Menu
Blog Banner Image

The Franchise Memorandum

Ninth Circuit Reverses Class Action Settlement Approval and Fee Award
Posted in Class Actions

The Ninth Circuit Court of Appeals has reversed the approval of a $10 million voucher settlement and a $2.6 million attorneys’ fee award in a class action over increased membership fees charged by Massage Envy franchises. McKinney-Drobnis v. Oreshack, --- F.4th ---, 2021 WL 4890277 (9th Cir. Oct. 20, 2021). The plaintiffs claimed the franchisor of the Massage Envy franchise system told customers their Massage Envy membership rates would not change after they signed up, and that they could cancel their memberships at any time. However, the company allegedly raised membership rates and intentionally made it hard for customers to cancel their memberships. The parties reached a settlement before a class was certified. Under the settlement, in exchange for the release of all claims against Massage Envy, class members could submit claims for vouchers for Massage Envy products and services. The trial court approved the settlement over the challenge of one objector, who appealed.

The Ninth Circuit agreed with the objector. First, the appellate court held that the trial court erred in finding the vouchers not to be “coupons” under the Class Action Fairness Act. As a result, the trial court evaluated the settlement under a less exacting standard and relied on an incorrect settlement value (the total settlement value, rather than the value of the redeemed coupons) in awarding attorney fees. Second, the Ninth Circuit held that the trial court abused its discretion by failing to adequately investigate and substantively grapple with some of the potentially problematic aspects of the relationship between the attorney-fee award and the benefits to the class. To that end, the Ninth Circuit held that the district court failed to apply the requisite heightened scrutiny for pre-class certification settlements.

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

To subscribe to monthly emails for The Franchise Memorandum, please click here

Topics

Archives

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Blog Authors