Cornelius Lewis v. H&M Hennes Mauritz GBC SB LLC

Case Number

25CV01802

Case Type

Hearing Date / Time

Wed, 09/03/2025 - 10:00

Nature of Proceedings

Plaintiff’s Unopposed Motion For Preliminary Approval Of Class Action Settlement

Tentative Ruling

For Plaintiff Cornelius Lewis: Phillip R. Poliner, Neil B. Fineman, Fineman Poliner LLP

                                   

For Defendant H&M Hennes & Mauritz GBC AB LLC: Ethan D. Millar, Alexander Akerman, Alston & Bird LLP

RULING

For all reasons discussed herein, unopposed motion of Plaintiff for preliminary approval of class action settlement is denied without prejudice.

Background

On March 25, 2025, Plaintiff Cornelius Lewis filed a class action complaint against Defendant H & M Hennes & Mauritz GBC AB LLC (H&M), alleging six causes of action: (1) violation of Civil Code section 1749.5); (2) violation of Civil Code section 1750 et seq. (Consumers Legal Remedies Act); (3) violation of Business and Professions Code section 17200 et seq. (unfair competition law); (4) violation of Business and Professions Code section 17500 et seq. (false advertising law); (5) money had and received; and (6) declaratory relief (Civ. Code, § 1060). As alleged in the complaint:

H&M sells clothing and accessories to the general public in retail stores, and gift cards which can be used to buy these items. (Compl., ¶¶ 16-17 & 24-25.) Within the past year, Plaintiff visited an H&M location in California and used an H&M gift card to pay for items purchased by Plaintiff. (Compl., ¶ 26.) After using the gift card to pay for these items, the balance of the gift card was less than $10. (Compl., ¶ 27.) Plaintiff did not want any other items and requested that the gift card be redeemed for cash, which an employee of H&M refused. (Compl., ¶¶ 28-29.) Statements and advertising on H&M’s web site also state that H&M’s gift cards are not redeemable for cash. (Compl., ¶ 31.)

H&M filed an answer to Plaintiff’s complaint on May 13, 2025, generally denying its allegations and asserting thirteen affirmative defenses.

On July 31, 2025, Plaintiff filed an unopposed motion for an order: (1) preliminarily approving a settlement agreement between the parties to this action; (2) provisionally certifying a putative class; (3) preliminarily approving class notices; (4) appointing Plaintiff as the class representative;(5) appointing the law firm of Fineman Poliner LLP as counsel for the class; and (6) setting a final approval hearing.

The parties’ settlement agreement:

In support of the motion, Plaintiff separately filed a copy of the “Class Action Settlement Agreement And Release” (the Settlement Agreement) at issue in this proceeding, which is executed by the parties.

The Settlement Agreement defines the “Class” and the “Class Members” as “[a]ll consumers in California who possess or possessed an H&M gift card with a balance of less than $10.00.” (SA, ¶¶ 2.2 & 3.5.) The “Class Period” runs from March 25, 2020, to the date the Court enters an order preliminarily approving the Settlement Agreement. (SA, ¶¶ 3.7 & 3.16.) The “Claim Period” is defined as the period of time within which Class Members may submit the claim forms further discussed herein, which ostensibly begins 10 days after the Court preliminarily approves the Settlement Agreement, and ends 90 days after the Settlement Agreement is finally approved by the Court or when a limit of 3,853 “valid and timely claims for a replacement e-gift card” have been made by Class Members, whichever comes first. (SA, ¶ 3.3.) (Note: The Court notes that the Settlement Agreement appears to contain a typographical error in paragraph 3.3 with respect to the “Claim Period”.)

Pursuant to the Settlement Agreement, the parties have also agreed that Plaintiff will be the “Class Representative”, and that the law firm of Fineman Poliner LLP will be “Class Counsel”. (SA, ¶¶ 3.4 & 3.8.)

The Settlement Agreement provides: that H&M will comply with Civil Code section 1749.5 in all of its California locations; that H&M Fashion USA, Inc., (H&M Fashion), which is H&M’s operating affiliate, “will thoroughly review its policies and practices in regard to redeeming its gift cards and update its employee materials, standard operating procedures, etc., to state: ‘California law requires that a gift card must be redeemed for cash, upon a customer’s request, when the gift card balance falls below $10.00,’ or similar language; that H&M Fashion “will instruct new employees ... that California law requires gift card cash redemption upon a customer’s request when gift card balances fall below $10.00 and procedures for redeeming gift cards below $10.00[]”; that H&M Fashion “will post for 12 months a reasonably sized notice in an employee-only area stating the following: ‘California law requires that a gift card must be redeemed for cash, upon a customer’s request, when the gift card balance falls below $10.00’ or similar language”; that H&M Fashion will ensure that all H&M retail stores in California have the ability to provide cash back on a gift card with a balance of less than $10; and that H&M Fashion will publish for 12 months on its gift card terms and conditions page the following: “In California, H&M gift cards with balances under $10 are redeemable for cash.” (SA, ¶¶ 4.1-4.7.)

The parties further agree that, for two years, H&M will perform two internal audits of its compliance with the terms of the Settlement Agreement, and provide to Class Counsel a declaration from an authorized representative of H&M Fashion confirming that compliance. (SA, ¶¶ 4.8-4.9.)

The Settlement Agreement also describes a procedure pursuant to which a Class Member may seek restitution for discarded gift cards, and which is to be administered by Class Counsel. (SA, ¶ 4.10.) Under this procedure, a Class Member must affirm under penalty of perjury that the member discarded an H&M gift card with a remaining balance of less than $10 after being informed by an H&M employee that the card could not be redeemed for cash. (SA, ¶¶ 4.10 & 4.10.1.) Upon such affirmation, that Class Member will be eligible to receive a $10 replacement e-gift card redeemable at any H&M store in California without a minimum purchase. (SA, ¶¶ 4.10.)

Class Counsel will create a web site (the Class Website) within ten days following the Court’s final approval of the Settlement Agreement, and maintain that web site during the Claims Period. (SA, ¶ 4.10.1.) The Class Website will include instructions for making a claim for a replacement e-gift card under the process described above. (Ibid.)

To file a claim for a replacement e-gift card, a Class Member must provide the affirmation described above within an electronic claim form (the Claim Form). (SA, ¶¶ 3.2 & 4.10.1 & Exh. 1 [Claim Form].) The Claim Form must identify the Class Member’s name, address, telephone number, and e-mail address, and must be submitted to Class Counsel for processing. (SA, ¶ 4.10.1.)

The replacement e-gift cards described above will be limited to one per household, as determined by the mailing or “IP” address of the claimant. (SA, ¶ 4.10.1.) Class Counsel may contact Class Members to follow up on potentially fraudulent claims provided there exists sufficient evidence raising a credible suspicion about that claim (such as multiple claims being made from the same “IP” address). (Ibid.) In addition, H&M may request that Class Counsel or a designated third-party request further information from a Class Member to verify that member’s claim for a replacement e-gift card. (SA, ¶ 4.10.2.)

The number of $10 replacement e-gift cards will be capped at 3,853, which the parties agree reflects the aggregate remaining balance of $38,530 as to all affected H&M gift cards with balances under $10. (SA, ¶ 4.10.) The replacement e-gift cards will be provided by H&M or H&M Fashion upon the submission of valid claims during the Claims Period. (SA, ¶¶ 4.10.1.)

The Settlement Agreement further provides that, within seven days after the Claims Period ends, Class Counsel will transmit to H&M’s counsel by email, a final accounting of all timely and valid claims. (SA, ¶ 4.10.2.) Within twenty-one days of receipt of these claims, H&M will identify any claims that it or its counsel believe are untimely or invalid. (Ibid.) The parties will promptly work together to resolve any disputes regarding the validity of claims, including by mediating any dispute that they are unable to resolve on their own. (Ibid.)

Within seven days of finalizing all timely and valid claims, H&M or its counsel will transmit to Class Counsel an amount of replacement e-gift cards equaling the lesser of (i) the number of valid and timely claims or (ii) 3,853. (SA, ¶ 4.10.2.) Class Counsel shall, within seven days, transmit the replacement e-gift cards to Class Members making claims. (Ibid.) If more than 3,853 timely and valid claims are submitted, only the first 3,853 timely and valid claims will be honored with a $10 replacement gift card. (Ibid.)

No other monetary relief will be provided to the Class Members apart from the restitution described above. (SA, ¶ 4.10.2.) Further, any amounts not provided to the Class Members due to a failure to submit a claim will remain with H&M. (SA, ¶ 4.13.)

The Settlement Agreement also provides for an incentive award to the Class Representative in the amount of $1,500, in recognition of the risks Plaintiff incurred to commence this action, and the time and effort expended to serve the interests of the class. (SA, ¶ 4.13.) The parties further agree that Class Counsel may recover attorney’s fees and costs in the amount of $75,000, based on the uncertainties of trial, the benefits to be obtained under the proposed settlement, and the costs, risks, and delays associated with the continued prosecution of this litigation, among other things. (SA, ¶ 4.14.)

The Settlement Agreement includes a general release by Plaintiff. (SA, ¶ 5.2.) In addition, the Class Members will release “all known claims, rights, liabilities, damages, judgments, indebtedness, losses, liens, demands, actions, and causes of action of any nature, which [p]laintiff or Class Members alleged or could have alleged based on the facts pled in the Action or have, had, or may have against [H&M] 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 failure by [H&M] to redeem a gift card with a balance of less than $10.00 for cash in California or any statement by [H&M] advising that a gift card with a balance of less than $10.00 is not redeemable for cash in California, including but not limited to, all claims that have been brought or could have been brought based on the facts pled in the Action, and including any claims relating to any policies, practices, or procedures that in any way relate to the redemption of gift cards with a balance of less than $10.00 for cash in California.” (SA, ¶¶ 3.17 & 5.1.)

Subject to the Court’s approval, H&M will publish at its own cost, and within twenty days after the Court grants preliminary approval, a one-quarter page “Summary Class Notice” (the Summary Notice) in the California editions of USA Today which the parties agree is a newspaper with a general circulation coverage over all California H&M locations. (SA, ¶¶ 3.21, 6.2.1 & Exh. 3 [Summary Notice].) The Summary Notice will include a brief explanation of this case and refer readers to the Class Website where a “Full Class Notice” (the Class Notice) will be published with directions on how to make a claim. (Id. at Exh. 2 [Class Notice].)

The Class Notice will be published on the Class Website within twenty days after preliminary approval of the Settlement Agreement, and will be modified upon final approval in regard to the directions for how to make a claim for replacement e-gift card under the procedure described above. (SA, ¶ 6.2.2.) Plaintiff will file with the Court, prior to the final approval hearing, a declaration certifying that the Class Notice was provided pursuant to the Settlement Agreement. (SA, ¶ 6.2.3.)

Under the terms of the Settlement Agreement, Class Members may object to the parties’ settlement by either appearing in person at the final approval hearing, or by serving a written objection on Class Counsel by mail no later than forty-five days after the Class Notice is first issued. (SA, ¶¶ 3.14 & 6.3.) A written objection to the Settlement Agreement must contain the Class Member’s name, home address, and telephone number to permit the parties to confirm that the objector is a Class Member. (SA, ¶ 6.3.) Plaintiff must file all timely and valid objections, including any notices of intention to appear at the final approval hearing that may be received from Class Members (if any) with Plaintiff’s motion for final approval of the Settlement Agreement. (Ibid.)

Class Members may also opt out of the Settlement Agreement by serving a written request for exclusion and delivering that request to Class Counsel, which must be postmarked within forty-five days after the first issuance of the Class Notice. (SA, ¶¶ 3.14 & 6.4.) The written request for exclusion must contain (a) the full name, home address, and telephone number of the person requesting exclusion, (b) the name of this action, and (c) a statement that the person is a Class Member and wishes to be excluded. (SA, ¶ 6.4.) Any Class Member who timely and properly requests exclusion in compliance with the Settlement Agreement will not have any rights under the parties’ settlement, will not be entitled to receive a replacement e-gift card, and will not be bound by the Settlement Agreement or the Court’s order finally approving the settlement. (SA, ¶ 6.4.) If the number of individuals who exclude themselves from the equals or exceeds 100 Class Members, H&M may elect to void the Settlement Agreement. (Ibid.)

The above summary is not intended to be exhaustive in regard to the terms of the Settlement Agreement which the Court has reviewed in full.

The declarations of Plaintiff and Plaintiff’s counsel:

The motion is also supported by a declaration of Plaintiff’s counsel, Neil B. Fineman, who states that, prior to filing this action, Fineman’s firm hired private investigators to determine whether employees at H&M’s retail stores in California were complying with the law. (Fineman Decl., ¶¶ 7 & 10.) These investigations revealed that employees were frequently failing to comply with lawful requests for cash back from gift cards under $10. (Fineman Decl., ¶ 7.)

Fineman further states that, after the complaint was filed, Fineman’s firm prepared and served informal and formal requests for discovery including as to the production by H&M of policy and procedures manuals and spreadsheets of gift card counts and balances. (Fineman Decl., ¶¶ 7 & 11.) Upon the receipt and review of H&M’s verified responses to that discovery, Fineman performed additional investigation and analyses including by hiring an investigator to perform a second set of investigations and audits to determine H&M’s compliance with the law, and by researching marketing databases and secondary sources related to gift card sales and redemptions. (Ibid.)

Fineman asserts that, based on H&M’s discovery responses, there exist approximately 10,100 gift cards sold by H&M in California with a present balance of less than $10. (Fineman Decl., ¶ 4.)

After reviewing the discovery responses of and documents produced by H&M, which permitted Fineman to assess liability, the parties participated in a private mediation with Judge William McCurine, Jr. (Retired) of Judicate West. (Fineman Decl., ¶¶ 7, 9, & 11.)

Fineman states that Judge McCurine proposed a cap of 3,853 claims because the amount of money remaining on all gift cards under $10 totals approximately $36,620. (Fineman Decl., ¶ 12.) Fineman explains that if all replacement gift cards worth $10 were claimed, the amount of money disgorged from H&M would total $36,620. (Ibid.) The parties and Judge McCurine agreed that it would be unjust and unfair if H&M was required to disgorge more money than that which presently exists on gift cards with a balance of less than $10. (Ibid.)

Fineman asserts that all Class Members and those California consumers who own an H&M gift card with a gift card balance above $10, as well as all future H&M gift card holders, will receive equitable benefits if the settlement is approved by the Court. (Fineman Decl., ¶ 13.)

According to Fineman, the identity of each member of the putative class is not known to the parties because the names of the purchasers of H&M gift cards are not recorded, the gift cards are transitory, and the final holder of each gift card is unknown. (Fineman Decl., ¶ 14.) For these reasons, Fineman asserts, notice cannot be given directly to members of the class. (Ibid.) Instead, the parties agreed that H&M will publish, at its own cost, the Summary Notice in the newspaper described above. (Ibid.) The Summary Notice will be published one time and will direct readers to the Class Website where they can review the Class Notice and obtain instructions for submitting a claim for a replacement e-gift card. (Fineman Decl., ¶¶ 14, 6.2.1 & Exh. 3.)

Fineman contends that the Class Notice is sufficient to outline the terms of the proposed settlement, inform class members of their right to object to or opt out of the settlement, and to provide details about the final approval hearing. (Fineman Decl., ¶ 14 & Exh. 3.)

Fineman contends that none of the statutory consumer claims asserted in the complaint would permit a private individual to obtain pecuniary damages, notwithstanding whether the alleged violations of the Consumers Legal Remedies Act, the Unfair Competition Law, and the false advertising law would permit limited injunctive relief on behalf of the class. (Fineman Decl., ¶ 5.) According to Fineman, Plaintiff believes that the injunctive relief agreed upon in the settlement agreement between the parties greatly exceeds the kind and type of injunctive relief that could be ordered by the Court if this matter went to trial and Plaintiff was successful. (Ibid.)

Fineman asserts that the recovery for each class member, if the settlement is approved, will include equitable relief through H&M’s implementation of changes to its policies and practices, and restitution consisting of replacement e-gift cards valued at $10. (Fineman Decl., ¶ 6.)

Fineman also describes his experience with and qualification to represent Plaintiff in consumer class actions such as the present action. (Fineman Decl., ¶¶ 15-18.) Fineman provides his hourly rates for similar litigation, which Fineman asserts are comparable to or below current market rates for experienced California attorneys practicing in the specialized field of complex consumer class action litigation, and the hours expended by Fineman in this litigation. (Fineman Decl., ¶¶ 20-22.) Fineman further asserts that his firm incurred $5,788.11 in litigation costs and expenses. (Fineman Decl., ¶ 23.)

The motion is also supported by a declaration of attorney Phillip R. Poliner, who provides a detailed description of his experience as class counsel in large class actions. (Poliner Decl., ¶¶ 4-5.)

Plaintiff also submits a declaration describing Plaintiff’s efforts, and the number of hours Plaintiff expended, to assist his counsel in this litigation, and the economic and other risks Plaintiff assumed in serving as the Class Representative. (Lewis Decl., ¶¶ 11-16.)

Analysis

 “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 v. Superior Court (2014) 228 Cal.App.4th 81, 93.) “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).)

Noted above, Plaintiff has filed a copy of the Settlement Agreement, the Summary Notice, and the Class Notice. Court records also reflect that Plaintiff lodged a proposed order with the motion. For these reasons, the Court finds that the motion is procedurally appropriate.

Upon a settlement of a class action, “notice of the final approval hearing must be given to the class members in the manner specified by the Court. The notice 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).)

“The rules specify the content of the notice to class members and the factors the Court must consider in determining the manner of notice.” (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1390.) “The content of the class notice is subject to Court approval.” (Cal. Rules of Court, rule 3.766(d).) To the extent Class Members may request exclusion from the Class, the notice must include all the items set forth in California Rules of Court, rule 3.766(d), which include “[a] statement that the Court will exclude the member from the class if the member so requests by a specified date[]” and “[a] procedure for the member to follow in requesting exclusion from the class[.]” (Cal. Rules of Court, rule 3.766(d)(2) & (3).)

 
“The manner of giving notice is subject to the trial Court’s virtually complete discretion.” (Chavez v. Netflix, Inc. (2008) 162 Cal.App.4th 43, 58, original italics.) To determine the sufficiency of the manner of giving the notice to class members, the Court considers the factors set forth in California Rules of Court, rule 3.766(e). “If personal notification is unreasonably expensive or the stake of individual class members is insubstantial, or if it appears that all members of the class cannot be notified personally, the Court may order a means of notice reasonably calculated to apprise the class members of the pendency of the action--for example, publication in a newspaper or magazine; broadcasting on television, radio, or the Internet; or posting or distribution through a trade or professional association, union, or public interest group.” (Cal. Rules of Court, rule 3.766(f).)

The Court has reviewed the terms of the Settlement Agreement described above with respect to the publishing of the Summary Notice and Class Notice, and finds that the manner of giving notice is inadequate to “ ‘ “fairly apprise the prospective members of the class of the terms of the proposed settlement and of the options that are open to them in connection with [the] proceedings.” [Citations.]’ [Citation.]” (7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135, 1164.)

For example, it can be inferred from the present record that each Class Member is a customer of H&M. Rather than requiring publication of an appropriate class notice in a conspicuous location at H&M’s physical retail store locations or on a website maintained by H&M, where consumers who are likely to view or purchase H&M’s products or gift cards would be most likely to be apprised of the Settlement Agreement and the notices described above, the Settlement Agreement contemplates a single one-time publication of only the Summary Notice.

In addition, though the Summary Notice will direct the Class Members to the Class Website where the Class Notice will ostensibly be posted, there is no indication that either the Summary Notice or the Class Notice will be provided in any other manner or place. There is also no information showing why or how a Class Member would be apprised of the existence of the Class Website apart from the one-time publication of the Summary Notice described above and in the Settlement Agreement.

In addition, considering that the Summary Notice will be published only one time and consist of less than half of a page in the publication described above, the way the Summary Notice will be published does not appear to be sufficiently conspicuous or reasonably calculated to apprise the class members of the pendency of this litigation.

The Court further notes that the only retail store postings that advise any person of the applicable provisions of California law provided for in the Settlement Agreement are located in employee-only areas of H&M’s retail stores which ostensibly are not regularly accessed by H&M’s customers.

Further, though the Settlement Agreement requires that a written request for exclusion be postmarked on or before forty-five days after the Class Notice is posted on the Class Website (SA, ¶¶ 3.14 & 6.4), the Class Notice appears to require that any request for exclusion be received, instead of postmarked, by that date. (SA, Exh. 2 at pdf p. 24, ¶ 2.) Plaintiff fails to explain this inconsistency which on its face appears to misinform Class Members as to the date by which a written request for exclusion must be submitted.

The examples provided above are intended to be illustrative but not exhaustive in regard to deficiencies which existing in the manner of giving notice. For all reasons discussed above, the Settlement Agreement does not appear adequate to provide notice to potential settlement class members who are also customers of H&M. Furthermore, the Court is unable to find that a one-time publication of the Summary Notice in the manner described above is sufficient to apprise settlement class members of the Settlement Agreement and the claims these class members will be required to release.

The Court must also “determine the settlement is fair, adequate, and reasonable. [Citations.] The purpose of the requirement is ‘the protection of those class members, including the named Plaintiffs, whose rights may not have been given due regard by the negotiating parties.’ [Citations.]” (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1801, fn. omitted (Dunk).)

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 Class as further defined above include California consumers who currently possess, or possessed, an H&M gift card with a value of less than $10. (SA, ¶ 3.5.) Therefore, the Settlement Agreement as a whole must be fair, adequate, and reasonable with respect to these consumers.

Noted above, the Settlement Agreement requires H&M Fashion to update its employee materials and operating procedures to state that gift cards must be redeemed for cash upon a customer’s request. (SA, ¶ 4.2.) Plaintiff fails to explain why Civil Code section 1749.5 requires a customer to first request a cash redemption before H&M 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, particularly if such customers have, in the past, been denied cash value redemption. Considering that the Settlement Agreement does not provide for any notice regarding a customer’s right to redeem a gift card with a balance below $10 to be placed anywhere other than in employee-only areas (see SA, ¶ 4.5), the Settlement Agreement does not appear fair or adequate.

The Court also questions whether requiring H&M to post notices to employees and web site users regarding the redemption of gift cards with a balance under $10 for 12 months is adequate. (SA, ¶ 4.5 & 4.7.) It is unclear to the Court why H&M is required to provide such notice for only 12 months. The Court also has additional concerns regarding what appears to be a unilateral right by H&M to reject a claim for a replacement gift card as untimely or invalid, and the absence of any clear or conclusive mechanism to resolve any disputes which may arise in connection with any claims for a replacement gift card. (See SA, ¶ 4.10.2.) For these additional reasons, and considering that the Settlement Agreement permits H&M to retain any amounts not provided to the Class Members, the Court is unable to conclude that the settlement is fair or adequate, and not the product of collusion. (Dunk, supra, 48 Cal.App.4th at p. 1801.)

The examples provided above are intended to be illustrative but not exhaustive of the Court’s concerns regarding the adequacy and fairness of the Settlement Agreement. The Court further notes that it is not obligated to provide an itemized list of all concerns with or deficiencies in the Settlement Agreement, and may not issue an advisory opinion as to the manner in which the Settlement Agreement may be revised. Because the manner of giving notice is insufficient, and the Court is unable to determine that the Settlement Agreement is fair, adequate, and reasonable, and not the product of collusion or overreaching for all reasons further discussed above, the Court will deny the motion without prejudice to any appropriate motion for preliminary approval of any revised settlement that may be filed by Plaintiff in the future.