$10M Massage Envy Class Action Settlement Tossed for Fees

Massage Envy Membership Fees Class Action Lawsuit Overview: 

• Who: Baerbel McKinney-Drobnis filed a class action lawsuit against Massage Envy Franchising, LLC. 
• Why: Plaintiff alleges Massage Envy increased “locked-in” fees for monthly massages.
• Where: The class action lawsuit was filed in California federal court. 

Massage Envy saw a $10 million class action settlement that offered Class Member vouchers tossed over unfair attorney fees.

A three-judge appellate panel determined the US District Court for the Northern District of California erred when finding that vouchers were not coupons under the Class Action Fairness Act, which affects the way a class counsel’s attorney fees are calculated, according to a recent opinion issued by the Ninth Circuit Court of Appeals. 

The verified vouchers requested by 105,693 Class Members in the Massage Envy class action settlement amounted to less than $3 million in value—less than the $10 million floor of the deal, with the vouchers ranging in value from $36.28 to $180.68, the opinion states.

However, the judge calculated class counsel’s fees by adding the $10 million face value of the vouchers with the expected $450,000 in administrative costs to award 25 percent, or $2.6 million, to the attorneys.

“The appellate panel determined that the district court erred when it approved the settlement as ‘fair, reasonable and adequate’… [when determining] whether class counsel allowed the pursuit of their own interests to infect the settlement negotiations,” the opinion states.

The panel vacated the district court’s approval of the attorney fees award and instructed the lower court to use the voucher’s actual value at the time of redemption when determining fees.

“When a settlement provides non-cash relief and a reverter provision, a district court must be on the alert for an attorneys’ fee award that is artificially inflated in relation to the relief provided to the class,” the panel wrote. “The more undesirable or inflexible a voucher is in comparison to cash or to a gift card, the greater the risk that the settlement value may be overinflated.”

Massage Envy Class Action Claimed Co Hiked Monthly Membership Rates

The plaintiffs claimed that Massage Envy required customers to prepay for massages—forfeiting massages for which they have already paid if they cancelled. 

The Massage Envy class action lawsuit alleged that customers were told that they could “lock in” membership rates, and that their monthly rate would not change. Additionally, they were told that they could cancel their memberships.

However, the company raised the membership rates. Customers claimed that in some cases, the rate hike was only 99 cents, but in other cases, the membership rates went up by around 30 percent. Additionally, customers claimed that the company intentionally maked it hard for customers to cancel memberships.

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The plaintiffs are represented by Trenton R. Kashima of Sommers Schwartz PC and Jeffrey R. Krinsk of Finkelstein & Krinsk LLP.

The Massage Envy Membership Rate Hike Class Action Lawsuit is Baerbel McKinney-Drobnis et al. v. Massage Envy Franchising LLC, case number 20-15539, in the U.S. Court of Appeals for the Ninth Circuit.

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