iTwo Reasons Why Revised Settlement Was Rejected
In April 2018, Kim sued Tinder in the Central District of California alleging age discrimination. Tinder moved to compel the arbitration of Kim’s claims, which the district court granted and consequently stayed the case pending the outcome of arbitration. Kim appealed the arbitration order, but later reached a settlement with Tinder while the appeal was pending. The class was defined to include “every California subscriber to Tinder Plus or Tinder Gold during the Class Period who at the time of the subscription was at least 29 years old and was charged a higher rate than younger subscribers.” The district court approved the settlement, but a group of objectors appealed. The Ninth Circuit reversed the district court’s order finding the lower court had “materially underrated the strength of the plaintiff’s claims, substantially overstated the settlement’s worth and failed to take the required hard look at indicia of collusion.”
On remand, the parties entered into a revised settlement which the district court also approved. The Ninth Circuit has now rejected that revised settlement, holding that Kim was inadequate for two key reasons.
First, the Ninth Circuit found that Kim was inadequate because she was subject to a binding arbitration agreement that did not extend to all members of the class. However, the class also included people who had never agreed to arbitrate. The Ninth Circuit found that Kim had a strong interest in settling her claim because, unlike the 7,000 members who were not bound by an arbitration agreement, she had no chance of going to trial. The Ninth Circuit stated it was an error for the district court to accept Kim’s argument that any conflict was insignificant because only 7,000 members of the 240,000-member class (i.e., 5%) did not have arbitration agreements. The Court held that “even if the district court’s estimate is correct, we have never determined adequacy by deferring to a percentage-of-the-class formula.” The Ninth Circuit stated that Kim’s willingness to risk even a minority of class members’ claims for a fee is “precisely the kind of conflict Rule 23(a)(4) was designed to avoid.”
Second, the Ninth Circuit found that Kim had failed to prosecute the action vigorously on behalf of others. The objectors argued that Kim conducted no discovery, even though Kim could point to two entries from her counsel, totaling five and a half hours, for drafting and finalizing written discovery, and one 30-minute entry for discussing an informal exchange of class information for settlement purposes. The Ninth Circuit found that while this was not “no discovery,” it “certainly [was] not extensive,” and suggested a lack of vigor in Kim’s prosecution of the case. Furthermore, the Court found that Kim’s approach to opposing Tinder’s motion to compel was not suggestive of vigor. The Court noted that Kim failed to make obvious arguments until after they were forfeited. The Court explained that while class representatives “ordinarily. . . will not be rendered inadequate simply because they failed to raise an argument that appears strong in hindsight,” the Court concluded by stating it was clear that Kim did not vigorously litigate this case on behalf of the putative class.
The Potential Impact on Employers
Kim v. Tinder is not an employment case. However, the holding can be beneficial to many employers in class action litigation. When the named plaintiff has an arbitration agreement, but the proposed class includes members who do not, the defendant can use the case to argue that the named plaintiff is inadequate and the class should not be certified. The decision underlines the importance of arbitration agreements and the effect they can have on class issues. Employers should add this case and its teachings to their toolbelt for opposing class certification.
