Courtney Jorstad  |  March 31, 2015

Category: Consumer News

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Zappos.comClass action settlement negotiations between Zappos and customers, who were allegedly victims as the result of a data breach, were brought to a head over attorneys’ fees.

U.S. District Judge Robert C. Jones has denied a motion by the plaintiffs in the Zappos data breach class action lawsuit to enforce a class action settlement in a March 27 order.

Zappos and the plaintiffs have been engaged in negotiating the terms of the class action settlement for about two years, and according to Judge Jones, they had reached an agreement, on everything but attorneys fees, before a mediation session scheduled on Nov. 12, 2014, when they were scheduled to meet to determine attorneys’ fees.

However, prior to that meeting, on Nov. 10, “the mediator obtained and conveyed the requested fee amount to Zappos’ s counsel. Zappos’s counsel found that the amount of fees sought was ‘extravagant’ and determined that the scheduled mediation would be unproductive based on how far apart the parties were on the issue of fees and costs.”

Zappos’s attorneys told the mediator that if the attorneys’ fees were not reduced, they “would not attend the mediation session. Although telephonic appearances were made, no fee agreement was reached.”

At that point the mediator informed the plaintiffs that “‘Zappos intends to litigate this case,'” and Zappos proceeded to file “a renewed motion to dismiss the second amended complaint,” which the company did on Jan. 30.

Judge Jones said that he cannot enforce the class action settlement because of the lack of agreement between the two parties on the attorneys’ fees.

“The facts here persuade the court that the amount of plaintiffs’ fee demand was a material and essential term of the agreement,” the Nevada federal judge wrote.

Zappos wanted the plaintiffs to agree to a cap on the attorneys’ fees and made it clear in many drafts of the Memorandum of Understanding (MOU) filed with the court that the online retailer “would not move forward with the settlement until a cap was placed on the amount of fees sought.”

Judge Jones concluded that “the court cannot compel compliance with a settlement agreement when the ‘material terms are left uncertain,'” and the “MOU does not constitute an enforceable settlement document because it omits caps on the amount of attorneys’ fees plaintiffs are entitled to seek, which appears from the record to be an important element to the settlement in this particular class action lawsuit.”

However, the Nevada federal judge did grant a motion by the plaintiffs to extend the amount of time they have to issue a response, which he wrote is due in 30 days.

The Zappos class action lawsuit was filed after Zappos servers in Sheperdsville, Kentucky were the subject of a hacker attack in January 2012.

Millions of Zappos customers’ names, phone numbers, account numbers, passwords, email addresses, billing and shipping addresses as well as the last four digits of credit cards were compromised.

Zappos, which is owned by Amazon.com, informed customers of the data breach via an email sent to 24 million customers on Jan. 16, 2012. The Zappos data breach class action lawsuit was filed on June 14, 2012.

Zappos is represented by Robert McCoy and Raleigh C. Thompson.

The lead counsel for the plaintiffs is Mark Gray.

The Zappos Data Breach Class Action Lawsuit is In Re Zappos, Inc., Security Breach Litigation, Case No. 3:12-cv-00325-RCJ-VPC, filed in the U.S. District Court of the District Nevada.

UPDATE: On Sept. 12, 2019, a proposed settlement was reached that would provide a 10 percent discount to the 24 million consumers affected by a 2012 Zappos data breach.

UPDATE 2: October 2019, the Zappos data breach class action settlement is now open. Click here for more information.

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One thought on Zappos Class Action Settlement Thwarted Over Attorneys’ Fees

  1. Sherry Russell says:

    Finally a judge is standing up for the settlement class so that there is money available for the people who were actually damage by the breach and not the greedy lawyers.

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