Hart v. BHH LLC

Background

Joanne Hart and Sandra Bueno brought this proposed class action for themselves and other similarly situated purchasers against BHH, LLC, doing business as Bell + Howell, and Van Hauser, LLC. The lawsuit concerned ultrasonic pest repellers manufactured and sold by BHH. The plaintiffs claimed that the devices were ineffective and that BHH committed fraud and breached warranties. BHH responded that the repellers worked under certain circumstances and that its marketing was not fraudulent.

BHH sold approximately 2.48 million repellers during the proposed class period, April 20, 2011, through June 15, 2016. After years of litigation, the parties reached a proposed settlement and the plaintiffs asked the court for preliminary approval. Preliminary approval is the first stage of the court’s review of a class-action settlement; it allows notice to be sent to class members before a later hearing on final approval.

Proposed Settlement

The proposed agreement provided different payments depending on whether a class member had proof of purchase. A class member with proof of purchase could receive a full refund for up to six units if the proof showed the price paid, or $15 for up to six units if it did not. A class member without proof of purchase could receive $15 per unit, capped at two units.

The proposal also included two provisions concerning attorneys’ fees. First, attorneys’ fees would be paid before any payments to class members. The agreement called for payment within 10 days after final approval, while payments to class members would occur 15 days after the agreement’s defined “Effective Date.” Depending on objections and appeals, this could mean that attorneys were paid before class members even if class members had to wait through an uncertain period.

Second, the agreement did not specify the amount of attorneys’ fees. Because the parties could not agree on a reasonable amount, they proposed arbitration to determine fees, costs, and expenses estimated to range from $3 million to $7.5 million.

Court’s Analysis

The court held that paying counsel before the class conflicted with the requirement that a class settlement be fair, reasonable, and adequate. The plaintiffs argued that early payment would discourage baseless objections and appeals that could delay payments. The court rejected that explanation, reasoning that the proposal paid counsel first even when there were no objectors and that the interests of class members being paid first outweighed the theoretical risk of frivolous objections.

The court also noted that sanctions under Federal Rule of Civil Procedure 11 could deter meritless objections and appeals. It rejected the plaintiffs’ reliance on decisions from other courts and on several earlier settlement-approval orders from the same district because those materials did not analyze the “quick-pay” provisions in detail.

The court separately ruled that the proposed arbitration of attorneys’ fees was inconsistent with the court’s responsibility to determine reasonable fees. In a class settlement, the court must protect absent class members and ensure that their interests are not subordinated to those of class counsel. The court explained that it would review the plaintiffs’ fee application itself if the settlement later came before it for final approval.

The court also questioned how an arbitrator could determine a reasonable fee before the claims process was completed. The total class recovery would not yet be known, and that amount could be important to calculating a fee under the percentage method.

Disposition

The court denied the plaintiffs’ motion for preliminary approval of the class-action settlement and directed the Clerk of Court to terminate the motion at ECF No. 285. The opinion did not grant preliminary approval of the proposed settlement.