Case Name: Lanie Lim, et al. vs. Vendini, Inc.
Case No.: 1-14-CV-259897

This is a putative class action arising out of a breach of defendant Vendini, Inc.’s (“Defendant”) servers and the resulting disclosure of data of Defendant’s customers, including their names, mailing addresses, e-mail addresses, phone numbers, and credit card numbers and expiration dates. The action is brought by plaintiffs Lanie Lim and John Lewert (“Plaintiffs”) on behalf of themselves and others similarly situated. Defendant is a ticketing service that handles sales for entertainment venues. Plaintiffs allege that Defendants’ customers purchase tickets through Defendant and entrust Defendant with safeguarding their personal information (including names, addresses, credit card numbers and expiration dates), but Defendant failed to implement and maintain policies and procedures to adequately protect the information of customers from unauthorized access, destruction, use, modification and/or disclosure, and failed to implement and maintain polices and procedures to detect and prevent such unauthorized acts.

Plaintiffs allege that on or about May 25, 2013, they received notice from Defendant stating that a third-party hacker accessed Defendant’s databases and may have accessed customers’ personal information. The announcement stated that Defendant detected the breach of April 25, 2013, and it was believed to have occurred in late March. Plaintiffs allege that Defendant inexplicably delayed in providing notice to consumers of the security breach, which prevented Plaintiffs and the putative class from taking immediate steps to monitor and attempt to safeguard their personal information. Plaintiffs allege they and the putative class have suffered damages including lost time and expenses for debit and credit card monitoring and identity theft insurance, out of pocket expenses, anxiety, emotional distress, fear and apprehension of identity theft and fraud, loss of privacy and other economic and non-economic harm.

The putative class is defined as: “All persons who are domiciled or reside in the United States whose [personal identification information] resided on Defendant’s computer network servers on or before April 25, 2013.”

The Complaint, filed January 31, 2014, asserts twelve causes of action for: (1) violation of California Civil Code section 1798.80 et seq.; (2) violation of California Business and Professions Code section 17200 et seq.; (3) false advertising under California Business and Professions Code section 17500 et seq.; (4) violations of the Consumer Legal Remedies Act, California Civil Code section 1750 et seq.; (5) breach of contract; (6) breach of implied contract; (7) unjust enrichment; (8) negligence; (9) invasion of privacy; (10) violation of the Song-Beverly Credit-Card Act, California Civil Code section 1747.08; (11) violation of the Stored Communications Act, 18 U.S.C. § 2711; and (12) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.

Plaintiffs now move for an order: (1) preliminarily approving Class Action Settlement Agreement and class notice procedures; (2) provisionally certifying the putative class for settlement purposes and appointing Plaintiffs as the class representatives; and (3) provisionally appointing the law firms of CounselOne, PC, Siprut PC, and the Law Offices of Scott E. Brown as class counsel for settlement purposes.

Defendant joins in the motion.

Settlement Terms

According to Plaintiffs, Lim’s counsel sent Defendant a letter in June 2013 outlining the claims on behalf of Lim and the proposed class, and over the next several months, the parties exchanged substantial information about the claims and Defendant’s defenses. The parties eventually participated in two full-day mediation sessions with the Honorable John Leo Wagner (Ret.), as well as representatives for Defendant’s general liability carrier, St. Paul Fire & Marine Insurance Company (“St. Paul”), who had filed a declaratory relief/coverage action against Defendant in federal court. The parties accepted Judge Wagner’s proposal to resolve the claims, and the parties thereafter engaged in negotiations to draft the Class Action Settlement Agreement (the “Settlement Agreement”).

Under the Settlement Agreement, all class members who do not opt out of the settlement will release claims from the “Data Security Incident” in exchange for Defendant’s creation of a non-reversionary common fund in the amount of $3,000,000.00, which includes up to 30 percent in attorney’s fees and up to $25,000 in costs, costs of claims administration and notice, and service awards of $2,500 for each of the Plaintiffs. Class members can submit claims for “Unreimbursed Identity Theft Losses” of up to $3,000.00 and/or “Unreimbursed Expenses” of up to $1,000.00 which are attributable to the Data Security Incident and occurred on or after April 25, 2013 through the end of the Claims Period.

Regarding notice to the putative class, to the extent Defendant possesses the name and contact information for any person it believes to be a class member, Defendant will provide this to the Claims Administrator within 7 calendar days after preliminary approval. Within 14 days after preliminary approval, the Claims Administrator will create and maintain a website that includes the Settlement Agreement, the Claim Form, and the preliminary approval Order (to be activated within 10 business days of preliminary approval). The website shall be designed and constructed to accept electronic Claim Form submissions. Also within 14 days after preliminary approval, the Claims Administrator will disseminate the Notice and Claim Form via e-mail to all class members for whom Defendant has provided e-mail addresses. The Claims Administrator will also disseminate the Summary Notice via e-mail and by postcard (U.S. Mail) to class members for whom Defendant has not provided an e-mail address, or whose e-mail notices are returned or otherwise known to be undeliverable. Finally, the Claims Administrator will disseminate the Summary Notice in one daily and one weekend issue of USA Today.

Class members may submit one claim before the expiration of the “Claims Period” (one year after the “Notice Date”, or the date by which the Notice Plan is complete) by submitting a “Claim Form” with required documentation to the Claims Administrator. Class members may object to the Settlement by filing their objections in writing with the Court, with service on class counsel, defense counsel, and the Claims Administrator, no later than the “Opt-Out Date”, which is 45 days after the Notice Date. Class members may be excluded from the settlement by sending a written Request for Exclusion to the Claims Administrator no later than the Opt-Out Date.

Discussion

“The well-recognized factors that the trial court should consider in evaluating the reasonableness of a class action settlement agreement include ‘the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.’ [Citations.] This list ‘is not exhaustive and should be tailored to each case.’ [Citation.]” (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128.) “[A] presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small. [Citation.]” (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.)

Here, the settlement is entitled to a presumption of fairness. It was reached through arm’s-length bargaining after formal mediation with Judge Wagner. In support of this motion, Plaintiffs submit the declaration of Judge Wagner, who discusses the issues and challenges involved in the settlement negotiations (including the insurance coverage issues), and offers his opinions on the fairness and reasonableness of the settlement terms. Although it appears there was no formal discovery, Plaintiffs’ counsel submits that prior to the first mediation session, the parties exchanged correspondences and draft pleadings, and Plaintiffs’ counsel communicated with Plaintiffs and other putative class members, investigated Defendant’s business and organizational structure, consulted with experts in the payment card industry (“PCI”), reviewed a substantial amount of PCI compliance documentation provided by Defendant, communicated with government agencies regarding Freedom of Information Act requests, and researched evolving case law. The experience of Plaintiffs’ counsel in consumer protection and class action litigation is supported by declarations.

“Although [t]here is usually an initial presumption of fairness when a proposed class settlement … was negotiated at arm’s length by counsel for the class, … it is clear that the court should not give rubber-stamp approval. Rather, to protect the interests of absent class members, the court must independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished. To make this determination, the factual record before the … court must be sufficiently developed… . The proposed settlement cannot be judged without reference to the strength of plaintiffs’ claims. The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement. The court must stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case, but nonetheless it must eschew any rubber stamp approval in favor of an independent evaluation.” (Kullar, supra, 168 Cal.App.4th at p. 130, internal citations and quotation marks omitted.)

Plaintiffs argue they have a strong case, but that Defendant would mount a vigorous defense regarding: industry-standard data-security protocols that Defendant adopted; the fact that Defendant had not entered into a contract with consumers regarding the use of their information; the fact that the number of putative class members who suffered unreimbursed out-of-pocket expenses is very small, and Defendant is not liable for class members who have not suffered unreimbursed out-of-pocket expenses; Plaintiffs’ and the class members’ lack of standing to assert claims due to lack of actual injury; and individualized issues regarding causation and damages that would defeat class certification. Plaintiffs submit that the risks and expense of continued litigation would include an examination of Defendant’s procedures and practices, costs of experts on data security, and extensive motion practice. Plaintiffs further submit that there is a high likelihood that Plaintiffs would be unable to recover a more substantial sum owing to Defendant’s financial condition, as well as the insurance coverage dispute and “burning” policy limits.

The record suggests that Plaintiffs faced a number of difficult issues in order to prevail on their claims. Balanced against this reality is the $3,000,000.00 settlement fund, which is not insubstantial, particularly given Defendant’s financial condition and insurance coverage issues. The Court finds that the settlement amount, balanced against the strength of Plaintiffs’ claims, is facially reasonable and fair.

Plaintiffs seek attorney’s fees equal to 30% of the Net Settlement Amount, which is not an uncommon contingency fee allocation. This award is reasonable under the “common fund” doctrine, which allows a party recovering a fund for the benefit of others to recover attorney’s fees from the fund itself. (See City and County of San Francisco v. Sweet (1995) 12 Cal.4th 105, 110-111.) Given that the case settled relatively quickly, in advance of the final approval hearing, Plaintiffs’ counsel should submit evidence to support a lodestar cross-check as a further way of evaluating the reasonableness of the attorney’s fee award. (See Lealao v. Beneficial Cal. Inc. (2000) 82 Cal.App.4th 19, 46-47.)

Regarding class representative awards, “‘[t]he rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.’ [Citation.] An incentive award is appropriate ‘“if it is necessary to induce an individual to participate in the suit[.]” … [Citation.]’ [Citation.] ‘[C]riteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. [Citations.]’ [Citation.] These ‘incentive awards’ to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. [Citation.]” (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395.) Here, the requested $2,500 awards for each of the named Plaintiffs are facially reasonable. In advance of the final approval hearing, Plaintiffs should provide more detailed evidence in support of the amount of time and effort spent.

Regarding the class notice procedures, notice by e-mail, first class mail, and publication is reasonably calculated to give due notice to the proposed class. “The content of a class notice is subject to court approval. If class members are to be given the right to request exclusion from the class, the notice must include the following:

A brief explanation of the case, including the basic contentions or denials of the parties;
A statement that the court will exclude the member from the class if the member so requests by a specified date;
A procedure for the member to follow in requesting exclusion from the class;
A statement that the judgment, whether favorable or not, will bind all members who do not request exclusion; and
A statement that any member who does not request exclusion may, if the member so desires, enter an appearance through counsel.”

(Cal. Rules of Court, rule 3.766(d).) Here, the Full Notice is Exhibit B to the Settlement Agreement, and it complies with rule 3.766(d) in all respects.

Plaintiffs also move for provisional certification of a settlement class. “The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.] [¶] The certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’ [Citation.] A trial court ruling on a certification motion determines ‘whether … the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.’ [Citations.]” (Sav-On, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

A class is ascertainable if it can be readily identified without unreasonable time and expense. (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.) Here, the putative class members are identifiable from Defendant’s records.

The numerosity requirement requires that it is impracticable to join all of the class members all before the court.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) This requirement is clearly satisfied, as Plaintiffs submit there were approximately 3.9 million persons who had active credit cards at the time of the Data Security Incident.

“Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class. [Citations.]” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450-451.) “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” (Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.) As discussed above, Plaintiffs’ counsel demonstrates their qualifications to conduct this litigation, and there is no reason to suggest that Plaintiffs’ interests are antagonistic to the interests of the class, or that their claims are not typical of the proposed class.

Regarding the requirement that common issues of law and fact predominate, “each member must not be required to individually litigate numerous and substantial questions to determine his [or her] right to recover following the class judgment.” (Washington Mutual Bank v. Superior Court (Briseno) (2001) 24 Cal.4th 906, 913-914.) Here, liability is based on legal and factual issues common to the class regarding the adequacy of Defendant’s policies and practices to protect against and notify affected class members of the Data Security Incident. Assessing the adequacy of these policies and practices does not predominantly involve individualized issues regarding each class members’ transactions with Defendant.

The Court provisionally certifies the settlement class and appoints Plaintiffs as settlement class representatives and Plaintiffs’ counsel as class counsel.

For all of these reasons, the motion for preliminary approval is GRANTED. The final approval hearing shall be held on a future date to be coordinated between counsel and the Court.. Papers supporting Plaintiffs’ request for attorney’s fees and costs and final approval of the settlement must be filed no later than fourteen (14) calendar days before the final approval hearing.