Judge Refuses to Approve Destination Maternity Class Action Settlement

A California federal judge refused to certify a class action settlement against Destination Maternity Corp., saying that he wants an explanation regarding the fairness of the settlement when Class Members could potentially get a much larger award.

Plaintiff Alana Schwartz charged Destination Maternity with allegedly asking customers for their phone numbers when paying with credit cards, which is a violation of California’s Song-Beverly Credit Card of 1971.

Schwartz and Destination Maternity agreed to a class action settlement, which would give each Class Member a $25 gift certificate.

But U.S. District Judge George King wants Schwartz to explain why some Class Members were either included or excluded from the class action settlement, and why this settlement is fair given the fact that under California law, Class Members could get $250 for the first violation and $1,000 for each following violation.

“Plaintiff fails to provide sufficient information about the composition of the Class for us to determine whether it is cohesive enough to be certifiable,” Judge King writes in his Monday ruling.

“The class definition is complicated, with many exclusions, but Plaintiff does not offer any explanation for why the Class is defined as it is,” he contends.

“Plaintiff must explain, at a minimum, (1) why subscribers of ‘Parents or Parenting magazines’ are included along with members of the Perks Program, (2) why a Class Member must have had two transactions at Defendant Destination Maternity Corporation’s retail stores between July 15, 2012 and the date of the Preliminary Approval Order to be included in the Class, and (3) why certain credit card purchases are excluded if the consumer made other arrangements (for shipping, exchange of merchandise, etc.) at the time of the purchase.”

“While we may surmise potential reasons for these provisions, we choose to rule on facts, not assumptions,” he added.

Judge King also wants Schwartz to explain why she believes there are 146,655 Class Members, why she is an adequate class representative, and why the attorneys representing the class are also adequate.

In addition, the California federal judge also wants to know why a $25 gift card for each Class Members is “a fair, reasonable, and adequate settlement.”

“There is no estimate of the maximum potential recovery for the Class, no estimate of the likelihood of success, and no explanation of why the proposed Settlement strikes an appropriate balance between the potential total recovery and the risk of failure in litigation,” Judge King explains.

“All that plaintiff provides are citations to approved settlements in other Song-Beverly Act class actions, with no explanation as to how this Settlement is comparable to them. In light of the fact that just one violation of the Song-Beverly Act can warrant a civil penalty of as much as $250 and every subsequent violation can warrant as much as $1000, a $25 certificate is a heavy discount on the maximum possible recovery. Plaintiff must provide a substantial justification for this discount,” he added.

Judge King also questions the terms that come with gift certificates, specifically that they are set to expire in 10 months, can only be used in one transaction while giving up whatever is remaining, and can only be used in stores and not for online purchases.

For these reasons, and others, the California federal judge said he is denying approval of the class action settlement without prejudice.

While it is illegal under California law for retailers to ask for any personal identifiable information from customers when making credit card purchases, such as a phone number, Schwartz reportedly admitted that she gave Destination Maternity her phone number to the cashier for the purpose of looking up her “perks program” profile.

Destination Maternity owns Motherhood Maternity, A Pea In The Pod, and Destination Maternity retails stores.

Alana Schwartz is represented by Kenneth Alan Goldman of the Law Office of Kenneth Goldman PC and James Timothy Ryan of James T. Ryan PC.

Destination Maternity Corp. is represented by Molly Moriarty Lane, Brendan Eugene Radke, Phillip J. Wiese and Diane Leslie Webb of Morgan Lewis & Bockius LLP.

Representatives for Destination Maternity Corp. did not respond to request for comment Tuesday.

The Destination Maternity Class Action Lawsuit is Alana Schwartz v. Destination Maternity Corporation et al., Case No. 2:14-cv-01477, in the U.S. District Court for the Central District of California.