Bedran v. American Express Travel Related Services

Filed 3/13/07 Bedran v. American Express Travel Related Services CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from a judgment of the Superior Court of Los Angeles County. Charles W. McCoy, Judge. Affirmed.

The Kick Law Firm, Taras Kick and G. James Strenio for Objectors and Appellants Franklin De Julius and Alan Futrell.

Johnson & Rishwain and Brian A. Rishwain for Plaintiffs and Respondents Fajima Bedran, Susan Langan (Settlement Class).

Stroock & Stroock & Lavan, Julia B. Strickland, Andrew W. Moritz and Nancy M. Lee for Defendant and Respondent.

* * * * * *

Objectors and appellants Franklin De Julius and Alan Futrell appeal from a final judgment entered in the action brought by plaintiffs and respondents Fajima Bedran and Susan Langan against defendant and respondent American Express Travel Related Services Company, Inc. (American Express). The judgment followed a statement of decision approving a class action settlement. Appellants contend that the trial court abused its discretion in approving the settlement, certifying the class and awarding attorneys fees.

We affirm. The trial court possessed ample information that permitted it to exercise its discretion in approving the settlement. It considered the relevant factors in finding the settlement fair, adequate and reasonable. It specifically considered that the differences in awards to two distinct groups of class members were rationally based on legitimate considerations and rejected the notion that the settlement involved an improper reversion to American Express. The trial court further acted within its discretion in certifying the class for settlement purpose and approving the award of attorneys fees.

FACTUAL AND PROCEDURAL BACKGROUND

The American Express Membership Rewards Program.

American Express issues American Express credit cards and administers the Membership Rewards program (MRP). The MRP is governed by written terms and conditions. American Express cardholders enrolled in the MRP pay an annual fee and earn one MRP point for each dollar charged on their credit card. MRP members may redeem their points for specified goods and services.

In September 1997, American Express instituted a policy requiring MRP members to pay their monthly bill in full in order to accrue MRP points. If a cardholder disputed a charge, American Express had a further policy to open an investigation and issue a temporary credit in the disputed amount. A cardholder with a valid dispute was therefore entitled to receive MRP points. When there was a delay in issuing this credit, however, American Expresss automated system would conclude that the cardholder had failed to pay the monthly balance in full and the cardholder would not receive any MRP points. As a result, a cardholder with a valid dispute improperly lost MRP points.

The Pleadings and Motions.

Fajima Bedran initially filed this action solely on behalf of the general public in December 2000, alleging a single cause of action for unfair business practice in violation of Business and Professions Code section 17200 et seq. As an additional cardholder on Benjamin Rishwains account, Bedran was never enrolled in the MRP. She sought an injunction and order that American Express restore any MRP points retained by means of the alleged unlawful practice.

For the next two years, the parties vigorously litigated the matter. Discovery was particularly difficult in view of the fact that American Express had no way of systematically determining how many accounts had been affected in the manner Bedran alleged; it could employ only a manual review of each account to ascertain whether MRP points had been forfeited where a cardholder disputed a valid charge and was not timely issued a temporary credit. In late 2002, the parties unsuccessfully mediated the matter before the Honorable J. Lawrence Irving, a retired United States District Court judge.

On January 13, 2003, the trial court granted American Expresss motion for summary judgment, which was brought on the ground that the MRPs choice of law provision in the terms and conditions requiring the application of New York law precluded any claim for violation of Californias Business and Professions Code.^[1]Two days later, the trial court granted an ex parte application for leave for Susan Langan to file a complaint in intervention. Langan filed her complaint on February 13, 2003. On the basis of the same factual allegations underlying the Bedran complaint, Langan brought a class action alleging causes of action under New York law for breach of contract, violation of New York General Business Law section 349 and fraud on behalf of herself and all current and former cardmembers of [American Express] . . . who are or were enrolled in the [MRP] and forfeited or failed to accrue Membership Rewards Points as a result of a temporary credit not being timely placed on the cardmembers account during the period from 1997 to the present . . . .

Shortly after the complaint was filed, American Express moved to compel arbitration pursuant to the arbitration provision contained in the MRP terms and conditions. In May 2003, the trial court issued a statement of decision granting the motion and deeming the matter complex pursuant to the California Rules of Court. (See Cal. Rules of Court, rule 3.403.) As part of its order, the trial court also ruled that the arbitrator was to determine the enforceability of a class action waiver contained in the terms and conditions arbitration provision. In July 2003, Langan filed a demand for arbitration with the American Arbitration Association. The arbitration did not go forward because the parties resumed settlement negotiations in late 2003.

The Class Settlement, Objections and Court Approval.

In March 2004, the parties reached a settlement in principle. In July 2004, they memorialized the settlement in a settlement agreement and general release (settlement agreement). The key terms of the settlement agreement included a credit by American Express of a minimum of 450 million and a maximum of one billion MRP points to class members who were currently enrolled in the MRP, with a fixed amount of 2,500 MRP points per claimant. To the extent that less than 450 million MRP points were redeemed by current MRP members, American Express agreed to convert the difference to cash at a rate of $0.005 per MRP point and distribute that amount to charities approved by the MRP terms and conditions. The settlement agreement also provided that American Express pay Bedran and Langan $3,750 each for their services and risks in being named plaintiffs, pay class counsel up to $1.4 million and 50 million MRP points for attorneys fees and costs, administer the settlement at its own expense and implement appropriate practice changes to address the issues raised in the action relating to the potential improper forfeiture of MRP points.

Bedran and Langan moved for court approval of the settlement in July 2004. As part of their motion, they sought temporary and conditional class certification for settlement purposes only. In August 2004, the trial court entered an order temporarily and conditionally certifying the settlement class for settlement purposes, preliminarily approving the class settlement and class notice, and setting the final approval hearing (fairness hearing) for January 11, 2005.

Pursuant to the trial courts preliminary approval order, American Expressthrough a retained class administratorprovided class notice by publication in USA Today and by mail to 161,530 potential members of the class settlement. As of December 2004, the class administrator had received 16,492 claim forms and 33 requests to opt out of the settlement.

In November 2004, appellants Franklin De Julius and Alan Futrell submitted separate objections to the proposed class settlement; Futrell further submitted a notice of intention to appear at the fairness hearing. Following a continuance and supplemental briefing, the trial court held the fairness hearing on February 15, 2005.^[2]At the hearing, appellants and four other individuals raised two concerns about the settlement: (1) They complained that it favored one class (current MRP members) over another (former MRP members); and (2) they argued that it violated California law by allowing residue from a common fund to revert to American Express. They also noted that the award for attorneys fees seemed disproportionate to the actual number of claims that had been received to date. They specifically noted, however, that they were not maintaining that this is a collusive settlement.

The trial court took the matter under submission. Shortly after the hearing, it issued an order requiring American Express to file a supplemental declaration explaining in greater detail what steps are to be taken to insure that the conduct alleged in this action has ended and shall not be repeated. In response, America Express submitted a declaration from its vice president of compliance, consumer and small business services describing the process that American Express had implemented which was designed to insure that any MRP points that could potentially be forfeited due to late or insufficient temporary credits were reinstated to a cardmembers MRP account.

In April 2005, the trial court filed a statement of decision approving the settlement. It initially concluded that it could presume the settlement was fair because it was reached through arms length bargaining, discovery was sufficient to allow counsel and the court to act intelligently, counsel was adequately experienced under the particular circumstances and the percentage of objectors was small. It further found that an analysis of additional factors yielded the same conclusion that the settlement was fair, reasoning that the outcome of any continuing litigation remained uncertain, the number of objectors and opt-outs was small, and the proposed compensation was reasonable and adequate. Addressing appellants concerns, the trial court found that the settlement did not involve any reversion to American Express and that any inference of unfairness resulting from disparate intraclass treatment was rebutted by a showing that the differences were rationally based on legitimate considerations. Specifically, the statement of decision explained: Current [MRP] members are eligible to redeem MRP points for rewards. Consequently, allowing them to recover redeemable points is rational. Former members are not eligible to accumulate or redeem MRP points . . . . As such, it is illogical to give former members MRP points, a recovery wholly useless to them.

The trial court further approved the request for attorneys fees based on the lodestar method, using a 1.9 multiplier. It concluded that the multiplier was reasonable and fair considering the novel issues raised by and complex nature of the case, the quality of representation, risk undertaken by counsel and significant result.

On May 2, 2005, the trial court entered judgment in accordance with the settlement agreement. This appeal followed.

DISCUSSION

Appellants contend that the judgment is unfair, inadequate and unreasonable. More pointedly, they argue that the trial courts statement of decision was based on erroneous information; that the trial court erroneously applied a presumption of fairness to the settlement; and that the trial court abused its discretion in concluding that the settlement was fair, certifying the class and awarding attorneys fees.

We affirm. By not objecting to the statement of decision, appellants waived any claim that the decision was based on factual errors. More importantly, the trial court properly exercised its discretion in applying a presumption of fairness to the settlement and in evaluating additional relevant factors to find the settlement fair, adequate and reasonable. It carefully considered the arguments that appellants raise on appeal, finding that any intraclass differences were rationally based on legitimate considerations and that the settlement did not involve any reversion to American Express. Likewise, the trial court properly exercised its discretion in certifying the class and awarding attorneys fees.

I. Standard of Review.

We review the trial courts approval of a class action settlement for an abuse of discretion. As set forth in Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 18011802 (Dunk): The trial court has broad discretion to determine whether the settlement is fair. . . . [] . . . [] Our task is limited to a review of the trial courts approval for a clear abuse of discretion. [Citations.] We will not substitute our notions of fairness for those of the [trial court] and the parties to the agreement. [Citations.] [Citation.] So long as the record . . . is adequate to reach an intelligent and objective opinion of the probabilities of success should the claim be litigated and form an educated estimate of the complexity, expense and likely duration of such litigation, . . . and all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise, it is sufficient. [Citations.] The Dunk court summarized: Ultimately, the [trial] courts determination is nothing more than an amalgam of delicate balancing, gross approximations and rough justice. [Citation.] (Id. at p. 1801.)

In 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th 1135, 11451146 (7-Eleven Owners), the court echoed this standard, stating: Great weight is accorded the trial judges views. The trial judge is exposed to the litigants, and their strategies, positions and proofs. He is aware of the expense and possible legal bars to success. Simply stated, he is on the firing line and can evaluate the action accordingly. [Citations.] To merit reversal, both an abuse of discretion by the trial court must be clear and the demonstration of it on appeal strong. [Citations.] (Accord In re Microsoft I-V Cases (2006) 135 Cal.App.4th 706, 723 [on appeal from a trial courts approval of a class action settlement, [o]ur task is limited to a review of the record to determine whether it discloses a clear abuse of discretion when the trial courts determination of fairness is challenged on appeal. We do not substitute our notions of fairness for those of the trial court or the parties to the agreement]; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 235 [Our task is not to determine in the first instance whether the settlement was reasonable or whether certification was appropriate. We determine only whether the trial court acted within its discretion in making the rulings that it did].)

We reject appellants assertion that the abuse of discretion standard should not be applied here because the trial judge who approved the settlementJudge McCoywas not the only judge on the case and had inadequate information to make a reasoned decision. The record establishes that Judge McCoy received the case in January 2003 and presided over the matter until judgment was entered in May 2005. As set forth in the statement of decision, during that time the parties conducted substantial discovery and significant research, and [a]s a result, both the parties and the Court now possess a record sufficient to allow intelligent analysis regarding the claims, issues, risks, and settlement terms involved in the instant litigation. Indeed, in view of Judge McCoys extensive involvement with the case, another judge declined to conduct the fairness hearing and continued it so that Judge McCoy could preside. Under these circumstances, we see no basis for applying a standard of review other than abuse of discretion. (See
7-Eleven Owners, supra, 85 Cal.App.4th at pp. 11661167 [given that so many imponderables enter into the evaluation of a [class] settlement [citation], an abuse of discretion standard of appellate review is singularly appropriate].)

II. The Trial Court Properly Exercised Its Discretion in Approving the Class Settlement.

A. Appellants Waived Any Claim That the Approval is Based on Erroneous Information.

Appellants initially challenge the trial courts approval of the class settlement on the ground that it was premised on erroneous information concerning the potential total number of MRP points improperly forfeited by class members. According to the statement of decision, the 450 million to one billion MRP point range of American Expresss payout was based on samplings performed by plaintiff which estimated forfeiture occurrences between 7% and 19% of 1.5 million accounts with total forfeitures of between 250 million and 675 million points (based on an average forfeiture of 2,365 per affected account). Appellants contendwithout citation to the recordthat discovery showed a potential of a 20 percent forfeiture rate on 4.2 million accounts, rather than the percentage and account figures upon which the settlement figures were based.

Judgments and orders of the lower courts are presumed to be correct on appeal. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) Under Code of Civil Procedure section 632, after the court issues its tentative decision, a party may request a statement of decision explaining the basis for its ruling. Thereafter, under section 634, the party must state any objection to the statement in order to avoid an implied finding on appeal in favor of the prevailing party. . . . [I]f a party does not bring such deficiencies to the trial courts attention, that party waives the right to claim on appeal that the statement was deficient . . . and hence the appellate court will imply findings to support the judgment. (Arceneaux, supra, at pp. 11331134, fn. omitted.) (In re Marriage of Cohn (1998) 65 Cal.App.4th 923, 928.) Appellants failed to file any objections to the statement of decision containing the supposed factual inaccuracies. They have therefore waived their claim of error on appeal. (See Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1380 [any defects in the trial courts statement of decision must be brought to the courts attention through specific objections to the statement itself]; Rebney v. Wells Fargo Bank (1991) 232 Cal.App.3d 1344, 13491350 [same]; cf. 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, 394, pp. 444445 [An appellate court . . . ordinarily [will] not consider procedural defects . . . in connection with relief sought . . . where an objection could have been, but was not, presented to the lower court by some appropriate method].)

B. The Trial Court Properly Exercised Its Discretion in Applying a Presumption of Fairness to the Class Settlement.

A trial court must approve a class action settlement agreement and may do so only after determining it is fair, adequate, and reasonable. [Citation.] It is vested with a broad discretion in making this determination. [Citation.] In exercising its discretion, that court should consider relevant factors, which may include, but are not limited to the strength of the plaintiffs case, the risk, expense, complexity and duration of further litigation as a class action, 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 class members to the proposed settlement. At the same time, the trial court should give [d]ue regard . . . to what is otherwise a private consensual agreement between the parties. [Citation.] Such regard limits its inquiry 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. [Citations.] (In re Microsoft I-V Cases, supra, 135 Cal.App.4th at p. 723, fn. omitted.) Though the burden is on the settlements proponents to show that it is fair, adequate and reasonable, the trial court may operate under a presumption of fairness when the settlement is the result of arms-length negotiation, investigation and discovery that are sufficient to permit counsel and the court to act intelligently, counsel are experienced in similar litigation, and the percentage of objectors is small. [Citation.] (Ibid.; accord Dunk, supra, 48 Cal.App.4th at p. 1802.)

In determining whether to apply a presumption of fairness to the settlement here, the trial court expressly analyzed each of the relevant factors. First, it found that [t]he parties reached this agreement after arms length bargaining as evidenced by the more than three years of litigation, attempts at mediation, and nine months spent negotiating a detailed agreement. It correctly noted that appellants had conceded this at the fairness hearing; they stated that they were not alleging that the settlement was collusive and that counsel fought hard throughout the litigation. Second, it found that the parties had conducted substantial discovery. It noted that a large part of the discovery efforts had been directed toward ascertaining a means of identifying injured cardholders, and American Expresss inability to make that identification was a factor in structuring the settlement. Third, it found that all counsel possessed the necessary experience to settle a case of this complexity, noting that class counsel had decades of experience litigating similarly complex matters. Finally, it noted that the opt-out rate was less than one-half of one percent and the rate of objectors was less than one-tenth of one percent, both relatively small ratios. On the basis of these findings, the trial court concluded that it could presume the settlement was fair, adequate and reasonable.

Appellants contend the trial court abused its discretion in reaching this conclusion for multiple reasons. We find none persuasive. First, appellants reiterate their waived argument that the trial court lacked adequate information to presume the settlement fair. Even absent any waiver, the record belies their assertion. The trial court had before it the results of years of discovery. On the basis of the information gleaned through that discovery, it determined that the amount and manner of the settlement payout was fair and reasonable, despite being aware that Bedran and Logan had extrapolated damages figures from the same discovery that exceeded the estimates ultimately relied on by the parties in structuring the settlement. The trial court possessed adequate information to make a rational and educated determination about the fairness of the settlement. (Dunk, supra, 48 Cal.App.4th at pp. 18021803 [ideal record for trial court to make fairness determination where the settled case was over three years old, the parties had conducted extensive discovery and pretrial litigation, and the trial court considered the extensive court file and the voluminous pleadings filed in support of and in opposition to the settlement].)

We likewise reject appellants second contention that the trial court could not apply a presumption of fairness because the settlement was entered prior to class certification. As explained by the court in Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at page 240: California courts have recognized that class action settlements should be scrutinized more carefully if there has been no adversary certification. [Citation.] This reflects concerns that the absent class members, whose rights may not have been considered by the negotiating parties, be adequately protected against fraud and collusion. [Citations.] However, these concerns are satisfied by a careful fairness review of the settlement by the trial court. Here, the trial courts careful evaluation of the relevant factors in reviewing the settlement ensured that absent class members were adequately protected.

Further, that former MRP members and current MRP members receive different forms of compensation is not a basis for declining to apply a presumption of fairness. Disparate treatment is not one of the factors to be considered in determining whether a settlement should be presumed fair. (Dunk, supra, 48 Cal.App.4th at p. 1801.) Similarly, that the settlement provides only nonpecuniary relief is not a relevant consideration in the trial courts determination to apply a presumption of fairness.^[3] (Ibid.)

Properly addressing one of the relevant Dunk factors, appellants further contend that the trial court placed too much emphasis on the relatively small percentage of objectors, noting that class members most likely lacked incentive to object in view of the small amount at stake per MRP member. But the amount at stake has never been a basis for determining whether a small percentage of objectors supports a presumption of fairness.^[4] (See, e.g., Boyd v. Bechtel Corp. (1979) 485 F.Supp. 610, 624 [fairness of settlement apportioning $120,000 among 717 class members affirmed, despite objections from 16 percent of the class, including three of four named plaintiffs].) Rather, as explained in In re Austrian & German Bank Holocaust Litigation (S.D.N.Y. 2000) 80 F.Supp.2d 164, 175, courts have held that receipt of objections comparable to or even greater than the level received here supports a presumption of fairness: If only a small number of objections are received, that fact can be viewed as indicative of the adequacy of the settlement. [Citation.] Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 118119 (3d. Cir. 1990) (29 objections out of 281 member class strongly favors settlement); Laskey v. Intl Union 638 F.2d 954 (6th Cir. 1981) (The fact that 7 out of 109 class members objected to the proposed settlement should be considered when determining fairness of settlement.); Marisol A. v. Giuliani, 185 F.R.D. 152, 162 (S.D.N.Y. 1999) (The Court views the small number of comments from a plaintiff class of over 100,000 children as evidence of the Settlement Agreements fairness, reasonableness and adequacy.). Pursuant to this authority, that the number of opt-outs and objectors here was well below one percent supported a presumption of fairness.

Finally, appellants contend that the trial court abused its discretion in concluding that the settlement was the result of arms-length negotiations and argue that several aspects of the settlement constituted evidence of collusion. But appellants took exactly the opposite position before the trial court. During the fairness hearing, they asserted: Also, we are not maintaining that this is a collusive settlement. . . . And we are not alleging that this was collusive, [all counsel] certainly fought very hard in the litigation process. . . . And for those of you who believe in class action as a vehicle, it is a good example of why the system can work. It is well established that a party is not permitted to change his position and adopt a new and different theory on appeal when the new theory involves a disputed factual situation not put in issue below. To permit a party to do so would be unfair to both the opposing litigant and the trial court. (E.g., Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 920; Sommer v. Gabor (1995) 40 Cal.App.4th 1455, 1468.) It is equally well established that a party is bound by the stipulation or open admission of his counsel and cannot mislead the court and jury by seeming to take a position on issues and then disputing or repudiating the same on appeal. [Citations.] (People v. Pijal (1973) 33 Cal.App.3d 682, 697.) Accordingly, appellants may not contend on appeal that the settlement is collusive when they took precisely the opposite position below.

In sum, the trial court acted well within its discretion in applying a presumption of fairness to the settlement.

C. The Trial Court Properly Exercised Its Discretion in Evaluating the Relevant Factors to Find the Settlement Fair, Reasonable and Adequate.

Beyond merely presuming the settlement fair, the trial court analyzed several other relevant factors to conclude that the settlement was fair, adequate and reasonable. (See In re Microsoft I-V Cases, supra, 135 Cal.App.4th at p. 723; Dunk, supra, 48 Cal.App.4th at p. 1802.) With respect to the strength of the plaintiffs case, it reasoned that the outcome of any continuing litigation remained uncertain. It expressly weighed the strength of Bedran and Langans showing of American Expresss liability against their ability to successfully pursue the matter, considering both that summary judgment had been granted against Bedran and that Langan may be required to arbitrate her claim individually. It concluded that the procedural posture of the case intensifie[d] the uncertainty inherent in any litigation, exacerbating the potential costs, risks, and duration of further proceedings here. In addition, it found the amount and type of compensation reasonable, noting that the proposed MRP point award per class member exceeded the estimated average loss and that requiring American Express to change its practices would prevent future similar harm.

In approving the settlement, the trial court also rejected the precise challenges that appellants renew on appeal. In response to the argument that the settlement was unfair because it treated former MRP members differently than current members, the statement of decision provided: [T]he disparity is based on reasonable differences inherent in class member status as either former or current cardholders and MRP program members. Current members are eligible to redeem MRP points for rewards. Consequently, allowing them to recover redeemable points is rational. Former members are not eligible to accumulate or redeem MRP points. In fact, upon choosing to leave the MRP program, former members freely chose to forego their ability to redeem MRP points. As such, it is illogical to give former members MRP points, a recovery wholly useless to them. Under the proposed settlement, Defendant redeems former class members points in the form of charitable contributions, contributions normally attainable from MRP program point redemption. This recovery method is particularly appropriate here due to the difficulty and expense required to ascertain the former members identities.

We conclude that the trial court properly exercised its discretion in concluding that disparate treatment of current versus former MRP members did not render the settlement unfair.^[5] Addressing a virtually identical argumentthat a class settlement improperly discriminated against former franchisees in favor of current franchiseesthe 7-Eleven Owners court stated: There is, however, no legal requirement that all members of the class must participate equally in any settlement. While intraclass disparities may be a signal of unfairness, the inference is rebuttable by a showing that differences in treatment are rationally based on legitimate considerations. [Citations.] (7-Eleven Owners, supra, 85 Cal.App.4th at pp. 11621163; see also Curtiss-Wright Corp. v. Helfand (7th Cir. 1982) 687 F.2d 171, 175 [When a . . . judge approves a class action settlement . . . , he almost always overrides the wishes of some class members for a bigger share of the pie. But his decision . . . , will be upheld unless he is found to have abused his discretion].) Here, the trial court offered a rational, detailed analysis as to why the disparity in treatment was logical and reasonably based on differences inherent in class member status as either a current or former MRP member. We find no abuse of discretion. (See In re Vitamin Cases (2003) 107 Cal.App.4th 820, 824, 830 [cash payment to commercial class and charitable distribution to consumer class upheld, where distinction was based on the legitimate consideration of potential exorbitant distribution cost of cash payment to consumer class].)

We likewise reject appellants contention that payment in the form of a charitable contribution is inadequate compensation to former MRP members.^[6] Again, the trial court identified the legitimate considerations that supported the distribution to charity: Charitable contributions were included in the settlement here to compensate former [MRP] members who Defendant cannot readily identify without a cost-prohibitive processa process which, if required of Defendant, would doubtlessly have prevented the parties from reaching an agreement. . . . The contributions here serve their intended purpose. Defendant does not retain the alleged ill-gotten gains. Class members receive compensation in the form of a charitable contribution to organizations included in the MRP program. The trial court properly exercised its discretion in concluding: Thus, class counsel negotiated into the settlement a method by which former members were to receive an equitable compensation while avoiding prohibitive identification expenses and maintaining the settlements integrity. (See In re Microsoft I-V Cases, supra, 135 Cal.App.4th at pp. 727, 728 [trial court properly exercised its discretion in approving settlement that provided for charitable distribution of vouchers where it determined that the class reasonably balanced the substantial and certain benefits against the risk, uncertainty and delay inherent in ongoing litigation].) These circumstances are unlike those in Mirfasihi v. Fleet Mortg. Corp. (7th Cir. 2004) 356 F.3d 781, 784786, cited by appellants, where the appellate court reversed approval of a settlement that provided for a charitable distribution in lieu of direct compensation to one class because the contribution was disproportionately low when compared to the potential damages figure and the class had not received any form of notice of the settlement.

The trial court properly exercised its discretion in overruling appellants objections on the ground of disparate treatment, finding: Under these circumstances and in light of the litigations uncertainty, the expense, and potential duration if litigation continued, the difficulty and expense of identifying former MRP members, and overall considerations of fairness and justice, the charitable contribution recovery method submitted by the parties meets the requisite fairness, adequacy, and reasonableness standards.

In addition to disparate treatment, appellants other principal challenge to the settlement is that the trial court abused its discretion by allowing a portion of the settlement to revert to American Express. Appellants rely on a discussion in State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460, where the court explained the steps involved in implementing a class settlement with a fluid recovery component: First, the defendants total damage liability is paid over to a class fund. Second, individual class members are afforded an opportunity to collect their individual shares by proving their particular damages, usually according to a lowered standard of proof. Third, any residue remaining after individual claims have been paid is distributed by one of several practical procedures that have been developed by the courts. [] . . . . The principal methods include a rollback of the defendants prices, escheat to a governmental body for either specified or general purposes, establishment of a consumer trust fund, and claimant fund sharing. All of these methods promote the policies of disgorgement and deterrence by ensuring that the residue of the recovery does not revert to the wrongdoer. (Id. at pp. 472473.)

In the statement of decision, the trial court explained why the settlement did not involve an improper reversion: [Appellants] argument hinges on an assertion that the settlement creates a one billion point fund. This is not so. Rather, the agreement creates the potential for a one billion point recovery in the event enough class members were to submit claim forms. . . . The one billion point contingency created a buffer to ensure that, should a large number of aggrieved class members come forward, sufficient compensation would exist[] to satisfy their recovery. In the event all 161,530 individuals to whom notice was sent tendered a valid claim, fewer than 405 million points would have been exhausted. This adequately demonstrates an intent that the recovery would not reach the one billion point ceiling. The only fund arguably created is a fund consisting of the 450 million point minimum, none of which is reverting to Defendant. Because the one billion point number was not a fund, but rather a contingent maximum potential recovery, the proposed settlement does not involve any residual reversion to Defendant and violates neither state nor federal law.

The trial court properly exercised its discretion in construing the settlement as not providing for a reversion to American Express. Indeed, the settlement appears to have been structured so as to obviate the need to reconcile the parties dramatically different estimates of the number of potential claimants. It provides for a minimum payment of 450 million pointsan amount more than adequate to cover the number of claims anticipated by American Express. But it also provides for a contingency amount of up to one billion points in the event that the number of claimants instead approaches the level suggested by appellants. Under these circumstances, the trial court acted within its discretion in finding no reversion. (See, e.g., Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 235 [Our task is not to determine in the first instance whether the settlement was reasonable . . . . We determine only whether the trial court acted within its discretion in making the rulings that it did].)

In any event, California law does not prohibit a class action settlement from providing for a reversion to a defendant. The court in In re Microsoft I-V Cases, supra, 135 Cal.App.4th 706 recently held that a court has discretion to approve a settlement that includes for a reversion of unpaid residual funds, so long as the settlement as a whole is fair, adequate and reasonable. (Id. at pp. 719722.) The court flatly rejected appellants contention that Code of Civil Procedure section 384^[7]bars any reversion, reasoning that the statute applies only where the settlement itself makes no provision for the distribution of unpaid residual funds. (In re Microsoft I-V Cases, supra, at pp. 722723; accord In re Vitamin Cases, supra, 107 Cal.App.4th at pp. 828-829 [explaining the residual distribution required by Code of Civil Procedure section 384 applies where settlement agreement does not describe the intended disposition of the residue and thereby fails to afford class members a means to object to the later adoption of a distribution method].) Appellants failure to acknowledge this recent case law does not lessen its impact.

The trial court also acted within its discretion in approving a distribution to charity as opposed to a cash payment to former MRP members. Beyond complaining about the settlements disparate treatment of former MRP members, appellants further contend that the settlement unfairly provides former MRP members with no benefit and no opportunity to self-identify to claim some form of compensation. The trial court found the charitable contribution method appropriate both because the selected charities were part of the MRP redemption options and in view of the expense involved in locating and identifying former members.^[8]Under similar circumstances, when it is not possible or practicable in a class action judgment to compensate class members according to their respective damages, courts approve settlements with a charitable contribution component despite the probability that some class members will not benefit whereas some nonmembers will. (In re Microsoft I-V Cases, supra, 135 Cal.App.4th at p. 716.) Moreover, when presented with a settlement that provides for a charitable contribution, the trial court has no duty to investigate other possible alternatives. The courts proper focus in this context is not so much whether another type of distribution might be better, but the extent to which the distribution, as proposed, is appropriately useful in fulfilling the purposes of the underlying cause of action. [Citation.] (Id. at p. 724.) Here, the trial court acted within its discretion in concluding that the charitable contribution aspect of the settlement was fair, adequate and reasonable. (See In re Vitamin Cases, supra, 107 Cal.App.4th at p. 832 [settlement agreement approved where class members received no direct individual benefit and entire distribution was in the form of a charitable fluid recovery].)

Finally, we find no merit to appellants contention that the failure to provide any direct monetary compensation to any class members renders the settlement unfair. Appellants claim that In reGeneral Motors Corp. Pick-Up Truck Fuel Tank (3d Cir. 1995) 55 F.3d 768 demonstrates that the award of MRP points should have raised a concern that the settlement was inadequate in view of the courts observation there that the fact that the settlement involves only non-cash relief, which is recognized as a prime indicator of suspect settlements, increases our sense that the classs interests were not adequately vindicated. (Id. at pp. 802, 803.) The trial court here, however, made specific findings that allayed any suspicion: Here, the proposed compensation exceeds the estimated average loss. Additionally, as part of this settlement, Defendant has altered its practices to prevent similar future harm. Class members are compensated for their loss, cardholders avoid future point forfeitures, and the parties escape costly, uncertain, and time-consuming litigation. These findings are akin to those in In re Microsoft I-V Cases, supra, 135 Cal.App.4th 706, where the appellate court held that the trial court properly exercised its discretion in finding a settlement fair even though the compensatory benefit to class members was indirect. (Id. at pp. 726727.)

In sum, the trial court analyzed the settlement carefully, applied the appropriate criteria and acted within its discretion in finding that the parties [met] the requisite fairness, adequacy and reasonableness standards.

III. The Trial Court Properly Exercised Its Discretion in Certifying the Class.

At the time it preliminarily approved the class settlement in August 2003, the trial court temporarily and conditionally certified the settlement class for settlement purposes. It defined the class as: All current and former cardmembers (CM(s)) of American Express . . . who are or were enrolled in the Membership Rewards Program (MRP) and forfeited or failed to accrue MRP points as the result of a credit not being timely placed on the CMs accounts during the period from January 1, 1997 to the [date of preliminary approval]. As part of the judgment, the trial court determined and adjudged the settlement class as final and permanent for the purposes of this action and settlement.

In Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th 224, the court explained that class action settlements should be scrutinized more carefully if there has been no adversary certification. [Citation.] This reflects concerns that the absent class members, whose rights may not have been considered by the negotiating parties, be adequately protected against fraud and collusion. [Citations.] However, these concerns are satisfied by a careful fairness review of the settlement by the trial court. . . . The possibility of abuse in such cases is held in check by the requirement that the judge determine the fairness of the settlement before he can approve it. [Citation.] (Id. at p. 240.) Here, as discussed above, the trial court carefully evaluated the settlements fairness and considered the interests of all class members, thereby alleviating any concerns arising from the absence of adversary certification.

A class action is appropriate 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 . . . . The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] 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. [Citation.] (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326; see also Code Civ. Proc., 382.)

We find no merit to appellants claim that the trial court abused its discretion in certifying the class because the requirements of representation and typicality were not met. (See Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326 [order granting class certification reviewed for an abuse of discretion].) In its certification order, the trial court made specific findings to support its conclusion that the proposed class satisfied the class certification prerequisites: [T]his Court preliminarily finds, solely for purposes of this settlement that: (a) the Settlement Class members are so numerous that joinder of all Settlement Class members in the action is impracticable; (b) there are questions of law and fact common to the Settlement Class which predominate over any individual questions; (c) the claims of the plaintiff Susan Langan (Langan) are typical of the claims of the Settlement Class; (d) Langan and her counsel have fairly and adequately represented and protected the interests of all of the Settlement Class members; and (e) a class action is superior to other available methods for the fair and efficient adjudication of the controversy . . . . These findings demonstrate that the trial court acted within its discretion in considering the appropriate criteria to certify the class. (See Sav-On Drug Stores, Inc. v. Superior Court, supra, at pp. 326, 327 [because a trial court is ideally situated to evaluate permitting a class action, it has great discretion in granting or denying a certification order, and [a]ny valid pertinent reason stated will be sufficient to uphold the order].)

Appellants assert that certification was inappropriate because there was no class representative at the time a settlement was reached in December 2002. There is no support in the record for this assertion; the record demonstrates that a settlement was not reached until March 2004, well after Langan had intervened.

Alternatively, they argue that Langana current MRP memberwas inadequate to represent the interests of former MRP members. The court in Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th 224 rejected a virtually identical argument. There, a class action ensued after Apple Computer discontinued its policy to provide free technical support to the owners of certain Apple products and instead instituted a fee-based support system. (Id at pp. 230231.) The class included some members who had paid Apple for technical support, some who had paid for technical assistance elsewhere, some who had called Apple and were refused free technical support but did not pay for support, and some who were simply deterred from calling at all by the change in policy. (Id. at p. 238.) Objectors to the proposed settlement argued that the class representativeswho had sought free technical support by calling Apple and had their requests refusedcould not adequately represent all of the different subgroups in the class. (Ibid.)

The Wershba court expressly disagreed: The fact that the class representatives had not personally incurred all of the damages suffered by each different class member does not necessarily preclude their providing adequate representation to the class. [Citation.] Differences in individual class members proof of damages is not fatal to class certification. [Citations.] (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 238.) The court concluded that there was a well-defined community of interest among the class members, as all had suffered a common alleged wrong of being deprived of free technical support. (Id. at p. 239.) Similarly here, all class members suffered the common alleged wrong of forfeiting or failing to accrue MRP points as a result of a temporary credit not being timely placed on their account. The fact that their ability to redeem MRP points differed was not fatal to certification. The trial court acted within its discretion in concluding that Langan is an adequate and typical representative of the conditionally certified Settlement Class . . . .

IV. The Trial Court Properly Exercised Its Discretion in Approving the Award of Attorneys Fees.

The settlement provided for an award of attorneys fees in the amount of $1.4 million, plus 50 billion MRP points, for a total value of $1.65 million. Appellants only challenge to the award is that it is disproportionate to the amount recovered by class members, representing 800 percent of the recovery to class members with filed claims and 70 percent of the balance of the settlement to be paid to charity.

In the statement of decision, the trial court properly exercised its discretion in rejecting the identical argument. (See Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132 [The experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong].) The trial court stated: The objectors proportional analysis is improper and misapplied. . . . Class counsel has based the fee request on the Lodestar method, not on a proportional fee request. Counsel claims 2,475 hours over a four year period of intense and contentious litigation, a reasonable number of hours under the circumstances. Counsel calculated its fee based [on] the 2,475 hours to equal $840,000, a rate of less than $350 per hour, reasonable for litigation of this complexity and scale. Counsel further requests $40,000 in costs and seeks a 1.9 multiplier.

Courts recognize two methods for calculating attorney fees in civil class actions: the lodestar/multiplier method and the percentage of recovery method. (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 254.) Under the lodestar approach employed by the trial court, a lodestar figure is calculated by multiplying the reasonable hours expended by a reasonable hourly rate. (Ibid.) The court may then adjust the fee upward or downward using a multiplier. (Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 833. Multipliers can range from 2 to 4 or even higher. [Citation.] (Wershba v. Apple Computer, Inc., supra, at p. 255.) In determining whether to apply a multiplier, courts consider: (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. [Citation.] (Ketchum v. Moses, supra, 24 Cal.4th at p. 1132.)

The trial court expressly analyzed these factors in approving the attorney fee award: Here, counsel confronted novel and complex issues including, but not limited to, potential class action preclusion, a choice of law clause affecting representative actions, a large number of potential class members, difficulty in ascertaining the number of points forfeited, and identifying affected class members. Such numerous and varied issues only served to intensify the risk of undertaking this case on a contingent basis. Clearly, plaintiffs counsel utilized their decades of complex litigation experience in achieving a recovery greater than the average number of points forfeited per aggrieved class member. In addition, this litigation produced a change in Defendants procedures, thereby preventing future MRP point forfeiture. Considering the cases complex nature and novel issues, the quality of representation and significant result, in light of the risk undertaken by counsel, a 1.9 multiplier is reasonable and fair under the circumstances . . . . We find no basis to disturb the trial courts careful exercise of its discretion in approving the attorney fee award under the lodestar approach.

DISPOSITION

The judgment is affirmed. Respondents to recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_______________________, Acting P. J.

DOI TODD

We concur:

_____________________, J.

ASHMANN-GERST

_____________________, J.

CHAVEZ

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^[1] On January 24, 2003, the trial court entered a separate judgment against Bedran and she filed a notice of appeal from that judgment on January 31, 2003. Briefing in that appeal has been stayed pending the outcome of this matter. (See Bedran v. American Express Travel Related Services, No. B165348.)

^[2]The judge who had tentatively approved the settlement, Judge McCoy, had since been reassigned as the supervising judge. Part of the reason for the continuance was to insure that Judge McCoy presided over the fairness hearing.

^[3]We address these arguments on the merits in part II.C., post.

^[4]California courts ruling on class action issues may look to federal courts in the absence of California law on a particular subject. (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 821; Dunk, supra, 48 Cal.App.4th at p. 1801, fn. 7.)

^[5]Bedran and Langan and American Express contend that appellantsas current MRP memberslack s