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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`MICHELE ARENA, et al.,
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`Plaintiffs,
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`v.
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`INTUIT INC., et al.,
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`Case No. 19-cv-02546-CRB
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`ORDER AND OPINION DENYING
`MOTION FOR PRELIMINARY
`APPROVAL OF CLASS ACTION
`SETTLEMENT
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`Defendants.
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`A group of Plaintiffs brought a putative class action against Intuit, Inc., alleging that
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`Intuit induced them into paying for its tax preparation services when they were entitled to
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`use Intuit’s free-filing option. The Court previously denied Intuit’s Motion to Compel
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`Arbitration, but the Ninth Circuit reversed. Plaintiffs, with support from Intuit, eventually
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`moved for preliminary approval of a proposed settlement. The settlement would award
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`claimants who expected to file for free, but ended up paying roughly $100 per year they
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`filed, an estimated $28 assuming a 5% participation rate. It would also require Intuit to
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`take various steps to inform consumers of the free file option.
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`In the meantime, many Intuit customers had filed individual arbitration demands
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`against Intuit, exposing Intuit to multiple fees for each arbitration, leaving aside potential
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`liability on the merits. The proposed settlement included a procedure by which these and
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`other class members could opt out, and was contingent on the Court immediately enjoining
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`individual arbitrations and any other parallel proceedings until the class member involved
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`in those proceedings opted out. Some of the arbitration claimants moved to intervene in
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`opposition to the proposed settlement, and the Court granted their motion on December 14,
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`2020. On December 17, 2020, the Court held a hearing and issued an order denying the
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`United States District Court
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 2 of 20
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`motion for preliminary approval. The Court delayed issuing an opinion at the parties’
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`request. Because the parties have been unable to reach a settlement to date, the Court now
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`provides its reasoning for denying the motion. The facts and reasoning set forth below
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`were applicable when the Court issued its December 17, 2020 order:1
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`The Court denies the motion for preliminary approval because the proposed
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`settlement is not fair, reasonable, and adequate under Rule 23(e)(2) of the Federal Rules of
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`Civil Procedure. In particular, the proposed settlement provides class members with
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`inadequate compensation and sets forth opt out procedures that unduly burden all class
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`members, but especially those who have already begun to pursue claims through
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`arbitration.
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`I.
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`BACKGROUND
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`Intuit owns TurboTax, an online tax preparation service. Complaint (dkt. 1) ¶ 1. In
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`2002, Intuit and other tax preparation services agreed with the Internal Revenue Service to
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`provide low-income taxpayers and active military members the option to file their taxes for
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`free. Id. ¶¶ 15–16, 20. In exchange, the government promised to not enter the tax
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`preparation software and e-filing services market. Id. ¶ 17. By staying out of that market,
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`the government helps Intuit maintain its status as the dominant provider of e-filing services
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`for all taxpayers, so long as Intuit offers free services to low-income taxpayers. Id. But
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`Plaintiffs allege that instead of steering eligible taxpayers to its free-filing option, or
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`simply letting customers find their way to it, Intuit misleadingly channeled free-filing
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`eligible taxpayers to its paid services. Id. ¶ 3.
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`On May 12, 2019, Plaintiffs sued Intuit on behalf of themselves and other similarly
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`situated individuals. Id. ¶ 47. They asserted claims for breach of contract and violations
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`of various state consumer protection laws. Id. ¶¶ 62–110. On August 19, 2019, the Court
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`appointed Daniel C. Girard of Girard Sharp LLP and Norman E. Siegel of Stueve Siegel
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`Hanson LLP (collectively, “interim class counsel”) as co-lead interim class counsel under
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`1 The Court notes that the parties have not advised the Court of any material change beyond their
`failure to reach a settlement.
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 3 of 20
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`Rule 23(g)(3) of the Federal Rules of Civil Procedure. See Order Appt. Interim Class
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`Counsel (dkt. 72).2
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`On October 28, 2019, Intuit moved to compel arbitration. See Mot. to Compel (dkt.
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`97). Intuit’s terms of service (“Terms”) contained an arbitration clause stating:
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`“ANY DISPUTE OR CLAIM RELATING IN ANY WAY TO THE
`SERVICES OR THIS AGREEMENT WILL BE RESOLVED BY
`BINDING ARBITRATION, RATHER THAN IN COURT, except that you
`may assert claims in small claims court if your claims qualify . . . WE
`EACH AGREE THAT ANY AND ALL DISPUTES MUST BE BROUGHT
`IN THE PARTIES’ INDIVIDUAL CAPACITY AND NOT AS A
`PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR
`REPRESENTATIVE PROCEEDING.”
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`Sun Decl. (dkt. 97-3) (“Terms”) at 4. On March 12, 2020, the Court denied Intuit’s
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`Motion to Compel Arbitration. See Order Denying Mot. to Compel (dkt. 141). But in
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`August 2020, the Ninth Circuit reversed, holding that the arbitration clause must be
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`enforced. See Dohrmann v. Intuit, Inc., 823 F. App’x 482 (9th Cir. 2020).
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`Plaintiffs had moved for class certification in January 2020, see Mot. to Certify
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`Class (dkt. 116), but the parties have not fully briefed that motion, and the Court is yet to
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`certify any class in relation to this case. Given the Ninth Circuit’s ruling and the
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`arbitration clause’s prohibition on class arbitration, Plaintiffs’ only path to obtaining class
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`relief from this Court is via a settlement with Intuit (or, less likely, after a successful
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`appeal to the U.S. Supreme Court).3
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`A.
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`The Proposed Settlement
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`On November 12, 2020, Plaintiffs moved for preliminary approval of a settlement
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`agreement with Intuit. See Mot. for Preliminary Approval (dkt. 162); Settlement
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`2 Under Rule 23(g)(3), “[t]he court may designate interim counsel to act on behalf of a putative
`class before determining whether to certify the action as a class action.”
`3 Plaintiffs have indicated that they may file a petition for writ of certiorari. See Hearing Tr. (dkt.
`206) at 30–31. Plaintiffs have also asserted that their arguments against the enforceability of the
`arbitration clause resemble those implicated by Henry Schein, Inc. v. Archer and White Sales,
`Inc., 141 S. Ct. 107 (2020) (granting a petition for writ of certiorari). See Hearing Tr. at 30. After
`this Court’s hearing on the motion for preliminary approval, the Supreme Court dismissed the writ
`of certiorari in Henry Schein as improvidently granted. See 141 S. Ct. 656 (2021).
`3
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`Northern District of California
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 4 of 20
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`Agreement (dkt. 162-1). The proposed settlement class “consists of all persons within the
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`United States who, from January 1, 2015 to November 20, 2020, paid to use TurboTax
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`online in a year in which they were eligible to file for free with the TurboTax Free File
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`Program.” Mot. for Preliminary Approval at 6. But the proposed settlement class is
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`narrower with respect to any monetary award, because in filing a claim for such an award,
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`class members must sign an attestation that they paid a fee to Intuit when they “expected”
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`to file for free. Id. at 7. The parties nonetheless estimate that the proposed class includes
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`19 million people. Id. at 6.
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`Under the proposed settlement, Intuit would pay a fixed sum of $40 million in
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`exchange for the release of all claims that were or could have been asserted in this case.
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`Id. “Notice and administrative expenses, as well as attorneys’ fees, expense
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`reimbursements and service awards approved by the Court, [would] be deducted from the
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`settlement amount.” Id. at 6–7. Class Counsel would seek “25% of the fund in attorneys’
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`fees and reimbursement of litigation expenses,” and each class representative would
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`receive a $10,000 “service award.” Id. at 7. The balance of approximately $28 million
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`would be paid to settlement class members who, as discussed above, must sign an
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`attestation that they paid a fee to Intuit when they “expected” to file for free. Id. at 7, 16.
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`Class members who timely submit a valid claim would receive a “pro rata” cash award
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`from the remaining pool, and class counsel expect that between 1% and 10% of settlement
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`class members would submit claims. Id. at 8. Any unclaimed distributions would be paid
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`to the settlement class members “who accepted or elected to receive a pro rata payment”
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`until the settlement administrator determines that further distributions are not economically
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`feasible. Id. at 8–9. Intuit asserts that “participating class members are expected to
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`recover 20% to 50% of the average fees a taxpayer paid to use TurboTax online in a year
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`they were eligible to file for free.” Intuit Opp. to Mot. to Intervene (dkt. 189) at 3. On
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`average, class members paid approximately $100 in filing fees in a given tax year. Mot.
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`for Preliminary Approval at 16. At the “midpoint” of the estimated participation rate, each
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`class member who files a claim “would receive about $28.” Mot. for Preliminary
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 5 of 20
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`Approval at 17.
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`Under the proposed settlement, Intuit would also modify certain business practices.
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`Mot. for Preliminary Approval at 7. As long as Intuit participates in the IRS Free File
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`Program, “for up to three years,” Intuit would:
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`1. “[A]dhere, to the fullest extent practicable, to the Federal Trade
`Commission’s guidelines for online marketing”;
`2. “[D]isclose the existence of the IRS Free File Program and qualifications
`to file for free . . . on one or more webpages maintained as part of, and
`accessible from the homepage of, the intuit.turbotax.com domain, and
`provide information on how to participate in the [program], and
`. . . maintain a publicly available webpage on the same domain setting
`forth the forms and schedules not covered in the TurboTax free edition”;
`3. “[C]reate a minimum of three blog posts each tax filing season . . . on its
`commercial website informing consumers about the IRS Free File
`Program and linking to it”;
`4. “[S]end a minimum of six email reminders to returning IRS Free File
`Program . . . customers,” until a customer “files their taxes” or
`“unsubscribes” from such emails; and
`5. Not engage “in any practice that would cause the landing page” for the
`Free File Program “to be ‘de-indexed’ from organic internet search
`results.”
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`Id. at 7–8.4 In this sense, the proposed settlement would provide non-monetary relief to
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`class members who, though eligible to file for free, did not expect to file for free and thus
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`could not submit a claim.
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`The proposed Notice to the Settlement Class would also advise class members
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`regarding the free file program. Id. at 8. Notice would be delivered to the email addresses
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`that Intuit has on file, though a settlement class member who requests a mailed copy “or
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`whose email address is no longer valid or otherwise results in a bounce-back message”
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`would receive a mailed copy at the address that Intuit has on file. Id. at 9. Notice would
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`also be available on a settlement website. Id.
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`The proposed settlement provides an opt out procedure for class members who wish
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`neither to file a claim nor to be bound by the settlement. Such class members must
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`4 The fifth promise to not de-index would have little, if any, practical effect because Intuit has
`already agreed with the IRS to not engage in such de-indexing. See Hearing Tr. at 39.
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`Id. at 10.5
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`send a written request to the Settlement Administrator providing their name,
`address, telephone number, e-mail address, and [wet-ink] signature; their
`unique identification number assigned by the Settlement Administrator; a
`statement that they are a member of the Settlement Class and wish to be
`excluded; and, if the [class member] has already filed an arbitration or
`lawsuit against Intuit, the relevant case name and number.
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`The settlement comes with two contingencies. Intuit would “have the right to
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`terminate the Settlement” if either “[1] the number of valid and timely opt-outs exceeds an
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`amount agreed upon [by] Class Counsel and Intuit in a confidential side letter,” which the
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`parties would share with the Court, or [2] “the Court does not enjoin the commencement
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`[or pursuit] of any additional actions or proceedings.” Id.; see also id. at 21. To that end,
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`Plaintiffs have requested that upon preliminarily approving the proposed settlement, the
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`Court “temporarily” enjoin class members from commencing or pursuing “related
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`proceedings,” including arbitrations, until they have opted out of the settlement. Id. at 21.
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`That injunction would go into effect immediately if the Court granted Plaintiffs’ Motion
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`for Preliminary Approval. See Proposed Order (dkt. 162-1) Ex. A at 8.
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`B.
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`Related Arbitration Proceedings
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`The proposed settlement comes with certain unusual circumstances. Namely, tens
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`of thousands of Intuit customers have already begun individually arbitrating analogous
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`claims against Intuit. A total of approximately 9,000 customers filed demands for
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`individual arbitration against Intuit with the American Arbitration Association (AAA)
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`either on October 1, 2019, shortly before Intuit moved to compel arbitration, or January 28,
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`2020, while the parties were litigating whether Plaintiffs’ claims must be arbitrated. See
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`Postman Decl. (dkt. 178) ¶ 5. On March 11, 2020, the day before the Court denied Intuit’s
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`Motion to Compel Arbitration, another 31,000 customers filed arbitration demands. Id.
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`More individual customer arbitration demands followed the Ninth Circuit’s August 2020
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`5 The proposed settlement also provides for an objection procedure through which Settlement
`Class Members may oppose final approval of the settlement. See Mot. for Preliminary Approval
`at 10–11.
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`ruling that the arbitration clause must be enforced: on October 9, 2020, approximately
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`17,000 additional customers filed demands for arbitration, and on October 23, 2020,
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`approximately 70,000 more customers did the same. Id.
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`These arbitration claimants have retained the same law firm, Keller Lenkner LLC.
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`They are all pursuing (1) consumer fraud claims under either their home state or California
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`law, and (2) federal antitrust claims. Id. ¶¶ 6–9. Their claims arise from the same
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`allegations that Plaintiffs’ assert: Intuit deceptively “steered” them away from “the free
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`option and toward its paid products.” Id. ¶ 23. They pursue public injunctive relief along
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`with damages and attorneys’ fees amounting to an average of approximately $2,700. Id.
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`¶¶ 7, 9.
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`The individual arbitrations have had significant financial consequences for Intuit,
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`with more costs on the horizon. AAA requires consumer claimants to pay an initial filing
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`fee (or submit a hardship-based waiver request) and respondents to pay slightly larger
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`filing fees. Id. ¶ 11; Costs of Arbitration, Effective Nov. 1, 2020 (dkt. 178-3); Costs of
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`Arbitration, Effective Sept. 1, 2018 (dkt. 178-4). The relevant rules in place before
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`November 1, 2020, required claimants to pay a $200 filing fee and the relevant business
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`(here, Intuit) to pay a $300 filing fee for each arbitration. See Costs of Arbitration,
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`Effective Sept. 1, 2018. The relevant rules in place after November 1, 2020 require
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`claimants to pay a $50 filing fee and Intuit to pay a $75 filing fee for each arbitration. See
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`Costs of Arbitration, Effective Nov. 1, 2020. In addition to its own filing fees, Intuit
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`would be liable for a large chunk of the claimants’ fees: Intuit’s Terms state that Intuit
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`will pay arbitration fees for claimants who are unable to do so, and “reimburse all such
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`fees and costs for claims totaling less than $75,000 unless the arbitrator determines the
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`claims are frivolous.” Terms ¶ 14. And, from Intuit’s perspective, it gets worse. In
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`addition to these filing fees, AAA rules provide that the business (here, Intuit) must pay
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`additional case management and arbitrator compensation fees for each arbitration. See
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`Costs of Arbitration, Effective Nov. 1, 2020; Costs of Arbitration, Effective Sept. 1, 2018.
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`Roughly 37,000 claimants who filed arbitration demands in March 2020 and earlier
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`7
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 8 of 20
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`have collectively paid millions of dollars in AAA filing fees, advanced by Keller Lenkner;
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`Intuit has paid millions in fees relating to those demands under protest, Postman Decl.
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`¶¶ 12–13, and appears obligated under the Terms to reimburse the fees paid by many
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`claimants.6 As of now, Intuit will also have to pay tens of millions in case management
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`and arbitrator compensation fees. Id. ¶¶ 14–15. Intuit has made settlement offers to 101 of
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`the individual arbitration claimants reflecting Intuit’s calculation of their full out-of-pocket
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`damages, and twenty-three of the claimants have accepted Intuit’s offers. See id. ¶ 19.
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`In short, Intuit faces massive costs associated with the individual arbitrations, even
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`before considering potential liability on the merits. Although Intuit questions whether
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`Keller Lenkner is looking out for its clients’ best interests, see Intuit Opp. to Mot. to
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`Intervene at 6, the parties do not dispute that these individual arbitrations expose Intuit to
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`enormous fees and costs. Intuit has acknowledged the bargaining advantage enjoyed by
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`the arbitration claimants, who can effectively “threaten” Intuit “into paying $3,000 in
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`arbitration fees, for a $100 claim.” Hearing Tr. at 64. It is unclear whether Intuit
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`considered this possibility when Intuit drafted the arbitration clause or litigated its
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`enforceability.
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`Before AAA, Intuit has objected to the claimants’ arbitration demands, the fees that
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`Intuit must pay AAA, and AAA’s neutrality. Postman Decl. ¶ 43. Intuit has also argued
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`that its Terms of Service and AAA rules give Intuit the right to face the arbitration
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`claimants’ claims in small-claims court, rather than arbitration. Id. ¶ 44. AAA determined
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`that Intuit’s arguments raised questions of arbitrability, and that under the arbitration
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`clause, individual arbitrators must decide such questions. Id. ¶ 45; Postman Decl. Ex. I
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`(dkt. 178-9) at 17, 29–30, 35–36, 39–40, 48–50, 57–58. Thus, AAA determined that the
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`individual arbitrations would go forward.
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`On June 12, 2020, Intuit sued “several thousand” arbitration claimants in California
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`6 Intuit notes that Keller Lenkner withdrew roughly 8,300 of these initial demands. Intuit Opp. to
`Mot. to Intervene at 7. And the 88,786 October 2020 arbitration claimants have (to the Court’s
`knowledge) not yet paid their filing fees. Id.
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 9 of 20
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`Superior Court. Postman Decl. ¶ 50; Case No. 20 STCV 22761 Order Denying Intuit Mot.
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`for Preliminary Injunction (dkt. 178-10) at 1. Intuit sought a declaration that Intuit may
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`choose to face their claims in small claims court, an order enjoining the arbitrations, a
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`declaration that the claimants seek “de facto” class arbitration barred by Intuit’s Terms,
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`and a declaration that California Senate Bill 707 (which imposes sanctions on a party that
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`drafted a consumer arbitration agreement, then fails to pay the fees necessary to proceed
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`under such an agreement) is preempted by the Federal Arbitration Act. Postman Decl.
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`¶ 50. On September 2, 2020, Intuit sought a preliminary injunction staying the
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`arbitrations. See id. ¶ 51. On October 8, 2020, the Superior Court denied Intuit’s motion
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`and held that the arbitrations must proceed. See Case No. 20 STCV 22761 Order Denying
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`Intuit Mot. for Preliminary Injunction at 16. On October 26, 2020, Intuit appealed the
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`Superior Court’s decision, and on October 27, 2020, Intuit filed a petition for a writ of
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`supersedeas from the California Court of Appeal. Postman Decl. ¶¶ 53, 54. The Court is
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`unaware of any material developments regarding the petition.
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`On October 28, 2020, the arbitration claimants asked the Superior Court to enjoin
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`Intuit from agreeing to a settlement with Plaintiffs that includes the arbitration claimants
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`and that burdens their right to opt out. Id. ¶ 56. Before the Superior Court ruled on that
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`motion, Intuit and Plaintiffs’ counsel agreed to a preliminary settlement, and Plaintiffs’
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`counsel filed the Motion for Preliminary Approval at issue here. Id. ¶ 57. On November
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`20, 2020, the Superior Court orally denied the arbitration claimants’ motion as moot given
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`the proposed settlement agreement, stating that the Superior Court would not interfere with
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`this Court’s proceedings. Id. ¶ 59; Superior Court Hearing Tr. (dkt. 178-11) at 5.
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`C.
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`Recent Procedural History
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`On November 30, 2020, nine arbitration claimants (“Intervenors”) moved to
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`intervene under Rule 24 of the Federal Rules of Civil Procedure. See Mot. to Intervene
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`(dkt. 177) at 8. On December 14, 2020, the Court granted that motion. See Order Re Mot.
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`to Intervene & Amicus Br. (dkt. 199) at 2.
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`Also on November 30, 2020, the Los Angeles City Attorney’s Office (LACA) and
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`County Counsel for the County of Santa Clara (SCCC) moved to file a joint amicus brief
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`opposing the proposed settlement and to participate in oral argument. See Mot. to File
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`Amicus Br. (dkt. 176). On December 14, 2020, the Court granted that motion as well. See
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`Order Re Mot. to Intervene & Amicus Br. at 1.
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`On December 14, 2020, the Court received a letter from the Attorneys General of
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`New York, Tennessee, Florida, Illinois, New Jersey, North Carolina, Pennsylvania, Texas,
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`and Washington. See AG Letter (dkt. 198). The letter noted that, in its opposition to
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`Intervenors’ motion to intervene and Amici’s motion for leave to file an amicus brief,
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`Intuit “twice remark[ed] that State Attorneys General have not intervened in this action or
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`objected to the settlement.” Id. The letter clarified that “a lack of affirmative action taken
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`by the Attorneys General does not indicate approval of this settlement.” Id.
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`On December 17, 2020, the Court held a hearing and issued an order denying the
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`motion for preliminary approval. See Order Denying Mot. for Preliminary Approval (dkt.
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`202). The Court explained that an opinion would follow in due course. Id. In the
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`meantime, Plaintiffs, Intuit, and Intervenors unsuccessfully attempted to settle. See
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`Minute Entry (dkt. 213). The Court now provides its opinion.
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`II.
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`LEGAL STANDARD
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`“‘[T]here is a strong judicial policy that favors settlements, particularly where
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`complex class action litigation is concerned.’” Allen v. Bedolla, 787 F.3d 1218, 1223 (9th
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`Cir. 2015) (quoting In re Syncor ERISA Litig., 516 F.3d 1095, 1101 (9th Cir. 2008)).
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`Nevertheless, Rule 23(e) of the Federal Rules of Civil Procedure requires courts to approve
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`any class action settlement. “[S]ettlement class actions present unique due process
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`concerns for absent class members.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th
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`Cir. 1998). As such, “the district court has a fiduciary duty to look after the interests of
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`those absent class members.” Allen, 787 F.3d at 1223 (collecting cases).
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`To approve a proposed settlement before a class has been certified, the Court must
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`determine that it “will likely be able to . . . approve the proposal under Rule 23(e)(2).”
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`Fed. R. Civ. P. 23(e)(1)(B); see also Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir.
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`2003) (explaining that to approve a settlement agreement reached prior to class
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`certification, the court must assess “whether a class exists” and “whether a proposed
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`settlement is fundamentally fair, adequate, and reasonable”) (citation omitted). Thus, if the
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`proposed settlement does not satisfy Rule 23(e), the Court must deny Plaintiffs’ motion for
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`preliminary approval regardless whether the proposed class could be certified.
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`Rule 23(e) is responsive to the peculiar nature of class actions, which may result in
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`absent class members unwittingly releasing claims against a defendant to facilitate a
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`settlement. Courts have “long recognized” that class action settlements “present unique
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`due process concerns for absent class members.” In re Bluetooth Headset Prods. Liability
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`Litig., 654 F.3d 935, 946 (9th Cir. 2011) (citation omitted). For example, there is always
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`the risk that class counsel will “collude” with defendants, “tacitly reducing the overall
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`settlement in return for a higher attorney’s fee.” Id. (citation omitted). That is why Rule
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`23(e) of the Federal Rules of Civil Procedure permits class actions to be settled “only with
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`the court’s approval.” Fed. R. Civ. P. 23(e).
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`Further, a court may give such approval “only after a hearing and only on finding
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`that” the proposed settlement is “fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2).
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`Whether a proposed settlement is fair, reasonable, and adequate depends on factors that
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`“will naturally vary from case to case.” In re Bluetooth, 654 F.3d at 946. But courts
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`“generally” must consider the following factors:
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`(1) the strength of the plaintiff’s case; (2) the risk, expense, complexity, and
`likely duration of further litigation; (3) the risk of maintaining class action
`status throughout the trial; (4) the amount offered in settlement; (5) the
`extent of discovery completed and the stage of the proceedings; (6) the
`experience and views of counsel; (7) the presence of a governmental
`participant; and (8) the reaction of the class members to the proposed
`settlement.
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`Id. (quoting Churchill Vill., LLC v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)).
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`When a “settlement agreement is negotiated prior to formal class certification,
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`consideration of these eight Churchill factors alone is not enough.” Id. (emphasis in
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`original). Before class certification, “there is an even greater potential for a breach of
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`fiduciary duty owed the class during settlement.” Id. And because “[c]ollusion may not
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`always be evident on the face of a settlement,” courts must examine whether there are
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`“more subtle signs that class counsel have allowed pursuit of their own self-interests and
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`that of certain class members to infect the negotiations.” Id. at 947.
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`Courts need not assess all these fairness factors at the preliminary approval stage.
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`See Alberto v. GMRI, Inc., 252 F.R.D. 652, 665 (E.D. Cal. 2008). Rather, “the preliminary
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`approval stage [i]s an ‘initial evaluation’ of the fairness of the proposed settlement made
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`by the court on the basis of written submissions and informal presentation from the settling
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`parties.” In re High-Tech Empl. Antitrust Litig., 2013 WL 6328811, at *1 (N.D. Cal. Oct.
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`30, 2013) (citing Manual for Complex Litigation (Fourth) § 21.632). At this stage,
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`“[p]reliminary approval of a settlement is appropriate if ‘the proposed settlement appears
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`to be the product of serious, informed, non-collusive negotiations, has no obvious
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`deficiencies, does not improperly grant preferential treatment to class representatives or
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`segments of the class, and falls within the range of possible approval.’” Ruch v. AM Retail
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`Grp., Inc., 2016 WL 1161453, at *7 (N.D. Cal. Mar. 24, 2016) (quoting In re Tableware,
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`484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007)).
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`III. DISCUSSION
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`The Court concludes that the proposed settlement does not satisfy Rule 23(e)
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`because it is not fair, reasonable, and adequate. Therefore, the Court denies Plaintiff’s
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`motion for preliminary approval. The Court need not consider whether it would likely be
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`able to certify the proposed class, or subsidiary issues like whether the proposed class
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`satisfies Rule 23(a)’s four initial requirements, Rule 23(g)’s adequacy of counsel
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`requirement, and Rule 23(b)(3)’s predominance requirement.
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`At every step of the Court’s Rule 23(e) analysis, the Court bears in mind the stakes
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`for different members of the proposed class. First, the arbitration claimants, like
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`Intervenors, would be subject to an immediate injunction and must opt out of the
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`settlement to continue pursuing their arbitration claims. These claimants may benefit from
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`the settlement if the $28 they would recover by filing a claim exceeds their expected net
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`Case 3:19-cv-02546-CRB Document 214 Filed 03/05/21 Page 13 of 20
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`recovery through arbitration. Given Intuit’s weak bargaining position in the arbitration
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`proceedings, it would likely be economically irrational for arbitration claimants with
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`legitimate claims to participate in the proposed settlement. Thus, the proposed
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`settlement’s primary effect on arbitration claimants is to stall their arbitrations until they
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`comply with the proposed opt out procedures. And if arbitration claimants both fail to opt
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`out of the settlement and fail to file a settlement claim, they get nothing. Second, there are
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`class members who may recover via government enforcement actions against Intuit.
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`Whether the proposed settlement harms these people depends on whether it could preclude
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`or limit their recovery in government enforcement actions—a complex question that the
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`parties and Amici dispute. See, e.g., Amicus Br. (dkt. 176-1) at 11–15; Plaintiffs’ Opp. to
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`Mot. to Intervene (dkt. 188) at 4. Third, there is the rest of the class. Because the Ninth
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`Circuit has held that Plaintiffs’ claims against Intuit must be