Hesse v. Godiva Chocolatier

Docket number: 1:19-cv-00972 (S.D. NY)

HLLI represented a Godiva chocolate consumer, Eli Lehrer, who successfully objected to the largely-illusory settlement in Hesse v. Godiva Chocolatier. The settlement would have paid class members like Lehrer conditionally at most $7 million. In contrast, plaintiffs’ attorneys negotiated a fixed $5 million fund earmarked for their own fees. The underlying class action alleged that Godiva misrepresented the manufacturing location of its chocolate products.

The settling attorneys sought settlement approval and attorneys’ fees based on an illusory settlement value of $15 million of benefit to the class. In fact, however, class members will receive at most about $7 million—less than half of what the attorneys asserted. Meanwhile, the class attorneys sought $5 million for themselves from a fund that was segregated from the class recovery such that any reduction in fees would not benefit the class. Instead, if the court reduces the attorneys’ fees, the overage would have remained with Godiva, just as any amount unclaimed by the class remains with Godiva. The settlement did not provide for any possibility of a second distribution of funds to the class members, even of those funds that remain after claims are paid by check or electronic payment. Any such remaining amounts will be paid to a third-party cy pres recipient engaged in advocacy on contentious issues that many class members may not wish to support.

Lehrer argued in his objection that the attorneys had negotiated a disproportionately-weighted settlement that too heavily favored the attorneys. In analyzing the settlement’s fairness under Rule 23(e)(2)(C)(ii), courts are required to consider the “effectiveness” of distribution—meaning the actual payments to the class, not the fictional $15 million that in theory could be claimed by class members but not in reality. The $5 million that class counsel negotiated for themselves represented about 40% of the combined settlement value, and they had agreed to terms that denied class members any opportunity to recovery a fee reduction or unclaimed funds. Lehrer asked the court to deny final approval of the settlement so that the attorneys can renegotiate a settlement that appropriately prioritizes class recovery.

On April 20, 2022, the court approved the settlement and awarded attorneys’ fees in an amount $2,150,000 less than class counsel requested, relying on the calculation method proposed by Mr. Lehrer.