bostick motion for increase in pro rata award

7/21/2019 Bostick motion for increase in pro rata award

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Case No. 2:13‐cv‐02488‐BRO (RZx)MEMORANDUM IN SUPPORT OF MOT. TO INCREASE PAYMENTS TO BUSINESS OPPORTUNITY

CLAIMANTS

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P p D. Drac t SBN 219044) [email protected] M. Petersen ( pro hac vice)[email protected]

Jason W. Hardin ( pro hac vice) [email protected] & Clendenin215 South State Street, Suite 1200Salt Lake City, UT 84151-0210Telephone: (801) 531-8900

T omas G. Fo ey, Jr., SBN 65812 [email protected] P, Karczag, SBN 223764 [email protected] Bezek Behle & Curtis, LLP15 West Carrillo StreetSanta Barbara, CA 93101Telephone: (805) 962-9495Attorneys or P a nt s Dana Bost c ,Anita Vasko, Judi Trotter, BeverlyMolnar, and Chester Cote

IN THE UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

DANA BOSTICK, et al.,

PLAINTIFF,

vs.

HERBALIFE INTERNATIONALOF AMERICA, INC., a NevadaCorporation, HERBALIFEINTERNATIONAL, INC., a NevadaCorporation, HERBALIFE, LTD a

Cayman Island Corporation,

DEFENDANTS.

Case No.: 2:13-cv-02488-BRO (RZx)

PLAINTIFFS’ MEMORANDUM

IN SUPPORT OF MOTION TO

INCREASE AWARDS TO

BUSINESS OPPORTUNITY

CLAIMANTS

Hon. Beverly Reid O’Connell

Date: May 11, 2015

Time: 1:30 p.m.Place: Courtroom 14-Spring St. Floor

Complaint filed: April 8, 2013

Case 2:13-cv-02488-BRO-SH Document 125-1 Filed 04/13/15 of 6 Page ID #:3628



1 Case No. 2:13‐cv‐02488‐BRO (RZx)MEMORANDUM IN SUPPORT OF JOINT MOT. FOR PRELIM. APPROVAL OF SETTLEMENT

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I. INTRODUCTION

Pursuant to Section 4.4.5 of the Stipulation of Settlement (“Settlement

Agreement”), Plaintiffs ask the Court to increase the limit on Pro Rata Awards for

business opportunity claimants from 50% of their total purchases to 75% of their

total purchases. This change, which was contemplated in the Settlement

Agreement, will benefit all class members receiving such awards and will not

diminish the cash benefits received by any other class member. Defendants do not

oppose the change.

II. BACKGROUND

On October 31, 2014, Plaintiffs and Defendants entered into the Settlement

Agreement. The Settlement Agreement provides (1) economic relief for the

Settlement Class through cash awards and refunds for returned product and (2) 13

specific agreed to corporate reforms. Under the terms of the Settlement

Agreement, Class Members who qualify and submit claims for a cash award are

referred to as “Business Opportunity Claimants” and are entitled to either a “Pro

Rata” or a “Flat Rate” cash award.

Those entitled to a Pro Rata award are Business Opportunity Claimants who

purchased at least $750 of Qualified (“Pro Rata Claimant”). The Settlement

Agreement currently provides that Pro Rata Claimants receive a Pro Rata award

that is equal to the lesser of (1) 100% of their estimated total loss from the sale of

“Qualified Products” or (2) 50% of the aggregate price they paid for the

“Qualified Products” during the class period. Claimants who do not meet the $750

Pro Rata award threshold but who otherwise qualify as a Business Opportunity

Claimant are entitled to a $20 Flat Rate award (“Flat Rate Claimants”).

Section 4.4.5(a) of the Settlement Agreement provides that “[i]f the

aggregate payment for Pro Rata Awards is less than 75% of the Net Settlement

Fund less the aggregate Flat Rate Awards . . . either party may move the Court to





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increase payment to Business Opportunity Claimants receiving a Pro Rata Award

up to the lesser of (i) 75% of the price paid by that claimant for the claimant’s

aggregate Qualified Products; or (ii) the total Net Settlement Fund.”

On December 2, 2014, this Court entered an order granting preliminary

approval of the Settlement Agreement and directed that notice of the settlement be

disseminated to the Class (the “Preliminary Approval Order”).1 Pursuant to the

Preliminary Approval Order, KCC, LLC, the Court-appointed Claims

Administrator, mailed and emailed direct notices to 1,533,339 potential class

members.2 The deadline for Class Members to submit a claim form was February

3, 2015 (“Claims Deadline”).3

Despite this deadline, through negotiations with

Defendants, Plaintiffs have secured continued acceptance of otherwise properly

completed claim forms through the date of filing this motion, with all parties

reserving their rights pending review of such claims. The deadline for Class

Members to object to the Settlement Agreement was March 28, 2015 (“Objection

Deadline”).4

To date, approximately 7,238 Class Members have submitted Claim Forms.

The most recent report from the claims administrator revealed that as of April 6,

2015 the aggregate amount of Pro Rata and Flat Rate awards due under the

Settlement Agreement is $5,738,761.49. Of this amount, $76,520.00 is

attributable to Flat Rate awards and $5,662,241.49 to Pro Rata awards.

Section 4.1 of the Settlement Agreement defines the Net Settlement Fund as

the $15,000,000 Settlement Fund less the costs of notice to the class and

administration of the settlement (approximately $600,000), attorney fees

1 Dkt. No. 105. 2 Dkt. No. 105 ¶ 19. 3 Dkt. No. 105 ¶ 44.4 Id.





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($5,250,000), and litigation costs ($210,000).5 That amount totals $8,940,000.

Thus, the aggregate payment for Pro Rata awards (less the aggregate Flat Rate

awards) is approximately 63% of the Net Settlement Fund.

Plaintiffs file this motion to seek approval of the Court to increase the

percentage payout to Business Opportunity Claimants from 50% to 75% pursuant

to Section 4.4.5 of the Settlement Agreement. Plaintiffs have been advised that

Defendants do not to object to Plaintiffs’ motion. Moreover, none of the Class

Members have objected to Section 4.4.5(a) of the Settlement Agreement or the

language providing for the increase in payments to claimants that Plaintiffs are

now seeking.

III. ARGUMENT

After a class action settlement agreement has been preliminarily approved,

the court is responsible for ensuring that the terms of the settlement agreement are

followed.6

Here, Section 4.4.5(a) of the Settlement Agreement provides for a

conditional increase in the amount a Business Opportunity Claimant may receive

as a Pro Rata award. If, after the claims have been submitted, the aggregate

payment to Pro Rata Claimants is less than 75% of the Net Settlement, then the

Pro Rata award can be increased from 50% to 75% of the total price paid by the

Pro Rata Claimant for his or her Qualified Products.

As of April 6, 2015, the aggregate settlement payments to the Pro Rata

Claimants total 63% of the currently estimated Net Settlement Fund. As this

amount is well below the 75% threshold contemplated by Section 4.4.5(a) of the

5 Section 4.1 also subtracts from the Settlement Fund any product return payments that, inthe aggregate, exceed the $2,500,000 Product Return Fund. However, to date, suchaggregate product return payments do not exceed $1,000,000, and therefore do not exceedthe Product Return Fund.6 See Sandpiper Vill. Condo. Ass'n., Inc. v. Louisiana-Pac. Corp., 428 F.3d 831, 846 (9th Cir.2005); Jeff D. v. Andrus, 899 F.2d 753, 758 (9th Cir. 1989) (“The court’s power to approve orreject settlements does not permit it to modify the terms of a negotiated settlement.”).





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Settlement Agreement, an increase of the payment percentage to Pro Rata

Claimants is appropriate.

While Plaintiffs continue to advocate for acceptance of late claims, it is

highly unlikely that late claims, accepted after the date of this Motion, will

increase the aggregate Pro Rata amount to greater than 75% of the total Net

Settlement Funds less the Flat Rate awards. In addition, no objector has presented

an objection that would prevent this Court from allowing this requested increase.

Based on current figures, Plaintiffs estimate that an increase of the

aggregate sales percentage to 75% will result in an additional payout to the Pro

Rata Claimants of $1,556,298.25 from the Settlement Fund. This is money that,

based on the Settlement Agreement, would otherwise go to cy pres. Increasing

payments to claimants is clearly preferable to paying those funds to cy pres.

IV.

CONCLUSION

Based on the plain language of the Settlement Agreement and the current

accounting of all claims made, the Court should enforce the terms of the

Settlement Agreement and allow Pro Rata claims to be paid out at “the lesser of

100% of the estimated total loss from Qualified Product sales or [75%] of the

price paid by that claimant for the claimant’s aggregate Qualified Products.”7

DATED: April 13, 2015 FABIAN & CLENDENIN, P.C.

FOLEY BEZEK BEHLE & CURTIS LLP

/s/ Scott M. Petersen

Phillip D. DrachtScott M. PetersenJason W. Hardin

Thomas G. Foley, Jr.Robert A. CurtisJustin P. Karczag

Attorneys for Plaintiff

7 Settlement Agreement, Sec. 4.4.5.





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CERTIFICATE OF SERVICE

I hereby certify that on this 13th day of April, 2015, the foregoing has been

served via the CM/ECF system on counsel for Plaintiffs and Defendants at the

following addresses:

A Howard Matz [email protected], [email protected] Lee Arndt [email protected] L Zifkin [email protected], [email protected],[email protected], [email protected], [email protected] K Panchapakesan [email protected], [email protected],[email protected] W Hardin [email protected] Sherman [email protected]

Jonathan David Schiller [email protected] F Kroetsch [email protected] P Karczag [email protected], [email protected],[email protected] D Gamarnik [email protected] T Drooks [email protected], [email protected] A Kamin [email protected], [email protected],[email protected], [email protected] D Dracht [email protected], [email protected],

[email protected] Allen Curtis [email protected],[email protected], [email protected] M Petersen [email protected], [email protected] Foley [email protected], [email protected],[email protected] S Ohlemeyer [email protected] L Petray [email protected], [email protected] James C Sturdevant [email protected],

[email protected], [email protected]

April 13, 2015 /s/ Scott M. Petersen

4830‐0996‐6115, v. 1


bostick motion for increase in pro rata award

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