On Tuesday, a divided Ninth Circuit panel reversed the district court’s decision to approve a pre-certification class settlement and award attorneys’ fees in an age discrimination case brought by Tinder Inc. user. The majority held that the lower court abused its discretion by improperly applying Federal Rule of Civil Procedure 23(e)(2)’s fairness factors.
According to the opinion, beginning in 2015, the dating app Tinder offered reduced pricing to those under 30 and later those under 29. In 2017, the over 30-year-old plaintiff purchased a premium version of the app. She subsequently sued Tinder in federal court over the biased practice and overcharge.
Tinder successfully moved the case to arbitration, and during a mediation session the parties reached a settlement applicable to a putative class of 240,000. In relevant part, the settlement combined free Tinder bonuses or subscriptions with cash, a flat $25 per person, and a commitment to quit age group pricing practices. In addition, the court approved $1.2 million in attorneys’ fees.
Subsequently, two class members, whose attorneys represent the lead plaintiff in a competing age discrimination class action against Tinder in California state court, were among six who objected to the proposed settlement. The objectors claimed, among other things, that Tinder’s cash pay-out was too low, the other perks unwanted or superfluous, and that the settlement was collusive and of little value.
In this week’s opinion, the panel held that the district court abused its discretion by “underrating the strength of the plaintiff’s case, overstating the settlement value, and overlooking the suggestions of collusion present.” At the outset of its analysis, the opinion noted that settlements that occur before class certification compel the trial court to “protect the interests of absent class members by scrutinizing the settlement’s fairness in light of well-established factors.”
First, the district court reportedly discounted the strength and value of the class members’ claims. By binding class members to the settlement here, the court improperly released their claims in the competing state law case, the opinion found.
Second, the lower court also exaggerated the settlement’s worth by accepting class counsel’s uncorroborated representation that the injunctive relief was worth $6 million, the opinion said. The dating’s app agreement to eliminate age group pricing from now on only applies to new California subscribers, a group that by definition excludes class members. “So it is hard to see how the court could credit the parties’ assertion that this benefit was worth $6 million to the class, when it appears to be a benefit of zero,” the majority wrote. In turn, the panel overrode the trial court’s award of attorneys’ fees because it aligned with neither method accepted by the circuit.
The split panel also concluded that the court below “abdicated its independent duty to see whether these actually excessive attorneys’ fees evidenced collusion in the settlement.” As such, the majority vacated the judgment and remanded the case for reconsideration.
The objectors are represented by Altshuler Berzon LLP, Kralowec Law P.C., and Rava Law Firm, the plaintiff-appellee by the Law Offices of Todd M. Friedman P.C. and Kristensen LLP, and the defendant-appellants by Manatt Phelps & Phillips LLP.
