Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Settlements in suit over software protection provider’s auto renewal program preliminarily approved, (Aug 31, 2016)

By Michael Menzhuber, J.D., LL.M.

The federal district court in San Jose preliminarily approved settlements of two class actions arising out of McAfee, Inc.’s operation of its auto-renewal program for its software protection subscriptions after it determined that the requirements for class certification were met and the settlements were fair (Williamson v. McAfee, Inc., August 30, 2016, Davila, E.).

Sam Williamson and Samantha Kirby were enrolled in McAfee’s auto-renewal program after they each purchased a McAfee software protection subscription. Williamson alleged that: (1) his initial subscription was advertised at a discount from an inflated expressly referenced former price; and (2) his renewal subscriptions were charged at a higher price than the current price for the product. Kirby alleged that McAfee debited her expired credit card for a renewal subscription without her authorization.

Williamson and Kirby each brought a putative class action against McAfee which asserted violations of California’s Unfair Competition Law and False Advertising Law. After the parties reached settlement agreements, Williams and Kirby filed motions seeking preliminary approval of the settlements.

Class certification. As an initial matter, the court determined that the classes could be certified because the four requirements in Federal Rule of Civil Procedure 23 were met. With respect to the Rule 23(a) requirements, the court found that: (1) the numerosity requirement was met because the size of the respective classes were 7.53 and 8.85 million members respectively; (2) the commonality requirement was met because the claims of class members from both classes raised common questions arising out of McAfee’s pricing practices; (3) the typicality requirement was met because both Williams and Kirby suffered injuries similar to class members in both classes; and (4) the "fair and adequate" representation requirement was met because neither of the plaintiffs nor their counsel had conflicts of interest with other class members.

With respect to Rule 23(b)(3), the court found that: (1) the "predominance" requirement was met because there were questions of law and fact common to all class members; and (2) the "superiority" requirement was met because each class member’s potential recovery paled in comparison to the legal costs associated with pursuing millions of independent legal actions.

Fairness of settlement. The court found that certain factors weighed against a finding of fairness, including the fact that McAfee had not agreed to change its challenged practice with respect to one of the classes and the amount of the benefit paid to each class member was only one-half of the average overcharge amount. However, it determined that these factors were outweighed by: (1) the significant effort expended by the parties to reach the settlements; (2) the parties’ consideration of the risks, complexities, and challenges associated with a protracted litigation; (3) the counsel for the plaintiffs, who were experienced litigators, supporting the settlement; and (4) McAfee’s agreement to change its challenged practice with respect to one of the classes.

The cases are Nos. 5:14-cv-00158 and 5:14-cv-02475-EJD.

Attorneys: Daniel Morley Kekoa Hattis (Hattis Law) for Sam Williamson. Daniel F. Katz (Williams and Connolly LLP) and Ellen A. Cirangle (Lubin Olson & Niewiadomski LLP) for McAfee, Inc.

Companies: McAfee, Inc.

Cases: StateUnfairTradePractices CaliforniaNews