Sloppy Settlements: What Kim v. Tinder Means for Early Class Action Settlements
For some time, the popular dating app Tinder had a policy of charging double rates to customers over thirty compared to younger users for its premium subscription.
When Lisa Kim realized that she was charged more than younger customers based solely on age, she brought a class action against the dating app under California’s Unruh Civil Rights Act and its unfair competition statute.
The parties negotiated a pre-class-certification settlement through a neutral mediator. The settlement reached between Tinder and Lisa Kim provided for an injunction against future age-based pricing and gave the class members a choice of:
(1) $25 in cash; (2) 25 “Super Likes” (if the Class Member had a current Tinder account); or (3) a one-month subscription to Tinder Plus or Tinder Gold, depending on which of those services the Class Member had previously purchased.
The District Court approved the settlement, over the objections of some class members, valuing the settlement at about $24 million. Moreover, the District Court approved the $1.2 million in attorney fees and costs requested by class counsel. However, the Ninth Circuit reversed, finding that the District Court had made numerous errors in its settlement valuation and review.
While some of the errors the Ninth Circuit identified were case-specific, others may affect how precertification settlements are reviewed going forward.
Firstly, the Ninth Circuit found that the District Court was incorrect to equate the settlement’s likely monetary value. The District Court’s evaluation of the settlement value was based on the $25 that Tinder was offering for each of the 240,000 class members: $25 times 240,000 equals $6 million. The Ninth Circuit emphasized, however, that many members of the class would not claim the $25, so Tinder would likely end up paying far less than $6M.
Second, the class counsel had represented that the injunctive relief that prevented Tinder from further age-based pricing was worth $6 million. While the District Court accepted this valuation, the Ninth Circuit took issue with it because no support for this $6 million evaluation appeared on the record. This is a useful reminder that class counsel should be prepared to substantiate claims about how to value non-monetary aspects of a settlement.
Lastly, the Ninth Circuit emphasized that the District Court must do more to scrutinize the settlement for possible collusion. The Court highlighted that “clear sailing” provisions – an agreement by a defendant not to oppose plaintiff’s attorney’s application for attorney fees – and attorney fees that outstrip the class monetary awards are red flags that require the District Court to ensure that no collusion occurred in reaching the settlement.
This case is likely to mean that pre-certification settlements will face additional scrutiny in the Ninth Circuit. Attorneys who represent clients in Ninth Circuit class actions should take a moment to review the opinion and learn from the parties’ missteps.
The case is Lisa Kim v. Tinder, Inc. et al., Case No. 18-55960 (9th Cir.).
Rushing McCarl LLP helps California businesses resolve disputes, mitigate legal risks, and protect their rights.