or not he or she missed any of the three key inaugural
events. The amended settlement agreement also clarified some aspects of how the CSSF would
be administered to address some of the Attorneys General’s concerns. The response brief also
addressed other arguments raised by the Attorneys General, which shall be addressed below.
The Court held a Fairness Hearing on May 25, 2010, with counsel for the parties as well
13
as a legal representative of the Attorneys General present. None of the potential class members
sought permission to speak at the Fairness Hearing.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or defenses of a
certified class may be settled . . . only with the court’s approval.” A class may be certified for
settlement purposes only, and such “settlement-only” classes have become increasingly
prominent. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 618 (1997). When certifying a
class for settlement purposes only, a court must consider whether the proposed class meets the
requirements of Federal Rule of Civil Procedure 23, although the court need not determine
whether the case, if tried, would present intractable management problems. Id. at 620; Thomas v.
Albright, 139 F.3d 227, 234 (D.C. Cir. 1998). As proponents of class certification, Plaintiffs
have the burden of establishing that each of the elements of Rule 23(a) are met and that the class
is maintainable pursuant to one of Rule 23(b)’s subdivisions. Amchem, 521 U.S. at 614; Fed. R.
Civ. P. 23; Richards v. Delta Air Lines, Inc., 453 F.3d 525, 529 (D.C. Cir. 2006). The four
prerequisites to a class action lawsuit under Rule 23(a) are: (1) the class is so numerous that
joinder of all members is impracticable; (2) there are questions of law or fact common to the
class; (3) the claims or defenses of the representative parties are typical of the claims and
defenses of the class; and (4) the representative parties will fairly and adequately protect the
interests of the class. See Fed. R. Civ. P. 23(a). These four requirements are referred to as
numerosity, commonality, typicality, and adequacy of representation. In addition, Plaintiffs must
demonstrate that the class is maintainable under Rule 23(b). In the instant case, Plaintiffs seek
certification under Rule 23(b)(3) and, as such, must show that “questions of law or fact common
14
to class members predominate over any questions only affecting individual members, and that a
class action is superior to other available methods for fairly and efficiently adjudicating the
controversy.” Fed. R. Civ. P. 23(b)(3). These requirements are referred to as predominance and
superiority. Among the factors that may be considered are (a) the class members’ interest in
individually controlling the prosecution of separate actions; (b) the extent and nature of any
litigation already begun by class members; and (c) the desirability or undesirability of
concentrating the litigation of the claims in the particular forum. Id.Approval of a proposed class action settlement lies within the discretion of the District
Court. In re Vitamins Antitrust Litig., 305 F. Supp. 2d 100, 103 (D.D.C. 2004) (“Vitamins II”).
Pursuant to Federal Rule of Civil Procedure 23(e), a court may approve a settlement that would
bind class members “only after a hearing and on finding that it is fair, reasonable, and adequate.”
Fed. R. Civ. P. 23(e)(2). “In a proposed settlement under which class members would be
awarded coupons, the court may approve the proposed settlement only after a hearing to
determine whether, and making a written finding that, the settlement is fair, reasonable, and
adequate for class members.” 28 U.S.C. § 1712(e). In considering whether to approve a
proposed class action settlement, 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.” United States v. District of Columbia, 933 F. Supp. 42, 47 (D.D.C. 1996).
Furthermore, there is a long-standing judicial attitude favoring class action settlements, and the
court’s “discretion is constrained by the ‘principle of preference’ favoring and encouraging
settlement in appropriate cases.” Vitamins II, 305 F. Supp. 2d at 103 (quoting Pigford v.
Glickman, 185 F.R.D. 82, 103 (D.D.C. 1999).
15
III. DISCUSSION
The Court shall begin its analysis with the topic of class certification, since the settlement
class must comport with the requirements of Rule 23. The Court shall then address the
reasonableness of the Settlement Agreement, taking into consideration the objections filed by the
class members, the opposition of the Attorneys General as amici curiae, and the parties’ briefs in
support of final approval. It is undisputed that the Court has jurisdiction over this class action
under the diversity statute as amended by CAFA. See 28 U.S.C. § 1332(d).
A. Certification of the Settlement Class
This Court conditionally certified the settlement class in its preliminary approval order.
At the final approval stage, the Court now provides a more detailed analysis of the Rule 23
requirements for certification of a settlement class.
1. Rule 23(a) Requirements
a. Numerosity.
Rule 23(a)(1) requires that the class be “so numerous that joinder of all members is
impracticable.” Fed. R. Civ. P. 23(a)(1). The numerosity requirement “imposes no absolute
limitations,” but rather “requires examination of the specific facts of each case.” Gen. Tele. Co.
of the Nw., Inc. v. EEOC, 446 U.S. 318, 330 (1980). Courts in this District have generally found
that the numerosity requirement is satisfied and that joinder is impracticable where a proposed
class has at least forty members. Bynum v. District of Columbia, 214 F.R.D. 27, 32 (D.D.C.
2003); Thomas v. Christopher, 169 F.R.D. 224, 237 (D.D.C. 1996), aff’d in part and rev’d in
part, 139 F.3d 227 (D.C. Cir. 1998). A plaintiff need not provide the exact number of potential
class members to satisfy the requirement, so long as there is a reasonable basis for the estimate
16
provided. Bynum, 214 F.R.D. at 32-33; Pigford, 182 F.R.D. at 347. Here, the parties agree that
the number of class members is approximately 13,500. The Court therefore easily finds that
joinder would be impracticable and that the numerosity requirement of Rule 23(a)(1) is satisfied.
b. Commonality
Rule 23(a)(2) requires that there be questions of law or fact common to the class. Fed. R.
Civ. P. 23(a)(2). “The commonality test is met when there is at least one issue, the resolution of
which will affect all or a significant number of the putative class members.” In re Lorazepam &
Clorazepate Antitrust Litig., 202 F.R.D. 12, 26 (D.D.C. 2001) (“Lorazepam I”) (quoting
Lightbourn v. County of El Paso, 118 F.3d 421, 426 (5th Cir. 1997)); see also Garcia v. Johanns,
444 F.3d 625, 631 (D.C. Cir. 2006). Significantly, “factual variations among the class members
will not defeat the commonality requirement, so long as a single aspect or feature of the claim is
common to all proposed class members.” Bynum, 214 F.R.D. at 33. Here, there are many
common factual and legal issues among the class members. For example, all members of the
settlement class paid tuition to attend the Conferences, and Envision made the same or
substantially similar representations to all class members regarding the services that would be
provided at the Conferences. Common legal issues include whether Envision’s advertisements
or assertions were false and misleading and whether they were material, as well as whether
Envision breached its contracts with the class members by failing to provide the promised
services. The Court therefore concludes that the commonality requirement of Rule 23(a)(2) is
met.
c. Typicality.
Rule 23(a)(3) requires a finding that “the claims or defenses of the representative parties
17
are typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). The typicality
requirement is “intended to assess whether the action can be efficiently maintained as a class and
whether the named plaintiffs have incentives that align with those of the absent class members so
as to assure that the absentees’ interests will be fairly represented.” Lorazepam I, 202 F.R.D. at
27 (citations omitted). The facts and claims of each class member do not have to be identical to
support a finding of typicality; rather, “[t]ypicality refers to the nature of the claims of the
representative, not the individual characteristics of the plaintiff,” In re Cardizem CD Antitrust
Litig., 200 F.R.D. 297, 304 (E.D. Mich. 2001). The typicality requirement 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.” Lorazepam I, 202 F.R.D. at 27 (quoting Pigford, 182 F.R.D. at 349).
Here, the claims of the named plaintiffs and those of the absentee members of the settlement
class arise from the same events and involve the same legal theory and elements of proof.
Named plaintiffs and class members are individuals who attended the Conferences and who have
not previously settled their claims with Envision. There is at least one class representative who
attended each of the three Conferences, and therefore the three student groups (i.e., junior high,
high school, and college) are represented. As their claims can only be described as typical of the
Settlement Class, the Court finds that the typicality requirement is satisfied.
d. Adequacy of representation.
Rule 23(a)(4) requires a finding that “the representative parties will fairly and adequately
protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). “Two criteria for determining the
adequacy of representation are generally recognized: (1) the named representative must not have
18
antagonistic or competing interests with the unnamed members of the class, 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 quotation omitted). The only evidence the Court has been presented with that
suggests that the named plaintiffs’ interests are in any way antagonistic to those of absentee
members of the settlement class is the fact that under the Settlement Agreement, the parties agree
that the class representatives should receive cash incentive awards in the amount of $2500 each.
However, the Court notes that it is within the Court’s discretion to grant the incentive awards,
and the class representatives had no assurance of receiving such awards during the pendency of
this litigation. Moreover, it appears that throughout this litigation, the named plaintiffs and the
absentee class members shared the identical objectives of establishing liability and obtaining
damages. The Court is satisfied that the named plaintiffs’ counsel have adequately prosecuted
the interests of the class. Plaintiffs’ attorneys have demonstrated experience handling class
action lawsuits and have undertaken a substantial investigation into the merits of claims that
could be asserted by the class and the financial condition of Envision to satisfy a judgment. See
generally Joint Mot. for Final Approval, Decl. of James J. Pizzirusso & Decl. of Robert F.
Coleman. Therefore, the Court finds that the adequacy requirement is satisfied.
2. Rule 23(b) Requirements
In order to certify the settlement class pursuant to Rule 23(b)(3), the Court must find that
questions of law or fact common to class members predominate over questions affecting only
individual members and that a class action is superior to other available methods for resolving
the controversy.
19
a. Predominance.
“There is no definitive test for determining whether common issues predominate,
however, in general, predominance is met when there exists generalized evidence which proves
or disproves an element on a simultaneous, class-wide basis, since such proof obviates the need
to examine each class member’s individual position.” Cohen v. Warner Chilcott Public Ltd. Co.,
522 F. Supp. 2d 105, 116 (D.D.C. 2007) (quotation marks and citations omitted). Common
issues must predominate but need not be dispositive. Id. Here, Plaintiffs allege that Envision
made misleading or negligent misrepresentations in their advertising and promotional materials
for the Conferences, which every class member received and relied on in deciding to pay tuition
and attend the Conferences. Plaintiffs further allege that Envision breached its contract with
Plaintiffs by failing to deliver on specific promises about what would be provided at the
Conferences. All of these issues involve single acts or omissions by Envision that pertain to each
member of the class. Although there may be some individualized questions relating to damages
for the breach of contract claim, this does not defeat class certification under Rule 23(b)(3). See
Johnson v. District of Columbia, 248 F.R.D. 46, 57 (D.D.C. 2008) (“[T]he mere existence of
individual damages issues in a Rule 23(b)(3) class does not cause individual issues to
predominate over common issues on liability or causation.”) Because Plaintiffs’ claims pertain
largely to actions taken by Envision vis-a-vis the class, the Court finds that the predominance
requirement of Rule 23(b)(3) is satisfied.
b. Superiority.
“The superiority requirement ensures that resolution by class action will ‘achieve
economies of time, effort, and expense, and promote . . . uniformity of decision as to persons
20
similarly situated, without sacrificing procedural fairness or bringing about other undesirable
consequences.” Cohen, 522 F. Supp. 2d at 117 (quoting Amchem, 521 U.S. at 615). The
superiority requirement is easily met here. The number of members in the settlement class is
approximately 13,500, and this class action settlement would resolve the remaining claims of all
of the Conferences attendees. Because the amount of damages for each class member is
relatively small compared to the cost of litigating an individual claim, resolution by class action
provides a superior method of adjudication and ensures that class members will receive equal
treatment. Accordingly, the Court finds that the superiority requirement of Rule 23(b)(3) is
satisfied.
Because the class is being certified for purposes of settlement only, the Court need not
consider whether the case, if tried, would present intractable management problems. Amchem,
521 U.S. at 620. However, the Court has considered all of the other relevant factors under Rule
23(a) and Rule 23(b)(3). The Court notes that since the settlement class was conditionally
certified and the settlement was preliminarily approved, none of the objectors have argued that
class certification is improper.15 Accordingly, the Court is satisfied that the proposed settlement
class satisfied the requirements of Rule 23, and therefore the Court shall certify the settlement
class.
3. Class Counsel
Pursuant to Rule 23(g), the Court is required to appoint class counsel to represent the
settlement class. In doing so, the Court must consider the work counsel has done in identifying
15
Although the Attorneys General argue that heightened scrutiny should apply to the
settlement, they do not argue that certification of the settlement class is improper.
21
or investigating potential claims in the action, counsel’s experience in handling class actions,
other complex litigation, and the types of claims asserted in this action, counsel’s knowledge of
the applicable law, and the resources that counsel will commit to representing the class. See Fed.
R. Civ. P. 23(g)(1)(A). The Court finds that Messrs. Pizzirusso and Coleman have adequately
represented the interests of class members and should be appointed class counsel.
B. The Fairness, Adequacy, and Reasonableness of the Settlement
Pursuant to Rule 23(e), the Court must determine whether the proposed settlement is
“fair, adequate and reasonable and is not the product of collusion between the parties.” Thomas
v. Albright, 139 F.3d 227, 231 (D.C. Cir. 1998) (citation omitted). There is no single test in this
Circuit for determining whether a proposed class action settlement should be approved under
Rule 23(e). Meijer, Inc. v. Warner Chilcott Holdings Co. III, Ltd., 565 F. Supp. 2d 49, 55
(D.D.C. 2008); Pigford, 185 F.R.D. at 98. However, in making such a determination, courts in
this Circuit have considered the following factors, among others: (1) whether the settlement is
the result of arm’s-length negotiations; (2) the terms of the settlement in relation to the strength
of plaintiffs’ case; (3) the status of the litigation at the time of the settlement; (4) the reaction of
the class; and (5) the opinion of experienced counsel. Vitamins II, 305 F. Supp. 2d at 104 (citing
numerous cases); In re Baan Co. Secs. Litig., 284 F. Supp. 2d 62, 64-67 (D.D.C. 2003).
In their brief amicus curiae, the Attorneys General contend that the Class Action Fairness
Act (“CAFA”) mandates heightened scrutiny of so-called “coupon settlements.”16 CAFA
16
Although Congress did not define the term “coupon” in the statute, courts have
generally considered a coupon settlement to be one that provides benefits to class members in the
form of a discount towards the future purchase of a product or service offered by the defendant.
See, e.g., Fleury v. Richemont N. Am., Inc., No. C-05-4525, 2008 WL 3287154, at *2 (N.D. Cal.
Aug. 6, 2008) (“While CAFA does not expressly define what a coupon is, the legislative history
22
establishes the following standard for judicial scrutiny of coupon settlements:
In a proposed settlement under which class members would be awarded coupons, the
court may approve the proposed settlement only after a hearing to determine whether,
and making a written finding that, the settlement is fair, reasonable, and adequate for
class members. The court, in its discretion, may also require that a proposed
settlement agreement provide for the distribution of a portion of the value of
unclaimed coupons to 1 or more charitable or governmental organizations, as agreed
to by the parties. The distribution and redemption of any proceeds under this
subsection shall not be used to calculate attorneys’ fees under this section.
28 U.S.C. § 1712(e). The “fair, reasonable, and adequate” standard imposed by CAFA is
identical to the language in Rule 23(e), and the only additional requirement explicit in the statute
is that the Court must hold a hearing and make a written finding that the settlement meets that
standard. CAFA also places other restrictions on coupon settlements, such as requiring that
attorneys’ fee awards attributable to the value of coupons be based on the value of the coupons
actually redeemed. See 28 U.S.C. § 1712(a).
The Attorneys General argue that based on the legislative history of CAFA, which
includes many statements critical of coupon settlements, Congress intended § 1712(e) to require
heightened scrutiny of proposed coupon settlements. In addition, the Attorneys General cite
three federal decisions purportedly recognizing this heightened scrutiny, relying most heavily on
Figueroa v. Sharper Image Corp., 517 F. Supp. 2d 1292, 1321 (S.D. Fla. 2007). In Figueroa, the
court held that “because the CAFA requirement in section 1712(e) applies only to coupon
settlements, and because it is codified to further Congress’ objectives and concerns regarding the
fairness vel non of coupon settlements in particular, the [court] interprets the statutory directive
suggests that a coupon is a discount on another product or service offered by the defendant in the
lawsuit.”) The parties do not dispute that the vouchers for future Envision programs qualify as
coupons for purposes of CAFA.
23
to imply the application of a greater level of scrutiny to the existing criteria than existed pre-
CAFA.” The Figueroa court also noted that the CAFA standard is identical to that of Rule 23
and that coupon settlements have been extensively criticized even before CAFA. Therefore, it is
unclear as to what degree of added scrutiny the Figueroa court “implied” from CAFA.
Defendants also cite Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 654
(7th Cir. 2006), a case that arose before CAFA in which the Seventh Circuit in dictum “note[d]
that in [CAFA] Congress required heightened judicial scrutiny of coupon-based settlements”; and
Kearns v. Ford Motor Co., No. CV 05-5644, 2005 WL 3967998, at *1 (N.D. Cal. Nov. 21,
2005), in which the court said that CAFA “put significant limits on so-called ‘coupon
settlements’ which produce hardly any tangible benefits for the members of the plaintiff class,
but generate huge fees for class attorneys.” Neither of these cases provides any meaningful
discussion of what “heightened scrutiny” under CAFA actually means.
This Court finds that the judicial scrutiny called for by § 1712(e) is indistinct from the
scrutiny required by Rule 23(e), with the understanding that coupon settlements pose a particular
risk of unfairness and unreasonableness because of the increased possibility that the benefits
afforded to class members will never be realized, since class members are provided with a future
discount on a product or service with which they were previously dissatisfied. See Figueroa, 517
F. Supp. 2d at 1302 (“[There are] three major problems with coupon settlements: they often do
not provide meaningful compensation to class members; they often fail to disgorge ill-gotten
gains from the defendant; and they often require class members to do future business with the
defendant in order to receive compensation.”) This is consistent with the finding of the court in
True v. American Honda Motor Co., No. EDCV 07-287, 2010 WL 707338, at *12 (C.D. Cal.
24
2010) (Feb. 26, 2010). In True, the court acknowledged the wide range of judicial and scholarly
criticism of coupon settlements and noted that the court’s role in evaluating coupon settlements
is to discern whether the value of a specific coupon settlement is reasonable in relation to the
value of the claims surrendered. With that standard in the mind, the Court shall review the
proposed settlement agreement in light of the factors enumerated above and the objections that
have been received.
1. Arm’s-Length Negotiation and the Opinion of Experienced Counsel
“A presumption of fairness, adequacy, and reasonableness may attach to a class
settlement reached in arm’s-length negotiations between experienced, capable counsel after
meaningful discovery.” Vitamins II, 305 F. Supp. 2d at 104. In this case, the parties reached a
settlement only after a lengthy mediation session that was presided over by an experienced
mediator. Although the mediation occurred before formal fact discovery began in this action,
Plaintiffs’ counsel had already conducted a substantial factual investigation into the experience
of many class members at the Conferences, conducting interviews with dozens of class members
and collecting various newspaper articles, internet weblogs, and other reports about the
Conferences. See Mem. in Supp. of Joint Mot. for Final Approval at 10. In addition, Envision
provided Plaintiffs’ Counsel with significant informal discovery relating to its financial
condition, insurance coverage, and resolution of previous complaints by attendees at the
Conferences. Therefore, it appears that the parties were well-positioned to mediate their claims,
and all the evidence before the Court indicates that this settlement is the product of arm’s-length
negotiation between experienced counsel.
The opinion of experienced counsel “should be afforded substantial consideration by a
25
court in evaluating the reasonableness of a proposed settlement.” Cohen, 522 F. Supp. 2d at 121(citation omitted). In this case, Class Counsel has substantial experience litigating consumer
class actions and are of the opinion that the settlement is fair, reasonable, and in the best interests
of the settlement class. See Joint Mot. for Final Approval, Decl. of Robert Coleman ¶ 17 & Decl.
of James Pizzirusso ¶ 20. In addition, the mediator has opined that the settlement is fair and
reasonable, based on “the significant recovery that the settlement affords the members of the
settlement class, Envision’s current and foreseeable economic condition, the difficulties inherent
in prosecuting any class action of this size, Envision’s defenses to Plaintiffs’ claims, and the risks
and expenses to Envision to defend Plaintiffs’ claims.” See Joint Mot. for Final Approval, Decl.
of Hon. Daniel Weinstein ¶ 9. The opinion of the mediator and experienced Class Counsel
weigh in favor of approving the settlement agreement.
2. The Terms of the Settlement in Relation to the Strength of Plaintiffs’ Case
The Settlement Agreement provides a benefit to class members in the form of two $625
transferable vouchers for tuition at future Envision programs, and it requires Envision to
establish a scholarship fund if less than $8 million worth of vouchers are claimed. If every class
member claims vouchers, Envision will pay out approximately $17 million worth of vouchers.
Plaintiffs contend that this settlement represents a substantial recovery in light of the risks and
costs of continuing litigation.
a. The value of the settlement.
The value of the settlement to each class member can be quantified in terms of the values
of the vouchers, which is a total of $1250. These vouchers represent an average savings of about
18%-41% off tuition for future Envision programs and a 45%-54% refund of the tuition paid for
26
the Conferences. However, a number of courts have recognized that the actual value of a coupon
to a class member may be less than its face value. See, e.g., In re Mexico Money Transfer Litig.,
267 F.3d 743, 748 (7th Cir. 2001) (“[C]ompensation in kind is worth less than cash of the same
nominal value.”) Here, the parties have structured the settlement agreement in a manner that
seeks to maximize the value of the vouchers to class members. First, the vouchers are valid for a
period of seven years, during which time Envision plans to offer approximately 2450 conferences
attended by approximately 340,000 students. See Joint Response to Br. Amicus Curiae at 6.
Second, the vouchers are fully transferable to other qualifying students, as well as to
family members of the class member (whether or not they otherwise qualify for enrollment at an
Envision program). Therefore, if a class member is unable to attend another program, he or she
may give it to a younger sibling or attempt to sell it to another student who qualifies to attend an
Envision conference. The Attorneys General and some objectors argue that the secondary market
for these vouchers is not established and therefore class members may have difficulty finding a
buyer for unused vouchers. Plaintiffs acknowledged at the Fairness Hearing that no secondary
market yet exists for these vouchers and that it is difficult to predict the ease with which they
may be resold. Plaintiffs argue, however, that class members should be able to utilize the
internet to find interested buyers, and Envision will maintain a website that explains that
vouchers are transferable. The Court recognizes that class members seeking to sell their
vouchers to unknown third parties may encounter some difficulties, but the Court also notes that
most class members are students who have a natural network of classmates to whom vouchers
might be sold, and the large number of programs that are offered during the seven-year period
makes it more likely that buyers can be found. The relatively high value of the vouchers also
27
makes it more likely that class members will be willing to bear the comparatively minimal
transaction costs associated with selling them.
The Attorneys General also contend that the vouchers do not provide meaningful
compensation to the class members in light of the fact that a party seeking to utilize a voucher by
their calculation must also spend hundreds, if not thousands, of dollars on tuition (which
typically includes lodging and meals) and transportation to the location of the program. They
note that although 28 U.S.C. § 1712(d) permits the Court to hear expert testimony on the actual
value of coupons awarded, no expert testimony has been proffered by the parties. During the
Fairness Hearing, class counsel indicated that they asked their administrative notice provider to
give an estimate as to the redemption value of the vouchers but that the provider was unable to
give an estimate due to the variety of conferences provided by Envision. It is clear, however, that
the vouchers will provide meaningful value to those class members who do wish to attend future
Envision programs. Envision has noted that approximately 95% of the attendees at the
Conferences had attended a prior program, and Envision’s counsel represented at the Fairness
Hearing that about ten percent of students attending Envision conferences each year are program
alumni. Envision also noted that 20% of the vouchers issued to claimants who settled prior to
this lawsuit have already been redeemed, suggesting there is significant interest among the class
in attending future programs. Indeed, two of the putative class members sent an email to Class
Counsel expressing hope that their vouchers would be available in time for use with an Envision
program they would like to attend this summer. See Joint Response to Br. Amicus Curiae, Exs.
D-E. This suggests that the vouchers do provide meaningful value to the class members.
The value of these vouchers also compares favorably to other coupon settlements that
28
have come before the federal courts for approval. For example, in In re Western Union Money
Transfer Litigation, No. CV-01-0335, 2004 WL 3709932 (E.D.N.Y. Oct. 19, 2004), the court
approved a settlement that awarded coupons providing a 13%-40% discount on fees for money
transfers. The coupons were freely transferable, could be used at over 170,000 locations
worldwide, remained valid for 35 months, and could be combined with any other discount. Id. at
*12-13. Here, the vouchers represent an 18%-45% discount off tuition costs for future programs,
are freely transferable, remain valid for seven years, and can be used at thousands of future
programs.
It is also significant that under the terms of the settlement, Envision will have to offer at
least $8 million worth of discounts on future programs, representing a substantial disgorgement
of profits obtained from the Conferences. The parties agreed to the $8 million figure because this
was the net profit that Envision realized from the Conferences, according to its financial
statements. This completely addresses the Figueroa court’s concern that coupon settlements do
not force defendants to “disgorge ill-gotten gains.” 517 F. Supp. 2d at 1302. Thus, in addition to
the personal benefit received by class members through the vouchers, they will receive the
benefit of knowing that Envision will not have profited from any wrongdoing.
The Attorneys General note that if at least 6400 class members claim their vouchers, no
cy pres fund will be created, and it is therefore possible that Envision will end up paying less
than $8 million if a substantial number of the vouchers claimed by those class members are never
redeemed. Although there is no guarantee, the Court thinks this is unlikely, for two reasons.
First, class members with no interest in the vouchers are unlikely to claim them in the first place.
Second, the high face value of the vouchers makes it likely that class members who do claim
29
vouchers will either use them or be motivated enough to find a willing buyer who plans to attend
an Envision program. Therefore, the Court expects that most of the vouchers that are distributed
will be redeemed within the seven-year period. In any event, the heart of the settlement is the
value afforded to the class members, which could be as high as $17 million, rather than the $8
million “guaranteed” payment by Envision.17
b. Strength of Plaintiffs’ claims and likelihood of success at trial.
The value of the settlement must be balanced against the likelihood of obtaining a
substantial recovery at trial. Plaintiffs have asserted three claims in this action: (1) violations of
the D.C. Consumer Protection Procedures Act (“CPPA”); (2) negligent misrepresentation; and
(3) breach of contract. The Attorneys General contend that liability “appears likely to be
established” on Plaintiffs’ CPPA claims, and the CPPA allows private plaintiffs to recover, inter
alia, treble damages or $1500 per violation, whichever is greater, reasonable attorneys’ fees, and
punitive damages. See Br. Amicus Curiae at 14; D.C. Code § 28-3905(k)(1). Thus, the
Attorneys General argue that Plaintiffs are likely to obtain substantially greater relief at trial than
is provided by the vouchers. However, liability cannot be assumed when evaluating a proposed
settlement, and Envision has defenses to this action that it would continue to assert if the
settlement is rejected. Even setting aside the facts of the case, there are practical and procedural
obstacles that stand in the way of success at trial.
First, and perhaps most significantly, it is not clear that D.C. law would apply to
17
The Court also notes that it would not be practical to require Envision to add the value
of unredeemed vouchers to the CSSF since this value would not be known until the end of the
seven-year period, which is also when the CSSF must be depleted under the terms of the
Settlement Agreement.
30
Plaintiffs’ claims. When exercising its diversity jurisdiction, the Court applies the choice-of-law
rules of the forum jurisdiction. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
Under District of Columbia law, courts employ a “modified governmental interests analysis
which seeks to identify the jurisdiction with the most significant relationship to the dispute.”
Washkoviak v. Student Loan Marketing Ass’n, 900 A.2d 168, 180 (D.C. 2006) (quotation marks
and citation omitted). Under this analysis, the court evaluates the governmental policies
underlying the applicable laws and determines which jurisdiction’s policy would be most
advanced by the application of its law to the facts of the case, taking into consideration (1) the
place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3)
the domicile, residence, nationality, place of incorporation and place of business of the parties;
and (4) the place where the relationship is centered. Id. (quoting District of Columbia v.
Coleman, 667 A.2d 811, 816 (D.C. 1995)). These factors generally point to the application of
either the law of Virginia, where Envision is located and made the representations, or the law of
each class member’s home state, where he or she would have received the alleged
misrepresentations and paid for the Conferences. See id. at 180-82; see also Shaw v. Marriott
Int’l, Inc., 570 F. Supp. 2d 78, 86-88 (D.D.C. 2008) (discussing choice of law analysis in
misrepresentation cases), aff’d in part, rev’d in part, ___ F.3d ___, 2010 WL 2134277 (D.C. Cir.
May 28, 2010).18 Although the choice-of-law analysis for the breach of contract claims might
favor application of District of Columbia law because the place of performance was, in most
instances, the District of Columbia, see Stephen A. Goldberg Co. v. Remsen Partners, Ltd., 170
18
The parties have indicated that only 24 members of the class are District of Columbia
residents.
31
F.3d 191, 198 (D.C. Cir. 1999), that conclusion is not certain. In any event, Plaintiffs’ breach of
contract claims are more individualized, since they are based not on the representations made to
all class members but the class members’ individual experiences at the Conferences, which
varied. Therefore, the breach of contract claims are less likely to lead to substantial class-wide
relief.
This uncertainty regarding the choice-of-law analysis significantly undermines the
strength of Plaintiffs’ claims against Envision and lowers the chance of a substantial recovery at
trial. If D.C. law cannot be uniformly applied to the class members’ claims, then Plaintiffs will
be unable to a large extent take advantage of the CPPA’s favorable provisions for consumers,
which include the possibility of treble and punitive damages. Of even greater concern is that
significant choice-of-law problems make it less likely that a class could be certified for trial
purposes. Before a global settlement was reached, the Bowman plaintiffs had filed a motion to
certify the class, and Envision vigorously opposed that motion, arguing that the requisite choice-
of-law analysis would require the court to apply the law of fifty different states to resolve the
case, making class certification impracticable. See Joint Response to Br. Amicus Curiae, Ex. C
(Defendants’ Opp’n to Mot. for Class Certification). Many courts have found that nationwide
class actions raise significant manageability problems when the law from multiple states must be
applied to determine liability. See, e.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1018-
19 (7th Cir. 2002); Walsh v. Ford Motor Co., 807 F.2d 1000, 1012 (D.C. Cir. 1986) (remanding
class certification question to district court to consider whether variations in state law prohibit a
finding of predomination for common questions of law). Although this Court need not consider
the manageability of a class action when certifying a class for settlement purposes, the Court
32
notes that choice-of-law questions may render the class action unmanageable such that no class-
wide recovery would be possible without a settlement. This factor weighs in favor of approving
the parties’ agreement.
Another factor to take into consideration is Envision’s ability to pay a judgment even if
Plaintiffs successfully prosecuted their claims at trial. The parties have indicated that, after
Envision already paid out approximately $1 million to settle prior claims arising out of the
Conferences, Envision would face severe financial difficulties if forced to provide cash refunds
to all the class members. Class counsel indicated at the Fairness Hearing that, based on the
financial discovery provided before the mediation, Envision was in default on its bank
obligations when negotiations began. According to the mediator, Envision’s financial condition
was “at the forefront of the settlement discussions,” and Envision’s Chief Financial Officer was
present at the mediation. See Joint Response to Br. Amicus Curiae, Ex. H (Aff. of Hon. Daniel
Weinstein) ¶ 12. Because Plaintiffs did not want to bankrupt the company through a lawsuit
(depriving themselves and others of the opportunity to partake in future educational programs as
well as potentially being unable to collect any judgment), they agreed to the voucher payment
system reflected in the settlement agreement, which allows Envision to pay over time. Plaintiffs’
desire to obtain immediate and certain relief weighs in favor of approving the settlement.19
19
The Attorneys General contend that “other federal courts have rejected . . . arguments
that the defendant’s purported precarious financial condition should justify a coupon settlement,”
citing Figueroa. See Br. Amicus Curiae at 15. However, the Figueroa court did not say that
financial condition could not be considered as a factor in evaluating settlements, and many
federal courts have explicitly considered this. See, e.g., In re Wireless Telephone Fed. Cost
Recovery Fees Litig., 396 F.3d 922, 932-33 (8th Cir. 2005) (requiring district courts to consider a
defendant’s financial condition when evaluating class action settlement agreements).
33
3. Reaction of the Class
There are fifteen objectors to the Settlement Agreement, representing approximately one-
tenth of one percent of the entire class. This relatively low rate of objection weighs in favor of
approval of the settlement. See Thomas v. Albright, 139 F.3d at 232 (“[A] settlement can be fair
even though a significant portion of the class and some of the named plaintiffs object to it.”)
Many of the objectors expressed concern that they could not or would not use the vouchers to
attend a future Envision program. However, that concern is addressed by the fact that the
vouchers are transferable to family members or to any other qualifying student and therefore have
a nonnegligible resale value. Other objectors expressed concern that the vouchers covered only
partial tuition, and many objectors generally expressed a preference for cash. The most
vociferous objectors demanded that Envision provide a full refund of the tuition paid for the
Conferences. These objections essentially amount to a complaint that the settlement does not
provide enough benefits. However, “[t]he court should not reject a settlement merely because
individual class members complain that they would have received more had they prevailed after a
trial.” Thomas, 139 F.3d at 231. Several objectors complained that the Settlement Agreement
did not sufficiently punish Envision for its misconduct and suggested that Envision be required to
provide at least a partial refund. As noted above, however, a cash settlement to all class
members would not have been feasible in light of Envision’s financial condition, and the
scholarship fund provision in the Settlement Agreement ensures that Envision will disgorge
substantially all of the profits that it earned from the Conferences.
One objector expressed concern that named class representatives and class counsel
receive cash while class members only qualify for tuition vouchers. However, that concern is
34
largely addressed by several facts about the negotiation of the settlement. First, the attorneys’ fee
and class representative incentive awards were negotiated separately by the parties after a
settlement was reached, and the Settlement Agreement expressly states that no portion of the
settlement payment shall be reduced to pay attorneys’ fees or incentive awards. Second, the
actual amounts awarded will be determined by the Court in ruling on the Plaintiffs’ Motion for
Attorneys’ Fees, Expenses, and Class Representative Service Awards, not by the parties. Third,
Envision’s insurers were willing to provide some compensation for class counsel’s fees because
they were already paying Envision’s outside counsel to defend this case under a reservation of
rights, and a settlement would avoid additional defense costs. See Joint Response to Br. Amicus
Curiae, Ex. H (Aff. of Hon. Daniel Weinstein) ¶ 13. Envision’s counsel represented at the
Fairness Hearing that its insurers would pay $935,000 for attorneys’ fees (roughly 65% of the
total), with Envision paying $535,000 (roughly 35%). Even if that $535,000 cash payment were
to be redistributed to class members as part of a cash settlement, each class member would
receive less than $40. It is doubtful that the class members would prefer such a small cash
settlement to the $1250 in transferable vouchers they will receive under the settlement
agreement. Whatever the market value of two $625 vouchers may be, it is surely greater than
$40.
The Court also notes that none of the objectors expressed a desire to appear at the
Fairness Hearing. The Attorneys General, who did appear at the Fairness Hearing through a
representative, argue that their opposition to the Settlement Agreement should counsel against
approval of the settlement. While the Court is not convinced that the Attorneys General’s
appearance as amici curiae alone weighs against approval, the Court has substantively
35
considered the detailed opposition of the Attorneys General in evaluating the fairness of the
settlement agreement and does so further below.
4. The Status of the Litigation at the Time of Settlement
“In determining whether a proposed class action settlement is fair, adequate, and
reasonable, courts consider whether counsel had sufficient information, through adequate
discovery, to reasonably assess the risks of litigation vis-a-vis the probability of success and
range of recovery.” Meijer, 565 F. Supp. 2d at 57 (quotation marks and citation omitted); see
also Vitamins II, 305 F. Supp. 2d at 105 (stating that settlement agreements should “not come too
early to be suspicious nor too late to be a waste of resources”). In this case, the parties reached a
settlement agreement before formal discovery began. However, as noted above, Plaintiffs’
counsel conducted significant factual investigation into possible class claims and the financial
situation of Envision prior to the mediation. In addition, the parties had fully briefed Envision’s
motion to dismiss in the Bowman action, and Envision had filed its brief in opposition to class
certification. The Attorneys General argue that the fact that settlement was reached prior to class
certification weighs against approval of the Settlement Agreement. However, in light of the
obstacles that Plaintiffs faced in establishing class certification and the information they obtained
about Envision’s financial condition, the timing of the settlement agreement raises no cause for
concern.
5. Analysis
The discussion above shows that the parties have reached a settlement that: (1) provides
class members with an immediate benefit that may be of substantial value (representing a 45%-
54% refund and a discount of 18%-45% on future programs); (2) disgorges substantially all of
36
the profits earned by Envision during the Conferences; (3) avoids the costs of future litigation;
(4) eliminates a substantial risk of no class-wide recovery given choice-of-law problems and
Envision’s financial condition; (5) was reached during an arms-length negotiation by well-
informed and experienced counsel; (6) has the approval of experienced class counsel and an
experienced mediator; and (7) has the general support of the settlement class, as demonstrated by
the very small number of objectors and the interest among class members to immediately receive
their benefits under the settlement. In the light of the above analysis, the settlement agreement
appears to be a reasonable compromise of Plaintiffs’ claims.
In their brief amicus curiae, the Attorneys General argue that this voucher settlement is
comparable to the one that was disapproved by the court in Figueroa v. Sharper Image
Corporation, 517 F. Supp. 2d 1292 (S.D. Fla. 2007). In that case, the plaintiffs brought claims
against Sharper Image for breach of contract, breach of warranty, unjust enrichment, and unfair
business practices relating to representations made regarding the company’s Ionic Breeze air
purifiers, for which plaintiffs had each paid hundreds of dollars. 517 F. Supp. 2d at 1300. The
settlement called for the plaintiffs to receive a $19 coupon, valid for two years, that could be used
towards the purchase of any product at a Sharper Image retail store. Id. at 1303, 1305. On those
terms alone, it is clear that the vouchers offered by Envision provide substantially more value
than the coupons at issue in Figueroa. In addition, the Figueroa court’s disapproval of the
settlement was based primarily on the fact that plaintiffs’ counsel had negotiated the settlement
from an extremely weak position (on the eve of a ruling that would potentially stay the case) and
did so without conducting a reasonable assessment of strength and value of the plaintiffs’ claims.
Id. at 1321-23. The Figueroa court also found that the plaintiffs’ claims were strong and that the
37
plaintiffs could reasonably expect to recover more than $19 per plaintiff at trial, making the cost
of proceeding to trial worth the small risk of no recovery. Id. at 1327. The parties in Figueroa
had also conducted discovery relating to jurisdiction and class certification and retained experts,
minimizing the added expense of proceeding to trial. Id. at 1328. All of these factors distinguish
Figueroa from this case, where the Plaintiffs compromised an uncertain case in exchange for
valuable consideration during an arms-length negotiation.
The parties’ settlement in this case is also distinguishable from two other coupon
settlement cases cited by the Attorneys General, True v. American Honda Motor Co., No. EDCV
07-287, 2010 WL 707338, at *12 (C.D. Cal. 2010) (Feb. 26, 2010), and Clement v. American
Honda Finance Corp., 176 F.R.D. 15 (D. Conn. 1997). In True, the court disapproved a
settlement that would have awarded class members a non-transferable $500 or $1000 voucher
toward the purchase of a new Honda, finding that it represented “at best, a 6.5% discount off the
purchase of a new car, redeemable only within the next nineteen months, just a few years after
they purchased or leased a new Honda.” 2010 WL 707338 at *21. The True court also criticized
the settlement for offering cash payments to only a certain subclass of plaintiffs whose prior
complaints could be documented and noted that the settlement was worth substantially less than
settlements obtained by similar claimants. See id. at *10, *14. Similarly, in Clement, the court
disapproved a settlement that would have awarded coupons of $75 or $150 toward the financing
of a new car through American Honda Finance Corp. See 176 F.R.D. at 26-28. The court found
that the coupons were “essentially worthless” because they expired in two or three years, were
not transferable to third parties, and were virtually worthless compared to the purchase price of a
new car. Id. at 27. Here, by contrast, the vouchers represent a substantial discount towards
38
tuition at future programs and are freely transferable to other eligible students. And although
Envision programs are relatively “big ticket” items for consumers, they are not like cars and
other durable goods that are typically only purchased when a new model is needed to replace an
older one. Unlike a discount on a new car issued to a person who just purchased a new car, the
vouchers in this settlement have immediate value.
Ultimately, the reasonableness of the settlement agreement must be considered in the
context of this case, not in comparison to terms of other coupon settlements. Although a cash
settlement would have been preferable to vouchers, Envision is not presently in a position to give
cash to all class members, and their ability to do so after judgment is also doubtful. It is true that
Envision paid out nearly $1 million to settle claims and complaints that it received in the
immediate aftermath of the Conferences. However, once those funds were exhausted, the
company’s financial situation prevented it from continuing to make cash payments. The fact that
early claimants received cash does not make this settlement unfair. The record suggests, and it is
reasonable to assume, that the individuals who filed early complaints and received early
settlements had stronger claims overall than the members of the settlement class (the vast
majority of whom have never formally complained to Envision about their experience at the
Conferences). The average settlement obtained by the early claimants (roughly $400 cash plus
$750 in vouchers) is actually not far off from the $1250 in vouchers that will be paid to members
of the settlement class. And relief is more widely available under the settlement agreement:
whereas early claimants had to indicate that they missed parts of the Conferences involuntarily in
order to receive a settlement, class members need only verify that they were “unsatisfied” with
their experiences. It is also important to note that none of the early claims filed against Envision
39
resulted in a judicial determination as to liability, so there is no benchmark judgment against
which to assess Plaintiff’s claims.
The parties crafted the settlement agreement in a manner that would provide meaningful
relief to the class members while ensuring that Envision could continue to operate while also
disgorging the profits from the Conferences over time. According to the experienced mediator,
“the significant value of the vouchers, their full transferability, the long duration of the time in
which they may be redeemed, and the scholarship fund set this settlement apart from other
coupon settlements.” Joint Response to Br. Amicus Curiae, Ex. H (Aff. of the Hon. Daniel
Weinstein) ¶ 15. Based on the significant recovery that the settlement affords the members of the
settlement class, the difficulties faced by the Plaintiffs in litigating this class action, the inherent
risks, costs, and time associated with continued litigation, and Envision’s financial condition, the
Court finds that the settlement is fair, reasonable, and adequate under Rule 23(e) and 28 U.S.C.
§ 1712(e). Therefore, the Court shall grant the parties’ Joint Motion for Final Approval, except
as to the potential cy pres fund.
The Court is troubled by the lack of standards governing the distribution of the money
from the Class Settlement Scholarship Fund, the potential cy pres fund. Although the parties
have amended the settlement agreement to provide that class counsel shall receive semiannual
reports on the administration of the CSSF, the fund is to be administered by Envision with nearly
complete discretion. If the amount of money in the CSSF is substantial, there is a risk that
Envision will use the scholarships as a promotional tool. At the Fairness Hearing, class counsel
agreed to the Court’s proposal that the Court would conditionally approve the CSSF provisions
of the settlement agreement until class members filed their claims for vouchers and the exact
40
amount of the CSSF could be determined, at which point the parties could submit a plan of
distribution with more detailed eligibility criteria. The Court shall follow that approach and
HOLD IN ABEYANCE final approval as to the plan of distribution of funds in the CSSF until
the amount of such funds are known.
IV. CONCLUSION
Having considered all of the above-listed factors, the objections, the opposition of the
Attorneys General, and the record as a whole, the Court finds that the terms of the settlement
agreement are fair, reasonable, and adequate and should be approved. The Court finds that it has
jurisdiction over this action, and there is no dispute that class may be certified for settlement
purposes. The Court finds that the settlement agreement was negotiated at arms-length by
experienced counsel with the assistance of an experienced mediator after an appropriate amount
of investigation and informal discovery, and it is the opinion of the experienced counsel and
mediator that the settlement is fair, adequate, and reasonable. The Court finds that the vouchers
to be awarded under the settlement agreement provide meaningful value to class members
because of their high face value ($1250, representing a 45%-54% refund and an 18%-45%
discount toward future programs), their transferability, and their seven-year duration. The Court
also finds that choice-of-law issues and Envision’s financial condition significantly undermine
Plaintiffs’ likeilhood of obtaining meaningful class-wide relief at trial. The Court finds that the
settlement is supported by the class, as demonstrated by the low number of objectors and opt-
outs. The Court also finds that the cy pres fund, if properly administered, will ensure that
Envision substantially disgorges the profits from its alleged misconduct.
Therefore, the Court shall overrule the objections to the settlement agreement and
41
GRANT the parties’ [24] Joint Motion for Final Approval of the Settlement Agreement.
Because the Court has concerns about the distribution of proceeds from the proposed cy pres
fund, the Court shall HOLD IN ABEYANCE approval of the Class Settlement Scholarship Fund
and revisit that issue after the class members have submitted their claims for vouchers and the
amount of money to be deposited into the CSSF is determined. The Court shall order the parties
to file a Joint Status Report after the claims period has ended and all claims have been received
so that the Court may make a final ruling at that time. The Court shall also HOLD IN
ABEYANCE Plaintiffs’ [25] Motion for Attorneys’ Fees, Expenses, and Class Representative
Service Awards and address those issues at a later date. An appropriate Order accompanies this
Memorandum Opinion.
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
42