Erin Caligiuri v. Symantec Corp.

Citation: 855 F.3d 860Docket: 16-2015

Court: Court of Appeals for the Eighth Circuit; April 28, 2017; Federal Appellate Court

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Erin Caligiuri and Michelle Van De Voorde appeal the district court's approval of a class action settlement against Symantec Corp. and Digital River, Inc. The plaintiffs allege that Symantec failed to inform consumers about free alternatives for re-downloading Norton software, for which they had purchased download insurance services. The district court certified a national class of individuals who bought these services between January 24, 2005, and March 10, 2011. In April 2015, the parties reached a settlement where Symantec agreed to pay $60 million into a settlement fund and provide service awards of up to $7,500 for each named plaintiff, with any excess awarded from the settlement fund. Class members were required to submit claims electronically within thirty days after the final approval order to receive $50 per purchase, subject to pro rata adjustments. Remaining funds post-distribution would be allocated to the Electronic Frontier Foundation if not claimed. The district court preliminarily approved the settlement in October 2015 and appointed a settlement administrator to notify class members via email and postcards. The district court scheduled a final fairness hearing for January 19, 2016. Caligiuri argues the court abused its discretion in several ways, including approval of the settlement without knowledge of final costs and the method of calculating attorneys’ fees, but the appeals court affirmed the lower court's decision.

As of January 10, 2016, the settlement administrator reported costs of $1,955,681.56, with an estimated total administrative cost of approximately $2,420,681.56 and claims received for 307,240 unique purchases. Class counsel filed a motion requesting one-third of the settlement fund, totaling $20,000,000, along with $738,605.19 in litigation expenses and $10,000 service awards for each of the two named plaintiffs. Class members Erin Caligiuri and Michelle Van de Voorde objected to the settlement and the motion for attorneys’ fees and service awards. Following a fairness hearing, the district court approved the settlement and class counsel's requests while denying the objections. Caligiuri and Van de Voorde subsequently appealed the decision.

In reviewing the settlement approval, the district court must determine if it is fair, reasonable, and adequate, with the appellate review standard being abuse of discretion. The appellants argued the court could not assess fairness without knowing final administrative costs and total amounts received by the class. The appellate court disagreed, noting that the district court operated with an estimate of administrative costs and that it is common for courts to approve settlements based on such estimates. Furthermore, there is no requirement for courts to know the final amount received by class members prior to approval, as seen in precedent cases. At the time of approval, it was estimated that the net settlement fund could amount to approximately $36,835,713.25, with provisions ensuring that remaining funds would be distributed to class members if sufficient amounts were available.

Any cy pres distribution in this case is expected to be minimal, primarily consisting of uncashed checks and residual funds if a second distribution yields less than $2 per approved claimant. Caligiuri and Van de Voorde's concerns about the adequacy of individual awards compared to estimated damages are unfounded. The district court anticipates that valid claimants will receive approximately $50 each, significantly exceeding their out-of-pocket costs ranging from $4.99 to $16.99. Prior to the fairness hearing, the settlement administrator reported 307,240 claimed purchases, insufficient to reduce the payout from $50. Subsequently, claims for 732,049 purchases were received, indicating that each approved claimant would receive about $49.82, still above their actual payments. Thus, the district court acted within its discretion in approving the settlement without final administrative costs or total amounts known.

Regarding attorneys’ fees, the district court's decisions are typically upheld unless shown to be an abuse of discretion. Two primary methods exist for fee analysis: the 'lodestar' method, which adjusts fees based on hours worked, and the 'percentage of the benefit' method, where fees are a fraction of the settlement fund. The court opted for the percentage-of-the-benefit method, awarding one-third of the total settlement fund. Caligiuri and Van de Voorde argue that including administrative costs in the settlement fund for fee calculation constitutes an abuse of discretion, referencing a Seventh Circuit ruling. However, in this circuit, administrative costs can be included in the benefit calculation. The court's review of the decision is based on whether the appellants demonstrated that the administrative costs were unjustifiable, which they failed to do.

Van de Voorde did not challenge the administrative costs as excessively high but argued that the notice program was insufficient, advocating for a more costly option of mailing physical notices to all class members. The district court's inclusion of administrative costs in the attorneys' fees calculation was upheld, as the determination of whether to base fees on net or gross recovery should result in a reasonable award. Caligiuri and Van de Voorde claimed the fee award was excessive and suggested it be reduced to 25% of the class benefit, but this was rejected. The district court found that the circumstances justified a large fee award, considering seven factors: (1) substantial benefit to the class from a $60 million settlement; (2) significant risk to plaintiffs’ counsel taking the case on a contingent basis; (3) complexity of legal and factual issues; (4) expertise of both plaintiffs’ and defendants’ counsel; (5) nearly 20,000 hours of work by plaintiffs’ counsel; (6) minimal objections from the class; and (7) typical awards in similar cases ranging from 25% to 36%. The court confirmed the fee's reasonableness using the lodestar method, finding a multiplier of less than two to reach the $20 million award, which is below common multipliers in similar cases. Ultimately, the court's decision to award the requested fees was not an abuse of discretion. Additionally, the cy pres doctrine allows for the distribution of unclaimed funds in class actions, reflecting the principle of distributing benefits as closely as possible to the intended recipients.

Unclaimed funds from a class action lawsuit should be distributed in alignment with the lawsuit's objectives and the interests of class members. The district court did not apply cy pres principles appropriately, as it merely approved a settlement with cy pres distribution terms to a specific organization under certain conditions. The court's approval of these terms is subject to review for abuse of discretion, requiring that any cy pres distribution adhere to established standards. Caligiuri contended that the district court erred by not ensuring that the cy pres recipient would directly benefit the class; however, cy pres distributions can be for indirect benefits as long as they are consistent with the lawsuit's nature. The Electronic Frontier Foundation, designated as the cy pres recipient, aligns with the lawsuit's aims of consumer digital rights protection. The distribution will occur only if remaining funds are insufficient to provide at least $2 to each claimant, compliant with legal requirements.

Service awards for named plaintiffs in class actions are granted to encourage representative lawsuits, and their approval is also reviewed for abuse of discretion. Caligiuri argued that the $10,000 awards were excessive, but similar awards are routinely granted in the circuit. The district court's analysis of the plaintiffs' contributions included their involvement in discovery, depositions, and other litigation efforts over five years, which ultimately led to a beneficial settlement for the class. The court's decision to award $10,000 was justified based on these efforts, and no error was found in the district court's reasoning. Consequently, the court affirmed the district court's order.