James Rosendahl vs Red Wing Brands of America Inc

Case Number

23CV05491

Case Type

Hearing Date / Time

Mon, 08/19/2024 - 10:00

Nature of Proceedings

Motion: Approval /Preliminary

Tentative Ruling

James Rosendahl vs. Red Wing Brands Of America, Inc.      

Case No. 23CV05491        

Hearing Date: August 19, 2024                                                          

HEARING:             Motion For Preliminary Approval Of Class Action Settlement And Conditional Certification Of A Plaintiff Class

ATTORNEYS:        For Plaintiff James Rosendahl: Phillip R. Poliner, Neil B. Fineman, Fineman Poliner LLP

                                    For Defendant Red Wing Brands of America, Inc.: Mark S. Eisen, Antonia Stabile, Benesch, Friedlander, Coplan & Aronoff LLP

TENTATIVE RULING:

The motion of Plaintiff  for preliminary approval of class action settlement is denied without prejudice to any future filing of a procedurally and substantively appropriate motion for preliminary approval.

Background:

On December 12, 2023, plaintiff James Rosendahl, individually and on behalf of others similarly situated, filed a putative class action complaint against defendant Red Wing Brands of America, Inc. (Red Wing), asserting five causes of action for (1) violation of Civil Code section 1749.5; (2) violation of Civil Code sections 1750 et seq. (the Consumers Legal Remedies Act or CLRA); (3) violation of Business and Professions Code section 17200 et seq. (California’s Unfair Competition Law or UCL); (4) money had and received; and (5) declaratory relief. As alleged in the complaint:

Red Wing sells gift cards to consumers in California which contain stored values representing the “balance” on the gift card. (Compl., ¶ 25.) Rosendahl visited a Red Wing location in California with a Red Wing gift card that he used to purchased items. (Id. at ¶ 26.) After paying for the items using the gift card, Rosendahl’s gift card balance was less than $10. (Id. at ¶ 27.) Rosendahl asked the Red Wing employee if he could obtain the cash balance of the gift card, but the employee refused Rosendahl’s request and told Rosendahl that the balance remains on the gift card for future use. (Id. at ¶ 29.)

Before filing the present lawsuit, investigations were performed on Rosendahl’s behalf to determine if the particular Red Wing employee’s failure to comply with California’s gift card law was an isolated incident. (Compl., ¶ 36.) The results of the pre-filing investigations revealed that Red Wing employees consistently failed to honor valid requests for cash back on gift cards with a balance of less than $10.00. (Id. at ¶ 37.) By Red Wing’s failure to provide California consumers with cash for gift cards with a stored value of under $10 its failure to have a consistent practice honoring such requests, all current and future holders of gift cards with a balance of less than $10 are denied certain consumer protections afforded to consumers under state law. (Id. at ¶ 38.)

In addition, at the time a Red Wing gift card is purchased and “loaded” with a money balance, Red Wing records the amount loaded on the gift card as an obligation that is reflected as gift card liability. (Compl., ¶ 32.) Red Wing recognizes income from gift cards when the likelihood the gift card will be redeemed by the customer is remote and Red Wing determines that it does not have a legal obligation to remit the value of unredeemed gift cards to the State of California as “breakage” income. (Id. at ¶ 33.) When Red Wing concludes that the likelihood of redemption of a gift card becomes remote, or when the likelihood of the gift card being redeemed by the customer is less than probable, Red Wing recognizes the breakage as income at that time. (Id. at ¶ 34.) Accordingly, Red Wing profits every time a gift card holder fails to redeem a gift card, including when the balance remaining is too low and a Red Wing employee refuses a gift card holder’s request for the cash balance of the gift card. (Id. at ¶ 35.)

Court records reflect that on February 26 and March 25, 2024, the Court entered separate orders extending Red Wing’s deadline to respond to the complaint upon the parties’ stipulation. (Feb. 6, 2024, & Mar. 25, 2024, Stipulations & Orders.)

On May 13, 2024, the Court entered an order upon the parties’ further stipulation staying Red Wing’s deadline to file a response to the complaint pending judicial approval of a class wide settlement of this action. (May 13, 2024, Stipulation & Order.)

On May 22, 2024, Rosendahl filed a motion for an order preliminarily approving a settlement agreement, provisionally certifying a plaintiff class, preliminarily approving the class notices, appointing Rosendahl as the class representative, appointing Rosendahl’s counsel, the law firm of Fineman Poliner LLP, as counsel for the class; and setting a date and time for a final fairness hearing. On the same date, Rosendahl separately filed a copy of a written Class Action Settlement Agreement And Release (the settlement agreement).

No opposition or other response has been filed to the present motion.

Analysis:

“California Rules of Court, rule 3.769 sets forth the procedure to be followed when a class action is provisionally settled prior to class certification.” (Luckey v. Superior Court (2014) 228 Cal.App.4th 81, 93 (Luckey), original italics [also noting that in such cases, “certification and settlement approval occur simultaneously”].) “A settlement or compromise of an entire class action, or of a cause of action in a class action, or as to a party, requires the approval of the court after hearing.” (Cal. Rules of Court, rule 3.769(a); Luckey, supra, 228 Cal.App.4th at p. 93 [a party to the settlement must first move for preliminary approval].) “Any party to a settlement agreement may serve and file a written notice of motion for preliminary approval of the settlement. The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion.” (Cal. Rules of Court, rule 3.769(c).)

As further detailed above, Rosendahl has filed with the motion a copy of the settlement agreement to which is attached a “Summary Class Notice” (the summary class notice), and a proposed “Notice of Pendency of Class Action and Proposed Settlement” (the full class notice). (See also, Fineman Decl., Exhs. 2 & 3.) Accordingly, the Court finds that the motion is procedurally appropriate.

After the preliminary settlement hearing, the court may enter an order “approving or denying certification of a provisional settlement class ….” (Cal. Rules of Court, rule 3.769(d).) If the court grants preliminary approval of the settlement, it must set a final approval hearing and provide for notice to be given to the class. (Cal. Rules of Court, rule 3.769(e); Luckey, supra, 228 Cal.App.4th at p. 93.) The notice to be given to class members “must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.” (Cal. Rules of Court, rule 3.769(f).) “Before final approval, the court must conduct an inquiry into the fairness of the proposed settlement.” (Cal. Rules of Court, rule 3.769(g).) “If the court approves the settlement agreement, it enters judgment accordingly.” (Luckey, supra, 228 Cal.App.4th at p. 93; Cal. Rules of Court, rule 3.769(h).)
 

Provisional certification of the settlement class:

Code of Civil Procedure section 382 authorizes class actions “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” (Code Civ. Proc., § 382.) “Class certification requires proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods. [Citation.]” (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089.) “The burden is on the party seeking certification to establish the existence of both an ascertainable class and a well-defined community of interest among the class members.” (Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, 913.)

To determine whether a class is ascertainable, the court examines “(1) the class definition, (2) the size of the class, and (3) the means available for identifying class members. [Citation.]” (Reyes v. San Diego County Bd. of Supervisors (1987) 196 Cal.App.3d 1263, 1271.) “A related inquiry is manageability of the proposed class[.]” (Global Minerals & Metals Corp. v. Superior Court (2003) 113 Cal.App.4th 836, 849.) “The community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.” (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.)

“Because a court evaluating certification of a class action that settled prior to certification is considering certification only in the context of settlement, the court’s evaluation of the certification issues is somewhat different from its consideration of certification issues when the class action has not yet settled. In some ways, the court’s review of certification of a settlement-only class is lessened; as no trial is anticipated in a settlement-only class case, ‘the case management issues inherent in the ascertainable class determination need not be confronted.’ [Citation.] However, other certification issues, ‘those designed to protect absentees by blocking unwarranted or overbroad class definitions’ require heightened scrutiny in the settlement-only class context ‘for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.’ [Citation.]” (Luckey, supra, 228 Cal.App.4th at pp. 93-94.) To protect absent class members whose rights may not have been considered by the settling parties, and to ensure the absence of fraud and collusion, heightened scrutiny is required if there has been no adversary certification. (Ibid.)

The settlement agreement defines the settlement class as “[a]ll consumers in California who possess or possessed a Red Wing gift card with a balance of less than $10[].” (Settlement Agreement, ¶ 3.5.) In the memorandum submitted in support of the motion, Rosendahl asserts that his counsel “hired two private investigators to independently visit ten Red Wing locations in northern and southern California”, that the investigators “were given ten Red Wing gift cards with a balance of $20 each, and the investigators visited ten Red Wing locations and purchased items with the gift cards”, and that “[o]nce the balance on each gift card was less than $10.00, the investigators requested the balance of the gift card in cash.” (Memorandum at p. 9, ll. 18-22.) Rosendahl contends that the results of his pre-filing investigations show that Red Wing employees consistently failed to honor valid requests for cash back on gift cards with a balance of less than $10. (Id. at p. 9, ll. 22-24.) Though this specific information does not appear in the declaration of Rosendahl’s counsel, Neil B. Fineman (Fineman), and while Rosendahl himself does not show that he has personal knowledge of these purported facts, the Court notes that Fineman generally describes pre-litigation investigations which ostensibly included the hiring of two licensed private investigators. (Fineman Decl., ¶ 9.)

Fineman asserts that, after filing the present action, he “prepared written discovery, including special interrogatories, form interrogatories, requests for admissions, and request for production.” (Fineman Decl., ¶ 10.) In the memorandum, Rosendahl asserts that, “based upon [Red Wing’s] discovery responses, there are currently an estimated 2,216 gift cards sold in California locations that have a balance of less than $10[]. Therefore, [Rosendahl] contends the class size is approximately 2,216 consumers.” (Memorandum at p. 11, ll. 11-13.) Neither Rosendahl nor his counsel have shown personal knowledge of these purported facts.

Rosendahl further contends that each class member has or had a right to receive cash back on their gift card balance upon request. Because Rosendahl also has a Red Wing gift card with a cash value under $10, Rosendahl contends that his claims are typical of the settlement class and are based on the same theories of liability asserted in the complaint. Rosendahl further asserts, in a conclusory manner, that his interests do not conflict with the settlement class interests and that anticipated defenses are not unique to Rosendahl.

Rosendahl presents information to show that his counsel is experienced in consumer class litigation such that he is able to adequately represent the settlement class. (See Fineman Decl., ¶¶ 5-7 [describing counsel’s experience as class counsel in other class action litigation]; Decl. of Phillip R. Poliner, ¶¶ 4-5 [same].)

Notwithstanding evidentiary issues relating to whether Rosendahl or Fineman’ have demonstrated personal knowledge of purported facts offered in the motion, Rosendahl has, for present purposes, presented evidence sufficient to show that there is a numerous, ascertainable class with a well-defined community of interest consisting of approximately 2,216 consumers who possess or possessed Red Wing gift cards sold in California locations with a balance of less than $10. There also appears to be a sufficient means available to identify class members from the records of Red Wing. Available information indicates that there exists common questions of law or fact with respect to whether members of the settlement class who possessed gift cards with a balance under $10 were permitted to redeem their gift cards for cash upon request. Rosendahl, who is identified in the settlement agreement as the class representative, appears to have claims typical of the settlement class and appears to be able to adequately represent the class. Class counsel has also presented evidence sufficient to show that counsel is experienced in class action litigation and can adequately represent the class.

Subject to the following, there appears to be reasonable support for provisional certification of the settlement class.

Fairness, adequacy, and reasonableness of the settlement:

To protect the rights of class members including the named plaintiff, the court must determine if the proposed class action settlement is fair, adequate and reasonable. (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1800-1801.) To determine whether a proposed class action settlement is fair, adequate, and reasonable, the court “should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.” (Id. at p. 1801.) In addition, to ensure due consideration is given to the proposed settlement agreement between the parties, the inquiry is limited “’to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.’ [Citation.]” (Ibid.)

The settlement agreement submitted by Rosendahl provides for a settlement to a settlement class of all California consumers who possessed a Red Wing gift card with a balance of less than $10, excepting those consumers who submit timely and valid requests for exclusion from the settlement agreement. (Settlement Agreement, ¶ 3.5.) As further discussed above, the settlement agreement provides that Rosendahl will be the named class representative, and Rosendahl’s counsel, the law firm of Fineman Poliner LLP, will be designated as class counsel. (Id. at ¶¶ 3.4 & 3.7.)

The terms of the settlement require Red Wing to make “commercially reasonable” efforts to comply with Civil Code section 1749.50, by: reviewing its policies and practices with respect to redeeming its gift cards and updating its employee materials or operating procedures to state that “California law requires that a gift card must be redeemed for cash, upon a customer’s request, when the gift card balance falls below $10[]” or similar language; holding at least at least one online or in-person training session for its existing guest-facing managers and retail employees in its California locations for purposes of reviewing Red Wing gift card redemption policies and procedures for the redemption of gift cards below $10; instructing new employees that California law requires that a gift card must be redeemed for cash upon a customer’s request when its balance falls below $10 and as to procedures for redemption of such gift cards; posting for 12 months a reasonably sized notice in an employee-only area of its California retail stores stating that “California law requires that a gift card must be redeemed for cash, upon a customer’s request, when the gift card balance falls below $10[]” or similar language; ensuring that all retail locations in California have the ability to provide cash back on gift cards with a balance of less than $10; publishing for 12 months under its website’s “Policies” tab or webpage a policy stating that “Red Wing gift cards with balances under $10 are redeemable for cash at its California retail locations,” (Settlement Agreement, ¶¶ 4.1-4.7.)

The settlement agreement also requires that Red Wing perform an internal audit of its compliance with the terms of the settlement agreement two times within a two year period following final judicial approval of the settlement agreement (final approval), as that term is defined in paragraph 3.11 of the settlement agreement. (Settlement Agreement, ¶ 4.8.) Red Wing will provide class counsel with one declaration from an authorized representative confirming its compliance with its obligations under the settlement agreement further discussed above. (Id. at ¶ 4.9.)

In addition, settlement class members who claim to have disposed of a gift card with a remaining balance of less than $10 as a result of being informed by a Red Wing employee that cash redemption was not permissible will be entitled to monetary relief. (Settlement Agreement, ¶ 4.11.) To that end, Red Wing has agreed to a claims process to be administered by class counsel and pursuant to which settlement class members who disposed of a gift card with a balance of less than $10 will receive a replacement gift card valued at $10 which can be used at any Red Wing location without an additional purchase requirement. (Ibid.)

Red Wing will make the $10 replacement gift cards available in response to claims which must be made during the “claims period”, defined to begin ten days after final approval and to end ninety days after final approval, or “when all 746 gift cards are claimed” by the settlement class members, whichever comes first. (Settlement Agreement, ¶¶ 3.3 & 4.11.) The number of replacement gift cards that Red Wing is obligated to provide will be capped at 746, which represents a best estimate of the amount remaining on gift cards with a balance of less than $10. (Id. at ¶ 4.11.) No other monetary relief will be made available to the settlement class. (Ibid.)

Settlement class members who have not discarded and remain in possession of a gift card with a balance under $10 are not eligible to file a claim for monetary restitution. (Settlement Agreement, ¶ 4.11.) Instead, these class members “may at their convenience visit any Red Wing location in California to fully utilize the remaining balance of their gift card or receive a cash redemption of the remaining balance of their cards.” (Ibid.)

With respect to settlement class members who disposed of gift cards with a remaining balance of less than $10 dollars and who wish to make a claim for a replacement gift card, instructions for making such claims will be set forth on a website created for the settlement within 10 days following final approval. (Settlement Agreement, ¶ 4.11.1.) The website will be created and maintained by Rosendahl’s counsel for the entire claims period further described above, with its content will be mutually agreed on by the parties. (Ibid.) To file a claim, a settlement class member must complete an electronic claim form  under penalty of perjury, stating that they possessed a Red Wing gift card with a balance of less than $10, that they were denied a cash redemption of the balance upon request to a Red Wing employee, and that they thereafter disposed of the gift card. (Ibid.) The electronic claim form will identify the member’s name, address, telephone number, and e-mail address, and will be processed by class counsel. (Ibid.)

Replacement gift cards will be limited to one per household, which will be determined by the mailing or “IP” address of each claimant. (Settlement Agreement, ¶ 4.11.1.) The settlement agreement further provides that, because neither Rosendahl nor Red Wing can specifically identify settlement class members who discarded their low value gift cards after requesting cash back from one of Red Wing’s employees, class counsel shall be permitted to contact class members to follow up on possibly fraudulent claims. (Ibid.) Class counsel will not question any settlement class member regarding the validity of a claim unless there is sufficient evidence raising a credible suspicion about a claim or claims, such as multiple claims being made from the same residential, commercial, or IP address. (Ibid.) Further, Red Wing has the right to request that class counsel or a designated third-party obtain further information from a claimant in order to verify any claim for a replacement gift card. (Ibid.)

Within seven days after the claims period described and defined above ends, the settlement website shall be taken down and class counsel will transmit all timely and valid claims received by class counsel to Red Wing’s counsel. (Settlement Agreement, ¶ 4.11.2.) Within twenty-one days of receipt, Red Wing’s counsel may identify claims that it or Red Wing believes are untimely or otherwise invalid, and the parties will thereafter “promptly work together” to resolve any disputes regarding the validity of claims, which may include mediation of any disputes that counsel is unable to resolve. (Ibid.)

Any settlement class member who fails to submit a timely, accurate, and completed claim is not entitled to receive a gift card. (Settlement Agreement, ¶ 4.11.3.)

Within seven days of finalizing all timely and valid claims, Red Wing will mail to class counsel replacement $10 gift cards equaling the lesser of the number of timely and valid claims or 746 claims. (Settlement Agreement, ¶ 4.11.2.) To the extent more than 746 timely and valid claims are submitted, only the first 746 timely and valid claims will be honored with a $10 replacement gift card. (Ibid.) Class counsel will thereafter send the replacement gift cards by mail to settlement class members within seven days of receipt. (Ibid.)

The settlement agreement further provides that there will be no unpaid residual whether under California Code of Civil Procedure Section 384 or any other statutory or case authority, and that any amounts not provided to the settlement class members due to a failure to submit a claim will remain solely with Red Wing. (Settlement Agreement, ¶ 4.12.) Red Wing will pay its own attorneys’ fees and costs and all costs incurred in administering the settlement. (Id. at ¶ 4.13.)

Within 20 days after the Court preliminarily approves the settlement agreement, Red Wing will publish, at its own cost, the summary class notice, ostensibly in the form attached as exhibit 3 to the settlement agreement, in the USA Today (California Editions), a newspaper with a general circulation coverage over all California Red Wing locations. (Settlement Agreement, ¶ 7.2.1.) The summary class notice will be a quarter page in size and will refer readers to the settlement website (www.rwb-gc.com) where the full class notice attached as exhibit 2 to the settlement agreement may be reviewed. (Ibid.) Rosendahl will publish the full class notice attached as exhibit 2 to the settlement agreement to the settlement website. (Id. at ¶ 7.2.2.) At least 16 days prior to the final hearing, Rosendahl will submit a declaration to the Court certifying that the summary class notice and full class notice were provided as required under the settlement agreement. (Id. at ¶ 7.2.3.)

Settlement class members who do not request exclusion from the settlement may appear, in person or by counsel, at the final fairness hearing to show why the settlement should not be approved as fair, adequate, and reasonable. (Settlement Agreement, ¶ 7.3.) The procedures for objecting to the settlement are set forth in the settlement agreement, and require the objecting class member to serve on class counsel a written objection and a notice of intention to appear not later than forty-five days following the first issuance of the class notices described above. (Ibid.) The objection must include: (1) the case caption and number; (2) the class member’s name, address, and telephone number; (3) an explanation of the basis on which the objector claims to be a settlement class member with supporting evidence; (4) a list of all other class action cases in which the objector or their attorney has submitted an objection to a settlement; (5) a statement of the reasons why the objector contends the Court should find that the settlement is not fair, reasonable and adequate, including all legal and factual support; and (6) the objector’s signature under penalty of perjury. (Ibid.) Class counsel will file any objections with the final approval motion. (Ibid.)

Settlement class members who wish to be excluded from and not bound by the settlement agreement must submit a valid request for an exclusion in writing to be delivered to class counsel by the deadline to file an objection as further detailed above. (Settlement Agreement, ¶ 7.4.) The information to be included in a request for exclusion from the settlement agreement is set forth in paragraph 7.4. Any settlement class member who does not opt out in a timely and valid manner will be deemed part of the settlement class and bound by all subsequent proceedings notwithstanding whether the member filed a claim. (Id. at ¶ 7.4.1.) If five percent or more of the settlement class requests to be excluded, Red Wing may in its sole discretion elect to withdraw from and terminate the settlement agreement. (Id. at ¶ 7.4.)

In consideration for the settlement, the settlement class members will release Red Wing from “any and all known or unknown claims, rights, and/or causes of action for damages, restitution, or injunctive or other legal or equitable relief, of any nature, asserted in connection with or that arise out of or relate in any manner whatsoever, in whole or in part, to any claim based on any alleged failure by any [Red Wing] to redeem a gift card with a balance of less than $10.00 for cash. Released Claims do not extend to unknown claims unrelated to any claim based on any alleged failure by a Released Party to redeem a gift card with a balance of less than $10.00 for the gift card’s cash value in the form of cash or check.” (Settlement Agreement, ¶¶ 3.16 & 5.1.) Rosendahl will release “all matters, and all claims relative thereto, which do now exist, may exist, or heretofore have existed between the Parties.” (Id. at ¶ 5.2.)

As further noted above, Red Wing will pay its own attorney fees and costs incurred in administering the settlement agreement. (Settlement Agreement, ¶ 4.13.) The settlement agreement further provides that the parties agreed to accept a “mediator’s proposal in regard to reasonable attorneys’ fees and costs in the amount of Sixty-Two Thousand Five Hundred Dollars and zero cents … to [class counsel] in accordance with Civil Code section 1780(e) and Code of Civil Procedure section 1021.5.” (Id. at ¶ 4.15.) The settlement agreement also contemplates an incentive award to be paid to Rosendahl in the amount of $1,500. (Id. at ¶ 4.14.)

Available information shows that Rosendahl conducted discovery and investigation into Red Wing’s policies and practices with respect to redeeming of gift cards with a balance under $10. (Fineman Decl., ¶¶ 9-10.) Thereafter, a settlement was reached through arms-length negotiations during a private mediation. (Id. at ¶ 8.) The mediator proposed 746 total claims to be allowed because the total amount of money remaining on all gift cards under $10 is approximately $7,460 such that if all 746 gift cards were claimed, the total amount of money to be disgorged would be $7,460. (Id. at ¶ 11.) The parties and the mediator agreed that Red Wing should not potentially pay more money than remains on gift cards under $10. (Ibid.)

Rosendahl further notes that the identity of each class member is not known because the names of purchasers of Red Wing gift cards is not always recorded and gift cards by their nature are transitory with the final holder being unknown. (Fineman Decl., ¶ 13.) Therefore, class notice cannot be given directly to settlement class members. (Ibid.)

Rosendahl further contends that measures that Red Wing has agreed to implement under the settlement will protect consumer rights to obtain cash for low-value gift cards rather than forcing consumers to purchase items they do not want or need. Rosendahl’s counsel believes that, based on his experience in class action litigation and the risk of the class not being certified or prevailing as to liability, the settlement is fair, reasonable, and adequate. (Fineman Decl., ¶ 14.)

There exist concerns with respect to various terms of the settlement further discussed below which prevent the Court from determining that the recovery by the class members under the settlement agreement represents a reasonable compromise, or that the settlement agreement is fair, reasonable, and adequate and not the product of collusion or overreaching between Rosendahl and Red Wing.

Civil Code section 1749.5 provides that “any gift certificate with a cash value of less than ten dollars ($10) is redeemable in cash for its cash value.” (Civ. Code, § 1749.5.) The settlement class as further discussed above consists of California consumers who currently possess, or possessed, a Red Wing gift card with a value of less than $10, and includes consumers who discarded gift cards upon the refusal by a Red Wing employee to redeem the card for its cash value. Therefore, the settlement agreement as a whole must be fair, adequate, and reasonable with respect to consumers who comprise the settlement class. To that end, timely and adequate notice of the settlement agreement is required to ensure due process to class members, to permit potential class members to object to or opt out of the settlement, to ensure class members who are in possession of low value gift cards are aware of their ability to redeem them for cash, and to ensure that class members entitled to replacement cards are aware of and may obtain that remedy. The notice provisions do not appear sufficient to apprise settlement class members of the settlement terms.

For example, each member of the settlement class is necessarily a Red Wing customer. However, rather than requiring publication of an appropriate class notice in a conspicuous location at physical store locations and on Red Wing’s website, where consumers who use Red Wing products or purchase gift cards are more likely to be apprised of the settlement and the class notices described above, the settlement agreement contemplates a single one-time publication of only the summary class notice above. Though the summary class notice will refer to the settlement website where the full class notice will appear, there is no indication that either notice will be provided in any other manner or place.

Rosendahl presents no evidence that the notice procedures described in the settlement agreement will provide adequate, if any, notice to potential settlement class members who are also customers of Red Wing. For example, there is no evidence that the newspaper described in the settlement agreement is widely read by Red Wing customers, or that its readership includes the persons who are typically Red Wing customers or purchasers of Red Wing gift cards such that the Court may evaluate whether or not the sole proposed method of providing class notice is the best feasible means of proving adequate notice of the settlement agreement or its terms, or the ability to opt out of or object to the settlement, to absent class member. Available information also appears to indicate that the manner in which the summary class notice is to be published may not be sufficiently conspicuous. For all reasons discussed above, the Court is unable to find that a one-time publication of a summary class notice in the manner described above is sufficient to apprise settlement class members of the settlement.

In addition, the Court is cognizant of the fact that, under circumstances such as those present here, there may exist no records which would identify consumers who discarded gift cards under $10. However, it not entirely clear to the Court the manner in which Red Wing or Rosendahl determined that, of the 2,216 total class members, the number of settlement class members who discarded gift cards totals no more than 746 consumers. This information is necessary to enable the Court to determine whether the cap on restitution is fair or reasonable to the settlement class, also considering that the parties appear to anticipate that there may exist more than 746 settlement class members who have discarded low value gift cards. It is also unclear why each household as defined under the settlement is limited to one replacement gift card considering that more than one member of a household may have discarded a low value gift card that could not be redeemed. Rosendahl presents no information to enable the Court to determine that this additional limitation is fair or reasonable.

The Court also notes that the settlement agreement discusses the publishing by Red Wing of a policy purporting to inform customers that low value gift cards are redeemable for cash at California locations. The “Policies Tab” described in this provision appears to be located an inconspicuous or unobvious location on the website. Rosendahl presents no information or evidence from which the Court can determine whether this page or tab is regularly visited or explored by Red Wing customers or customers who wish to purchase or redeem gift cards.

Furthermore, based on the requirement that Red Wing include a customer notice on the policies tab of its website, it would also appear that gift cards may be offered for sale on Red Wing’s website. If true, the information acquired by Red Wing in processing such sales would appear, at a minimum, to include recipient e-mail addresses and other identifying information. Further, to the extent that online customers are permitted to purchase physical gift cards through the website, such a sale might also include physical mailing addresses. However, Rosendahl offers no information as to what, if any, information is collected from the customer when gift cards are sold whether via the Red Wing website or otherwise. There is no evidence or argument currently before the Court to explain why notification of the settlement agreement by electronic or regular mail, which is more likely to reach purchasers of gift cards and therefore those to whom gift cards were passed to, in addition to the published notice, is in any way infeasible, impractical, or impossible.

Considering that low value gift cards are redeemable in cash for their cash value, it is also unclear to the Court why replacement gift cards will be distributed to settlement class members rather than payment representing the cash value of the unredeemed cards. In addition, the meaning of the phrase “without an additional purchase requirement” is ambiguous as to whether or not the parties intend that the replacement gift cards to be distributed to qualifying settlement class members may in fact be redeemed for cash at Red Wing locations notwithstanding whether their cash value is $10, and not less. Moreover, to the extent the replacement gift cards cannot be redeemed for cash, it would appear that settlement class members must, in fact, make a purchase in order to reduce the gift card balance below $10 before it will be redeemed for cash. To the extent the replacement gift cards cannot be redeemed for cash until their cash value is below $10, the settlement would not appear to be collusive and overreaching to the extent it requires settlement class members to make a purchase at a Red Wing store before they may redeem the replacement gift cards for their cash value.

In addition to capping the number of restitution claims which may be made, the settlement agreement also provides that any amounts remaining on low value gift cards which Red Wing employees refused to redeem will remain with Red Wing to the extent a settlement class member fails to submit a claim. The amount of money remaining on gift cards with balances under $10 belongs to the holders of such gift cards under Civil Code section 1749.5. A more appropriate distribution of funds remaining on unredeemed gift cards, whether due to a failure to submit a claim form or otherwise, would be in the manner of a cy pres award or distribution. As the settlement agreement permits monies improperly held by Red Wing in violation of Civil Code section 1749.5 to remain with Red Wing, the settlement agreement does not appear to be fair, justified, or appropriate, particularly in light of the settlement’s apparent failure to provide any direct or meaningful notice to past and future gift card holders of their rights under California law as further discussed herein.

Additionally, while the settlement class includes those class members who still possess a gift card with a balance less than $10, it is unclear what benefit, if any, is being provided to these class members apart from permitting a cash redemption to which they are already entitled under Civil Code section 1749.5. Further, it would appear that virtually no effort is being made to advise such settlement class members of their right under California law to redeem their low value gift cards for cash. Instead, the settlement agreement’s notice requirements effectively ensure that class members who are still in possession of low value gift cards will not learn of their right to redeem their low value gift cards for cash.

The Court further notes that the only retail store postings that advise any person of applicable provisions of California law provided for in the settlement are located in employee-only areas of the Red Wing’s retail stores or in what appears to be an inconspicuous location on the website of Red Wing which may not regularly be accessed by settlement class members for reasons further discussed above. (Settlement Agreement, ¶¶ 4.5-4.7.) Furthermore, the training to be provided to Red Wing employees and the updates to Red Wing’s policies and procedures appear to inform Red Wing employees that they are required to redeem low value gift cards only upon a customer’s request. (Id. at ¶¶ 4.2, 4.4, 4.5.) Civil Code section 1749.5 does not require a customer to first request a cash redemption before an entity must redeem the gift card. Moreover, before a customer can make such a request, he or she must be aware of his or her rights under California law to do so, particularly if such customers have, in the past, been denied cash value redemption or if the cards in a customer’s possession contain language advising the holder that they are not redeemable for cash.

Finally, the Court finds the settlement agreement’s sunset provision, located at paragraph 4.8, is ambiguous in meaning and effect. It appears to require Red Wing to perform the obligations set forth in paragraphs 4.2 through 4.8 end for only 2 years following final approval. In addition, the terms of the settlement require that Red Wing provide notices to its employees and customers for only 12 months. (Settlement Agreement, ¶¶ 4.5 & 4.7.) The apparent cessation of Red Wing’s obligations after 12 or 24 months is perplexing to the Court. In addition, though the settlement agreement requires that Red Wing provide to class counsel a declaration confirming its compliance with obligations set forth in paragraphs 4.2 through 4.8 of the settlement agreement, the settlement agreement is silent as to the time period or manner in which Red Wing shall provide this confirmation, or the manner in which any noncompliance will be secured. Considering that class counsel is responsible for administering the settlement and not a third party settlement administrator, the Court cannot reach a reasoned judgment that the settlement agreement is not the product of collusion or overreaching.

For all reasons discussed above, the settlement agreement as whole appears to benefit only Rosendahl, his counsel, and Red Wing. Accordingly, the Court has additional concerns regarding the manner in which claims will be administered solely by class counsel and provisions which appear to permit counsel for Red Wing to unilaterally reject a claim to the extent counsel believes the claim is untimely or invalid. (See Settlement Agreement, ¶ 4.11.2.) Further compounding these concerns is the absence of any clear mechanism to resolve any disputes regarding the validity or timeliness of a claim, including whether or not a settlement class member whose claim has been rejected as invalid or untimely may appeal such a determination and if so, to whom the appeal is submitted. For this additional reason, and considering that the settlement permits Red Wing to retain any amounts not provided to settlement class members, the Court is unable to determine that there exists no collusion or overreaching, or that the settlement is reasonable or fair.

The examples provided above are illustrative but not exhaustive, and the Court is not obligated to provide an itemized list of all concerns nor may the Court issue an advisory opinion as to the manner in which the settlement may be redrafted or whether any particular revision would render the settlement fair, adequate, or reasonable. However, it appears here that the parties have eschewed every means of providing direct notice to the settlement class, in favor of sole use of an indirect notification by a single day publication in a newspaper for which no readership or distribution information has been provided. In addition, and for all reasons more fully discussed above, the Court is unable to determine that the settlement agreement is fair, adequate, and reasonable, and not the product of collusion or overreaching. Therefore, the Court will deny the motion without prejudice to any future procedurally and substantively appropriate motion for preliminary approval that may be filed by Rosendahl.