Business & Practice

FTD Bankruptcy Could Derail Class Petition Before Supreme Court

June 11, 2019, 7:12 PM

A petition seeking U.S. Supreme Court review of the practice of distributing class settlement funds to charity will likely be put on hold after the defendant’s parent company declared bankruptcy.

Provide Commerce LLC notified the trial court that approved the settlement that parent FTD Cos. filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware June 3.

The Bankruptcy Code imposes an automatic stay on all litigation against the company, Provide told the U.S. District Court for the Southern District of California June 10.

The stay should affect the Supreme Court petition challenging the settlement’s terms, although nothing on the court’s docket reflects a stay yet.

The settlement resolves allegations that Provide and Regent Group Inc. unlawfully enrolled online consumers in a rewards program and charged them a monthly fee when they accepted a $15 “thank you” gift.

Provide agreed to pay $12.5 million in cash plus $20 merchandise credits sent automatically to class members even if they didn’t submit claims. If all class members had used the $20, the total settlement would have been worth $38 million.

Only 3,000 of the 1.3 million class members made claims for cash, resulting in a $225,000 payout. Class counsel gets $8.85 million in attorneys fees and $3 million goes to three San Diego universities.

Rather than sending the $3 million to charities as “cy pres,” the parties to the deal should have made more of an effort to distribute those funds to the class members, objector Brian Perryman told the Supreme Court in his June 7 reply brief.

The Provide case gives Perryman’s counsel Ted Frank another chance to get Supreme Court review of cy pres distributions. The court punted in March after hearing oral argument in his other case, Frank v. Gaos, which concerned the distribution of all of an $8.5 million Google privacy settlement to charity.

Andrus Anderson LLP, Gupta Wessler PLLC, and Steckler Law Group LP represent the class. Cooley LLP represents Provide. The Hamilton Lincoln Law Institute Center for Class Action Fairness represents Perryman.

Jones Day and Richards, Layton & Finger P.A. represent FTD in bankruptcy court.

The case is Perryman v. Romero, U.S., No. 18-1074, 6/10/19.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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