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EBay Settlement Over ‘Featured Plus’ Approved

SAN FRANCISCO (CN) - A federal judge signed off on a $4.75 million settlement agreement between eBay and disgruntled users of its ill-fated Featured Plus service.

Auto accessories dealer and lead plaintiff Custom LED claimed in a 2012 lawsuit that it paid $39.95 for eBay's now-defunct Featured Plus service, which was supposed to bump the ads of subscribers to the top of the search page. The service was allegedly "completely nonfunctional" much of the time because of known bugs in the program.

Despite these issues, eBay continued to both market Featured Plus and charge for the service even after the service had stopped working entirely, according to the complaint.

Last year, U.S. District Judge Susan Illston dismissed Custom LED's common-law fraud claims, but moved the contract action forward. After a year of investigation and discovery, the parties entered into mediation and announced they had reached a $4.75 million settlement agreement in June.

But in August, U.S. District Judge Jon Tigar found the proposed settlement deficient, citing an overly broad release of any claim relating to Featured Plus - whether related to Custom LED's action or not - and a lack of information within the planned notice to potential class members on the scope of the release.

Tigar also questioned whether the default method of distributing the settlement - eBay account credits - would be fair to the entire class. After giving the parties 60 days to cure the deficiencies, the judge cleared the new agreement Wednesday.

Under the settlement eBay will pay $4.75 million, which includes an enhancement award of $7,500 for Custom LED and about $1.2 million in attorneys' fees for class counsel and settlement-administration costs. The remaining $3.2 million will be distributed to Featured Plus in two subclasses, bifurcated by time period.

"One-third of the fund will be allocated to the time period ranging from Jan. 23, 2008 to Sept. 28, 2009, and the remaining two-thirds will be allocated to the period ranging from Sept. 29, 2009 to Feb. 4, 2013," Tigar wrote. "The justification for this allocation is eBay's contention that Featured Plus worked exactly as described prior to Sept. 29, 2009 and that any alleged problems arose only after that date, when eBay made certain changes to the descriptions and functionality of Featured Plus. Specifically, eBay has evidence showing that Featured Plus listings were shown in 'Featured Items' sections for all searches in period 1, regardless of where the buyer originated the search or how the search results were organized. No such evidence exists with respect to the listings in period 2. As such, the class members' claims in period 1 are significantly weaker than those in period 2."

Each class member will receive a percentage of the fees paid to eBay, relative to the total fees paid by the entire class. That total figure has been redacted but is in the millions for both time periods.

The default method of paying out the settlement involves account credits for active eBay users. Though Tigar originally took exception with this scheme, since some may find their portion of the settlement eaten up by the user fees they currently ow eBay, affected users can opt out and receive a check instead or apply for a refund of those credits once received.

"The court finds that the universal availability of the check option and the prominent display of information pertaining to that option is sufficient to ensure that certain segments of the class will not benefit more from the settlement than others," Tigar wrote.

EBay also retains the right to dump the settlement agreement before final approval is given if more than 100 class members drop out to pursue their own claims.

Tigar did extend the deadline for claims and exclusions to 120 days from the date of notice, rather than the 81 days called for in the agreement. He ordered eBay to begin the notice scheme within 30 days, and ordered plaintiffs to file for final approval within five months.

A final fairness hearing is set for June 18, 2014.

Custom LED and the class is represented by Shawn Leuthold in San Jose and Figari & Davenport in Dallas. Benjamin Chapman, of the San Diego firm Cooley Godward, represented eBay in the action.

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