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Carol M. Mcdonough, et al v. Toys "R" Us

June 13, 2011

CAROL M. MCDONOUGH, ET AL., PLAINTIFFS,
v.
TOYS "R" US, INC. D/B/A BABIES "R" US, ET AL., DEFENDANTS.
ARIEL ELLIOTT, ET AL., PLAINTIFFS,
v.
TOYS "R" US, INC. D/B/A BABIES "R" US, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Anita B. Brody, J.

MEMORANDUM

On January 21, 2011, all Plaintiffs and Defendants entered into an agreement to settle these related antitrust class actions. After execution and preliminary approval by the Court, Defendant Regal Lager, Inc. ("Regal Lager") failed to make its required payment to the settlement fund. Plaintiffs now move to enforce the settlement agreement against Regal Lager. For the reasons that follow, I will grant Plaintiffs' motion and order Regal Lager to pay its settlement contribution.

I.BACKGROUND*fn1

Plaintiffs bring these class actions on behalf of themselves and all consumers who purchased certain baby products from Babies "R" Us stores during specified time periods. On July 15, 2009, I certified five subclasses in the McDonough class action. The only subclass relevant to Regal Lager was defined as: "All persons who directly purchased any BabyBjorn baby carrier distributed by Regal Lager from Babies 'R' Us within the U.S. for the period February 2, 2000, to April 30, 2005." McDonough v. Toys "R" Us, 638 F. Supp. 2d 461, 492 (E.D. Pa. 2009);McDonough ECF No. 585.*fn2 On December 29, 2009, a related class action, Elliott v. Toys "R" Us, Inc., was filed against most of the McDonough Defendants but not against Regal Lager.

On May 27, 2010, counsel informed the Court that they had reached an accord to settle both McDonough and Elliott. Counsel periodically updated the Court through January 2011 as the settlement was actively negotiated and eventually fully finalized in writing.

A. The Executed Settlement Agreement

On January 21, 2011, all parties in both actions executed a thirty-four page settlement agreement ("the Agreement"). In doing so, the parties stated that they "intend to be, and shall be, bound by this Agreement upon its execution . . . ." Pls.' Mem. Supp. Mot. Prelim. Approval Class Settlement, Ex. 1 ¶ 4, McDonough ECF No. 699-1, Elliott ECF No. 39-1 [hereinafter "Agr."]. The parties stipulated for settlement purposes to the certification of subclasses, the designation of class representatives, and the appointment of class counsel. Id. ¶ 2. The Agreement states that "each Defendant shall pay the portion of the Settlement Amount to be contributed by that Defendant" to an escrow account by a certain date. Id. ¶ 11; see also id. ¶ 17 (referring to payment as "required"). In exchange for this consideration, and upon the "payment of the Settlement Amount," Plaintiffs agreed to release all related claims against that Defendant regarding the baby product sales that are the subject of these actions. Id. ¶ 10. Collectively, Defendants were to pay $35,000,000.00 into the settlement fund. Id. ¶ 1(gg).

After execution, the Agreement provides that it can only be rescinded in accordance with Section X. Id. ¶¶ 4, 13. Section X first provides that both Plaintiffs and Defendants shall have the option to rescind the Agreement in its entirety if the Court declines to approve the Agreement, if the Court declines to enter Final Judgment in substantially the same form as proposed by the parties, or if the Court approves provisions that vary in a material way from that proposed. Id. ¶ 37.

The next paragraph provides circumstances upon which the "[t]he Agreement can also be terminated by Plaintiffs." Id. ¶ 38. Plaintiffs have the right to "terminate and cancel the Settlement Agreement in its entirety" if a defendant failed to make its payment into escrow or if a defendant filed for bankruptcy and the trustee rejected the Agreement. Id. ¶ 38(a). If Plaintiffs elect to terminate the Agreement in accordance with this provision, they must do so in writing and "the parties shall return to their respective rights." Id. ¶ 38(b). If one of those two described events occurs but Plaintiffs do not elect to terminate the Agreement in its entirety, the contract provides the following:

Plaintiffs and all Class Members shall maintain all of their claims and rights against the Defendant(s) that either did not pay into escrow its/their contribution . . . or rejected the Settlement Agreement, and, the Settlement Agreement shall be deemed amended to: (i) eliminate any such Defendant(s) from the terms of the release and from the dismissal of any of the claims in this Litigation; and (ii) reduce the Settlement Amount by the amount of any such Defendant(s)' unpaid contribution.

Id.

The parties choose Pennsylvania law to govern the terms of the Agreement. Id. ¶ 46. They also stipulated that this Court "shall retain exclusive jurisdiction over all matters relating to the implementation and enforcement of this Agreement." Id. ¶ 47.

B. Preliminary Approval by the Court

On January 25, 2011, I held a hearing on preliminary approval of settlement. Plaintiffs' motion for approval was accompanied by the Agreement, executed by all parties. On the record at the hearing, all parties confirmed that they agreed to the terms of the Agreement. On January 31, 2011, I preliminarily approved the settlement, consolidated the actions for the purpose of settlement, preliminarily certified eight subclasses, and ordered Defendants "to make their respective contributions to the Settlement Fund provided for by the Settlement Agreement." Order Preliminarily Approving Settlement and Providing for Notice, McDonough ECF No. 706, Elliott ECF No. 49. The definition of the ...


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