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In Re: Skechers Toning Shoe Products Liability Litigation

May 13, 2013

IN RE: SKECHERS TONING SHOE PRODUCTS LIABILITY LITIGATION


The opinion of the court was delivered by: Thomas B. Russell U.S. District Judge

This matter comes before the Court upon the Grabowski Plaintiffs' Motion for Final Approval of Class Action Settlement and Attorneys' Fees and Expenses. (Grabowski Mot., Docket Number ("DN") 403.)*fn1 The various other plaintiffs have filed motions for attorneys' fees. (Stalker Mot., DN 399; Hochberg Mot., DN 401; and Loss Mot., DN 404.) Appropriate responses and replies have been filed for each motion. The Court also held a final fairness hearing on this matter on March 19, 2013, during which it heard arguments on all motions. Accordingly, this matter is now ripe for adjudication. For all of the following reasons, Grabowski's motion for Final Approval of Class Action Settlement is GRANTED. The parties' motions for attorneys' fees and expenses are granted in the manner described herein.

BACKGROUND

On May 16, 2012, Grabowski moved the Court for preliminary approval of a class-action settlement on the consumer fraud and economic injury claims asserted on behalf of the putative nationwide class. The motion requested class certification, preliminary approval of the settlement and notice plan, and the setting of a final fairness hearing. Only Stalker objected to the motion for preliminary approval, and even then, the objection did not address the underlying substance of the settlement. Rather, Stalker objected to the attorneys' fees provision in the proposed settlement. In light of Stalker's objection, Grabowski amended the proposed settlement agreement by removing the controversial attorneys' fees provision. The Court held a preliminary fairness hearing on the proposed settlement on July 24, 2012. After reviewing and considering the motion for preliminary approval, Stalker's objections, the subsequent amendment, and the arguments presented at the preliminary fairness hearing, the Court preliminarily approved the settlement agreement. (See Mem. Op. & Order of Aug. 13, 2012, DN 148.) In doing so, the Court certified the settlement class, authorized the proposed class-notice program, appointed counsel for Grabowski as Class Counsel, and named representative plaintiffs.

Grabowski now moves for final approval of the class-action settlement and also seeks attorneys' fees, costs, expenses, and incentive awards for the representative plaintiffs. The Court held a final fairness hearing on March 19, 2013, in which it invited all potentially interested parties to comment or object to the settlement. Of particular note, none of the parties appearing before the Court (i.e., Stalker, Hochberg, and Loss) objected to the underlying terms of the settlement. Rather, they contested the apportionment of attorneys' fees. Although none personally appeared at the fairness hearing, the Court also considered the eleven written objections submitted by individuals. The Court is now prepared to issue its final decision on the class-action settlement in this case.

DISCUSSION

I.The Class Received Notice of the Proposed Settlement

Under Federal Rule of Civil Procedure 23(e), a class action may only settle with court approval. In the process of approving a class settlement, a court "must direct notice in a reasonable manner to all class members who would be bound by the proposal." Fed. R. Civ. P. 23(e)(1). In its motion for preliminary approval, Grabowski set forth a plan for notifying class members of the settlement's terms. In their motion for final approval, at the final fairness hearing, and in subsequent filings requested by the Court, Grabowski reported on the nature, success, and expense of the notice program. The settlement documents, including a description of the settlement and a settlement claim form, were made available to the class via a website, and various methods, including a toll-free telephone number, were established to address class members' questions concerning the settlement.

As reported at the fairness hearing, Grabowski sent direct mailings of the class notice to more than 250,000 potential class members for whom it had physical addresses. In addition, Grabowski worked with The Garden City Group, a company specializing in class-action administration, to develop a notice program that would reach class members through traditional print media and various electronic means, including Internet-based advertising. According to The Garden City Group, the notice program exceeded "original projections by reaching 89 percent of Class Members, who are Women 18 to 44, and 84 percent of All Adults 18 to 44 years of age, on average 5 times; delivering over 732,000,000 impressions, or opportunities to see the notice through traditional media, news articles, online advertising, mobile advertising and social media and blogs." (Decl. Jeanne C. Finegan, DN 403-8, ¶ 10.) As of April 18, 2013, more than 520,000 claims for relief had been submitted by class members. Based on the record, the Court finds that the notice program was adequate and consistent with Federal Rule of Civil Procedure 23 and the standards of due process.

II.Final Approval of the Settlement

In addition to notice, a court may only approve a class-action settlement "after a hearing and on finding that [the settlement] is fair, reasonable, and adequate." Fed. R. Civ. P. 23(e)(2). The Court next considers whether the proposed settlement complies with the requirements of Rule 23.

A.Terms of the Settlement

The settlement provides monetary and injunctive relief to class members. Pursuant to the agreement, Skechers has established a $40 million, non-reversionary fund for the payment of class claims. Two factors determine the amount class members will recover from the settlement fund. First, benefit amounts are differentiated based on the type of Skechers Toning Shoe claimants purchased. For example, claimants who purchased "Shape-Ups" will receive a larger payment than those who purchased "Podded Sole Shoes" because Shape-Ups were a more expensive product. Second, disbursements from the settlement fund will be paid on an "Initial" and "Maximum" basis. The "Initial Amount" of the cash disbursement is calculated so as to exceed class members' likely alternative measure of damages - the difference between the purchase price for the product as represented and the value of the product received. The "Maximum Amount" is calculated to fully compensate class members for the purchase price of their Skechers Toning Shoes. The maximum amount is double the initial amount and will only become available to claimants if, after the processing of all claims, settlement funds remain available. Based on the amount of funds still available and on the number of claimants, the "Initial Amount" will then be increased on a pro-rata basis until the "Maximum Amount" is paid to claimants. It should be noted that the initial amount of the payment may be reduced on a prorata basis if there are more claimants than initially expected. At the final fairness hearing Grabowski represented to the Court that pro-rata reduction is a possible because of the large number of claims already received. In the unlikely event that any amount of the $40 million fund is not consumed by the settlement, the remaining balance will be paid to the Federal Trade Commission and will not revert to Skechers. The following table displays the disbursement amounts available to class members who timely submit their claims: Shoes Initial Amount Maximum Amount Shape-Ups $40.00 $80.00 Podded Sole Shoes $27.00 $54.00 Tone-Ups (Non-Podded Sole) $20.00 $40.00 Resistance Runner $42.00 $84.00

In addition to monetary relief, the settlement provides class members with injunctive relief. Working in conjunction with the Federal Trade Commission, Skechers has agreed to make significant changes to the manner in which it markets, advertises, and labels Skechers Toning Shoes. Among other things, Skechers will no longer make any claim that the toning shoes provide certain health benefits unless supported by scientific evidence substantiating those claims.

B.Standard for Settlement Approval

As discussed above, a court may only approve class-action settlements that are "fair, reasonable, and adequate." Fed. R. Civ. Pro. 23(e)(2). In making this determination, the Sixth Circuit Court of Appeals had held that courts should be guided by the following seven factors:

(1) the risk of fraud or collusion;

(2) the complexity, expense and likely duration of the litigation;

(3) the amount of discovery engaged in by the parties; (4) the likelihood of success on the merits; (5) the opinions of class counsel and class representatives; (6) the reaction of absent class members; and (7) the public interest.

Int'l Union, United Auto., Aerospace, & Agr. Implement Workers of Am. v. Gen. Motors Corp., 497 F.3d 615, 631 (6th Cir. 2007) ("UAW") (citations omitted). No one of these factors is dispositive. Rather, all are to be weighed and considered in light of the particular demands of the case. See, e.g., Grenada Invs., Inc. v. DWG Corp., 962 F.2d 1203, 1205-06 (6th Cir. 1992). Federal policy favors class action settlement. UAW, 497 F.3d at 632. In fact, "[o]nce preliminary approval has been granted, a class action settlement is presumptively reasonable, and an objecting class member must overcome a heavy burden to prove that the settlement is unreasonable." Levell v. Monsanto Research Corp., 191 F.R.D. 543, 550 (S.D. Ohio 2000) (citing Williams v. Vukovich, 720 F.2d 909, 921 (6th Cir. 1983); Bronson v. Bd. of Educ. of City Sch. Dist. of Cincinnati, 604 F. Supp. 68, 71 (S.D. Ohio 1984)).

C.Nature of the Objections to the Settlement

As discussed above, Stalker, Hochberg, and Loss -- plaintiffs who filed nationwide class actions similar to Grabowski -- have not objected to the overall terms of the proposed settlement. At the final fairness hearing they agreed that the terms of the settlement are fair, reasonable, and adequate, and provide substantial relief to class members. Although the main litigants in this action have not objected to the terms of the proposed settlement, the Court received at least eleven written objections from individuals. The Court pauses to describe these objections prior to considering whether the settlement should be approved.

The individual, written objections fall into three categories. First, two objectors claim that they should be reimbursed the full purchase price for their shoes, rather than the partial payout proposed in the settlement. Second, eight other "objectors" filed documents with the Court expressing satisfaction with their purchases. To the extent that they object to the settlement, they do not object on their own behalf but rather argue that Skechers should not enter into the settlement because it provided a valuable product that performed as promised. Third, one person objects on belief that the settlement would bar her from seeking compensation for personal injuries.

The Court finds these objections to be without merit. For the first category, reimbursement of the full price of the shoes would preclude payment to some class members because the settlement fund would be consumed more quickly. Furthermore, reimbursement of the full price would overcompensate the class members. As represented by Grabowski and Skechers, the monetary relief available under the settlement is calculated to compensate the class members for the difference between the shoe they bought and the shoe actually received. Reimbursement of the full purchase price would overcompensate class members. The second category cannot truly be considered objections because the objectors express satisfaction with the product received and do not seeks compensation or other relief. The final category is also without merit because the proposed settlement in no way waives, infringes on, or otherwise affects a class member's right to maintain personal injury claims against Skechers. The proposed settlement only reaches the consumer fraud and economic injury claims.

Overall, the Court finds that the written objections received from individuals are without merit and in no way bar or preclude the approval of the settlement.

D.Consideration of Settlement Factors

Having found the written objections meritless, the Court next considers the seven factors set forth in UAW, which guide the inquiry into whether the proposed settlement is fair, reasonable, and adequate.

1.The Risk of Fraud or Collusion "'Courts presume the absence of fraud or collusion in class action settlements unless there is evidence to the contrary.'" Thacker v. Chesapeake Appalachia, L.L.C., 695 F. Supp. 2d 521, 531 (E.D. Ky. 2010) (quoting Leonhardt v. ArvinMeritor, Inc., 581 F. Supp. 2d 818, 838 (E.D. Mich. 2008)). The Court addressed the risk of fraud or collusion when preliminarily approving the settlement, stating:

The Settling Parties have demonstrated to the Court that the proposed settlement was agreed upon after arm's length negotiations and a sufficient exchange of discovery material, including documents and witnesses. Evidence shows that though the settlement agreement was finally agreed upon in May 2012, negotiations began in December 2010 with the parties reaching agreement on some substantive issues as early as March 2011. From March 2011 through November 2011, the Settling Parties exchanged discovery materials that allowed Grabowski to develop her claims and value her case. By November 2011, the framework of the proposed settlement agreement was agreed upon, including the dollar amount of class relief. Finally from November 2011 through May 2012, the Settling Parties completed settlement negotiations, drafted the specific terms of the settlement agreement, and made preparation for the administration of the settlement program, including class notification and electronic claims processing.

No party has objected to the settlement agreement claiming that it was not properly negotiated or is the result of collusive practice. The history of this litigation shows that the Settling Parties have produced a fair settlement that was negotiated at arm's length by equal parties and that it was not tainted by any form collusion. (Mem. Op. & Order, DN 148, p. 16.)

Since preliminary approval, no party has alleged that the settlement is the product of fraud or collusion and there is no evidence in the record to indicate such. To the contrary, evidence shows that the settlement was the product of arm's-length, good-faith negotiations between Grabowski and Skechers. Accordingly, the Court finds that the proposed settlement does not suffer from and is not otherwise tainted by fraud or collusion. The absence of fraud or collusion supports approval of the settlement.

2.The Complexity, Expense, and Likely Duration of the Litigation "In evaluating a proposed class settlement, the Court must also weigh the risks, expense and delay the plaintiffs would face if they continued to prosecute the litigation through trial and appeal." Thacker, 695 F. Supp. 2d at 531 (citing In re Cardizem CD Antitrust Litig., 218 F.R.D. 508, 523 (E.D. Mich. 2003)). The Court ...


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