In re Wawa, Inc. Data Security

Docket Number: 2:19-cv-6019 (E.D. Penn.)
Appellate Case Number: 22-1950 (3d Cir.)

The Center for Class Action Fairness (CCAF), representing its director Theodore H. Frank, filed an objection to a class action settlement over a data breach of Wawa customer data, which would pay attorneys more than the class members they represent.

Under the terms of the initial settlement, the defendant would have provided just over $1 million worth of Wawa gift cards to claimants through a claims process. The attorneys depicted this as a $12.2 million fund to justify an allegedly 24.9% fee of more than $3 million. But in fact few class members claimed, so the settlement would likely not provide much more than the $1 million floor for gift card relief. Frank contends the disparity makes the settlement unfair, and it must be denied final approval so that the parties can renegotiate a settlement that puts class members first.

After our objection, the settling parties amended the settlement agreement to increase the relief provided to the class by sending $5 gift cards directly to 575,000 class members and removed the “kicker” provision which required that any reduction in the class counsel’s fee award revert to the defendant. We are continuing to object to the requested award of class counsel, which amounts to more than half of the total settlement value.A fairness hearing was held on January 26.

On April 20, the district court granted the attorney fees in full based on the amount made available.

On September 8, Frank appealed the district court’s order, arguing that it legally erred in awarding class counsel a fee based on a percentage of the gift cards and cash that the class will never actually receive. Attorneys General for Utah, Alabama, Arkansas, Indiana, Kentucky, Montana, South Carolina, Tennessee, Texas, and Virginia filed an amicus brief in support of Frank and his contentions that attorneys’ fees need be awarded based on what class members actually receive as compensation and that, here, class counsel is likely to capture nearly the entire settlement fund through their fee request since class members are highly unlikely to redeem their low-value gift cards.

Briefing on the appeal concluded on November 30, 2022. HLLI attorney Adam E. Schulman argued the case for objector Frank on March 30, 2023 (link to recording).

On November 2, 2023, the Third Circuit vacated the fee award and remanded for “for consideration of the amounts distributed to and expected to be claimed by the class.” The panel rejected the argument that money hypothetically made available to class members controls the fee award, finding that this practice “is not required by history or precedent.”

A majority of the panel also found it significant that class counsel had negotiated a “kicker” reversion provision for itself in the original settlement agreement. Prior to Frank’s objection, the kicker required that unawarded fees would revert to the defendant rather than class members. Even after removal, a majority found that reversion serves as a “deterrent” against courts scrutinizing attorneys’ fees.

After remand, the district court was instructed to reconsider the fee award in light of actual class recovery, and after investigating the selfish kicker agreement, which might indicate “coordinated rather than zealous advocacy.”

On April 9, 2024, the district court issued an opinion granting the same fee award vacated by the Third Circuit based on the illusory amount made “made available” to class members. HLLI intends to appeal again.

Case Documents