Smith v. Keurig Green Mountain, Inc.

Background

Kathleen Smith brought a consumer class action alleging that Keurig Green Mountain, Inc. falsely and misleadingly labeled plastic single-serve coffee pods as “recyclable.” She alleged that recycling facilities were not properly equipped to handle the pods, which were small and contaminated with foil and food waste, and that the pods often ended up in landfills even when facilities could process them. She claimed that she would not have bought the products, or would have paid less for them, had she known they were not recyclable.

The complaint asserted claims under Massachusetts’s Consumer Protection Act; for breach of express warranty, unjust enrichment, and misrepresentation; for declaratory relief; under California’s Consumers Legal Remedies Act; and under California’s Unfair Competition Law. The court had previously certified a class of people who purchased the products for personal, family, or household purposes in California. The proposed settlement expanded the class to purchasers throughout the United States.

Settlement Terms

The settlement class covered people in the United States who purchased Keurig’s pods for personal, family, or household purposes during the period beginning June 8, 2016, and ending when class notice was first published, subject to stated exclusions. Keurig agreed to make a non-reversionary payment of $10 million into an account covering class payments, administration expenses, incentive awards, and attorneys’ fees and costs.

A class member who submitted a claim without proof of payment would receive $5. A class member who submitted proof of payment would receive $0.35 for every ten pods purchased, with a minimum payment of $6 and a maximum payment of $36. Each household could submit only one claim.

Keurig also agreed to qualify its recyclability claims with the statement, “Check Locally – Not Recycled in Many Communities.” The statement would appear whenever Keurig represented that the pods were recyclable, including on boxes and cartons, in electronic advertising and promotional materials, in videos, on its website, and in public corporate responsibility and sustainability reports.

Unclaimed settlement funds would be distributed to the Ocean Conservancy, receiving 75 percent, and Consumer Reports, Inc., receiving 25 percent. This type of distribution is commonly called a cy pres distribution. The court found that these organizations shared relevant interests with class members in preventing consumer fraud involving recyclable-plastic labeling.

Notice and Class Reaction

The settlement administrator used digital media, print publications, and email notice. After discovering that approximately 140,000 class members had been omitted from the original email list, the administrator sent additional notice to them and extended the claim, exclusion, and objection deadlines for those who had not received the original notice.

By February 8, 2023, the administrator had sent the original notice to 1.7 million people, sent follow-up email notice to 1.4 million people who had not yet submitted claims, and sent additional notice to the omitted 140,000 class members. The administrator had received approximately 623,000 apparently valid claims, with an anticipated distribution of $3.5 million to class members. Twelve people requested exclusion, and two class members objected. The court considered the objections but found that they did not require rejection of the settlement.

Court’s Analysis of the Settlement

The court reviewed the settlement under Federal Rule of Civil Procedure 23, which requires court approval of a class settlement after a hearing and a finding that the settlement is fair, reasonable, and adequate. Because the settlement expanded the class from California purchasers to a nationwide class, the court applied heightened scrutiny for possible conflicts or collusion.

The court found the notice adequate and concluded that the settlement was fair, adequate, and reasonable. It relied on the $10 million settlement amount, the risks and complexity of continued litigation, the risk of maintaining class-action status, the parties’ discovery and mediation efforts, the benefits from the required labeling changes, and the small number of objections and exclusions. The court also noted that Keurig disputed liability and disputed whether the plaintiffs could obtain monetary or injunctive relief if the case continued.

The court’s order approved the settlement; it did not decide whether Keurig’s recyclability labeling was actually false or misleading. Instead, the order resolved the certified class action through the parties’ agreement.

Attorneys’ Fees and Costs

Class counsel requested $3 million in attorneys’ fees and $568,180 in costs. The court applied California law and evaluated the fee request using the percentage-of-the-fund method, with a lodestar cross-check. A lodestar is an estimate based on the reasonable hours worked multiplied by reasonable hourly rates.

The court found that 30 percent of the $10 million common fund was reasonable. It considered the results achieved, the risks of litigation, counsel’s work and experience, the contingent nature of the representation, the time spent, and comparable awards. The court also found reasonable the more than 6,000 hours counsel reported, the hourly rates of $300 to $575 for associates and $720 to $925 for partners, and the requested costs.

The court therefore granted the request for attorneys’ fees and costs and awarded $3,000,000 in fees and $568,180 in costs, for a total of $3,568,180.

Incentive Awards and Disposition

Class counsel requested incentive awards of $5,000 for Smith and $1,000 for Matthew Downing. The court considered their participation in the litigation, the benefits to the class, and the time and effort they expended. It found both awards reasonable and granted the request for a total of $6,000.

The court granted the motion for final approval of the class action settlement and granted the motion for attorneys’ fees and service award. It directed the parties and settlement administrator to implement the settlement and directed the parties to file a short stipulated final judgment within 21 days of the order.