Marc Zebrasky vs Blaze Pizza, LLC
Case No: 19CV00838
Hearing Date: Fri Sep 27, 2019 9:30

Nature of Proceedings: Motion: Approval of Class Action Settlement

TENTATIVE RULING: The hearing on the motion will be further continued to October 11, 2019 (or such other date acceptable to the parties that might be set at the current hearing), with instructions for the parties to provide the further information requested no later than October 4, 2019.

Background: The Court incorporates by reference the background information for the settlement, which was set forth in the Minute Order from the initial August 30, 2019 hearing on this matter.

As that Minute Order reflects, this Court had a number of concerns regarding the settlement itself, and the provisions it made for notification of the class. The Court requested the parties to provide further information no later than September 20, 2019, that would assist it in evaluating the proposed class settlement and determine whether to grant preliminary approval of the settlement.

Plaintiff filed a response on that date, including an Amendment to the Settlement Agreement to which the parties had agreed in response to a number of the Court’s concerns, as well as a declaration of plaintiff’s counsel setting forth the parties’ legal and factual responses to the Court’s various concerns. A declaration from Mandy Shaw, the CFO and Interim CEO of Blaze Pizza, LLC, was also provided.

The alterations and explanations include:

In response to the Court’s concern that the publication of the Summary Class Notice and the maintenance of the Settlement website may not sufficiently apprise class members about the settlement and the rights to object or be excluded, the parties have now agreed, in addition to these acts, that the Summary Class Notice will be posted in each California Blaze Pizza location. The Summary Class Notice will refer readers to the Full Class Notice on the settlement website.

In response to the Court’s inquiry about possible e-mail or other notice for those who had purchased gift cards from the website, Ms. Shaw explained that approximately 95% of all gift cards are purchased in-store, as opposed to online through the website. E-mail addresses are not collected during in-store transactions, nor are billing addresses collected for those who purchase gift cards with debit or credit cards. While the third-party processing company collects the information, it is unavailable to Blaze Pizza; Blaze Pizza has unsuccessfully tried to obtain the information.

As a result, and taking into consideration the considerations set forth in California Rules of Court, rule 3.766(e), the parties believe that given the type of relief requested (primarily injunctive relief), the stake of individual class members (equitable relief, and a subclass receiving restitution in the form of vouchers worth $9.99), and the possible prejudice to class members who did not receive notice, the in-store notice, along with publication and internet notice, satisfies the due process requirement for providing class notice.

In response to the Court’s concern that current and future gift card holders be informed that gift cards with a balance of less than $10 are redeemable for cash in some way other than adding consumer rights language to the Terms and Conditions web-page, the parties have now agreed that if final approval is granted, Blaze Pizza will provide notice of the gift card holder’s right to cash back from gift cards with a balance of less than $10 on both its dedicated Gift Card web-page, and it will post notice of that right at each point-of-sale register in all Blaze Pizza California locations.

The Court noted the settlement agreement limit on the number of claimants to which Blaze Pizza would provide restitution, and questioned what would happen with the value amount of that restitution should there be fewer claims than the amount provided for in the agreement, and requested further evidence and explanation why defendant’s retention of the unclaimed fund value would be fair to the settlement class, justified, or appropriate.

The parties respond that the money remaining on gift cards with balances of less than $10 is not defendant’s money, but has also not been determined to be unclaimed funds, since gift cards cannot expire. The total amount of money remaining on all of the under-$10 gift cards cannot be considered unclaimed; it is only certain that they have not yet been used or redeemed. It would be impossible and unethical for the parties to decide when class members should utilize or cash-in their gift cards and remit the amounts remaining to a cy pre beneficiary, because to do so would put an expiration date on the gift cards, which the law does not permit. It would be unfair for defendant to remit the value of all gift cards with a balance of less than $10 to a cy pres beneficiary, and still be responsible for redeeming those under-$10 gift cards should a class member then visit Blaze Pizza with one of those cards. Further, the parties contend that the statute requiring unpaid money to be distributed to a cy pres beneficiary is inapplicable here, because there is no claim fund, and there are no unpaid money or unclaimed funds. Except for those few class members who have discarded their low-value gift cards, the vast majority of California consumers who still have their under $10 gift cards still have all of the rights of those cards, and can redeem them for items or cash. Further, Civil Code section 384 does not apply when there is no claim fund and when no money is being provided to the class. Here, no class members are receiving money; only equitable relief, and some will be able to make a claim for a replacement gift card, and not cash. As a result, there is no money going to the class.

The Court was concerned that, under the settlement, the franchisees would obtain all of the benefits of the settlement (including a release of claims) but have none of the responsibilities. In response, Blaze Pizza was able to obtain agreement from all of its California Operators that accept Gift Cards to be bound by the agreement. There are only 3 Operators who neither sell nor accept gift cards, and they will neither be bound by the obligations, nor protected by the benefits, of the settlement agreement. All Blaze Operators who accept Blaze Pizza gift cards are required to comply with the settlement terms, including posting in-store notices and training employees. However, if any one Operator breaches the agreement, the breach is on that franchisee, and not on the other parties to the agreement.

The Court found the agreement’s sunset provision to be ambiguous in meaning and effect. In response, the parties revised its language, and only the new employee training requirement ceases after 24 months after the agreement’s effective date. Other affirmative obligations have deadlines that are set forth in the agreement.

ANALYSIS: The Court commends the parties with respect to their attempts to respond to its concerns with the Class Action Settlement Agreement. While these efforts have made significant progress towards resolving the issues, the Court still needs additional evidence and information from the parties, before it can consider granting preliminary approval of the settlement. Consequently, the hearing on the motion will be further continued to October 11, 2019 (or such other date acceptable to the parties that might be set at the current hearing), with instructions for the parties to provide the further information requested no later than October 4, 2019.

The Court still has serious concerns about the ability of any class member who has discarded a low value gift card to ever discover that they may make a claim to obtain the replacement gift card. The only places that information is being provided is in the Summary Notice, which will be published in USA Today, and in the Full Class Notice, which will be located only on the settlement website, www.bp-gc.com.

Under the Amendment, defendant has agreed to also post the Summary Notice at each of their owned locations, and at each location of an Operator who is participating in the settlement (i.e., all locations except the three locations which neither sell nor accept the gift cards). The Agreement does not specify where this in-store notice will be posted, and specifies only that the in-store Summary Notice will be 5”x7” in size.

The Court notes that the exemplar of the Summary Notice that was originally provided to it as part of the original Settlement Agreement, even at full 8.5”x11” letter size, does not mention a class member’s ability to make a claim for a replacement card until approximately three-quarters of the way through a very long paragraph of very fine print, as the final item of a ten-item list of the terms to which Blaze Pizza has agreed in settling the action. Certainly, that Notice is now outdated, since the parties have amended the terms to some extent, and no new Summary Notice or Full Class Notice have been provided to the Court to reflect those changes.

The difficulty in locating or identifying the restitution and claims provision in even the full-sized notice, will necessarily be exacerbated when the Summary Notice is shrunk down to 5”x7”, even if class members happen to actually see and read it. That ability is further imperiled by the failure of the Amendment to the Settlement Agreement to provide any indication of where this shrunken notice will be posted with the Blaze Pizza store locations. Indeed, the chances of those who discarded gift cards with value under $10 actually finding the claims information appear remote.

Given the very real likelihood that few or none of those impacted class members would ever obtain notice of their ability to make a claim, the entire restitution and claims provisions appear illusory, providing nothing of value to these class members for the settlement and release of their claims. It was for that reason that the Court had expressed concern about what would happen to the amount purportedly committed by Blaze Pizza for restitution claims, should fewer claims be made than the cap which is set forth in the agreement.

The original motion provided evidence that although there were approximately 79,506 gift cards outstanding which had a present balance under $10, the total value of those unclaimed cards was $62,845. Because consumers unaware of their rights, and/or who have been told that their low value gift cards are not redeemable for cash, may well have discarded those cards, the Settlement Agreement provided for restitution to those class members who submit a claim within the claims period. Indeed, under the settlement agreement, Blaze Pizza committed to providing restitution in the form of an egift card valued at $10.00 (not $9.99, as the September 20, 2019 declaration of attorney Fineman set forth at p. 3, line 21), for up to 3,143 claimants, for a potential total restitution value of $31,430, which is approximately 50% of the total $62,845 value of unclaimed cards. The obligation was made in spite and in acknowledgment of the possibility that class members might still have their gift cards and redeem them, and the obligation to provide such restitution is not an insignificant issue in this Court’s evaluation of the fairness of the settlement. To the extent the settlement terms appear to have made it almost impossible for impacted class members to discover their right to obtain a replacement card, the restitution term is illusory and of no value.

Additionally, it was this amount to which the Court was referring when it inquired what would happen to the unclaimed funds at the end of the claims period, if fewer than 3,143 claims were made. While the response filed by the parties contends that the cy pres inquiry was legally improper because there is no settlement fund, and Blaze Pizza was simply going to provide replacement gift cards, this appears to the Court to be more a matter of semantics than substance. In the Settlement Agreement, Blaze Pizza obligated itself to provide restitution in an amount not to exceed $31,430, consisting of 3,143 replacement gift cards valued at $10.00 each. Whether or not it actually sets aside a cash fund from which it reimburses claims, or simply issues replacement egift cards valued at $10.00, is a distinction without a difference with respect to this Court’s evaluation of the fairness of the settlement to the class. Particularly given the structure of the settlement in a manner that makes it difficult for impacted class members to discover their ability to make a claim, the Court believes it important to know what will happen to the remainder of that $31,430, and believes that a cy pres beneficiary, perhaps in the form of a contribution to an agency or charity which acts to combat child hunger, may be appropriate.

The Court will therefore further continue the hearing on this matter, and request the parties to provide it with (a) an scaled exemplar of the proposed 5”x7” notice, to assist it in evaluating the ability of a consumer to locate the claim provision, and (b) a photograph, taken without use of magnification, from the perspective of a customer placing an order at a Blaze Pizza location, to show the location and visibility of the Summary Notice, so that the Court has any ability to evaluate the effectiveness of the signage in communicating actual notice of the ability to present a claim in a manner that is sufficiently clear to be readily understood by such potential class members.

The Court would further welcome any other mechanisms by which actual notice could be provided to the class members who would be eligible to submit claims, to assist it in further evaluating whether to provide preliminary approval to the settlement.

The Court notes that parties have agreed that a notice will be posted, for a period of 12 months, at each point-of-sale terminal, Blaze Pizza gift cards with balances under $10 are redeemable for cash in California. The parties have also agreed that Blaze Pizza guest-facing employees will be trained with respect to this policy. At a bare minimum, such employees could also be trained and instructed to respond, during the claims period, to any customer who sees the notice that low value gift cards may be redeemed for cash and mentions to the employee that they discarded such a card, to also expressly advise the customer/class member of their ability to submit a claim to obtain a replacement card and the deadline for doing so. Perhaps some sort of “take-away” card with the settlement website web address could be provided to and/or made available for any such customer/class member.

Additionally, the Court notes that the parties have now agreed to post on the Blaze Pizza “Gift Card” website, for a period of 12 months, that “In California, Blaze Pizza gift cards with balances under $10 are redeemable for cash.” Adding a link, for the duration of the claims period, directing those who might have discarded gift cards with balances under $10 to the settlement website for further information, could also assist in providing notice to class members.