On December 5, 2023, the Ninth Circuit vacated a decision by a district court approving a $5.2 million class action settlement between plaintiff Lisa Kim and Tinder, Inc., a mobile dating app. The case alleged that Tinder’s pricing scheme—which charges users over the age of 29 more for its premium packages than users under the age of 29—is discriminatory and violates California’s Unruh Civil Rights Act, Cal. Civ. Code §§ 51 et seq, and California’s unfair competition law, Cal. Bus. & Prof. Code §§ 17200 et seq. This was the second time the Ninth Circuit reversed the district court’s approval of a class settlement in this case.
The first settlement, where Tinder had agreed to a $17.3 million payout, was rejected in 2021. The Ninth Circuit vacated the settlement’s approval, holding that 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” (noting, in particular, “a request for attorneys’ fees that dwarfed the anticipated monetary payout to the class[,]” see Op. at 9 (citing Kim v. Allison, 8 F.4th 1170, 1174-75 (9th Cir. 2021)(“Kim I”)).
Last week, a revised settlement of $5.2 million was again rejected by the Ninth Circuit. The panel held that Kim was not an adequate class representative because she had a conflict of interest with the class and failed to vigorously litigate the case.
First, the Ninth Circuit held that Kim had a conflict of interest with the class because she was subject to an arbitration agreement that did not extend to all members of the class. On July 31, 2015, Tinder adopted terms of use that included arbitration and choice-of-law provisions. It was undisputed that Kim had signed on to her Tinder account multiple times after the terms of use were adopted and therefore was subject to its terms. However, the class included people who had never agreed to the terms and thus were not subject to the arbitration and choice-of-law provisions. According to the panel, 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 class did not sign the terms of use (only 5% of the 240,000-member class). 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.” Op. at 14. The Ninth Circuit described Kim’s willingness to risk even a minority of class members’ claims for a fee as “precisely the kind of conflict Rule 23(a)(4) was designed to avoid.” Id.
Second, the panel found that Kim had failed to prosecute the action vigorously on behalf of the class. While the objectors argued that Kim conducted “no” discovery, Kim’s proposed fee award actually included two entries for preparing written discovery and exchanging class data and information for settlement purposes for a total of five hours. The panel observed 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. Id. at 15 (emphasis added). Additionally, the Court noted that Kim failed to make obvious arguments until after they were forfeited while fighting Tinder’s motion to compel arbitration. It clarified that while class representatives “ordinarily. . . will not be rendered inadequate simply because they failed to raise an argument that appears strong in hindsight,” the facts “call[ed] into question whether she vigorously litigated this case on behalf of the class.” Op. at 16.
The objectors are represented by counsel that also represents Allan Candelore, who filed suit against Tinder alleging identical claims three years earlier in California Superior Court. That case can now play out in state court.