1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ANNIE CHANG, et al., Case No. 19-cv-01973-HSG
8 Plaintiffs, ORDER GRANTING MOTIONS FOR ATTORNEY FEES, COSTS, AND 9 v. SERVICE AWARDS AND FOR FINAL APPROVAL OF CLASS ACTION 10 WELLS FARGO BANK, N.A., SETTLEMENT 11 Defendant. Re: Dkt. Nos. 139, 141
12 13 Before the Court are Plaintiffs’ motions for attorneys’ fees and expenses and service 14 awards for lead plaintiffs, and for final approval of this class action settlement. Dkt. No. 139, 141. 15 The Court held a final fairness hearing on July 13, 2023. Dkt. No. 143. Following the hearing 16 and at the Court’s request, Plaintiffs submitted supplemental briefing on the two motions. Dkt. 17 No. 146. For the reasons set forth below, the Court GRANTS Plaintiffs’ motions. 18 I. BACKGROUND 19 a. Factual Allegations and Procedural Background 20 Plaintiffs bring this putative class action alleging Defendant Wells Fargo aided and abetted 21 an alleged Ponzi scheme (the “Equitybuild Scheme” or the “Scheme”) conceived by non-parties 22 Jerome and Shaun Cohen (the “Cohens”) and their entities Equitybuild, Inc. and Equitybuild 23 Finance, LLC f/k/a Hard Money Company, LLC (collectively, “Equitybuild”). Dkt. No. 1 24 (“Compl.”) ¶¶ 1–5; Dkt. No. 129 at 1 n.3. Equitybuild solicited investors by promising them 25 returns flowing from real estate purchases, renovations, and developments in Chicago. Compl. ¶¶ 26 20–21. Plaintiffs allege that the Equitybuild Scheme was a “sham,” as the Cohens “raised money 27 from investors through misrepresentations and omissions, siphoned much of it, improperly 1 off each investment by taking undisclosed fees.” Compl. ¶ 4. 2 In August 2018, the SEC filed a complaint in the Northern District of Illinois against 3 Equitybuild and the Cohens, charging them with fraud under U.S. securities laws and misuse and 4 misappropriation of investor money. Id. ¶¶ 58-60; Dkt. No. 129-1 ¶ 7. That court appointed a 5 Receiver (the “Equitybuild Receiver”) who, among other things, identified and issued notices to 6 835 persons or entities “who might have a claim against the Equitybuild Scheme.” Dkt. No. 129-1 7 ¶¶ 41–48. The Receiver received claims from all 835 claimants.1 Id. ¶ 51. 8 Plaintiffs filed their Complaint on April 12, 2019, alleging that Wells Fargo, as the only 9 bank Equitybuild used, “aided and abetted the Equitybuild Scheme.” Dkt. No. 129 at 3; see 10 Compl. ¶¶ 66-68. The Complaint asserted claims for 1) aiding and abetting fraud; 2) aiding and 11 abetting breach of fiduciary duty, and 3) negligence. See generally Compl. Wells Fargo moved to 12 dismiss the Complaint, which the Court denied as to the first two claims, and granted, with leave 13 to amend, as to the third. Dkt. Nos. 37, 62. Following substantial discovery concerning Plaintiffs’ 14 remaining claims, one unsuccessful mediation before the Honorable Andrew J. Guilford (Ret.) in 15 February 2021, and renewed settlement discussions, the parties ultimately executed an agreement 16 to settle this case on June 16, 2022. See Dkt. No. 129-1, Ex. A (“Settlement Agreement”). 17 This Court granted Preliminary Settlement Approval in December 2022. Dkt. No. 136. 18 Plaintiffs then filed a Motion for Attorneys’ Fees, Expenses, and Service awards on April 4, 2023, 19 Dkt. No. 139, and for Final Approval of Class Action Settlement on June 8, 2023, Dkt. No. 141. 20 Both were unopposed. Dkt. No. 140, 142. The parties appeared before the Court for a fairness 21 hearing on the motions in July, Dkt. No. 143, and filed requested supplemental briefing shortly 22 thereafter, Dkt. No. 146. Among other things, the supplemental briefing provided preliminary 23 monetary estimates for individual class member recovery, and confirmed that this settlement 24 would be additive to, not duplicative of, the Receiver’s work in the SEC action. See Dkt. No. 146.
25 b. Settlement Agreement 26 Key terms of the parties’ Settlement Agreement, Dkt. No. 129-1, Ex. A (“Settlement 27 1 Agreement” or “SA”), are as follows: 2 i. The Class 3 The Class consists of “all persons and entities who invested in the Equitybuild Scheme and 4 were damaged thereby.” Settlement Agreement, § 1.5; see also Dkt. No. 135-4, Ex. D (“Class 5 Notice”). 6 ii. Notice to the Class & Settlement Website 7 The Settlement Agreement directed that each member of the class be sent a notice of the 8 Settlement and a Claim Form. Settlement Agreement, § 7.3; Dkt. No. 129-1 ¶¶ 49–50. Per the 9 Agreement, the Notice directed Class Members to a settlement website containing copies of 10 relevant motions and orders. Settlement Agreement, § 7.7; Class Notice at 2–4, 7. The Notice 11 and Claim Form also provided class members agreed-upon information regarding, among other 12 things, the natures of the claims, class, and settlement terms (including the amounts requested for 13 attorneys’ fees, costs, and service awards), opt-out and objection rights, and details about the final 14 approval hearing. See Class Notice; Dkt. No. 135-5, Ex. E (Claim Form). 15 iii. Monetary Relief, Plan of Allocation & Cy Pres Distribution 16 The Settlement Fund consists of a payment from Wells Fargo of $3,750,000 into an escrow 17 account. Dkt. No. 129 at 4–5; Settlement Agreement, § 3.1.1. The gross settlement fund includes 18 “payments to Settlement Class Members, payments for costs and expenses related to Class Notice 19 as well as the implementation and administration of the Settlement, payment of Attorneys’ Fees 20 and Expenses for Class Counsel, and payment of the Service Award for the Class Representatives, 21 as approved by the Court Settlement Agreement.” Settlement Agreement ¶ J. Class members are 22 entitled to relief relative to the dollar amount they claim (and if necessary, substantiate) as a loss 23 on their claim forms. Settlement Agreement § 3.1.3 24 With the notice and claims process now completed, Plaintiffs have greater visibility into 25 the likely monetary distribution than they did at the preliminary approval stage. With 588 26 claimants, class counsel calculate that on a net basis (assuming this Court approves the proposed 27 costs, fees, and service awards), the average claimant will receive a monetary recovery of 1 on a claimed loss of $3,500,000.2 See Dkt. No. 146 at 4. If there is a balance remaining after 2 distribution, it will not revert to Defendant; instead, once it is no longer feasible to make 3 additional distributions, any remaining balance will be donated to the Victim Connect Resource 4 Center, a non-profit that assists “victims of investment fraud, including specifically Ponzi schemes 5 . . . .” Settlement Agreement § 1.39; Dkt. No. 135 at 1. 6 II. DISCUSSION 7 a. Final Settlement Approval 8 i. Class Certification 9 Final approval of a class action settlement requires, as a threshold matter, an assessment of 10 whether the class satisfies the requirements of Federal Rule of Civil Procedure 23(a) and (b). 11 Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019–1022 (9th Cir. 1998). Because no facts that 12 would affect these requirements have changed since the Court preliminarily approved the class on 13 December 20, 2022, this order incorporates by reference the Court’s prior analysis under Rules 14 23(a) and (b) as set forth in the order granting preliminary approval. See Dkt. No. 136 at 6–10. 15 ii. The Settlement 16 “The claims, issues, or defenses of a certified class may be settled . . . only with the court’s 17 approval.” Fed. R. Civ. P. 23(e). The Court may finally approve a class settlement “only after a 18 hearing and on finding that it is fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). Where 19 the parties reach a class action settlement prior to class certification, the Ninth Circuit has 20 cautioned that such settlement agreements “‘must withstand an even higher level of scrutiny for 21 evidence of collusion or other conflicts of interest than is ordinarily required under Rule 23(e) 22 before securing the court’s approval as fair.’” Roes, 1-2 v. SFBSC Mgmt., LLC, 944 F.3d 1035, 23
24 2 As class counsel explains, these calculations assume that the 57 currently pending claims are ultimately validated in full. Dkt. No. 146 at 4. Of these, 47 claims seek higher loss amounts than 25 the amounts prepopulated in their claim forms (based on the numbers obtained from the Receiver) and are currently being reviewed against backup documentation submitted by the claimants. Id. 26 The remaining 10 claims, which also seek higher amounts than the amount prepopulated in their claim forms, are still awaiting backup documentation. Claimants have received deficiency letters 27 requesting necessary documentation, which the settlement administrator will consider if and when 1 1049 (9th Cir. 2019) (quoting In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th 2 Cir. 2011)). A more “exacting review is warranted to ensure that class representatives and their 3 counsel do not secure a disproportionate benefit at the expense of the unnamed plaintiffs who class 4 counsel had a duty to represent.” Id. (quotations omitted). 5 The Ninth Circuit has identified several “subtle signs” the Court should consider to 6 determine whether “class counsel have allowed pursuit of their own self-interests to infect the 7 negotiations.” Roes, 944 F.3d at 1043. These include: (1) “when counsel receive[s] a 8 disproportionate distribution of the settlement; (2) when the parties negotiate a clear-sailing 9 arrangement, under which the defendant agrees not to challenge a request for an agreed-upon 10 attorney’s fee; and (3) when the agreement contains a kicker or reverter clause that returns 11 unawarded fees to the defendant, rather than the class.” McKinney-Drobnis v. Oreshack, 16 F.4th 12 594, 607–08 (9th Cir. 2021) (quotation omitted). 13 To assess whether a proposed settlement comports with Rule 23(e), the Court may also 14 consider some or all of the following factors: (1) the strength of plaintiff’s case; (2) the risk, 15 expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class 16 action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery 17 completed, and the stage of the proceedings; (6) the experience and views of counsel; (7) the 18 presence of a governmental participant; and (8) the reaction of the class members to the proposed 19 settlement. See McKinney-Drobnis, 16 F.4th at 609 (quoting Churchill Vill., LLC v. Gen. Elec., 20 361 F.3d 566, 575 (9th Cir. 2004)). In addition, “[a]dequate notice is critical to court approval of 21 a class settlement under Rule 23(e).” Hanlon, 150 F.3d at 1025. As discussed below, the Court 22 finds that class members received adequate notice, and that the proposed settlement is fair, 23 adequate, and reasonable. 24 1. Adequacy of Notice 25 Under Federal Rule of Civil Procedure 23(e), the Court “must direct notice in a reasonable 26 manner to all class members who would be bound by the proposal.” Fed. R. Civ. P. 23(e)(1). 27 Rule 23(c)(2)(B) requires “the best notice that is practicable under the circumstances, including 1 must “clearly and concisely state in plain, easily understood language” the nature of the action, the 2 class definition, and the class members’ right to exclude themselves from the class. Fed. R. Civ. P. 3 23(c)(2)(B). Although Rule 23 requires that reasonable efforts be made to reach all class 4 members, it does not require that each class member actually receive notice. See Silber v. Mabon, 5 18 F.3d 1449, 1454 (9th Cir. 1994) (noting that the standard for class notice is “best practicable” 6 notice, not “actually received” notice). 7 The Court finds that the notice plan previously approved by the Court was duly 8 implemented and complies with Rule 23(c)(2)(B). Beginning in February 2023, the Court- 9 appointed Claims Administrator, Rust Consulting, issued notice packets (consisting of the Class 10 Notice and Claim Form) by first-class mail to class members using records obtained from the 11 Equitybuild Receiver. Dkt. Nos. 141 at 3–4 (citing Dkt. Nos. 141-1 [“Rabe Decl.”]; 141-1, Ex. A 12 [notice packet]). By June 1, 2023 (less than a week before the June 8 claim filing deadline), the 13 Claims Administrator had mailed 826 total notice packets; of those, only 25 proved undeliverable. 14 See id. at 4 (noting the delivery success rate was approximately 97%). In addition to mailing 15 notice packets, the Claims Administrator also established, pursuant to the Settlement Agreement, a 16 website posting the Class Notice and Claim Form, which logged 7,887 visits between February 8 17 and June 1, 2023.3 Id. The Claims Administrator also set up a toll-free telephone hotline offering 18 pre-recorded information about the settlement and an option to speak with a live agent. See Rabe 19 Decl. ¶ 17. Between February 8 and June 1, 2023, the Administrator fielded 113 calls to the 20 number. Id. As of June 1, 2023, class counsel had not received any opt-out requests or objections. 21 Dkt. No. 141 at 5; Rabe Decl. ¶¶ 18, 19. In light of these facts, the Court finds that the parties 22 have sufficiently provided the best practicable notice to class members.
23 2. Fairness, Adequacy, and Reasonableness 24 Having found the notice procedures adequate under Rule 23(e), the Court next considers 25 whether the entire settlement comports with Rule 23(e). 26 In deciding the motion for preliminary approval, the Court considered all three signs of 27 1 collusion that the Ninth Circuit has identified. See Dkt. No. 136 at 12–13; see also McKinney- 2 Drobnis, 16 F.4th at 607–08. Nothing in the record changes the Court’s preliminary conclusion 3 regarding these factors. The proposed settlement is non-reversionary; notwithstanding any clear 4 sailing provision regarding counsel’s request for attorneys’ fees, the majority of the monetary 5 settlement will be distributed to class members; and the Court still carefully scrutinizes the 6 requests for attorneys’ fees and incentive awards to ensure class members’ interests are protected 7 under the settlement. See Section II.b.i. 8 The Court further finds that other factors discussed in McKinney-Drobnis also indicate that 9 the proposed settlement is fair, adequate, and reasonable. 10 a. Strength of Plaintiff’s Case and Litigation Risk 11 Approval of a class settlement is appropriate when plaintiffs must overcome significant 12 barriers to make their case. See Chun-Hoon v. McKee Foods Corp., 716 F. Supp. 2d 848, 851 13 (N.D. Cal. 2010). Difficulties and risks in litigating weigh in favor of approving a class 14 settlement. See Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 966 (9th Cir. 2009). “Generally, 15 unless the settlement is clearly inadequate, its acceptance and approval are preferable to lengthy 16 and expensive litigation with uncertain results.” Ching v. Siemens Indus., Inc., No. 11-cv-04838- 17 MEJ, 2014 WL 2926210, at *4 (N.D. Cal. June 27, 2014) (quotations omitted). 18 The Court finds that the amount secured in this settlement is reasonable in light of the 19 complexity of this litigation and the substantial risk that Plaintiffs would face in further litigation. 20 Were the case to proceed, Plaintiffs’ counsel anticipate numerous hurdles to class recovery despite 21 having confidence in their claims. See Dkt. No. 141 at 7–11. First, Plaintiffs’ counsel emphasize 22 that Defendant Wells Fargo has “steadfastly” denied liability and maintains there is “no evidence” 23 for Plaintiffs’ allegations. Id. Plaintiffs recognize that with just circumstantial evidence, they face 24 an uphill battle proving that Wells Fargo had actual knowledge of the Equitybuild Scheme 25 perpetrators’ fraud and breach of duty, which is a critical element of their claims. Id. Second, 26 counsel expect Defendant to “hotly contest[]” any class certification motion by arguing that 27 Plaintiffs’ claims require individualized inquiry across different state laws, and then petitioning 1 counsel further stress that at trial, overcoming Defendant’s arguments that they did not cause 2 Plaintiffs’ losses may be difficult, and could jeopardize a meaningful damage award. Id. at 10. 3 The Court finds credible Plaintiffs’ contention that the case has presented “difficult legal and 4 factual issues that required creativity and sophisticated analysis,” and that continued litigation of 5 these issues would require the investment of significant additional time and resources by the Court 6 and the parties. Id. 7 In reaching a settlement, Plaintiffs have ensured a favorable recovery for the class and 8 avoided these risks. See Rodriguez, 563 F.3d at 966 (finding litigation risks weigh in favor of 9 approving class settlement). Accordingly, these factors also weigh in favor of approving the 10 settlement. See Ching, 2014 WL 2926210, at *4 (favoring settlement to protracted litigation). 11 b. Settlement Amount 12 The Court previously concluded that the amount of the settlement was within the range of 13 possible approval. See Dkt. No. 136 at 15. Its opinion has not changed. Based on the facts in the 14 record and the parties’ arguments at the final fairness hearing, the Court finds that the settlement 15 amount falls “within the range of reasonableness” in light of the risks and costs of litigation. See 16 Villanueva v. Morpho Detection, Inc., No. 13-cv-05390-HSG, 2016 WL 1070523, at *4 (N.D. Cal. 17 March 18, 2016) (citing cases). 18 Plaintiffs’ damages expert estimates that the maximum losses recoverable at trial would be 19 approximately $100 million before any recovery by the Equitybuild Receiver. Dkt. No. 141 at 12. 20 Putting aside recovery by the Receiver, the total settlement amount of $3.75 million represents 21 approximately 3.75% of total estimated losses, but “a much higher percentage of plausibly 22 recoverable damage considering class certification, summary judgment, trial and post-trial risks.” 23 Id. Given these risks, Plaintiffs view this outcome as “very favorable and reasonable.” Id. at 3. 24 The Court agrees, particularly as “[i]t is well-settled law that a cash settlement amounting to only 25 a fraction of the potential recovery does not per se render the settlement inadequate or unfair.” 26 Officers for Justice v. Civil Serv. Comm’n of City & County of S.F., 688 F.2d 615, 628 (9th Cir. 27 1982). 1 individual recovery. As discussed above, on a net basis, the average claimant will recover around 2 $4,350, with a low of $11.89 based on a claimed loss of $503.31 and a high of $82,710.87 based 3 on a claimed loss of $3,500,000. See Dkt. No. 146 at 4. The Court finds that this recovery is 4 significant, especially when weighed against the litigation risks in this case, such that this factor 5 weighs in favor of approval. 6 c. Extent of Discovery Completed and Stage of Proceedings 7 The Court finds that Plaintiffs’ counsel had sufficient information to make an informed 8 decision about the merits of the case. See In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 9 (9th Cir. 2000). 10 By the time the parties reached a settlement, the parties had “vigorously litigated the 11 [a]ction and had a well-founded and realistic understanding of the strengths and weaknesses of the 12 claims and defenses asserted.” Dkt. No. 141 at 13. Before filing their complaint, Plaintiffs 13 thoroughly investigated the legal theories and facts. Id. Once filed, the parties completed 14 “extensive” briefing and argument on Defendant’s 12(b)(6) motion to dismiss the complaint, and 15 engaged in years of “hard-fought” discovery which involved “111,000 pages of documents 16 produced by Defendant, 26,000 pages produced by Plaintiffs and over 14,000 pages of documents 17 produced by third parties” – as well as 3.16 million pages from the Equitybuild Receiver. Id. 18 Additionally, the parties engaged in “extensive” settlement negotiation, including mediation, 19 which helped the parties refine their understanding of their relative positions. Id. 20 For these reasons, this factor supports approval. The Court is persuaded that Plaintiffs’ 21 counsel entered the settlement discussions with a substantial understanding of the factual and legal 22 issues, so as to allow them to assess the likelihood of success on the merits. See Destefano v. 23 Zynga, Inc., No. 12-CV-04007-JSC, 2016 WL 537946 at *12 (N.D. Cal. Feb. 11, 2016) (finding 24 this factor weighed in favor of approval where parties engaged in pre-filing investigation, motion 25 to dismiss briefing, discovery, and mediation). 26 d. Reaction of Class Members 27 The reaction of the class members supports final approval, as no members opted out or 1 raises a strong presumption that the terms of a proposed class settlement action are favorable to the 2 class members.” Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 528–29 (C.D. 3 Cal. 2004); see also In re Linkedin User Privacy Litig., 309 F.R.D. 573, 589 (N.D. Cal. 2015) (“A 4 low number of opt-outs and objections in comparison to class size is typically a factor that 5 supports settlement approval.”). 6 As discussed above, the settlement terms were publicized through a notice process this 7 Court has deemed adequate. The Administrator mailed 826 notice packets and received 588 8 claims from injured investors, almost all of which have been processed. Importantly, no class 9 member filed an objection or exclusion request, which “strongly supports [the settlement’s] 10 fairness, reasonableness, and adequacy . . . .” Martin v. AmeriPride Servs., Inc., No. 08CV440- 11 MMA JMA, 2011 WL 2313604, at *7 (S.D. Cal. June 9, 2011). Since no potential class members 12 have raised concerns or opted out, the Court finds that the positive reaction of the settlement class 13 supports approval of the settlement. 14 * * * 15 After considering and weighing the above factors, the Court finds that the settlement 16 agreement is fair, adequate, and reasonable, and that the settlement class members received 17 adequate notice.4 Accordingly, Plaintiffs’ motion for final approval of the class action settlement 18 is GRANTED. 19 b. Attorneys’ Fees, Costs, and Service Awards 20 In its unopposed motion and consistent with the Settlement Agreement, class counsel asks 21 the Court to approve an award of $937,500 in attorneys’ fees and $128,723.32 in costs. Dkt. No. 22 139 at 1–21. Counsel also seeks a $10,000 service award for each of the named Plaintiffs. Id. at 23 21–23. 24
25 4 The Court has also reviewed the proposed release, Dkt. No. 129-1, Ex. A at 41–43, and finds that it is consistent with Ninth Circuit law and the identical factual predicate rule, and further 26 underscores the adequacy of the settlement. See Hesse v. Sprint Corp., 598 F.3d 581, 590 (9th Cir. 2010) (“A settlement agreement may preclude a party from bringing a related claim in the 27 future even though the claim was not presented and might not have been presentable in the class 1 i. Attorneys’ Fees & Costs 2 1. Legal Standard 3 Class counsel is entitled to an award of reasonable attorneys’ fees and reimbursement of 4 litigation expenses from the common fund they created for the benefit of a class. See Fed. R. Civ. 5 P. 23(h); Staton v. Boeing Co., 327 F.3d 938, 967 (9th Cir. 2003). The purpose of the “common 6 fund” doctrine is to avoid unjust enrichment by requiring “those who benefit from the creation of 7 the fund [to] share the wealth with the lawyers whose skill and effort helped create it.” In re 8 Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1300 (9th Cir. 1994). The district court 9 has discretion over the amount of attorney fees to award. Vizcaino v. Microsoft Corp., 290 F.3d 10 1043, 1048 (9th Cir. 2002). 11 Under California law, the “percentage of fund method” is proper in class actions. Laffitte 12 v. Robert Half Int’l Inc., 1 Cal. 5th 480, 506 (2016). In common fund cases, 25% of the total pool 13 is the “benchmark” for a reasonable fee award. See, e.g., In re Bluetooth, 654 F.3d at 942. Even 14 where the benchmark is requested, though, the award must be supported “by findings that take into 15 account all of the circumstances of the case.” Vizcaino, 290 F.3d at 1048. These circumstances 16 include: (1) the results achieved; (2) the risk of litigation; (3) the skill required and the quality of 17 work; (4) the contingent nature of the fee and the financial burden carried by the plaintiff; and (5) 18 awards made in similar cases. See id. at 1048–50. 19 In addition, “trial courts have discretion to conduct a lodestar cross-check on a percentage 20 fee.” Id. The “lodestar figure is calculated by multiplying the number of hours the prevailing 21 party reasonably expended on the litigation (as supported by adequate documentation) by a 22 reasonable hourly rate for the region and for the experience of the lawyer.” In re Bluetooth, 654 23 F.3d at 941 (citing Staton v. Boeing Co., 327 F.3d 938, 965 (9th Cir. 2003)). Class counsel is also 24 entitled to recover “those out-of-pocket expenses that would normally be charged to a fee paying 25 client.” Harris v. Marhoefer, 24 F.3d 16, 19 (9th Cir. 1994) (quotations omitted). 26 2. Discussion 27 Plaintiffs’ counsel seeks $937,500 in attorneys’ fees, which represents the “benchmark” 1 Agreement. See Dkt. Nos. 139 at 3; 136 at 12. Counsel urges that its requested fees are 2 appropriate under the “percentage of the fund” method. Dkt. No. 139 at 11–13. The Court agrees 3 that the request is reasonable. 4 The first and most critical factor in assessing an attorneys’ fee request is “the degree of 5 success obtained.” Hensley v. Eckerhart, 461 U.S. 424, 436 (1983); see also Lowery v. Rhapsody 6 Int’l, Inc., 69 F.4th 994, 997 (9th Cir. 2023) (“The touchstone for determining the reasonableness 7 of attorneys’ fees in a class action is the benefit to the class.”). As discussed, Plaintiffs’ counsel 8 obtained a significant recovery for the class by securing a $3.75 million non-reversionary 9 settlement fund. Even after factoring in fees, costs, and service awards, each class member stands 10 to receive more than $4,350 on average for their injuries. The Court agrees that this is a good 11 result that confers benefits on the class. The fact that no class members have objected or opted out 12 only buttresses that conclusion. 13 This recovery – which represents approximately 3.75% of all possibly recoverable 14 damages at trial – must be considered in light of the significant risks that Plaintiffs would face in 15 further litigation. In fact, the risk that further litigation might result in Plaintiffs not recovering at 16 all, particularly in a case involving complicated legal issues such as purported aiding and abetting 17 of fraud, is a significant factor in the award of fees. See Vizcaino, 290 F.3d at 1048. As Plaintiffs 18 explained, they credibly anticipate hurdles proving “both that the defendant had actual knowledge 19 of the underlying fraud and that it was also the cause of their injuries.” Dkt. No. 139 at 14–15. 20 Plaintiffs also expect a hard fight to certify a nationwide class and survive Defendant’s eventual 21 move for summary judgment. Id. Given these challenges, this factor weighs in favor of approving 22 the fee request. See Vizcaino, 290 F.3d at 1048. 23 Counsel also litigated this case skillfully and professionally against a well-resourced 24 Defendant. Counsel carefully crafted and then successfully defended its complaint against 25 Defendant’s motion to dismiss, and also obtained voluminous records from various sources, 26 including the Equitybuild Receiver. Dkt. No. 139 at 17. The risk that counsel took in litigating 27 this case on a contingency basis for the last few years weighs in favor of a substantial attorneys’ 1 without any certainty that they would be compensated. Dkt. No. 139 at 16. 2 Outcomes in similar cases also support awarding counsel the benchmark 25% of the 3 common fund. See, e.g., Jordan v. Paul Fin., LLC, No. CV 07-04496 SI, 2013 U.S. Dist. LEXIS 4 164651, at *10 (N.D. Cal. Nov. 19, 2013) (awarding 25% of $1.75 million settlement in case 5 involving aiding and abetting claims); Jenson, v. First Tr. Corp., No. CV 05-3124 ABC (CTX), 6 (C.D. Cal. June 9, 2008) (awarding 33% of settlement fund); Joint Equity Comm. of Invs. of Real 7 Est. Partners, Inc. v. Coldwell Banker Real Est. Corp., No. SACV-10-401 AG (MLGx) (C.D. Cal. 8 2012) (awarding 35% of settlement to counsel representing investors who lost money in fraudulent 9 real estate securities scheme); Bostick v. Herbalife Int’l of Am., Inc., No. CV 13-2488 BRO (SHx), 10 2015 U.S. Dist. LEXIS 83499, at *17 (C.D. Cal. June 17, 2015) (awarding 28% of $17.5 million 11 settlement fund in pyramid scheme case). 12 As a final check on the reasonableness of fees, the Court may compare the requested fees 13 with counsel’s bills under the lodestar analysis. See, e.g., Vizcaino, 290 F.3d at 1050–51 14 (“Calculation of the lodestar, which measures the lawyers’ investment of time in the litigation, 15 provides a check on the reasonableness of the percentage award.”). 16 Class counsel represent that their firms spent a total of 2,738.60 hours on this case for a 17 lodestar of $1,733,734.00. Dkt. No. 139 at 18–19. Based on the billing summaries submitted, the 18 Court is persuaded that counsel expended a reasonable amount of time on this matter. See Dkt. 19 Nos. 139-1, Exs. F & G; 139-3. Having reviewed the declarations of Plaintiffs’ counsel regarding 20 their billing rates and the prevailing billing rates of the local legal community, the Court is further 21 satisfied that counsel have requested reasonable hourly rates for their firms’ work. 5 See Dkt. Nos. 22 139-1 (Scarlato Decl.); 139-3 (Cervantez Decl.); see also United Steelworkers of Am. v. Phelps 23 Dodge Corp., 896 F.2d 403, 407 (9th Cir. 1990) (“[A]ffidavits of the plaintiffs’ attorney and other 24 attorneys regarding prevailing fees in the community, and rate determinations in other cases . . . 25 5 The Court notes that the hourly rates of Plaintiffs’ counsel Rosca Scarlato LLC range from $725 26 to $825 for partners, $300 to $425 for of counsels, $300 to $475 for associates, $300 for an experienced document review lawyer, $205 for paralegals, and $275 for a legal analyst, and that 27 the hourly rates of Plaintiffs’ counsel Altshuler Berzon LLP range from $825 to $1275 for 1 are satisfactory evidence of the prevailing market rate.”). The Court finds that the billing rates 2 used by class counsel to calculate the lodestar are in line with (and in some cases, significantly 3 discounted from) prevailing rates in this district for personnel of comparable experience, skill, and 4 reputation. See, e.g., Hefler v. Wells Fargo & Co., No. 16-CV-05479, 2018 WL 6619983, at *14 5 (N.D. Cal. Dec. 18, 2018) (rates from $650 to $1,250 for partners or senior counsel, $400 to $650 6 for associates); In re Volkswagen “Clean Diesel” Mktg., Sales Practices, & Prod. Liab. Litig., No. 7 2672 CRB (JSC), 2017 WL 1047834, at *5 (N.D. Cal. Mar. 17, 2017) (finding billing rates 8 ranging from $275 to $1600 for partners, $150 to $790 for associates, and $80 to $490 for 9 paralegals reasonable). 10 The Court therefore finds the Plaintiffs’ lodestar reasonable, and finds it significant that 11 Plaintiffs are requesting substantially less in fees than the amount they reasonably incurred. Here, 12 the requested fee ($937,500) is a negative multiplier of .54 as compared to the $1,733,734.00 13 lodestar, Dkt. No. 139 at 18, which “further demonstrates the reasonableness of the fee request.” 14 Taylor v. Shutterfly, No. 5:18-cv-00266-BLF, 2021 U.S. Dist. LEXIS 237069 (N.D. Cal. Dec. 7, 15 2021) (collecting cases); see also In re Regulus Therapeutics Inc. Sec. Litig., No. 3:17-cv-182- 16 BTM-RBB, 2020 WL 6381898, at *7 (S.D. Cal. Oct. 30, 2020) (“[A] multiplier less than 1.0 is 17 below the range typically awarded by courts[.]”). 18 An attorney who has created a common fund for the benefit of the class is also entitled to 19 reimbursement of reasonable litigation costs from that fund. See Harris, 24 F.3d 16 at 19. Class 20 counsel are entitled to recover “those out-of-pocket expenses that would normally be charged to a 21 fee paying client.” Id. Here, counsel request $128,723.32, which is less than the $145,000 22 estimate reflected in the preliminary request. See Dkt. No. 136 at 13. To support their request, 23 counsel have broken down expenses by category, including costs for experts, mediation, document 24 management and storage, travel costs, service of process fees, and more. See Dkt. Nos. 139-1 25 (Scarlato Decl.), Ex. H; 139-3 (Cervantez Decl.), Ex. C; 139-2 (Gardner Decl.), Exs. A & B. Most 26 of the claimed costs (approximately 60%) stem from counsel’s use of two e-discovery platforms; 27 the other major costs arose of out Plaintiff’s retention of three experts and an experienced 1 were necessary for prosecution of the action, and should be reimbursed. 2 In recognition of the favorable settlement, the substantial risks of litigation, and the 3 financial burden assumed, the Court accordingly GRANTS the request for attorneys’ fees and 4 costs, and awards to class counsel $937,500 in attorneys’ fees and $128,723.32 in costs, for a total 5 of $1,066,223.32.
6 ii. Service Award 7 Lastly, Plaintiffs’ counsel requests a service award of $10,000 for each of the five named 8 plaintiffs: Annie Chang, Ann Liu, Oliver Chang, Melanie Gonzales and Gary Gonzales.6 While 9 awards are discretionary, “[i]t is well-established in this circuit that named plaintiffs in a class 10 action are eligible for reasonable incentive payments, also known as service awards.” Harris v. 11 Vector Mktg. Corp., No. C-08-5198 EMC, 2012 WL 381202, at *18 (N.D. Cal. Feb. 6, 2012). 12 Service awards are designed to “compensate class representatives for work done on behalf of the 13 class, to make up for financial or reputational risk undertaken in bringing the action, and, 14 sometimes, to recognize their willingness to act as a private attorney general.” Rodriguez, 563 15 F.3d at 958–59. If they choose to grant such awards, the Ninth Circuit has cautioned that “district 16 courts must be vigilant in scrutinizing all incentive awards to determine whether they destroy the 17 adequacy of the class representatives . . . .” Radcliffe v. Experian Information Sols. Inc., 715 F.3d 18 1157, 1165 (9th Cir. 2013) (quotations omitted). 19 In the Ninth Circuit, service awards of up to $5,000 are “presumptively reasonable.” Wong 20 v. Arlo Techs., Inc., No. 5:19-CV-00372-BLF, 2021 WL 1531171, at *12 (N.D. Cal. Apr. 19, 21 2021). However, larger awards can be appropriate. See, e.g., Black v. T-Mobile USA, Inc., No. 22 17-cv-04151-HSG, 2019 U.S. Dist. LEXIS 123676, at *21 (N.D. Cal. July 24, 2019) (granting 23 $10,000 service award); Rabin v. PricewaterhouseCoopers LLP, No. 16-cv-02276-JST, 2021 U.S. 24 Dist. LEXIS 41285, at *31 (N.D. Cal. Feb. 3, 2021) (granting $20,000 service awards). To 25 evaluate the reasonableness of a proposed service award, courts look to factors such as the 26
27 6 Annie Chang and Oliver Chang own and manage named Plaintiffs, Tiger Chang Investments, 1 representative’s service to the class, investment of time, and reputational harm. Staton, 327 F.3d 2 at 977. Another important consideration is the proportionality between the incentive award and 3 the range of class members’ settlement awards. See, e.g., Burden v. SelectQuote Ins. Servs., No. 4 10-cv-5966-LB, 2013 WL 3988771, at *6 (N.D. Cal. Aug. 2, 2013). 5 In this case, the relevant factors support the requested service award. First, no class 6 members objected to the proposed service award, which tends to suggest that class members are 7 satisfied that their representatives did confer a benefit. Second, lead plaintiffs have spent 8 significant time on this case, dedicating more than 860 hours across approximately five years to 9 fulfilling their duties as class representatives. Dkt. No. 139-1, Ex. A–E. These duties involved 10 gathering and reviewing documents, communicating extensively with counsel, participating in 11 mediation, preparing for depositions, responding to discovery requests, and performing other 12 necessary functions. Id. Annie Chang attests that she invested 175 hours fulfilling her duties. 13 Dkt. No. 139-1, Ex. A. Ann Liu estimates she spent 180 hours on this case; her husband Oliver 14 Chang estimates he spent 160. Id., Exs. B & C. Melanie Gonzales attests that she expended 15 around 175 hours in her role; her husband Gary Gonzales estimates 175. Id., Exs. D & E. The 16 Court finds these contributions considerable. 17 Third, the Court finds that the relationship between the size of the awards and class 18 recovery does not raise red flags. In this case, the proposed service award represents 2.3 times 19 more than the average class member’s recovery of approximately $4,351, but still a fraction of the 20 largest recovery ($82,710.87). On the whole, the Court is persuaded that a $10,000 service award 21 is not so disproportionate to the anticipated class recovery as to warrant denial. See, e.g., Crump 22 v. Hyatt Corp., No. 20-CV-00295-HSG, 2023 WL 1997770 (N.D. Cal. Feb. 14, 2023) (holding 23 that where the lead plaintiff invested 35 hours on the case and requested a recovery 400 times 24 greater than the average class member’s recovery, a $10,000 service award was unsupportable). 25 Further, the Court is cognizant that service awards can, in some circumstances, introduce a 26 conflict between the interests of the lead plaintiffs and those of the class, but does not believe that 27 the proposed award threatens to destroy adequacy of lead plaintiffs’ representation in this case. 1 just 1.9% of their aggregate losses if the Court awards a total of $50,000 in service awards. Dkt. 2 No. 139-1 at 22. Given that the proposed awards cannot come close to making the lead plaintiffs 3 whole, and given that each class member (including each lead plaintiff) recovers on a pro rata 4 basis from the settlement fund, it follows that the lead plaintiffs retained a vested personal interest 5 in maximizing the total settlement fund for the class. And from their own sworn declarations and 6 counsel’s discussion of their contributions, it appears they worked diligently to do just that. Dkt. 7 Nos. 139-1 at 21–22; 139-1, Exs. A–E. 8 For these reasons, the Court finds that in this case – where class representatives each 9 invested between 160-180 hours and where the service award is only around 2.3 times greater than 10 the average class member’s recovery – a $10,000 service award for each of the named plaintiffs is 11 justified. The Court GRANTS the requested service of award of $10,000 for lead plaintiffs Annie 12 Chang, Ann Liu, Oliver Chang, Melanie Gonzales, and Gary Gonzales. 13 III. CONCLUSION 14 Accordingly, the Court GRANTS the motion for final approval of class action settlement, 15 Dkt. No. 141 and GRANTS the motion for attorneys’ fees and incentive award, Dkt. No. 139. 16 The Court awards attorneys’ fees in the amount of $937,500 and litigation expenses in the amount 17 of $128,723.32. The Court further awards $10,000 as an incentive award to each of the five 18 named Plaintiffs. 19 The parties and settlement administrator are directed to implement this Final Order and the 20 settlement agreement in accordance with the terms of the settlement agreement. The parties are 21 further directed to file a short stipulated final judgment of two pages or less within 21 days from 22 the date of this order. The judgment need not, and should not, repeat the analysis in this order. 23 Within 21 days after the settlement checks become stale (or, if no checks are issued, all 24 funds have been paid to class members, cy pres beneficiaries, and others pursuant to the settlement 25 agreement), the parties must file a Post-Distribution Accounting, which provides the following 26 information: The total settlement fund, the total number of class members, the total 27 number of class members to whom notice was sent and not returned 1 submitted, the number and percentage of opt-outs, the number and percentage of objections, the average and median recovery per 2 claimant, the largest and smallest amounts paid to class members, the method(s) of notice and the method(s) of payment to class members, 3 the number and value of checks not cashed, the amounts distributed to each cy pres recipient, the administrative costs, the attorneys’ fees 4 and costs, the attorneys’ fees in terms of percentage of the settlement 5 fund, and the multiplier, if any. 6 || Counsel are directed to summarize this information in an easy-to-read chart that allows for quick 7 comparisons with other cases. The parties shall post the Post-Distribution Accounting, including 8 || the easy-to-read chart, on the settlement website. The Court may hold a hearing following 9 || submission of the parties’ Post-Distribution Accounting. 10 IT IS SO ORDERED. 11 Dated: — 10/19/2023
= 12 Appr 3 Mbt). HAYWOOD S. GILLIAM, JR. 13 United States District Judge
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