The opinion of the court was delivered by: Glasser, United States Senior District Judge
Proposed class representatives Andrew Parker and Eric DeBrauwere (the "Representative Plaintiffs") filed an amended class action complaint on October 30, 1998 (the "Complaint") against defendants Time Warner Entertainment Company, L.P. and its subsidiary, Time Warner Cable (collectively, "Time Warner" or the "defendant"). The Complaint alleges, inter alia, that the defendant violated certain provisions of the Cable Communications Policy Act of 1984, 47 U.S.C. § 551 et seq. (the "Cable Act").*fn1
The Representative Plaintiffs and the defendant move jointly for approval of a class action settlement agreement. The attorneys for the Representative Plaintiffs, Hagens Berman Sobol Shapiro LLP (the "Hagens Firm"), Kirby McInerney LLP (the "Kirby Firm"), Cuneo Gilbert & LaDuca LLP (the "Cuneo Firm") and the Law Offices of James M. Beaulaurier (the "Beaulaurier Firm" and collectively, "Class Counsel") move for attorneys' fees and expenses. The attorneys for objector-intervenors Rick and Sharon Lobur, Forizs & Dogali, P.L. and The Anderson Law Firm (together, the "Loburs' Counsel"), and the attorneys for objector-intervenors Lydia Townsend and Rosalie Vitrano (together with the Loburs, the "Objectors"), the Law Offices of Steven B. Witman (the "Witman Firm") each move for attorneys' fees and expenses.
For the reasons stated below, the parties' motion for approval of the settlement agreement is granted. Class Counsel's motion for attorneys' fees, expenses and plaintiff incentive awards is granted in part and denied in part. The Loburs' Counsel's motion for attorneys' fees and expenses is granted in part and denied in part. The Witman Firm's motion for attorneys' fees and expenses is denied. The Objectors' respective motions for incentive awards are denied.
This order brings to a close a case that has raised compelling questions of law arising at the intersection of consumer protection statutes that provide for minimum statutory damages and the class action mechanism. Each of these tools is intended to encourage the prosecution of cases that would otherwise be too costly for an individual plaintiff to pursue. The combination of the two threatens defendants with the multiplication of statutory damages, possibly beyond the contemplation of Congress and the limits of due process.
The settlement of this case reserves for another day the question of whether a class seeking statutory damages for each of its members, far in excess of the actual harm and ruinous to the defendant, should be certified for trial. However, the proposed settlement itself raises interesting questions about the valuation of settlements involving large numbers of class members and benefits that are difficult to value.
The settlement, while fair, adequate and reasonable -- in that it makes a minimal sum available to the purported victims of a minimal harm -- is nonetheless unsatisfying because so much time and labor was expended to achieve so little.
This case has already been the subject of several orders. See No. 98 Civ. 4265 (ERK), 1999 WL 1132463 (E.D.N.Y. Nov. 8, 1999) (Korman, J.) (the "1999 Order") (denying defendant's motion to dismiss the Complaint); 198 F.R.D. 374 (E.D.N.Y. 2001) (the "2001 Order") (adopting the report and recommendation of Magistrate Azrack certifying a class for injunctive and declaratory relief but denying certification of a class for damages); 331 F.3d 13 (2d Cir. 2003) (the "2003 2d Cir. Decision") (vacating the decision of this Court on the question of class certification and remanding for further proceedings); 239 F.R.D. 318 (E.D.N.Y. 2007) (the "2007 Order") (denying settlement class certification under Fed. R. Civ. P. 23(b)(2) because monetary damages predominated over injunctive relief and under 23(b)(3) because of inadequate notice and procedural and substantive unfairness). This Memorandum and Order incorporates and assumes familiarity with these decisions.
The Complaint alleges that Time Warner collected detailed personal information about cable television subscribers throughout its nationwide system. (Compl. ¶¶ 4, 43). Time Warner maintained this information in its list sales database ("LSDB"), which it offered for sale to third parties, including telemarketers, direct marketing services companies, and Time Warner affiliates and divisions. (Compl. ¶¶ 6, 9, 45-48, 60). The Complaint alleged that the database included subscribers' names and addresses, premium subscriptions, such as HBO, Disney, and Playboy, credit card information, places of employment, whether subscribers lease or own their residence, and social security and drivers' license numbers. (Compl. ¶¶ 11, 43). Time Warner enhanced the information that it collected directly from its subscribers with information it had obtained from third parties, including Time Warner affiliates and divisions. (Compl. ¶¶ 4, 7, 44, 68).
The Complaint alleges that Time Warner violated the Cable Act's substantive privacy provisions by collecting and disclosing its customers' personally identifiable information ("PII") and failing to give proper notice of its practices.*fn2 Under the Cable Act, cable providers must give notice to their customers of the nature of the PII that they collect, how it is used, the nature, frequency and purpose of any PII disclosures and their retention of such information, all as provided for by 47 U.S.C. § 551(a)(1).*fn3 The Complaint alleges that Time Warner violated the notice provisions of § 551(a) by failing to adequately notify subscribers of its use and disclosure of their PII, including the nature of the PII collected from subscribers and third party sources, the nature and frequency of the uses and disclosures of such information, and the period during which Time Warner maintained such information. (Compl. ¶¶ 62-71, 80).
Subsection § 551(c) of the Cable Act prohibits the disclosure of PII without the prior consent of a subscriber with the exceptions provided for in subdivision (c)(2). This subdivision allows for the disclosure of the names and addresses of subscribers to any cable service or other service, provided that customers are given the opportunity to opt out of such disclosure and so long as the disclosure does not give additional detail pertaining to customer viewing habits.*fn4 The Complaint alleges that Time Warner violated the disclosure provisions of § 551(c) by disclosing information other than subscribers' names and addresses without their consent. (Compl. ¶¶ 8, 55-60, 72-74).
The Complaint sought minimum statutory damages of at least $1,000 per violation for every subscriber, as provided for by § 551(f)*fn5 , claiming injury by the class "which is, at a minimum, hundreds of millions of dollars." (Compl. ¶¶ 77, 82.)
1. The Settlement Agreement
The parties first reached a proposed settlement in June 2005 (the "Prior Agreement"). The Prior Agreement gave class members whose names appeared in the LSDB the opportunity to claim free Time Warner cable services for their own use, or to transfer that benefit to a third party. After a hearing on May 19, 2006, at which the parties and the Objectors were heard, the Prior Agreement was ultimately rejected by the Court for reasons set forth in the 2007 Order. Chief among the reasons for its rejection was distributional unfairness to class members who were identified as being in the LSDB, but did not at the time of the settlement live in areas of the country where cable television service is provided by Time Warner. 2007 Order, 239 F.R.D. at 340. Those class members could not personally use the free cable services and could only transfer the benefit to those who did live in such areas. The Prior Agreement was also rejected because the notice provisions failed to provide "the best notice that is practicable under the circumstances," Fed. R. Civ. P. 23(c)(2)(B), to persons then identified as being in the LSDB who were no longer Time Warner Cable subscribers. 2007 Order, 239 F.R.D. at 333-36.
The Representative Plaintiffs and the defendant filed a new settlement agreement on April 2, 2008 (the "Settlement Agreement"). This Court granted preliminary approval of the Settlement Agreement, provisionally certified the class and directed dissemination of notice to the class in an order dated May 8, 2008 (the "Preliminary Approval Order"). The provisionally certified class (the "Class") consisted of: "All persons throughout the United States who were Time Warner Cable subscribers at any point in time between January 1, 1994, and December 31, 1998, [herein, the "Relevant Period"] except for current Time Warner Cable officers, directors, employees and counsel." (the "Class Members"). (Prelim. Approval Order 2.)
In the 2007 Order, the Court identified four categories of class members to which the Prior Agreement provided disparate benefits:
(1) those Class Members who are listed on the Time Warner List Sales Database dated January 1, 1999, ("LSDB"), and who currently subscribe to Time Warner Cable services . . . (hereinafter "Category I" Class Members); (2) those Class Members who are listed on the LSDB and who no longer subscribe to Time Warner Cable services, but live in an area served by Time Warner Cable (hereinafter "Category II" Class Members); (3) those Class Members who are listed on the LSDB and who no longer subscribe to Time Warner Cable services, and who do not live in an area served by Time Warner Cable (hereinafter "Category III" Class Members); and, (4) those Class Members who are not listed on the LSDB (hereinafter "Category IV" Class Members). 2007 Order, 239 F.R.D. at 326.
The categories recognized by the Court in the 2007 Order remain applicable to the current Settlement Agreement.*fn6 The benefits available to each category of Class Member are provided for as follows:
Class Category Benefits Available
(i) One free month of any Time Warner Cable service that is available on a monthly basis and to which the customer does not currently subscribe, or
(ii) two free Movies on Demand, or
(i) One free month of any Time Warner Cable service that is available on a monthly basis, with no installation fee of any kind, or
(ii) two free Movies on Demand, or
(iii) the ability to transfer to any other person who lives within an area serviced by Time Warner Cable one free month of service or two free Movies on Demand, or
(i) The ability to transfer to any other person who lives within an area serviced by Time Warner Cable one free month of service or two free Movies on Demand, or
(Settlement Agreement & 4(a)-(b).)
The benefits made available by the Settlement Agreement differ from those in the Prior Agreement in that all three categories of Class Members eligible to receive benefits may now opt to receive a $5 check rather than service benefits.*fn7 All class members who select as their benefit a free month of service may either contact Time Warner to cancel the service at the end of the month or do nothing and be billed for the service at Time Warner's usual rate until such a time as they cancel it. (Settlement Agreement & 4(e).)
In addition to the direct benefits to the Category I, II and III Class Members, the Settlement Agreement also provides for what is termed "Remedial Relief". (Settlement Agreement ¶ 12.) This includes revisions to Time Warner's privacy notice and additional revisions to the privacy notice should Time Warner re-enter the business of selling customer information that has been enhanced with publicly available data. (Settlement Agreement ¶ 12.) Furthermore, Time Warner will provide Class Counsel with its privacy notices for a period of three years from the date the Settlement Agreement is approved. (Settlement Agreement ¶ 12.) Finally, Time Warner will employ a Chief Privacy Officer for an unspecified period of time and will give as cy pres relief $250,000 to each of the Samuelson Law, Technology & Public Policy Clinic at Boalt Hall Law School and the Center for Democracy and Technology's Ronald Plesser Fellowship. (Settlement Agreement ¶ 14.)
Once the settlement becomes effective, Class Members release "all claims which have been alleged in the Action, and claims which could have been alleged in the Action relating to Time Warner's privacy notices and list sales practices between 1994 and 1998 under 47 U.S.C. § 551 and/or any similar federal or state consumer protection law, privacy law and/or common law." (Settlement Agreement, Definitions, ¶ O.) The Settlement Agreement also provides that, subject to Court approval, Time Warner will pay Class Counsel's fees and costs in the total amount of $5 million. Class Counsel will pay any objector's counsel's fees or costs, as awarded by the Court or otherwise. (Settlement Agreement ¶ 26.)
2. Notification and Submitted Claims
Notice by mail, directed to more than 7.2 million current and former subscribers whose names appeared in the LSDB, was sent June 6-9, 2008. (Affidavit of Jeanne C. Finegan dated Nov. 26, 2008 ("Finegan Aff."), ¶¶ 9-10.) Of these, 286,505 were postcards mailed to Former Claimants; 1,518,526 were long form notices ("Notice") mailed to current subscribers and former subscribers whose addresses had been verified and had not previously claimed a benefit; and 5,453,436, approximately 75% of the total, were postcards mailed to the last known address of former subscribers whose address information could not be updated with Time Warner's current subscriber database or the National Change of Address registry ("NCOA"). (Finegan Aff. ¶¶ 6-9.) In addition, the claims administrator established a settlement website (www.twcsettlement.com) where English and Spanish versions of the Notice and claim form were available. (Finegan Aff. ¶ 18.) A summary form of the Notice was published in several national publications. (Finegan Aff. ¶ 14.) As of November 23, 2008, the claims administrator had received 172,602 claim forms in response to the Settlement Agreement to add to the 286,503 claim forms received in connection with the Prior Agreement, for a total of 459,105. (Finegan Aff. ¶ 20.)
On December 9, 2008, the Court held a settlement hearing pursuant to Fed. R. Civ. P. 23(e)(2) (the "Fairness Hearing"). Arguments were heard on the motion for approval of the Settlement Agreement, motions for approval of attorneys' fees and expenses for Class Counsel and Objectors' counsel, and motions for incentive awards for the Representative Plaintiffs and Objectors. In addition, objections from class members Bob Lamb and Franklin Conde were also heard. See § II.C(2) infra.
A. Certification of the Settlement Class
The parties "[f]or settlement purposes only . . . stipulate[d] that the Class will be certified under Fed. R. Civ. P. 23(b)(2) and/or 23(b)(3)." (Settlement Agreement ¶ 2.) Notwithstanding the parties' willingness to stipulate to the certification of the class for settlement purposes, the Court bears an independent responsibility to make a determination that every Rule 23 requirement is met before certifying a class. Karvaly v. eBay, Inc., 245 F.R.D. 71, 78 (E.D.N.Y. 2007) (Glasser, J.).
"Because the terms and structure of the Settlement Agreement differ only in relatively small details from the version rejected by the Court in the 2007 Order, much of the Court's analysis of the previous settlement proposal applies with equal force to this one." (Prelim. Approval Order 1-2.) Therefore, the Court relies upon its prior analysis which led to the conclusion that the Fed. R. Civ. P. 23(a) factors of numerosity, commonality, typicality and adequacy were satisfied by the Class. 2007 Order, 239 F.R.D. at 328-30.
When each of the Rule 23(a) factors are met, "parties seeking class certification must show that the action is maintainable under Rule 23(b)(1), (2), or (3)." Amchem Products, Inc. v. Windsor, 521 U.S. 591, 614 (1997). As set forth in detail in the 2007 Order, the Class is not maintainable under Rule 23(b)(2) because the damages component of the settlement predominates over the equitable relief component. 2007 Order, 239 F.R.D. at 332. (See Prelim. Approval Order 2.) Therefore, only the Rule 23(b)(3) factors will be reviewed.
Rule 23(b)(3) applies to the certification of class actions for damages. The rule requires that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed. R. Civ. P. 23(b)(3).
a. Notice Required for (b)(3) Classes Pursuant to Rule 23(c)(2)(B)
In the 2007 Order, the Court did not reach the question of whether the Rule 23(b)(3) factors of "predominance" and "superiority" were satisfied because the notice requirements for 23(b)(3) classes, found in Rule 23(c)(2)(B), had not been satisfied. Rule 23(c)(2)(B) calls for "the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort."
Pursuant to the Prior Agreement, the Class Members entitled to receive direct settlement benefits were identified from a list of the 4.7 million customers comprising the LSDB as of January 1999 (the "1999 LSDB"). 2007 Order, 239 F.R.D. at 320, 325. Of those customers in the 1999 LSDB, the parties undertook to individually notify only those 1.37 million persons who were Time Warner Cable subscribers at the time of the Prior Agreement -- the Category I Class Members. (Joint Memorandum in Support of Final Approval of Settlement dated May 12, 2006 ("2006 Joint Mem."), 24.) Accordingly, individual notice was not provided to the approximately 3.4 million other persons whose names appeared in the 1999 LSDB who were no longer Time Warner Cable subscribers -- the Category II and Category III Class Members. Individual notice was also not provided to the approximately 10.8 million Class Members whose names did not appear in the 1999 LSDB -- the Category IV Members. 2007 Order, 239 F.R.D. at 325.
Testimony was offered by objectors Rick and Sharon Lobur that the addresses from a database of 16 million persons created in January 1999 could be updated to provide current addresses for those persons with 90% accuracy at a cost of $22,400 using existing software.*fn8
2007 Order, 239 F.R.D. at 335. The Court held that if the addresses of a large number of additional Class Members could be determined at such a minimal cost, that limiting notice only to those 1.37 million Category I Class Members could not constitute the "best notice practicable" required by Rule 23(c)(2)(B). Id. at 336.
Pursuant to the Settlement Agreement, Time Warner first reviewed all available LSDB backup tapes to identify as many Category I, II and III Class Members as possible. See n.6 supra. This process yielded the names of approximately 7.2 million former subscribers, including those 4.7 million subscribers identified from the 1999 LSDB. Time Warner then took those subscriber names and attempted to update their addresses using their own current subscriber lists and the NCOA database. As a result, notice was mailed to 286,505 Former Claimants and approximately 1.52 million verified and 5.45 million unverified addresses of persons in Categories I, II and III, in addition to notice provided through the publication program. See § I.B.2 supra. Although efforts to improve the accuracy of the Class Members' mailing addresses fell far short of the 90% accuracy figure urged by the Loburs, the procedures nonetheless appear to have facilitated the "best notice practicable" and have satisfied the Court's concerns about compliance with Rule 23(c)(2)(B).
b. Predominance of Common Issues of Law and Fact
"The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem, 521 U.S. at 623. "That inquiry trains on the legal or factual questions that qualify each class member's case as a genuine controversy." Id. at 623 n.18.
Here, the questions common to Class Members that predominate are whether Time Warner's privacy notice satisfied its statutory notice obligations pursuant to 47 U.S.C. § 551(a) and whether Time Warner satisfied its statutory obligation pursuant to §551(c) not to disclose a subscriber's PII without first obtaining their consent. The privacy notice issue applies to all Class Members insofar as all subscribers are entitled to be informed of "the nature, frequency, and purpose of any disclosure which may be made of [any PII collected or to be collected], including an identification of the types of persons to whom the disclosure may be made." 47 U.S.C. § 551(a)(1)(B). The nondisclosure issue applies to any Class Member whose PII was sold without their consent, a group which includes some or all of the subscribers appearing in the LSDB during the class period. Therefore, the Court finds that common questions of law or fact predominate.
c. Superiority of Class Action
In evaluating whether "a class action is superior to other available methods for the fair and efficient adjudication of the controversy," the Court may consider any relevant factor, including, but not limited to, the factors listed in Rule 23(b)(3).
The Court will first address those factors listed in Rule 23(b)(3):
(A) the interest of the members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating litigation in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action.
In the 2001 Order, this Court noted that "the interest in pursuing individual relief is typically lower in actions, such as this one, to enforce compliance with consumer protection laws, since damage awards in such cases are generally too small to permit a single consumer to bring suit." 198 F.R.D. at 385. However, the Court also observed that the availability of statutory damages and attorneys' fees provided for in the Cable Act's enforcement provisions makes individual enforcement feasible, if not probable.*fn9
As a practical matter, neither the parties nor the Court know of any such individual actions either currently being prosecuted or reduced to judgments in the past. The reasons for this may include the cost of bringing a suit, the negligible harm or general compliance by cable operators. Therefore, while the prospect of statutory damages could theoretically tempt some individual plaintiffs, the difficulty in litigating and proving a Cable Act violation is such that the interest of individual plaintiffs in controlling an action is ...