throbber
Case: 19-55807, 08/17/2021, ID: 12203229, DktEntry: 63-1, Page 1 of 25
`
`FOR PUBLICATION
`
`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`
`
`LISA KIM, individually and on behalf
`of all others similarly situated,
`Plaintiff-Appellee,
`
` No. 19-55807
`
`D.C. No.
`2:18-cv-3093-
`JFW-AS
`
`OPINION
`
`
`TINDER, INC., a Delaware
`corporation; MATCH GROUP, LLC, a
`Delaware limited liability company;
`MATCH GROUP, INC., a Delaware
`corporation,
`
`Defendants-Appellees.
`
`Appeal from the United States District Court
`for the Central District of California
`John F. Walter, District Judge, Presiding
`
`Argued and Submitted January 15, 2021
`Pasadena, California
`
`Filed August 17, 2021
`
`
`
`
`
`
`
`RICH ALLISON; STEVE FRYE,
`Objectors-Appellants,
`
`v.
`
`v.
`
`

`

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`
`ALLISON V. TINDER
`
`2
`
`Before: Consuelo M. Callahan and Paul J. Watford, Circuit
`Judges, and Jed S. Rakoff,* District Judge.
`
`Opinion by Judge Rakoff;
`Dissent by Judge Callahan
`
`
`SUMMARY**
`
`Class Settlement
`
`
`
`
`The panel reversed the district court’s approval of a pre-
`
`certification class settlement, vacated the district court’s
`judgment and attorneys’ fees award, and remanded for the
`district court to conduct the more probing inquiry required
`for a pre-certification class settlement.
`
`Plaintiff Lisa Kim brought suit against Tinder, Inc. in
`
`federal court pursuant to the Class Action Fairness Act of
`2005 (“CAFA”) for violations of California’s Unruh Civil
`Rights Act and its unfair competition statute. Tinder
`successfully compelled arbitration, and Kim and Tinder
`reached a settlement, before class certification, that applied
`to a putative class. Class members Rich Allison and Steve
`Frye objected. The district court rejected the objections,
`certified the class for settlement purposes, granted final
`approval of the proposed settlement, and awarded Kim a
`
`
`* The Honorable Jed S. Rakoff, United States District Judge for the
`Southern District of New York, sitting by designation.
`
`** This summary constitutes no part of the opinion of the court. It
`has been prepared by court staff for the convenience of the reader.
`
`

`

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`3
`
`ALLISON V. TINDER
`
`
`
`$5,000 incentive payment and her counsel $1.2 million in
`attorneys’ fees.
`
` Addressing the district court’s approval of the settlement
`overall, the panel held that the district court correctly recited
`the fairness factors under Fed. R. Civ. P. 23(e)(2), but that
`the district court abused its discretion by underrating the
`strength of the plaintiff’s case, overstating the settlement
`value, and overlooking the suggestions of collusion present.
`
`The panel held that independent of the district court’s
`
`abuse of discretion in its overall evaluation of the settlement,
`the approval of the attorneys’ fees was itself an abuse of
`discretion. By adopting without any scrutiny the purported
`value of the injunctive relief and failing to consider the likely
`claims rate, the district court shirked its independent duty to
`assess the value of the settlement
`
`Judge Callahan dissented. She agreed with the majority
`
`that the district court’s $24 million valuation of the
`settlement agreement was to some degree overinflated, but
`she dissented because the district court nevertheless
`reasonably evaluated the settlement class’s relatively weak
`claims. Because the settlement provided for fair, reasonable,
`and adequate value for the release of the class’s claims, she
`would affirm on the ground that the district court did not
`abuse its discretion in approving the settlement. Judge
`Callahan also disagreed with
`the majority’s opinion
`discussion of whether the award of attorneys’ fees was an
`abuse of discretion because the discussion was superfluous,
`given the majority’s holding that the district court’s approval
`of the settlement should vacated, and because the objectors
`waived any challenge to the district court’s lodestar
`calculations.
`
`
`
`
`

`

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`4
`
`
`ALLISON V. TINDER
`
`COUNSEL
`
`
`Danielle Leonard (argued) and Michael Rubin, Altshuler
`Berzon LLP, San Francisco, California; Kimberly A.
`Kralowec, Kralowec Law P.C., San Francisco, California;
`Alfred G. Rava, Rava Law Firm, San Diego, California; for
`Objectors-Appellants.
`
`Adrian R. Bacon (argued) and Todd M. Friedman, Law
`Offices of Todd M. Friedman P.C., Woodland Hills,
`California; John P. Kristensen, Kristensen LLP, Los
`Angeles, California; for Plaintiff-Appellee.
`
`Donald R. Brown (argued), Robert H. Platt, and Benjamin
`G. Shatz, Manatt Phelps & Phillips LLP, Los Angeles,
`California, for Defendants-Appellees.
`
`
`
`OPINION
`
`RAKOFF, District Judge:
`
`Beginning in 2015, the dating app Tinder began offering
`reduced pricing for those under 30, later changed to those
`under 29. In 2017, plaintiff Lisa Kim purchased a premium
`version of the Tinder app, but because she was already in her
`thirties, she paid more for her monthly subscription than
`those in their twenties. Kim brought suit against Tinder in
`federal district court pursuant to the Class Action Fairness
`Act of 2005 (“CAFA”) for violations of California’s Unruh
`Civil Rights Act and its unfair competition statute. Over
`Kim’s
`opposition, Tinder
`successfully
`compelled
`arbitration. After a daylong mediation session with a retired
`judge, Kim and Tinder reached a settlement, before class
`certification, that applied to a putative class.
`
`

`

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`
`
`
`ALLISON V. TINDER
`
`5
`
`Specifically, the settlement class included all California-
`based Tinder users who were at least 29 years old when they
`subscribed to Tinder’s premium services and were charged
`a higher price than younger subscribers. As part of the
`settlement, Tinder agreed to eliminate age-based pricing in
`California for new subscribers. Class members who
`maintained or reactivated their Tinder accounts would
`automatically receive 50 “Super Likes” (described below),
`for which Tinder would ordinarily have charged $50.
`Finally, class members who submitted a valid claim form
`would also receive their choice of $25 in cash, 25 Super
`Likes, or a one-month free subscription to the premium
`Tinder service previously purchased.
`
`Class members Rich Allison and Steve Frye, whose
`attorneys represent the lead plaintiff in a competing age-
`discrimination class action against Tinder in California state
`court, were among six class members who objected to the
`proposed settlement. These two objectors, in particular,
`argued that Tinder offered too paltry a cash payout, as well
`as Super Likes that premium subscribers did not need and
`subscriptions that former subscribers did not want, all in
`exchange for releasing valuable claims that had only been
`strengthened by recent victories in related California actions.
`Rejecting these objections, the district court certified the
`class for settlement purposes, granted final approval of the
`proposed settlement, and awarded Kim a $5,000 incentive
`payment and her counsel $1.2 million in attorneys’ fees.
`Allison and Frye now appeal.
`
`We conclude that, while the district court correctly
`recited the fairness factors under Fed. R. Civ. P. 23(e)(2), it
`materially underrated the strength of the plaintiff’s claims,
`substantially overstated the settlement’s worth, and failed to
`take the required hard look at indicia of collusion, including
`
`

`

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`ALLISON V. TINDER
`
`6
`
` a
`
` request for attorneys’ fees that dwarfed the anticipated
`monetary payout to the class. We therefore reverse the
`district court’s approval of the pre-certification class
`settlement, vacate the judgment and attorneys’ fees award,
`and remand for the district court to conduct the “more
`probing inquiry” that a pre-certification class settlement
`demands. See Hanlon v. Chrysler Corp., 150 F.3d 1011,
`1026 (9th Cir. 1998).
`
`BACKGROUND
`
`Tinder is a dating app operated by Tinder, Inc., Match
`Group, LLC, and Match Group, Inc. (collectively, “Tinder”)
`that uses computer technology to match users with nearby
`singles. Users “swipe right” on a dating profile to indicate
`interest and left to signify a lack of it. If two users both swipe
`right, the potential couple can message each other through
`the app. To indicate heightened interest, users can send one
`another a “Super Like.” Users receive one free Super Like
`daily but can purchase additional Super Likes for $1 each.
`
`In March 2015, Tinder launched Tinder Plus, an ad-free
`premium service that offered new features: users could
`swipe right unlimited times, change their minds about
`matches initially rejected, see dating profiles of users in
`other cities, and receive more than the one free “Super Like”
`per day allotted to regular users. Tinder Plus operated on a
`two-tiered pricing basis: subscribers thirty and under paid
`$9.99 a month, and subscribers over thirty paid $19.99. In
`March 2016, Tinder lowered the age cutoff for a reduced
`subscription price from 30 years old to 29 years old. In 2017,
`Tinder launched still another premium service, Tinder Gold,
`which used the same two-tiered pricing scheme for
`subscribers under and over 29.
`
`

`

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`
`
`
`
`ALLISON V. TINDER
`
`7
`
`To create a Tinder account, a user must agree to the
`Terms of Use. Since 2014, the Terms of Use have included
`a ban on class actions and a binding arbitration provision for
`all disputes arising from or relating to Tinder services that
`cannot be brought in small claims court. In July 2015, Tinder
`added a
`login screen disclosure (“the sign-in wrap
`agreement”) informing users that continued use of the
`service indicated consent to the Terms of Use.
`
`Kim created her first Tinder account in October 2013 and
`another in April 2015. She purchased a Tinder Plus
`subscription on February 21, 2017, paying $19.99 as a user
`over thirty. Two days later, after being presented with the
`sign-in wrap agreement, she logged into the account.
`
`On April 12, 2018, Kim sued Tinder, alleging age
`discrimination in violation of the Unruh Civil Rights Act,
`Cal. Civ. Code §§ 51 et seq. Kim later amended her
`complaint
`to add a claim under California’s unfair
`competition law. See Because the suit was a putative class
`action, it was brought, pursuant to CAFA, in the U.S. District
`Court for the Central District of California.
`
`Tinder moved to compel arbitration, which Kim
`opposed. Kim argued that her Unruh Act claim sought public
`injunctive relief and that the arbitration agreement was
`unenforceable to the extent it barred such relief. Kim also
`sought discovery with respect to the evidence that she had
`viewed and consented to the arbitration agreement. The
`district court denied the discovery request as “vague.” The
`court further determined that Kim consented to the sign-in
`wrap agreement and that the agreement was enforceable, not
`least because it still permitted Kim to seek injunctive relief
`through arbitration. The court stayed the case and directed
`Kim to arbitration.
`
`

`

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`8
`
`
`ALLISON V. TINDER
`
`Kim appealed the district court’s arbitration ruling. But
`while the appeal was pending, Kim and Tinder participated
`in a full-day mediation with retired Judge Louis Meisinger
`on November 29, 2018. The parties reached a settlement on
`December 1, 2018 and entered an agreement memorializing
`that settlement on December 31, 2018.
`
`The Settlement Agreement
`
`The settlement agreement defines the settlement class to
`include “every California subscriber to Tinder Plus or Tinder
`Gold during the Class Period who at the time of the
`subscription was at least 29 years old and was charged a
`higher rate than younger subscribers, except those who
`choose to opt out of the Settlement Class.” The class
`contains about 240,000 members. Under the agreement,
`every class member who has or reactivates a Tinder account
`will automatically receive 50 Super Likes, regardless of
`whether the user files a claim. In addition, class members
`who file a timely claim will receive their choice of:
`“(1) $25.00 in cash; (2) 25 Super Likes (but only if the Class
`Member has a current Tinder account); or (3) a one-month
`subscription to Tinder Plus or Tinder Gold, depending on
`which of those services the Class Member had previously
`purchased (this option is not available to any Class Member
`who has a current subscription to Tinder Plus or Tinder
`Gold).” Finally, the settlement contained an injunctive
`component. Defendants agreed to eliminate age-based
`pricing for new subscribers in California, but “reserve[d] the
`right to offer a youth discount to subscribers age 21 or
`younger.”
`
`As part of the settlement, Tinder further agreed not to
`challenge an award of attorneys’ fees of $1.2 million plus
`reasonable costs and expenses. Similarly, Tinder agreed not
`
`

`

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`
`ALLISON V. TINDER
`
`
`
`to oppose an incentive award of $5,000 to Kim “for services
`performed in representing the Settlement Class.”
`
`9
`
`Objections
`
`After the settlement was presented to the district court
`for approval, Allison and Frye filed objections, arguing that
`the plaintiff and class counsel were inadequate, that the
`claims form was burdensome, that the risk to the class posed
`by further litigation was low, and that the settlement was
`collusive and of little value.
`
`Allison and Frye also argued that another, almost-
`identical class action lawsuit better demonstrated the value
`of the class members’ claims: Candelore v. Tinder, Inc.,
`228 Cal. Rptr. 3d 336 (2018), review denied (May 9, 2018).1
`In Candelore, as here, the class action plaintiff alleged that
`Tinder violated the Unruh Act by charging customers over
`29 more than it charged younger customers for the same
`service. Id. at 339. While Tinder initially moved successfully
`to dismiss the complaint for failure to state a claim, id.
`at 340, on appeal, Candelore secured a ruling that his
`allegations did state a claim for age discrimination under the
`Unruh Act—and that, if his allegations were true, Tinder’s
`age-based distinction would not be justified by public policy
`as a matter of law. See id. at 350. In the course of its decision,
`the Candelore court “recognize[d] . . . that past cases,” like
`Javorsky v. Western Athletic Clubs, Inc., 195 Cal. Rptr. 3d
`706 (2015), “have embraced the notion that age may serve
`as a reasonable proxy for income in upholding age-based
`discounts against Unruh Act claims.” 228 Cal. Rptr. 3d
`at 344. But those cases, the court reasoned, are “inconsistent
`
`1 Allison’s and Frye’s attorneys also represented lead plaintiff Allan
`Candelore in this lawsuit.
`
`

`

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`ALLISON V. TINDER
`
`10
`
`with the ‘individual nature’ of the right secured by the
`[Unruh] Act, which protects individuals from unequal
`treatment based on generalizations about ‘a group’ to which
`they belong.” Id. at 347.
`
`Allison and Frye argued that Candelore showed the
`relative weakness of Kim as a class representative. Unlike
`Kim, Candelore was not compelled to arbitration, because
`when Candelore signed up for Tinder Plus in March 2015,
`the sign-up wrap agreement was not yet in place. Allison and
`Frye also stressed that the appellate victory in Candelore
`showed that the class members had meritorious Unruh Act
`claims and significant leverage.
`
`Preliminary Approval
`
`Despite Allison’s and Frye’s objections, the district court
`granted preliminary approval of the settlement agreement. In
`its preliminary approval order, the district court recognized
`that the settlement agreement contained a “clear sailing”
`provision—that is, an agreement by Tinder not to oppose
`plaintiff’s attorneys’ application for $1.2 million
`in
`attorneys’ fees—and noted that such provisions “are
`considered troubling and a possible sign of collusion.”
`However, the court reasoned that the provision was unlikely
`to indicate collusion here because “the attorneys’ fees
`provision was not negotiated until after the parties had
`agreed to the other settlement terms,” a neutral mediator
`oversaw
`the
`fee negotiation, and
`the
`fee award
`“represent[ed] . . . approximately 5 percent of the total
`estimated value of the Settlement.” Id. Nevertheless, the
`court promised that it would “closely scrutinize the
`attorneys’ fees requested at the Final Fairness Hearing” to
`confirm that collusion was unlikely. Id.
`
`

`

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`
`
`
`
`ALLISON V. TINDER
`
`11
`
`Final Approval
`
`the district court
`the final approval hearing,
`At
`determined
`that
`the proposed settlement was “fair,
`reasonable, and adequate” under Federal Rule of Civil
`Procedure 23(e). The district court’s analysis focused on the
`perceived weakness of Kim’s case, the supposed benefits the
`settlement would provide to class members, and the low
`number of class-member objections.
`
`In the district court’s estimation, Kim’s case was weak.
`Kim’s claim had been compelled to arbitration, and the court
`found that “over 95 percent of the Class Members” could be
`bound by similar arbitration agreements, which could
`present a bar to ultimate class certification. The court also
`determined that, while Candelore could help the class
`members survive a motion to dismiss, “the [unfavorable]
`holding of Javorsky [is] more compelling and more in line
`with the weight of authority” on summary judgment or at
`trial. The court also noted that other, as-of-yet unraised
`defenses could end the class’s quest for relief, including
`arguments related to choice-of-law and contractual limits on
`liability.
`
`At the same time, the court concluded that the agreement
`“will provide direct and meaningful benefits to the
`Settlement Class” to “a total value of $24 million.” This
`value included $12 million worth of Super Likes disbursed
`automatically, up to $6 million in “potential cash or cash-
`equivalent benefits” distributed through the claims process,
`and $6 million in injunctive relief. In regard to the latter, the
`court noted that “Class Counsel estimates that the injunctive
`relief negotiated on behalf of the Class and the public has a
`value of at least $6 million,” but the court did not otherwise
`evaluate why this was a reasonable value.
`
`

`

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`12
`
`
`ALLISON V. TINDER
`
`Finally, the district court also found that the “reaction of
`class members” favored the settlement, because of about
`240,000 class members, only six had objected to the
`settlement. The court found Allison’s and Frye’s allegations
`of collusion unpersuasive, because the settlement offered a
`significant benefit of $12 million in Super Likes to class
`members automatically, those class members who preferred
`a cash benefit could submit a claim form, the parties had
`delayed negotiating attorneys’ fees in mediation until after
`they had reached agreement on substantive settlement terms,
`and the attorneys’ fees sought were proportionate to a
`$24 million settlement value.
`
`Turning to attorneys’ fees, per se, the court analyzed the
`proposed attorneys’ fee award under the “percentage-of-
`fund” and “lodestar” methods and concluded that the fee
`award was reasonable under both. The court also found the
`incentive award to Kim was reasonable because of “the time
`and effort Plaintiff has devoted to this case” and because the
`$5,000 amount was “presumptively reasonable.” (quoting
`Faigman v. AT & T Mobility LLC, 2011 WL 672648, at *5
`(N.D. Cal. Feb. 16, 2011)).
`
`The district court then granted final approval of the class
`action settlement and awarded $1.2 million in attorneys’ fees
`and a $5,000 incentive payment to Kim.
`
`DISCUSSION
`
`In general, we review for abuse of discretion both a
`district court’s grant of approval of a pre-certification class
`action settlement and the court’s calculation of attorneys’
`fees. Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 963 (9th
`Cir. 2009); In re Bluetooth Headset Prods. Liab., 654 F.3d
`935, 940 (9th Cir. 2011). The factual findings underlying the
`
`

`

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`ALLISON V. TINDER
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`
`
`fee award are reviewed for clear error. Bluetooth, 654 F.3d
`at 940.
`
`13
`
`class
`that occur before
`settlements
`However,
`certification are subject to “a high procedural standard.”
`Allen v. Bedolla, 787 F.3d 1218, 1223 (9th Cir. 2015). The
`district court must act as a fiduciary, protecting the interests
`of absent class members by scrutinizing the settlement’s
`fairness in light of well-established factors. Id. Accordingly,
`“the district
`court must
`show
`it has
`explored
`comprehensively all factors, and must give a reasoned
`response to all non-frivolous objections.” Dennis v. Kellogg
`Co., 697 F.3d 858, 864 (9th Cir. 2012) (internal citations and
`quotation marks omitted). Reversal is warranted when the
`settlement terms “contain convincing indications” that the
`class representative and class counsel’s self-interest won out
`over the class’s interest, and “the district court was wrong in
`concluding otherwise.” Staton v. Boeing Co., 327 F.3d 938,
`960 (9th Cir. 2003).
`
`I
`
`We turn first to the approval of the settlement overall.
`Rule 23(e) authorizes district courts to approve class action
`settlements when they are “fair, reasonable, and adequate.”
`See Fed. R. Civ. P. 23(e)(2). In this Circuit, a district court
`examining whether a proposed settlement comports with
`Rule 23(e)(2) is guided by the eight “Churchill factors,” viz.,
`“(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 of the proposed settlement.” In re Bluetooth
`
`

`

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`ALLISON V. TINDER
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`14
`
`Headset Prods. Liab., 654 F.3d at 946 (citing Churchill Vill.
`v. Gen. Elec., 361 F.3d 566 (9th Cir. 2004)); see also Hanlon
`v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). Only
`when
`the district court “explore[s]
`these
`factors
`comprehensively” can
`the settlement award “survive
`appellate review.” See In re Mego Fin. Corp. Sec. Litig.,
`213 F.3d 454, 458 (9th Cir. 2000).
`
`However, “consideration of these eight Churchill factors
`alone is not enough to survive appellate review.” In re
`Bluetooth Headset Prod. Liab. Litig., 654 F.3d at 946; see
`also Briseño v. Henderson, 998 F.3d 1014, 1025–26 (9th Cir.
`2021) (holding that the revised Rule 23(e) requires courts “to
`go beyond our precedent” by applying the heightened
`scrutiny set forth in Bluetooth to all class action settlements).
`Rule 23(e)(2) also requires the court to consider “the terms
`of any proposed award of attorney’s fees” and scrutinize the
`settlement for evidence of collusion or conflicts of interest
`before approving the settlement as fair. Briseño, 998 F.3d at
`1024–25.
`
`As noted, the district court’s determinations in these
`respects are reviewed on appeal for abuse of discretion. But
`even applying that deferential standard of review, we find
`that the district court so underrated the strength of the
`plaintiff’s case, so overstated the settlement value, and so
`overlooked the suggestions of collusion present as to
`collectively constitute an abuse of discretion.
`
`First, the district court discounted the strength and value
`of the class members’ claims because the court “f[ound] the
`holding of Javorsky to be more compelling and more in line
`with the weight of authority than the holding in Candelore.”
`In so doing, the district court ignored the fact that the
`settlement class members are also putative members of the
`class in Candelore—and the settlement agreement therefore
`
`

`

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`ALLISON V. TINDER
`
`
`
`releases claims where Candelore is the law of the case,
`regardless of whether the district court finds the opinion
`persuasive.
`
`15
`
`The district court also substantially overstated the
`settlement’s worth. Tinder’s agreement to eliminate age-
`based pricing going forward applies only to new California-
`based subscribers—a group that, by definition, does not
`include the class members. Yet, the court accepted class
`counsel’s unsupported representation that the injunctive
`relief was worth $6 million to the class. We see no basis for
`this conclusion.
`
`Furthermore, the universal participation component, an
`award of 50 Super Likes, is available only to class members
`who maintain or reactivate their Tinder accounts. In
`December 2018, approximately 44% of the class did not
`have a Tinder account. For many obvious reasons, these
`class members might not want to resume their relationship
`with Tinder to receive the class benefit, e.g., because in the
`intervening years, they had entered into a satisfactory
`romantic relationship, or because their experience of age
`discrimination soured them on Tinder entirely, or whatever.
`Further still, because those class members who still have
`Tinder Plus or Tinder Gold accounts already receive
`150 Super Likes per month, the marginal value of 50 more
`is low.
`
`Further still, the district court grossly overstated the
`value of the claims that Tinder would actually pay as being
`$6 million. This was based on the extremely doubtful
`assumption that all members of the class would not only file
`a claim but also elect the $25 cash alternative. In reality,
`based on the actual claims rate at the time of final approval
`of 0.745%, Tinder stood to pay less than $45,000.
`
`

`

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`16
`
`
`ALLISON V. TINDER
`
`Third, as for possible collusion, the district court did not
`adequately scrutinize the combination of a clear-sailing
`provision and an attorneys’ fee award that outstripped the
`likely financial benefit to the class. Because these early, pre-
`certification settlements are so open to abuse and so little
`subject to scrutiny at the time by the district court, the court
`is required to search for “subtle signs” that plaintiff’s
`counsel has subordinated class relief to self-interest. In re
`Bluetooth Headset Prods. Liab., 654 F.3d at 947; see also
`Briseño, 998 F.3d at 1024–25 (explaining that although class
`certification “does not cleanse all sins, especially when it
`involves potential collusion over divvying up funds between
`class counsel and the class,” “[t]he potential for collusion
`reaches its apex pre-class certification”). Signs of collusion
`can include: (1) a handsome fee award despite little to no
`monetary distribution for the class, (2) a “clear sailing”
`provision under which defendant agrees not to object to the
`attorneys’ fees sought, and (3) an agreement that fees not
`awarded will revert to the defendant, not the class fund.
`Allen, 787 F.3d at 1224. The presence of these three signs is
`not a death knell—but when they exist, “they require[] the
`district court to examine them, . . . develop the record to
`support its final approval decision,” and thereby “assure
`itself that the fees awarded in the agreement were not
`unreasonably high.” Id. (quoting In re Bluetooth Headset
`Prods. Liab., 654 F.3d at 947).
`
`The settlement agreement here contained a clear-sailing
`provision. This Court has frequently stressed that “‘clear
`sailing’ agreements on attorneys’ fees are important warning
`signs of collusion.” Roes, 1–2 v. SFBSC Mgmt., LLC,
`944 F.3d 1035, 1051 (9th Cir. 2019) (quoting Lane v.
`Facebook, 696 F.3d 811, 832 (9th Cir. 2012)). When a
`district court encounters such a provision, it must “peer into
`the provision and scrutinize closely the relationship between
`
`

`

`Case: 19-55807, 08/17/2021, ID: 12203229, DktEntry: 63-1, Page 17 of 25
`
`ALLISON V. TINDER
`
`
`
`attorneys’ fees and benefit to the class,” even when the
`settlement has been negotiated “with a neutral mediator
`before turning to fees.” In re Bluetooth Headset Prods.
`Liab., 654 F.3d at 948.
`
`17
`
`Here, however, the district court did not develop the
`record to support its conclusion that the attorneys’ fees were
`proportionate to the value to the class. Instead, the court, as
`noted above, calculated the settlement value based on a
`totally unrealistic claims rate and an unexplained injunctive
`relief valuation, and then found the attorneys’ fee award
`proportional to that inflated settlement value.
`
`The district court gave “deference to the mediation
`proceedings and the judgment of the parties regarding the
`reasonableness of fees,” but in so doing abdicated its
`independent duty to see whether these actually excessive
`attorneys’ fees evidenced collusion in the settlement. See
`Allen, 787 F.3d at 1224 (quoting In re Bluetooth Headset
`Prods. Liab., 654 F.3d at 947).
`
`II
`
`Independent of the district court’s abuse of discretion in
`its overall evaluation of the settlement, the approval of the
`attorneys’ fees was itself an abuse of discretion. The district
`court approved a $1.2 million attorneys’ fee award, because
`“the $1,200,000 in attorneys’ fees sought equates to
`approximately 5 percent of the estimated $24,000,000 in
`settlement benefit provided to the Class.” But, as already
`noted, the $24,000,000 figure was greatly overstated.
`
`This Circuit permits two methods of calculating
`attorneys’ fee awards in class actions: (1) the “lodestar”
`method and (2) the “percentage-of-recovery” method. In re
`Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 570 (9th
`
`

`

`Case: 19-55807, 08/17/2021, ID: 12203229, DktEntry: 63-1, Page 18 of 25
`
`ALLISON V. TINDER
`
`18
`
`Cir. 2019) (en banc). Under the lodestar method, the court
`multiplies the number of hours the prevailing party
`reasonably spent on litigation by a reasonable hourly rate to
`determine a presumptively reasonable fee award. See
`Yamada v. Nobel Biocare Holding AG, 825 F.3d 536, 546
`(9th Cir. 2016). The court may then “adjust” the award “by
`an appropriate positive or negative multiplier reflecting . . .
`the quality of representation, the benefit obtained for the
`class, the complexity and novelty of the issues presented,
`and the risk of nonpayment.” In re Bluetooth Headset Prods.
`Liab. Litig., 654 F.3d at 941–42 (quoting Hanlon, 150 F.3d
`at 1029). Benefit
`to
`the class
`is
`the “[f]oremost”
`consideration. Id. at 942. This method is especially
`appropriate in class actions “where the relief sought—and
`obtained—is . . . primarily injunctive.” Id. at 941.
`
`The percentage-of-recovery approach may be used
`“where the defendants provide monetary compensation to
`the plaintiffs” and class benefit is easy to quantify. See In re
`Hyundai, 926 F.3d at 570. Under this method, “the court
`simply awards the attorneys a percentage of the fund
`sufficient to provide class counsel with a reasonable fee.”
`Hanlon, 150 F.3d at 1029. Injunctive relief is inherently
`difficult to monetize. Yamada, 825 F.3d at 547. Thus, a
`district court must exercise caution when using the value of
`injunctive relief to determine proportional attorneys’ fees
`and should generally avoid valuing hard-to-measure
`injunctive relief altogether, “because of the danger that
`parties will overestimate the value of injunctive relief in
`order to inflate fees.” SFBSC Mgmt., LLC, 944 F.3d at 1055.
`When a settlement includes injunctive relief among other
`forms of relief, the court should (1) “explain[] why the value
`of the injunctive relief’s benefits to individual class members
`was readily quantifiable and worth [the estimated value]” or
`(2) “exclude[] the injunctive relief from the valuation of the
`
`

`

`Case: 19-55807, 08/17/2021, ID: 12203229, DktEntry: 63-1, Page 19 of 25
`
`ALLISON V. TINDER
`
`
`
`settlement and explain[] why attorneys’ fees . . . were
`justified.” Id. at 1056.
`
`19
`
`As already noted, the settlement agreement between Kim
`and Tinder provides injunctive relief that eliminates age-
`based pricing in California

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