1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 NICHOLAS DER-HACOPIAN, Case No. 18-cv-06726-HSG
8 Plaintiff, ORDER GRANTING MOTION FOR PRELIMINARY APPROVAL OF 9 v. CLASS ACTION SETTLEMENT
10 DARKTRACE, INC., Re: Dkt. No. 47 11 Defendant.
12 13 Pending before the Court is the unopposed motion for preliminary approval of class action 14 settlement filed by Plaintiff Nicholas Der-Hacopian. Dkt. No. 47. The parties have reached a 15 settlement regarding Plaintiff’s claims and now seek the required court approval. The Court held a 16 hearing on February 13, 2020. See Dkt. No. 48. For the reasons detailed below, the Court 17 GRANTS Plaintiff’s motion for preliminary approval of class action settlement. 18 I. BACKGROUND 19 A. Factual Background 20 Plaintiff brings this consumer class action against Defendant Darktrace, Inc. alleging that 21 Defendant violated the Fair Credit Reporting Action (“FCRA”), 15 U.S.C. §§ 1681 et seq. See 22 generally Dkt. No. 23 (“FAC”). As part of its employment application process, Defendant 23 requires consumer reports, known as background checks, to evaluate prospective employees. See 24 id. at ¶ 13. In July 2018, Plaintiff applied for a job with Defendant. See id. at ¶ 12. At 25 Defendant’s request, Plaintiff agreed to Defendant’s requirement that he authorize Defendant, and 26 a consumer reporting agency of its choosing, to perform a background check on Plaintiff. Id. at 27 ¶¶ 14–15, 22. Plaintiff signed a document titled “Employee Authorization to Release Records” 1 contained erroneous information, and Defendant denied Plaintiff employment based on the 2 information in the report. See id. at ¶¶ 18–22, 32–33. As a result, Plaintiff contends that he 3 suffered financial and reputational harm. See id. at ¶ 36. 4 According to Plaintiff, Defendant violated the FCRA with these background checks by 5 (1) including a release of future liability in the Authorization that it required employment 6 applicants to sign authorizing a background check; and (2) using the background check to make an 7 adverse employment decision without timely providing the prospective employee with a copy of 8 the report and a summary of his or her rights under the FCRA. See id. at ¶¶ 15–27, & Ex. A. 9 Section 1681b(b)(2) requires consumer report authorizations to consist “solely of the disclosure 10 that a consumer report may be obtained for employment purposes.” 15 U.S.C. 11 § 1681b(b)(2)(A)(i). And § 1681b(b)(3) requires that “in using a consumer report for employment 12 purposes, before taking any adverse action based in whole or in part on the report, the person 13 intending to take such adverse action shall provide to the consumer to whom the report relates” a 14 copy of the report and a written description of the consumer’s rights under the FCRA. See 15 15 U.S.C. § 1681b(b)(3)(A)(i), (ii). Based on those facts, the FAC asserted two causes of action 16 under Sections 1681(b)(2) and (b)(3) of the FCRA. See FAC at ¶¶ 45–58. Plaintiff also sought to 17 represent two classes of consumers based on each claim, defined as: 18 All natural persons residing within the United States and its 19 Territories regarding whom, beginning five (5) years prior to the filing of this Complaint and continuing through the conclusion of this 20 action, the Defendant procured or caused to be procured a consumer report for employment purposes using a written disclosure containing 21 language substantially similar in form to the Employee Authorization to Release Records form provided to Plaintiff; and 22 All natural persons residing in the United States who (i) within five 23 (5) years prior to the filing of the Complaint, (ii) applied for employment with Defendant, (iii) were the subject of a consumer 24 report used by Defendant for employment purposes, (iv) were the subject of an adverse employment action by Defendant, and (iv) were 25 not provided with a copy of the report and/or a written summary of their rights under the FCRA prior to the adverse action. 26 27 See id. at ¶ 38. 1 B. Procedural History 2 Plaintiff initially filed this action on November 6, 2018. See Dkt. No. 1. Plaintiff then 3 filed his first amended complaint on January 16, 2019. See FAC. The parties did not engage in 4 motions practice; instead, Defendant answered the complaint on January 30, 2019. See Dkt. No. 5 30. On April 24, 2019, the parties engaged in an all-day mediation before Michael Loeb of JAMS, 6 though the parties did not reach settlement that day. See Dkt. No. 39. However, the parties 7 continued settlement discussions after the conclusion of the mediation. See Dkt. No. 40. They 8 reached a class settlement in principle on June 20, 2019. See Dkt. No. 47 at 3. With the assistance 9 of Mr. Loeb, the parties entered into a settlement agreement on November 21, 2019. See Dkt. No. 10 47-1. Plaintiff then filed the unopposed motion for preliminary settlement approval on November 11 21, 2019. See Dkt. No. 43 (refiled at Dkt. No. 47). 12 On March 31, 2020, the Court requested supplemental briefing from the parties regarding 13 the scope of the settlement release. See Dkt. No. 52. The Court raised concerns that although the 14 allegations were relatively narrow, the release of claims in the settlement agreement as then 15 written was quite expansive. Id. The Ninth Circuit has cautioned, however, that “[a] settlement 16 agreement may preclude a party from bringing a related claim in the future even though the claim 17 was not presented and might not have been presentable in the class action, but only where the 18 released claim is based on the identical factual predicate as that underlying the claims in the 19 settled class action.” Hesse v. Sprint Corp., 598 F.3d 581, 590 (9th Cir. 2010) (quotations 20 omitted) (emphasis added). In response, the parties agreed to narrow the scope of the release of 21 claims. See Dkt. No. 53. They submitted a revised Settlement Agreement, Dkt. No. 53-1, Ex. A 22 (“SA”), and a revised Notice of Settlement, Dkt. No. 53-2, Ex. B. 23 i. Settlement Agreement 24 The key terms of the parties’ settlement are as follows: 25 Class Definition: The Settlement Class is defined as:
26 [A]ll applicants for employment with and employees of DarkTrace from whom DarkTrace obtained the individual’s consent to procure 27 a consumer report using a form document substantially similar to the November 5, 2016 and the date the Final Judgment and Order 1 approving this Settlement Agreement is entered by the Court. 2 SA at ¶ III.C. 3 Settlement Benefits: The parties have agreed to both non-monetary and monetary relief. 4 Moving forward, Defendant will comply with the disclosure, authorization, and notice practices 5 relating to obtaining consumer reports and the provision of consumer reports and summaries of 6 rights referenced in §§ 1681b(b)(2)(A)(i) and 1681b(b)(3) of the FCRA. See id. at ¶ IV.H. 7 Additionally, Defendant will pay each class member $300 in a settlement check mailed via regular 8 mail to each class member. See id. at ¶ IV.B.1; see also ¶ VII.A. The checks will become void 60 9 days after the date of mailing. Id. This payment is separate from any requested service award to 10 the class representative; class counsel’s requested attorneys’ fees; and the costs Defendant will 11 bear of serving notice to the class of the settlement and for administering the settlement payments. 12 See id. at ¶¶ IV.B.2, IV.B.3, VI.J.E. 13 Cy Pres Distribution: Settlement checks that are undeliverable or not cashed within 60 14 days of mailing will be void and those funds will be donated to “a recipient to be agreed to by the 15 parties.” SA at ¶¶ IV.B.4, VII.B. Following the hearing on the motion for preliminary approval, 16 the parties submitted a supplemental declaration identifying the National Consumer Law Center 17 (“NCLC”) as the stipulated cy pres recipient. See Dkt. No. 51. 18 Release: All settlement class members will release:
19 any and all claims the Class Member Releasing Parties have under 15 U.S.C. § 1681b(b)(2)(A)(i) and/or 15 U.S.C. §§ 1681b(b)(3)(A)(i) 20 and 16818b(b)(3)(A)(ii).
21 22 SA at ¶ XII.A. In addition, class members:
23 shall be deemed to have expressly waived and relinquished, with respect solely to claims the Class Member has or may have under 15 24 U.S.C. § 1681b(b)(2)(A)(i) and/or 15 U.S.C. §§ 1681b(b)(3)(A)(i) and 1681b(b)(3)(A)(ii), the provisions, rights and benefits of Section 25 1542 of the California Civil Code, or any other similar provision under federal or state law, which provides: 26 A GENERAL RELEASE DOES NOT EXTEND TO 27 CLAIMS, THAT THE CREDITOR OR RELEASING THE RELEASE AND THAT, IF KNOWN BY HIM OR 1 HER, WOULDHAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR 2 RELEASED PARTY. 3 Id. The class representative further agrees to release Defendant from:
4 any and all manner of claims, grievances, controversies, allegations, accusations, demands, judgments, causes of action, actions, suits, 5 whether class, representative, individual or otherwise in nature, damages whenever incurred, liabilities of any nature whatsoever as 6 well as all forms of relief, including all remedies, costs, losses, liabilities, damages, debts, expenses, penalties, interest, and 7 attorneys’ and other professionals’ fees and related disbursements, whether known or unknown, foreseen or unforeseen, suspected or 8 unsuspected, asserted or unasserted, whether (a) claiming compensation, money damages, equitable or other type of relief; (b) 9 based on any federal, state, or municipal statute, law, ordinance, or regulation; (c) based on common law or public policy; or (d) sounding 10 in tort or contract, whether oral or written, express or implied, law or equity, statutory or common law, or any other causes of action that 11 the Class Representative Releasing Party, whether directly, representatively, derivatively, or in any other capacity, ever had, now 12 has, or hereafter can, shall, or may have against the Released Parties accruing on or before the Effective Date (collectively, the “Class 13 Representative Released Claims”). It is expressly intended and understood by the parties that this Agreement is to be construed as a 14 complete settlement, accord, and satisfaction of the Class Representative Released Claims. 15 16 Id. at ¶¶ XII.B, XII.C. 17 Class Notice: A third-party settlement administrator will mail the “Notice of Proposed 18 Class Action Settlement and Hearing” (the “Notice”) to class members by regular mail within 30 19 days of the Court’s order preliminarily approving the settlement. See id. at ¶¶ V.B, V.C. The 20 settlement administrator will make reasonable efforts to locate class members whose notices are 21 returned as undeliverable such as using the USPS National Change of Address database and 22 commercially available address verification resources. Id. 23 The notice will include: the nature of the action, a summary of the settlement terms, and 24 instructions on how to object to and opt out of the settlement, including relevant deadlines. See 25 Dkt. No. 53-2, Ex. B. 26 Opt-Out Procedure: The deadline for a class member to submit a request for exclusion is 27 60 days after the date of the Notice mailing. SA at ¶ III.K. Those wishing to do so may mail their 1 Incentive Award: Plaintiff as class representative may apply for incentive award of no 2 more than $15,000. SA at ¶ IV.B. 3 Attorneys’ Fees and Costs: Class Counsel may file an application for attorneys’ fees not to 4 exceed $150,000. Id. 5 II. PROVISIONAL CLASS CERTIFICATION 6 The plaintiff bears the burden of showing by a preponderance of the evidence that class 7 certification is appropriate under Federal Rule of Civil Procedure 23. See Wal-Mart Stores, Inc. v. 8 Dukes, 564 U.S. 338, 350–51 (2011). Class certification is a two-step process. First, a plaintiff 9 must establish that each of the four requirements of Rule 23(a) is met: numerosity, commonality, 10 typicality, and adequacy of representation. Id. at 349. Second, he must establish that at least one 11 of the bases for certification under Rule 23(b) is met. Where, as here, a plaintiff seeks to certify a 12 class under Rule 23(b)(3), he must show that “questions of law or fact common to class members 13 predominate over any questions affecting only individual members, and that a class action is 14 superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. 15 R. Civ. P. 23(b)(3). 16 “The criteria for class certification are applied differently in litigation classes and 17 settlement classes.” In re Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 556 (9th Cir. 2019) 18 (“Hyundai II”). When deciding whether to certify a litigation class, a district court must consider 19 manageability at trial. Id. However, this concern is not present in certifying a settlement class. 20 Id. at 556–57. Thus, in deciding whether to certify a settlement class, a district court “must give 21 heightened attention to the definition of the class or subclasses.” Id. at 557. 22 Because the parties reached settlement before the Court considered class certification in 23 this case, the Court must determine whether provisional certification is appropriate. As detailed 24 below, the Court finds that it is appropriate under the circumstances. 25 A. Rule 23(a) 26 i. Numerosity 27 Rule 23(a) requires that the putative class be “so numerous that joinder of all members is 1 satisfies the numerosity requirement. See Dkt. No. 47 at 13. 2 ii. Commonality 3 Rule 23(a)(2) requires that “there are questions of law or fact common to the class.” A 4 contention is sufficiently common where “it is capable of classwide resolution—which means that 5 determination of its truth or falsity will resolve an issue that is central to the validity of each one of 6 the claims in one stroke.” Dukes, 564 U.S. at 350. Commonality exists where “the circumstances 7 of each particular class member vary but retain a common core of factual or legal issues with the 8 rest of the class.” Parra v. Bashas’, Inc., 536 F.3d 975, 978–79 (9th Cir. 2008). “What matters to 9 class certification . . . is not the raising of common ‘questions’—even in droves—but rather the 10 capacity of a classwide proceeding to generate common answers apt to drive the resolution of the 11 litigation.” Dukes, 564 U.S at 350 (citation omitted) (emphasis omitted). Even a single common 12 question may do to satisfy the commonality requirement. See id. at 359. 13 Here, all members of the proposed class were required to sign the Authorization as part of 14 their employment application process. Thus, whether such a practice violated the FCRA is not 15 only a common question among all class members, but the key question in this litigation. 16 iii. Typicality 17 Next, Rule 23(a)(3) requires that “the claims or defenses of the representative parties are 18 typical of the claims or defenses of the class.” Fed R. Civ. P. 23(a)(3). “The test of typicality is 19 whether other members have the same or similar injury, whether the action is based on conduct 20 which is not unique to the named plaintiffs, and whether other class members have been injured by 21 the same course of conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) 22 (quotation omitted). Under the “permissive standards” of Rule 23(a)(3), the claims need only be 23 “reasonably co-extensive with those of absent class members,” rather than “substantially 24 identical.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). In other words, 25 typicality is “satisfied when each class member’s claim arises from the same course of events, and 26 each class member makes similar legal arguments to prove the defendant’s liability.” Rodriguez v. 27 Hayes, 591 F.3d 1105, 1124 (9th Cir. 2010) (quotation omitted). “The commonality and typicality 1 158, & n.13 (1982). However, typicality—like adequacy—looks at whether the plaintiffs are 2 proper parties to proceed with the suit. Id. 3 As with all putative class members, Defendant requested that Plaintiff sign an 4 Authorization as part of his application process; Defendant obtained a background report; and 5 Defendant then used it to evaluate Plaintiff’s application. There is no evidence before the Court to 6 suggest that Plaintiff’s claims differ in any way from those of the putative class members. Thus, 7 the typicality requirement is satisfied. 8 iv. Adequacy 9 Finally, Rule 23(a)(4) requires that the “representative parties will fairly and adequately 10 represent the interests of the class.” Fed. R. Civ. P. 23(a)(4). On this question of adequacy, the 11 Court must address two legal questions: (1) whether the named plaintiffs and their counsel have 12 any conflicts of interest with other putative class members; and (2) whether the named plaintiffs 13 and their counsel will prosecute the action vigorously on behalf of the proposed class. See In re 14 Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000). This inquiry too “tend[s] to 15 merge” with the commonality and typicality criteria. See Falcon, 457 U.S. at 158, n.13. 16 There is no indication that Plaintiff has any conflict of interest with any putative class 17 member. Moreover, Plaintiff has secured representation by competent counsel, experienced in 18 consumer class actions generally and FCRA cases specifically. See, e.g., Dkt. No. 47 at 15–16 19 (collecting cases). The Court accordingly finds the adequacy requirement is satisfied. 20 B. Rule 23(b)(3) 21 Additionally, to certify a class, a plaintiff must satisfy the two requirements of Rule 22 23(b)(3). First, “questions of law or fact common to class members [must] predominate over any 23 questions affecting only individual members.” Fed. R. Civ. P. 23(b)(3). Second, “a class action 24 [must be] superior to other available methods for fairly and efficiently adjudicating the 25 controversy.” Id. 26 i. Predominance 27 The “predominance inquiry tests whether proposed classes are sufficiently cohesive to 1 (2016) (quotation omitted). The Supreme Court has defined an individualized question as one 2 where “members of a proposed class will need to present evidence that varies from member to 3 member.” Id. (quotations omitted). A common question, on the other hand, is one where “the 4 same evidence will suffice for each member to make a prima facie showing [or] the issue is 5 susceptible to generalized, class-wide proof.” Id. (quotation omitted). 6 The Court concludes that for purposes of settlement, common questions predominate here, 7 because the putative class members were exposed to similar Authorizations and Defendant used 8 the resulting background reports to evaluate their suitability for employment. 9 ii. Superiority 10 The superiority requirement tests whether “a class action is superior to other available 11 methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The 12 Court considers four non-exclusive factors: (1) the interest of each class member in individually 13 controlling the prosecution or defense of separate actions; (2) the extent and nature of any 14 litigation concerning the controversy already commenced by or against the class; (3) the 15 desirability of concentrating the litigation of the claims in the particular forum; and (4) the 16 difficulties likely to be encountered in the management of a class action. Id. 17 The Court concludes that a class action enables the most efficient use of Court and attorney 18 resources and reduces costs to the putative class members by allocating costs among them. 19 Further, this forum is appropriate, and there are no obvious difficulties in managing this class 20 action. 21 The Court finds that the predominance and superiority requirements of Rule 23(b)(3) are 22 met. 23 C. Class Representative and Class Counsel 24 Because the Court finds that Plaintiff meets the commonality, typicality, and adequacy 25 requirements of Rule 23(a), the Court appoints Plaintiff as class representative. When a court 26 certifies a class, it must also appoint class counsel. Fed. R. Civ. P. 23(c)(1)(B). Factors that 27 courts must consider when making that decision include: claims in the action; 1 (ii) counsel’s experience in handling class actions, other complex litigation, and the types of claims asserted in the action; 2 (iii) counsel’s knowledge of the applicable law; and (iv) the resources that counsel will commit to representing the class. 3 4 Fed. R. Civ. P. 23(g)(1)(A). 5 Counsel have investigated and litigated this case throughout its existence and have listed 6 their myriad cases representing plaintiffs in consumer class actions. See Dkt. No. 47 at 15–16. 7 Accordingly, the Court appoints the law firms of SmithMarco, P.C and Francis Mailman 8 Soumilas, P.C. as class counsel. 9 III. PRELIMINARY SETTLEMENT APPROVAL 10 A. Legal Standard 11 Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or defenses of a 12 certified class—or a class proposed to be certified for purposes of settlement—may be settled . . . 13 only with the court’s approval.” Fed. R. Civ. P. 23(e). “The purpose of Rule 23(e) is to protect 14 the unnamed members of the class from unjust or unfair settlements affecting their rights.” In re 15 Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). Accordingly, before a district court 16 approves a class action settlement, it must conclude that the settlement is “fundamentally fair, 17 adequate and reasonable.” In re Heritage Bond Litig., 546 F.3d 667, 674–75 (9th Cir. 2008). 18 Where the parties reach a class action settlement prior to class certification, district courts 19 apply “‘a higher standard of fairness’ and ‘a more probing inquiry than may normally be required 20 under Rule 23(e).’” Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012). Such settlement 21 agreements “must withstand an even higher level of scrutiny for evidence of collusion or other 22 conflicts of interest than is ordinarily required under Rule 23(e) before securing the court’s 23 approval as fair.” Roes, 1-2 v. SFBSC Mgmt., LLC, 944 F.3d 1035, 1048–49 (9th Cir. 2019) 24 (quoting In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011)). A more 25 “‘exacting review’ is warranted ‘to ensure that class representatives and their counsel do not 26 secure a disproportionate benefit at the expense of the unnamed plaintiffs who class counsel had a 27 duty to represent.’” Id. (quotations omitted). 1 settlement: (1) appears to be the product of serious, informed, non-collusive negotiations; (2) does 2 not grant improper preferential treatment to class representatives or other segments of the class; 3 (3) falls within the range of possible approval; and (4) has no obvious deficiencies. In re Lenovo 4 Adware Litig., No. 15-MD-02624-HSG, 2018 WL 6099948, at *7 (N.D. Cal. Nov. 21, 2018). 5 Courts lack the authority, however, to “delete, modify or substitute certain provisions. The 6 settlement must stand or fall in its entirety.” Hanlon, 150 F.3d at 1026. 7 B. Analysis 8 i. Evidence of Conflicts and Signs of Collusion 9 The first factor the Court considers is whether there is evidence of collusion or other 10 conflicts of interest. See Roes, 944 F.3d at 1049. The Ninth Circuit has directed district courts to 11 look for “subtle signs of collusion,” which include whether counsel will receive a disproportionate 12 distribution of the settlement, whether the parties negotiate a “‘clear sailing’ arrangement (i.e., an 13 arrangement where defendant will not object to a certain fee request by class counsel),” and 14 whether the parties agree to a reverter that returns unclaimed funds to the defendant. Id. 15 As discussed above, the proposed settlement is non-reversionary, with all unclaimed funds 16 awarded to a cy pres recipient, the NCLC. SA at ¶¶ IV.B.4. VII.B; see also Dkt. No. 51. 17 However, the Settlement Agreement contains a clear sailing arrangement, which states that “Class 18 Counsel’s attorneys’ fees and costs shall be capped at the sum of One Hundred and Fifty 19 Thousand, Dollars ($150,000.00), and Defendant agrees to pay and will not object to any 20 application for fees and costs that does not exceed that amount, subject to Court approval.” SA at 21 ¶ IV.B.3. 22 a. Clear Sailing Provision 23 Clear sailing provisions are not prohibited, though they “‘by [their] nature deprive[] the 24 court of the advantages of the adversary process’ in resolving fee determinations and are therefore 25 disfavored.” Id. at 1050 (quoting In re Bluetooth, 654 F.3d at 949) (alterations in original). The 26 Ninth Circuit has noted that clear sailing arrangements are “important warning signs of collusion,” 27 because “‘[t]he very existence of a clear sailing provision increases the likelihood that class 1 re Bluetooth, 654 F.3d at 948). Accordingly, when confronted with a clear sailing provision, the 2 district court has a heightened duty to “scrutinize closely the relationship between attorneys’ fees 3 and benefit to the class, being careful to avoid awarding ‘unreasonably high’ fees simply because 4 they are uncontested.” Id. (quotation omitted). 5 Here, counsel may request fees and costs of up to $150,000. See id. at ¶ VIII. Such fees 6 and costs, even were the Court to award them in their entirety, however, do not diminish the 7 recovery to the class members under the settlement. The $300 payment to each class member is 8 unaffected by any requested attorneys’ fees. See id. at ¶¶ IV.B.2, IV.B.3, VI.J.E. The Court also 9 recognizes that class counsel obtained tangible results for the prospective class members, as 10 discussed in Section III.B.iii. below. The Court acknowledges that the maximum total recovery to 11 the prospective class members would only be approximately $82,500 ($300 x 275 class members), 12 which is considerably less than the maximum attorneys’ fees class counsel may seek. 13 Nevertheless, class counsel did assume substantial risk in litigating this action on a 14 contingency fee basis, and incurring costs without the guarantee of payment for its litigation 15 efforts. That risk is even more acute under the circumstances, as class members’ statutory 16 recovery under the FCRA is capped at $1,000 in statutory damages for each member of a class. 17 See 15 U.S.C. § 1681n(a)(1)(A). The attorneys’ fees and costs necessary to litigate an FCRA class 18 action thus may often exceed any possible recovery. Under the circumstances, the Court does not 19 find it unreasonable that counsel may request attorneys’ fees of up to $150,000. The Court is 20 cognizant of its obligations to review class fee awards with particular rigor, and at the final 21 approval stage will carefully scrutinize the circumstances and determine what attorneys’ fees 22 award is appropriate in this case. Accordingly, given that the settlement is non-reversionary and 23 any attorneys’ fees will not diminish the class recovery, the Court does not find that the clear 24 sailing provision weighs against preliminary approval. 25 b. Cy Pres Distribution 26 The Court must also evaluate whether the parties’ proposed cy pres recipient is 27 appropriate. A cy pres award must qualify as “the next best distribution” to giving the funds to 1 appropriate cy pres beneficiary,” and there must be a “‘driving nexus between the plaintiff class 2 and the cy pres beneficiaries.’” Id. (citation omitted). That is to say, a cy pres award must be 3 “‘guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class 4 members, and must not benefit a group too remote from the plaintiff class.’” Id. (citations 5 omitted). A cy pres distribution is not appropriate if there is “‘no reasonable certainty’ that any 6 class member would benefit from it.” Id. (citation omitted). 7 Here, the parties have selected the NCLC as their cy pres recipient. See Dkt. No. 51. The 8 NCLC advocates for and provides resources to low-income consumers throughout the United 9 States. Id. Accordingly, the Court preliminarily finds that there is a sufficient nexus between the 10 cy pres recipient and the class, as the NCLC shares the interests of the class members in protecting 11 access to justice, regardless of socioeconomic status. 12 ii. Preferential Treatment 13 The Court next considers whether the settlement agreement provides preferential treatment 14 to any class member. The Ninth Circuit has instructed that district courts must be “particularly 15 vigilant” for signs that counsel have allowed the “self-interests” of “certain class members to 16 infect negotiations.” In re Bluetooth, 654 F.3d at 947. For that reason, courts in this district have 17 consistently stated that preliminary approval of a class action settlement is inappropriate where the 18 proposed agreement “improperly grant[s] preferential treatment to class representatives.” Lenovo, 19 2018 WL 6099948, at *8 (quotations omitted). 20 Although the Settlement Agreement authorizes Plaintiff to seek an incentive award of no 21 more than $15,000 for his role in this lawsuit, see SA at ¶ IV.B, the Court will ultimately 22 determine whether he is entitled to such an award and the reasonableness of the amount requested. 23 Incentive awards “are intended to compensate class representatives for work done on behalf of the 24 class, to make up for financial or reputational risk undertaken in bringing the action.” Rodriguez 25 v. West Publ’g Corp., 563 F.3d 948, 958–59 (9th Cir. 2009). Plaintiff must provide sufficient 26 evidence to allow the Court to evaluate his award “individually, using ‘relevant factors includ[ing] 27 the actions the plaintiff has taken to protect the interests of the class, the degree to which the class 1 pursuing the litigation . . . .’” Stanton v. Boeing Co., 327 F.3d 938, 977 (9th Cir. 2003). The 2 Court will consider the evidence presented at the final fairness hearing and evaluate the 3 reasonableness of any incentive award request. Nevertheless, because incentive awards are not 4 per se unreasonable, the Court finds that this factor weighs in favor of preliminary approval. See 5 Rodriguez, 563 F.3d at 958 (finding that “[i]ncentive awards are fairly typical in class action 6 cases” and “are discretionary” (emphasis omitted)). 7 iii. Settlement within Range of Possible Approval 8 The third factor the Court considers is whether the settlement is within the range of 9 possible approval. To evaluate whether the settlement amount is adequate, “courts primarily 10 consider plaintiffs’ expected recovery balanced against the value of the settlement offer.” Lenovo, 11 2018 WL 6099948, at *8. This requires the Court to evaluate the strength of Plaintiff’s case. 12 Here, the total settlement amount of $82,500 constitutes approximately 30% of the 13 $275,000 maximum statutory recovery for the approximately 275 class members. See 15 U.S.C. 14 § 1681n(a)(1)(A). Plaintiff acknowledges that he would face substantial risk in continuing to 15 litigate this case, such as maintaining class treatment and prevailing at trial. Dkt. No. 47 at 10–11. 16 The Court finds that the settlement amount, given these risks, weighs in favor of granting 17 preliminary approval. 18 iv. Obvious Deficiencies 19 The fourth and final factor that the Court considers is whether there are obvious 20 deficiencies in the settlement agreement. The Court finds no obvious deficiencies, and therefore 21 finds that this factor weighs in favor of preliminary approval. 22 * * * 23 Having weighed the relevant factors, the Court preliminarily finds that the settlement 24 agreement is fair, reasonable, and adequate, and GRANTS preliminary approval. The Court 25 DIRECTS the parties to include both a joint proposed order and a joint proposed judgment when 26 submitting their motion for final approval. 27 IV. PROPOSED CLASS NOTICE PLAN 1 notice that is practicable under the circumstances, including individual notice to all members who 2 can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). Individual notice must 3 be sent to all class members “whose names and addresses may be ascertained through reasonable 4 effort.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974). 5 Here, the notice plan provides direct notice via mail to class members, and the settlement 6 administrator will make reasonable efforts to locate class members whose notices are returned as 7 undeliverable such as using the USPS National Change of Address database and commercially 8 available address verification resources. See id. at ¶¶ V.B, V.C. The Court finds that the proposed 9 notice process is “‘reasonably calculated, under all the circumstances,’ to apprise all class 10 members of the proposed settlement.” Roes, 944 F.3d at 1045. 11 With respect to the content of the notice itself, the notice must clearly and concisely state 12 in plain, easily understood language: 13 (i) the nature of the action; (ii) the definition of the class certified; 14 (iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance through an attorney if 15 the member so desires; (v) that the court will exclude from the class any member who requests 16 exclusion; (vi) the time and manner for requesting exclusion; and 17 (vii) the binding effect of a class judgment on members[.] 18 19 Fed. R. Civ. P. 23(c)(2)(B). The Court finds that the content of the proposed notices, Dkt. No.53- 20 2, Ex. B, provides sufficient information about the case and thus conforms with due process 21 requirements. See Hyundai II, 926 F.3d at 567 (“Notice is satisfactory if it generally describes the 22 terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and 23 to come forward and be heard.” (quotations omitted)). 24 V. CONCLUSION 25 For the foregoing reasons, the Court GRANTS Plaintiff’s motion for preliminary approval 26 of class action settlement. The parties are DIRECTED to meet and confer and stipulate to a 27 schedule of dates for each event listed below, which shall be submitted to the Court within seven 1 5 Deadline for Settlement Administrator to mail 3 notice to all putative Class Members Filing deadline for attorneys’ fees and costs motion | = ti(‘;Ss~*=s*™d 4 Filing deadline for incentive payment motion Pe Deadline for Class Members to opt-out or object to 5 settlement and/or application for attorneys’ fees and 6 costs and incentive payment Filing deadline for final approval motion Pe 7 Final fairness hearing and hearing on motions Pe 8 The parties are further DIRECTED to implement the proposed class notice plan. 9 IT IS SO ORDERED. 10 || Dated: 4/17/2020 11 Abpspurred 3 Mb). HAYWOOD S. GILLIAM, JR. 12 United States District Judge
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