Nichols v. Noom Inc.

Background

Mojo Nichols, Susan Brewster, Duane Dea, Maryanne Deracleo, Karen Kelly, Rebecca Richards, Jennifer Sellers, and Stacy Spencer brought a proposed class action against Noom, Inc., Artem Petakov, and John Does 1 to 5. The plaintiffs alleged that Noom’s enrollment, automatic-renewal, and cancellation practices violated California’s Automatic Purchase Renewal Statute, New York General Business Law § 349, and common-law theories. The alleged conduct involved consumers who were charged for an automatically renewing subscription to Noom’s Healthy Weight program.

In an earlier ruling, the court dismissed conversion claims under the laws of New York, Ohio, Texas, Alabama, and the District of Columbia, along with the portion of the California Unfair Competition Law claim based on California’s Bot Disclosure Law. The court denied the defendants’ motion to dismiss the remaining causes of action. The parties then conducted discovery, participated in mediation and settlement conferences, and negotiated a settlement.

Settlement Terms

The settlement class included natural persons who purchased a Noom Healthy Weight Subscription in the United States through the Noom website or mobile app from May 12, 2016, through October 6, 2020; were charged by Noom; and did not receive a full refund or chargeback. Purchases through the Apple App Store or Google Play Store were excluded.

Noom agreed to fund a $56,000,000 non-reversionary cash fund: $46,000,000 for Subclass A and $10,000,000 for Subclass B. Cash payments would be distributed based on the amounts class members paid Noom. The agreement also provided up to 100,000 free, non-recurring one-month memberships for qualifying Subclass B members who requested them. The settlement included changes to Noom’s subscription practices, including clearer cancellation instructions, reminders about upcoming charges, and additional consent requirements for certain renewals.

The settlement released claims arising from or related to the action that accrued between May 12, 2016, and the date of the preliminary approval order and that were asserted or could have been asserted in the action or related state-court actions. Angeion Group was selected as settlement administrator, with its administration costs capped at $635,000.

Class Certification and Settlement Approval

The court certified the class for settlement purposes under Federal Rule of Civil Procedure 23. It found that the proposed class met the requirements of numerosity, commonality, typicality, and adequate representation. The court also found that common questions predominated and that a class action was the superior method of resolving the claims. The court noted that the parties estimated approximately two million class members.

Under Rule 23, a court may approve a class settlement only if it is fair, reasonable, and adequate. The court examined both the negotiation process and the settlement’s substance. It found that the parties negotiated at arm’s length after extensive discovery, mediation, and settlement conferences. The court also found that the notice program complied with due process and Rule 23. The notice campaign generated 525,400 claims, or a 28% participation rate; 79,844 class members claimed subscription credits; there were no objections; and eight people opted out.

The court found the settlement adequate in light of the complexity and expected duration of continued litigation, the risks concerning liability, damages, class certification, and appeal, and the value of the recovery. The court stated that the $56 million cash payment represented 27.5% of the $203,559,671 in damages the plaintiffs would have sought at trial, without counting the value of the credits and business-practice changes. The court did not decide the merits of whether Noom had violated the law.

Attorneys’ Fees and Service Awards

Class counsel requested attorneys’ fees and litigation expenses equal to one-third of the $56,000,000 cash fund, or $18,666,666. The court approved that request, finding it reasonable based on the litigation’s size and complexity, the risks undertaken, the work performed, and the results achieved. Counsel reported spending more than 9,000 hours on the case and approximately $325,000 in litigation costs, which counsel agreed to absorb rather than deduct separately from the settlement fund.

The court also approved service awards totaling $135,000 for the class representatives. The approved awards ranged from $5,000 to $12,500, reflecting the representatives’ different levels of participation and effort.

Cy Pres Recipients and Disposition

The court approved the National Consumers League and the National Consumer Law Center as recipients of qualifying residual settlement funds. The court found that their missions—protecting consumers from fraud in the digital marketplace and educating legal practitioners—were closely related to the lawsuit.

Judge Katharine H. Parker granted the plaintiffs’ motion for final approval, certified the class for settlement purposes, approved the settlement subject to full funding by Noom, and approved the requested service awards and attorneys’ fees. The court dismissed the action with prejudice and directed the Clerk of Court to terminate the case.