District Court Discounts Fee Request for Coupon Settlement

Here's the first of three 2008 cases we'll mention today that pertain to attorney's fees, which often present an important issue in wage and hour cases and class actions. In and unpublished case entitled Fernandez v. Victoria’s Secret Stores, LLC (CD Cal. 2008) Case 2:06-cv-04149-MMM-SH,  the U.S. District Court gave final approval to a wage and hour class action settlement in a case against Victoria’s Secret stores, alleging a failure to pay wages, unfair trade practices and unfair competition, and conversion of wages. The basic underlying claim was the the company required job applicants to participate in a sales tryout during which they are trained and directed to work in Victoria’s Secret stores without pay.

The settlement included payment to class members in the form of $67.50 in store gift cards ("Each class member who submits a valid claim form will receive a gift card from Victoria’s Secret in the amount of $67.50. This gift card will not expire, will be freely transferrable, and can be used to purchase products sold at any Victoria’s Secret store or online."). The agreement calls for Victoria’s Secret to pay up to a maximum of $10 million, with $3.5 million going toward attorney fees. Because the settlement involved gift cards, the court reduced the actual cash value of the settlement to $8.5 million. At that amount, the attorney fee request represented 39.4% of the total settlement compensation. The court found this to be too high, and cut the fees to $2.9 million, or 34% of the value of the settlement. The amount reflected a lodestar multiplier of 1.82.

It is quite uncommon to see "coupon settlement" in a wage and hour case, particularly a case that was removed from Superior Court under CAFA. The only kind of wage and hour case in which this is common is when the claims include "wardrobing" claims, whereby clothing stores (Gap, Polo, J. Jill, Chico's, etc.) require their employees to buy clothes from their employer. We've had restaurants offer food coupons as part of meal and rest break settlements, but we've never accepted such offers.

The order also reflects an interesting tactic the class counsel used to increase notice. In additional to mailings to 77,411 class members, a notice was published in five major California newspapers and a Facebook flyer was also made available to visitors at Facebook.com. "According to Facebook, the flier was viewed 584,000 times." Approximately 4.4% of the notices were returned as undeliverable. There were 7,280 timely claim forms, a 9.4% response rate. There were 29 opt-outs and three objectors, one of whom objected because she felt she had been treated well as a Victoria’s Secret employee and would like to be rehired.

You can download the order here.

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