ORDER GRANTING PRELIMINARY APPROVAL OF PROPOSED CLASS SETTLEMENT AND ORDER VACATING CASE MANAGEMENT SCHEDULE
WILLIAM ALSUP, District Judge.
All parties in this civil antitrust class action involving direct purchasers of mesquite lump charcoal move for preliminary approval of a proposed class settlement. For the reasons stated herein, the motion is
Prior orders have summarized the history of this action so it will not be repeated herein (Dkt. Nos. 138, 159). In brief, this is a civil antitrust class action following a guilty plea to a per se violation of Section 1 of the Sherman Antitrust Act. United States v. Lord, No. 12-cr-326 (N.D. Cal.). The class is composed of persons and entities who purchased mesquite lump charcoal directly from defendants during the alleged eleven-year price-fixing and customer-allocation conspiracy. Defendants are Lazzari Fuel Company, LLC, California Charcoal and Firewood, Inc., Chef's Choice Mesquite Charcoal, and their principals. Lazzari previously obtained a leniency agreement with the Department of Justice and offered purchase rebates in the form of discounts taken through deductions from future customer remittances to eleven of its customers as "restitution." Only three customers have made purchases eligible for the discounts and the "restitution" program ends in December 2014.
In November 2013, this action and another putative class action were commenced. The actions were consolidated. When the parties appeared for the initial case management conference, counsel for Lazzari stated that Lazzari was a small business with limited resources. Attorney Elizabeth Pritzker was subsequently appointed as interim counsel under Rule 23(g)(3).
Lazzari and its principals later moved for preliminary approval of a partial class settlement. That proposal was rejected after oral argument. A class was certified and two more defendants (California Charcoal and its principal) reached a partial class settlement.
All defendants then moved for preliminary approval of a revised proposed class settlement. After supplemental submissions and oral argument, the parties were given the opportunity to fix some potential pitfalls with their proposal. Now, the parties have filed a joint addendum to the class settlement agreements, an amended claim form, and an amended proposed class notice. Having considered the briefing and oral argument, this order finds as follows.
1. PROPOSED SETTLEMENT.
Under the settlement proposal, the key terms would be as follows.
* * *
The following factors are considered when determining whether a proposed class settlement is fundamentally fair, adequate, and reasonable under Rule 23(e):
Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003) (citations omitted).
This order finds that each defendant-group's proposed settlement contribution is reasonable in light of the facts and circumstances. In total, the proposed $4.575 million class settlement would represent 55% of the low-end estimated overcharges before trebling, as determined by plaintiffs' trial expert.
Lazzari's $825,000 proposal is offered in light of (1) its relative "weak financial condition," based on their financial statements and an accountant report rendered by plaintiffs; (2) its leniency agreement with the Department of Justice under Section 213 of the Antitrust Criminal Penalty Enhancement and Reform Act ("ACPERA");
California Charcoal's proposal is offered as a one-time payment of $1.55 million. This payment would be due within ninety days of preliminary approval and would come from Mr. Ring's own funds. California Charcoal would pay for 25 percent of all anticipated costs for settlement administration and notice. Class counsel, for their part, stated that they "took into consideration the circumstantial evidence of liability that exists" against the California Charcoal defendants (Pritzker Decl. ¶¶ 30, 31, 36; Pritzker Supp. Decl. ¶ 12).
Chef's Choice's proposal is offered in light of Mr. Lord's "limited financial resources." Mr. Lord and Chef's Choice would pay $2.2 million by liquidating Mr. Lord's personal assets and using the "ongoing sales revenues" of Chef's Choice (Pritzker Supp. Decl. ¶ 11). Mr. Lord's assets total $3.37 million, as of September 2014 (Lord Exh. 1). In addition, Chef's Choice would pay for up to $5,000 for the costs of settlement administration and notice, above and beyond its contribution.
All of the proposed settlements were negotiated by experienced counsel with the assistance of an active magistrate judge. The instant proposal came after class certification and with only a handful of weeks in the fact discovery period remaining. Plaintiffs have deposed all of the individual defendants, submitted a damages report, and hired an accountant to review the Lazzari defendants' finances. Defendants submitted their own expert declaration in response to the plaintiffs' damages report and took Rule 30(b)(6) depositions of plaintiffs.
The risk, expense, and complexity of continued litigation and trial are not insubstantial. If the case proceeds on the merits, at least some of the defendants would move for summary judgment and file a Daubert motion. Indeed, the class certification order warned that a defense attack on the plaintiffs' damages report could result in decertification. Considering the facts and circumstances herein, this order finds that it may well be in the best interest of the class to receive some payment relatively soon, rather than face the additional expense and risk of trial.
Accordingly, this order finds that preliminary approval of the proposed class settlement is appropriate.
2. PLAN OF ALLOCATION.
Class counsel stated that defendants' records contain "deficiencies that make it difficult to fairly and accurately calculate settlement benefits on a pro rata basis." In pertinent part, Chef's Choice did not maintain purchase orders for many of its "key customers" and suffered a "massive data loss" in 2012. Lazzari only had electronic data for the period 2008 through 2011. Data for earlier years would need to be recreated from "paper invoices or payment records, to the extent such records exist" (Pritzker Decl. ¶¶ 45, 46).
The parties thus propose that the net settlement fund be allocated, pro rata, on a claims-made basis, based on the "total dollar value of each class member's qualifying mesquite lump charcoal purchases in proportion to the total amount of the net settlement fund." All of the net settlement fund would be distributed to eligible class members. The average estimated recovery is $2,163, after fees and expenses are deducted.
Each of the 1,500 class members would need to complete and submit a claim form to qualify for a portion of the settlement fund. The two-page proposed claim form would require that each class member complete a table providing the yearly dollar amount spent on direct purchases of mesquite lump charcoal from each defendant. The form would advise that the claims administrator may request verification of the information provided by class members.
The proposed claim form is
The parties have filed an agreed-upon notice of class certification and class settlement. The proposed notice is
4. SUPPLEMENTAL COVER LETTER.
Three class members made purchases eligible for rebates under Lazzari's "restitution" program. No double recovery at the expense of other class members will be allowed. The parties thus propose a supplemental cover letter appended to the class notice sent to the three class members. No revision to the claim form was proposed by the parties.
The proposed supplemental notice is
For the reasons stated herein, the motion for preliminary approval of the class settlement is