Doe v. Securtest

• Court: District Court, N.D. California
• Decided: November 29, 2023
• Docket: 3:18-cv-07344
• Status: Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 REGMON HAWKINS, 10 Case No. 18-cv-07344-RS Plaintiff, 11 v. ORDER DENYING MOTION FOR 12 PRELIMINARY APPROVAL OF SECURTEST INC, et al., CLASS ACTION SETTLEMENT 13 Defendants. 14

15 This proposed class action settlement, now in its second iteration, remains deeply flawed. 16 Plaintiff Regmon Hawkins seeks preliminary approval on behalf of himself and a proposed class 17 of individuals who allegedly did not receive appropriate written disclosures for background checks 18 procured for employment purposes pursuant to the Fair Credit Reporting Act (FCRA). See 15 19 U.S.C. § 1681b(b)(2). The proposed settlement purports to distinguish itself from its predecessor 20 by conditioning Defendants’ payment of a $50,000 settlement to Hawkins to resolve Hawkins’ 21 individual claims on this Court’s approval of the $100,000 class settlement. Pursuant to Civil 22 Local Rule 7-1(b), the motion is suitable for disposition without oral argument, and the hearing set 23 for December 14, 2023, is vacated. The motion for preliminary approval is denied. 24 The proposed settlement fails to resolve the fundamental conflict of interest between 25 Hawkins as class representative and the other members of the class highlighted in this Court’s 26 previous denial of preliminary approval. See Dkt. 56, Order (Dec. 2, 2022). If anything, the proposed 27 settlement exacerbates Hawkins’ conflict of interest with the class by more clearly conditioning 1 settlement, Hawkins receives $50,000 (and, now, an additional $5,000 service award) only upon 2 approval of the $100,000 class settlement. The addition of an incentive award for Hawkins means 3 each of the approximately 1,579 class members now receives approximately $3 less than they did 4 under the previous proposed settlement agreement.1 Though Hawkins explains how his individual 5 claims differ from the class claims, the fact remains that he stands to recover a huge percentage of 6 the total amount Defendants are willing to spend to settle this case. Hawkins would receive slightly 7 more than $55,000 from settlement approval (he also would recover his pro rata share of the class 8 settlement), which is 36% of the $150,000 Defendants are willing to pay in total. See Johnson v. 9 Rausch, Sturm, Israel, Enerson & Hornik, LLP, 333 F.R.D. 314, 318–19 (S.D.N.Y. 2019) (finding 10 class representative’s interests antagonistic to class members’ interests where class representative 11 would receive $1,000 upon settlement approval based on potential statutory damages while each 12 class member would receive as little as $5.01). 13 The newly proposed $5,000 incentive award also raises eyebrows. It is roughly 208 times 14 the average predicted recovery per class member, constitutes 5% of the total settlement fund, and 15 constitutes 12% of the settlement fund after attorney fees and costs and settlement administration 16 costs are covered. See, e.g., Chavez v. Lumber Liquidators, Inc., No. 09-cv-4812, 2015 WL 17 2174168, at *4–5 (N.D. Cal. May 8, 2015) (rejecting proposed settlement where incentive award 18 was 37 times greater than average class member recovery and 7% of total settlement fund). This is 19 not to say the $5,000 award alone renders preliminary approval inappropriate. Indeed, the adequacy 20 issue raised by Hawkins’ settlement of his individual claims is more troubling. It is merely to point 21 out one way in which the new proposed settlement is more problematic than the first proposed 22 settlement.2 23

24 1 Each class member now stands to recover about $23, down from $26 in the previously proposed settlement. 25 2 The proposed settlement appears deficient on at least one other front, as it seems to release all 26 class members’ claims arising under both the FCRA and the Investigative Consumer Reporting Agency Act (ICRAA). See Dkt. 71, at 6–7; Dkt. 71-5, at 15–16. It is not clear, however, why class 27 members would be unable to seek statutory damages under the ICRAA in individual actions. This Court has insufficient information to determine whether $23 per class member is fair, reasonable, 1 In short, preliminary approval is inappropriate here because there is significant reason to 2 || doubt that Hawkins is an adequate representative of the 1,579 members of the FCRA disclosure 3 class. Hawkins’ clear financial incentive is to fight for approval of the proposed class settlement 4 || regardless of how much (or little) each individual class member stands to receive. Accordingly, the 5 motion for preliminary approval is denied. 6 7 || ITISSO ORDERED. 8 9 Dated: November 29, 2023 10 VN bday RICHARD SEEBORG I Chief United States District Judge 12

15 16

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Z 18 19 20 21 22 23 24 25 26 || and adequate where each class member is giving up their potential claims under the ICRAA for apparently no consideration. See, e.g., Cunha v. Chico Produce, Inc., No. 17-cv-597, 2019 WL 27 12875982, at *6 (N.D. Cal. June 25, 2019). 98 ORDER DENYING PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT CASE No. 18-cv-07344-RS