Gatchalian v. Atlantic Recovery Solutions, LLC

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 HARRIET GATCHALIAN, Case No. 22-cv-04108-JSC

8 Plaintiff, ORDER RE PARTIES’ MOTION FOR 9 v. PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT AND 10 ATLANTIC RECOVERY SOLUTIONS, PROVISIONAL CLASS LLC, et al., CERTIFICATION 11 Defendants. Re: Dkt. No. 48 12 13 Plaintiff brings this putative consumer class action against Defendants for abusive, 14 deceptive, and unfair debt collection practices. (Dkt. No. 1-1.)1 Pursuant to Federal Rule of Civil 15 Procedure 23, the parties now move for provisional certification of a class exclusively for 16 settlement purposes, preliminary approval of a proposed class action settlement, and a stay 17 pending final approval. (Dkt. No. 48.) Having carefully considered the motion, the Court 18 concludes oral argument is unnecessary, see Civ. L. R. 7-1(b), and GRANTS the parties’ motion. 19 BACKGROUND 20 Plaintiff allegedly incurred and defaulted on a consumer debt transferred to DNF 21 Associates, LLC, which then directed Atlantic Recovery Solutions, LLC to collect the debt from 22 Plaintiff. (Id. ¶¶ 18-21.) From June 2021 to October 2021, Atlantic Recovery Solutions left 23 numerous voicemails on and sent various text messages to Plaintiff’s cellular telephone, 24 representing Atlantic Recovery Solutions needed to speak with Plaintiff or her legal representation 25 immediately regarding documentation forwarded for legal review, “a legal required notice,” “[her] 26 filed case,” Atlantic Recovery Solutions’ “need to make a negative recommendation on [her] 27 1 behalf,” and “employment verification with [her] employer.” (Id. ¶¶ 22-37.) 2 Plaintiff seeks statutory damages against Defendants under the California Rosenthal Fair 3 Debt Collection Practices Act, California Civil Code §§ 1788-1788.33, and the federal Fair Debt 4 Collection Practices Act, 15 U.S.C. §§ 1692-1692p, for Defendants’

5 routine practice of sending voicemail and cellular telephone text messages, like those sent to Plaintiff, which fails to disclose: 1) 6 Defendants’ identity, 2) the nature of Defendants’ business, and 3) that each message was a communication from a debt collector in an 7 attempt to collect a debt; and which attempt to instill a false sense of urgency in the consumer by falsely representing or implying that a 8 civil lawsuit would be filed, or had been filed, to collect a defaulted consumer debt, when no such civil lawsuit was intended to be filed or 9 had in fact been filed. 10 (Dkt. No. 1-1 ¶ 5.) 11 At mediation, the parties agreed to settle the case. (Dkt. No. 44.) The parties now seek 12 preliminary approval of the class action settlement. 13 SETTLEMENT AGREEMENT 14 A. Class 15 The parties request the Court provisionally certify a class composed of all persons with 16 addresses in California to whom Atlantic Recovery sent voicemail messages and/or text messages 17 in an attempt to collect defaulted consumer debt on behalf of DNF Associates, which was 18 originally owed to Sallie Mae Bank, from June 6, 2021, through the date of class certification. 19 (Dkt. No. 48-2 ¶ 2.3.) Excluded from the class are any class members who timely mail a request 20 for exclusion; any officers, directors, or legal representatives of Defendants; and any judge, 21 justice, or judicial officer presiding over this matter and the members of their immediate families 22 and judicial staff. (Id. ¶ 2.4.) 23 B. Payment Terms 24 The settlement agreement requires Defendants to pay a class fund of $51,975.00 as a pro 25 rata distribution to class members, which will amount to no less than $175.00 to each class 26 member, under 15 U.S.C. § 1692k(a)(2)(B)(ii) and California Civil Code § 1788.17. (Id. ¶ 4.1.) 27 To the extent any settlement checks remain uncashed 90 days from the date of their mailing, the 1 a cy pres recipient. (Id. ¶ 4.4; see Dkt. No. 48-5 ¶¶ 4-9.) Defendants will pay Plaintiff $2,000.00 2 in statutory damages pursuant to 15 U.S.C. § 1692k(a)(2)(A) and California Civil Code § 1788.17, 3 (Dkt. No. 48-2 ¶ 4.2), and $2,000.00 as a service award, (id. ¶ 4.6), and will cease collecting from 4 Plaintiff the debt originally owed to Sallie Mae Bank. (Id. ¶ 4.5.) 5 Under the settlement agreement, Defendants must pay attorneys’ fees and costs to 6 proposed class counsel pursuant to 15 U.S.C. § 1692k(a)(3) and California Civil Code § 1788.17. 7 (Id. ¶ 4.8.) Proposed class counsel estimates their lodestar is approximately $117,000 and they 8 will request approximately $123,500 in their forthcoming fee motion. (Dkt. No. 48-1 at 10.) 9 C. Scope of Release 10 Each class member will “release and forever discharge Defendants and all of Defendants’ 11 respective principals, members, subsidiaries, partners, officers, directors, shareholders, managers, 12 employees, agents, representatives, successors, assigns, attorneys, and vendors, and insurance 13 carriers,” (Dkt. No. 48-2 ¶ 7.1), from “all claims alleging violation of California Civil Code §§ 14 1788-1788.33 and/or 15 U.S.C. §§ 1692-1692p, or similar or related claims or causes of action 15 under state or federal law, arising from or relating to voicemail messages, and/or cellular 16 telephone text messages, sent by or on behalf of, Defendants in the form described in Plaintiff’s 17 Complaint herein, which were sent within the Class Settlement Period.” (Id. ¶ 2.17.) Thus, under 18 the settlement, class members waive all rights under California Civil Code § 1542 as to any 19 alleged violation of California Civil Code §§ 1788-1788.33 and 15 U.S.C. §§ 1692-1692p, as well 20 as similar or related claims arising from Defendants’ conduct as described in Plaintiff’s complaint. 21 (Id. ¶ 7.1.) 22 The settlement’s release includes “unknown claims,” meaning class members’ released 23 claims include those “Plaintiff or any class member does not know or even suspect to exist against 24 any of the Released Parties, which, if known, might have affected his or her decision regarding the 25 settlement of this matter,” and further, claims “known or unknown, suspected or unsuspected, 26 contingent or non-contingent, which now exist, or have existed, or could have existed, through the 27 effective date of this Agreement, based upon actions or conduct occurring on or before the date of 1 facts concerning each of the Released Parties.” (Id. ¶ 7.1.) 2 D. Notice 3 The parties have designated American Legal Claim Services, LLC as the settlement class 4 administrator. (Dkt. No. 48-1 at 12.) Defendants will provide Plaintiff and American Legal Claim 5 Services a list of class members and their addresses based on Defendants’ records within five 6 business days of the settlement’s execution. (Id.; Dkt. No. 48-2 ¶ 3.4.) American Legal Claim 7 Services will obtain the current address of each class member by running the last known address 8 reflected in Defendants’ records for each class member through the U.S. Postal Service National 9 Change of Address database. (Dkt. No. 48-2 ¶ 3.4.) Not later than 25 days after the preliminary 10 approval date, American Legal Claim Services will mail the class notice to each class member. 11 (Id.) All envelopes in which American Legal Claim Services mails the class notice to class 12 members will include a notation requesting address correction, and if any notice is returned with a 13 new address, American Legal Claim Services will resend the class notice to the new address. (Id.) 14 American Legal Claim Services is not responsible for the postal service’s failure to timely deliver 15 the class notice to class members and will not have any obligation to resend a notice that is not 16 returned by the postal service before the final fairness hearing. (Id.) Defendants will bear the cost 17 of distributing the class notice and related expenses. (Id. ¶ 3.5.) 18 E. Opt-Outs and Objections 19 Class members who wish to exclude themselves from the class action settlement must mail 20 a written request for exclusion to class counsel, or American Legal Claim Services, postmarked no 21 later than 60 days after the preliminary approval date. (Id. ¶ 5.1.) The written request must 22 include the case name and number for this action; the class member’s full name, address, and 23 telephone number; and a statement affirming the class member’s wish to be excluded from the 24 class action settlement. (Id. ¶ 5.2.) 25 Class members who wish to object to the class action settlement must mail a written notice 26 of objection to the Court, postmarked no more than 60 days after the Initial Notice Date, or, 27 alternatively, object orally at the final approval hearing. (Id. ¶ 6.1.) The written notice must 1 telephone number; a statement of each objection; description of the facts and law underlying each 2 objection; a statement noting whether the class member intends to appear at the fairness hearing; a 3 list of all witnesses the class member intends to call by live testimony, deposition testimony, or 4 affidavit or declaration testimony; and a list of exhibits the class member intends to present at the 5 final fairness hearing. (Id. ¶ 6.2.) 6 DISCUSSION 7 A class proposed for the purposes of settlement requires the Court’s approval to be 8 certified. Fed. R. Civ. P. 23(e). Because the parties have reached a settlement agreement before 9 class certification, the Court “must peruse the proposed compromise to ratify both the propriety of 10 the certification and the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th 11 Cir. 2003). At the preliminary approval stage, the court grants approval only if justified by the 12 parties’ showing the court will likely be able to (1) certify the class for purposes of judgment on 13 the proposal and (2) approve the proposal under Rule 23(e)(2). Ramirez v. Trans Union, LLC, No. 14 12-CV-00632-JSC, 2022 WL 2817588, at *3 (N.D. Cal. July 19, 2022); see Fed. R. Civ. P. 15 23(e)(1)(B). If the court preliminarily certifies the class and finds the settlement appropriate after 16 “a preliminary fairness evaluation,” the class will be notified, and a final fairness hearing will be 17 scheduled to determine if the settlement is fair, adequate, and reasonable under Federal Rule of 18 Civil Procedure 23. Ramirez, 2022 WL 2817588, at *3. 19 A. Conditional Class Certification 20 A class must meet each requirement of Federal Rule of Civil Procedure 23(a) and at least 21 one of the requirements of Rule 23(b). Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013). Under 22 Rule 23(a), there are four prerequisites for class action certification:

23 (1) the class is so numerous that joinder of all members is impracticable; 24 (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of 25 the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the 26 interests of the class. 27 Fed. R. Civ. P. 23(a). Of the requirements of Federal Rule of Civil Procedure 23(b), the parties 1 Under Rule 23(b)(3), “the questions of law or fact common to class members [must] predominate 2 over any questions affecting only individual members,” and “a class action [must be] superior to 3 other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 4 23(b)(3). 5 a. Rule 23(a) Requirements 6 Each of the Rule 23(a) factors are satisfied. 7 i. Numerosity 8 Numerosity requires the class be “so numerous that joinder of all members is 9 impracticable.” Fed. R. Civ. P. 23(a)(1). Generally, the numerosity requirement is satisfied where 10 a class includes at least 40 members. Rannis v. Recchia, 380 F. App’x 646, 651 (9th Cir. 2010). 11 Here, the numerosity requirement is satisfied because “there are approximately 297 settlement 12 Class Members.” (Dkt. No. 48-1 at 14.) 13 ii. Commonality 14 Commonality requires “questions of law or fact common to the class.” Fed. R. Civ. P. 15 23(a)(2). Parties seeking class certification must prove their claims depend on a common 16 contention of such a nature it is capable of class-wide resolution, meaning the determination of its 17 truth or falsity will resolve an issue central to the validity of each claim at once. Wal-Mart Stores, 18 Inc. v. Dukes, 564 U.S. 338, 350 (2011). Class-wide proceedings must generate common answers 19 to common questions of law or fact apt to drive resolution of the litigation. Id. The parties must 20 demonstrate class members have suffered the same injury. Id. at 349-350. 21 The parties identify common contentions and demonstrate class members suffered the 22 same injury. All class members were sent similar debt collection communications by Defendants 23 regarding a defaulted debt originally owed to Sallie Mae Bank. The principal issues of law are 24 whether Defendants’ collection communications violated the California Rosenthal Fair Debt 25 Collection Practices Act, California Civil Code §§ 1788-1788.33, and the federal Fair Debt 26 Collection Practices Act, 15 U.S.C. §§ 1692-1692p, by failing to disclose

27 1) Defendants’ identity, 2) the nature of Defendants’ business, and 3) urgency in the consumer by falsely representing or implying that a 1 civil lawsuit would be filed, or had been filed, to collect a defaulted consumer debt, when no such civil lawsuit was intended to be filed or 2 had in fact been filed. 3 (Dkt. No. 1-1 ¶ 5.) Commonality is thus satisfied. Stockwell v. City & Cnty. of San Francisco, 4 749 F.3d 1107, 1111 (9th Cir. 2014) (“Rule 23(a)(2) requires a single significant question of law 5 or fact.” (cleaned up)); Evon v. L. Offs. of Sidney Mickell, 688 F.3d 1015, 1029 (9th Cir. 2012) 6 (ruling commonality existed where class members all received debt collection letters at their place 7 of employment without consent and the issue was violation of the Fair Debt Collection Practices 8 Act); Parra v. Bashas’, Inc., 536 F.3d 975, 978-79 (9th Cir. 2008) (“Where the circumstances of 9 each particular class member vary but retain a common core of factual or legal issues with the rest 10 of the class, commonality exists.”). 11 iii. Typicality 12 Typicality requires “the claims or defenses of the representative parties are typical of the 13 claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “The test of typicality is whether other 14 members have the same or similar injury, whether the action is based on conduct which is not 15 unique to the named plaintiffs, and whether other class members have been injured by the same 16 course of conduct.” Evon, 688 F.3d at 1030 (cleaned up). “Typicality refers to the nature of the 17 claim or defense of the class representative, and not to the specific facts from which it arose or the 18 relief sought.” Ellis v. Costco Wholesale Corp., 657 F.3d 970, 984 (9th Cir. 2011). 19 Defendants sent similar voicemail and/or cellular telephone text messages to plaintiff and 20 the class members attempting to collect defaulted consumer debts allegedly in violation of the 21 California Rosenthal Fair Debt Collection Practices Act, California Civil Code §§ 1788-1788.33, 22 and the federal Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p. As in Abel, 23 Plaintiff’s claims are typical of the claims of the class because each class member was sent similar 24 collection communications and thus were subjected to the same violations of California and 25 federal law. Abels v. JBC Legal Grp., P.C., 227 F.R.D. 541, 545 (N.D. Cal. 2005) (“Each of the 26 class members was sent the same collection letter as Abels and each was allegedly subjected to the 27 same violations of the FDCPA. Therefore, this Court concludes that claims of the class 1 met.”). Typicality is satisfied. 2 iv. Adequacy of Representation 3 Adequacy of representation requires “the representative parties will fairly and adequately 4 protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). “In making this determination, courts 5 must consider two questions: (1) do the named plaintiffs and their counsel have any conflicts of 6 interest with other class members and (2) will the named plaintiffs and their counsel prosecute the 7 action vigorously on behalf of the class?” Evon, 688 F.3d at 1031 (cleaned up). 8 There is no reason Plaintiff will be unable to “fairly and adequately protect the interests of 9 the class” under Rule 23(a)(4) for purposes of statutory damages claims. Plaintiff has no conflicts 10 of interest with other class members, suffered the same alleged statutory injury as all other class 11 members, shares with the class the common goal of protecting consumer rights granted under fair 12 debt collection statutes and recovering damages for Defendants’ alleged violations of state and 13 federal law. Proposed class counsel has significant experience prosecuting consumer class 14 actions, including Fair Debt Collection Practices Act actions. (Dkt. No. 48-2 ¶¶ 3-11.) Plaintiff 15 and proposed class counsel are adequate for purposes of Rule 23(a)(4). 16 b. Rule 23(b)(3) Requirements 17 Both the predominance and superiority requirements are satisfied under Rule 23(b)(3). 18 i. Predominance 19 “The first requirement of Rule 23(b)(3) is predominance of common questions over 20 individual ones.” Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996). The 21 predominance inquiry “trains on the legal or factual questions that qualify each class member’s 22 case as a genuine controversy, questions that preexist any settlement,” and “tests whether 23 proposed classes are sufficiently cohesive to warrant adjudication by representation.” Amchem 24 Prod., Inc. v. Windsor, 521 U.S. 591, 594 (1997). “In addressing the questions of law or fact 25 common to the members, the Court looks at common factual link between all class members and 26 the defendants for which the law provides a remedy.” Abels, 227 F.R.D. at 547. If a common 27 question will drive the resolution of the litigation, the class is sufficiently cohesive. Jabbari v. 1 predominance test is whether adjudication of common issues will help achieve judicial economy.” 2 Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009) (cleaned up). 3 In this case, the same common legal questions qualify each class member’s case as a 4 genuine controversy such that the proposed class is sufficiently cohesive to warrant adjudication 5 by representation. As in Abels, the common fact is all class members were subjected to 6 Defendants’ policy of sending collection communications via similar voicemail and/or text 7 messages to collect defaulted consumer debts in violation of California and federal law. Abels, 8 227 F.R.D. at 547 (“The common fact in this case is that the putative class members were 9 subjected to Defendants’ policy of sending collection letters, which are alleged to violate the [Fair 10 Debt Collection Practices Act]. Thus, the legal issues arising from Defendants’ letters are the 11 same for each class member.”). Here, the issues are common to the class: whether it was 12 Defendants’ standard practice and policy to send collection communications via voicemail and/or 13 cellular telephone text messages without adequate disclosures and with implicit threats, and 14 whether those collection communications violate California Civil Code §§ 1788-1788.33 and 15 15 U.S.C. §§ 1692-1692p. The only individual issue is the identification of consumers who were 16 subjected to Defendants’ standard practice and policy of collection communications, which the 17 parties assert can be determined through Defendants’ records. The common issues predominate, 18 and Plaintiff’s complaint hinge on these common issues. 19 ii. Superiority 20 Finally, the class action mechanism is the superior method for adjudicating this lawsuit. 21 Fed. R. Civ. P. 23(b)(3). “Where classwide litigation of common issues will reduce litigation 22 costs and promote greater efficiency, a class action may be superior to other methods of litigation. 23 A class action is the superior method for managing litigation if no realistic alternative exists.” 24 Valentino, 97 F.3d at 1234–35 (9th Cir. 1996). Factors relevant to the superiority requirement 25 include: (A) the class members’ interests in individually controlling the 26 prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy 27 already begun by or against class members; (D) the likely difficulties in managing a class action. 1 2 Fed. R. Civ. P. 23(b)(3); Zinser v. Accufix Rsch. Inst., Inc., 253 F.3d 1180, 1190 (9th Cir.), opinion 3 amended on denial of reh’g, 273 F.3d 1266 (9th Cir. 2001) (“In determining superiority, courts 4 must consider the four factors of Rule 23(b)(3).”) “A consideration of these factors requires the 5 court to focus on the efficiency and economy elements of the class action so that cases allowed 6 under subdivision (b)(3) are those that can be adjudicated most profitably on a representative 7 basis.” Zinser, 253 F.3d at 1190. However, where “confronted with a request for settlement-only 8 class certification, a district court need not inquire whether the case, if tried, would present 9 intractable management problems, for the proposal is that there be no trial.” Amchem Prod., Inc., 10 521 U.S. at 620. 11 Rule 23(b)(3)(A), (B), and (C) favor class certification. Each class member’s individual 12 stake in the litigation is small, so there is little incentive to bring an individual action. Id. at 616. 13 Likewise, any class members’ interest in individually controlling the prosecution of separate 14 actions is minimal. Any class member who wishes to pursue a separate action is free to opt out of 15 the settlement. Additionally, there is not similar litigation already underway elsewhere weighing 16 against proceeding as a class here, nor any reason not to try a class action in this District. A class 17 here would achieve economies of time, effort, and expense, and promote uniformity. The class 18 action mechanism is the superior method for adjudicating Plaintiff and class members’ claims 19 against Defendants. 20 * * * 21 Accordingly, conditional certification of the class for settlement purposes is proper. 22 B. Preliminary Approval of Settlement Agreement 23 In making a preliminary determination of the fairness, adequacy, and reasonableness of a 24 class action settlement agreement, courts must ensure the settlement did not result from collusion 25 among the parties and consider 26 (1) the strength of the plaintiff’s case; (2) the risk, expense, 27 complexity, and likely duration of further litigation; (3) the risk of stage of the proceedings; (6) the experience and views of counsel; (7) 1 the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement. 2 3 In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011). Because collusion 4 may not be evident on a settlement’s face, courts must be vigilant for subtle signs “class counsel 5 have allowed pursuit of their own self-interests and that of certain class members to infect the 6 negotiations.” Id. at 947. “A few such signs are:

7 (1) when counsel receive a disproportionate distribution of the settlement, or when the class receives no monetary distribution but 8 class counsel are amply rewarded; (2) when the parties negotiate a ‘clear sailing’ arrangement providing 9 for the payment of attorneys’ fees separate and apart from class funds, which carries the potential of enabling a defendant to pay class 10 counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class; and 11 (3) when the parties arrange for fees not awarded to revert to defendants rather than be added to the class fund. 12 13 Id. (cleaned up). 14 However, the Court cannot fully assess such factors until the final approval hearing, so “a 15 full fairness analysis is unnecessary at this stage.” Alberto v. GMRI, Inc., 252 F.R.D. 652, 665 16 (E.D. Cal. 2008). “At the preliminary approval stage, the settlement need only be potentially fair.” 17 Ramirez v. Trans Union, LLC, No. 12-CV-00632-JSC, 2022 WL 2817588, at *4 (N.D. Cal. July 18 19, 2022). Preliminary approval is appropriate where “the proposed settlement appears to be the 19 product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not 20 improperly grant preferential treatment to class representatives or segments of the class, and falls 21 within the range of possible approval.” In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 22 1079 (N.D. Cal. 2007). 23 a. Fairness Factors 24 i. Settlement Process 25 The first factor concerns “the means by which the parties arrived at settlement.” Harris v. 26 Vector Mktg. Corp., No. C-08-5198 EMC, 2011 WL 1627973, at *8 (N.D. Cal. Apr. 29, 2011). 27 To approve a proposed settlement, a court must be satisfied the parties “have engaged in sufficient 1 Acosta v. Trans Union, LLC, 243 F.R.D. 377, 396 (C.D. Cal. 2007) (cleaned up). Courts thus 2 have “an obligation to evaluate the scope and effectiveness of the investigation plaintiffs’ counsel 3 conducted prior to reaching an agreement.” Id. 4 Plaintiff’s counsel submit declarations in support of their motion for preliminary approval 5 detailing their experience and this action’s litigation history and settlement negotiation. (Dkt. 6 Nos. 48-2, 48-3, 48-4, 48-5.) On June 6, 2022, Consumer Law Center, Inc., filed Plaintiff’s 7 complaint in the Superior Court of California, County of Santa Clara, alleging Defendants violated 8 various provisions of California and federal fair debt collection practices law by making false, 9 deceptive, and misleading representations in debt collection communications to collect defaulted 10 debts. (Dkt. No. 48-2 ¶¶ 12-13.) On July 13, 2022, Defendants removed to this Court. (Dkt. No. 11 1.) Plaintiff propounded written discovery on each of the Defendants, to which Defendants 12 responded and produced documents and audio recordings in December 2022 and January 2023. 13 (Dkt. No. 48-2 ¶¶ 15-18.) Plaintiffs also served subpoena requests on two third parties, to which 14 one third party responded in January 2023. (Id. ¶ 19.) On January 18, 2023, the Court appointed 15 Celia McGuinness as mediator and ordered the parties to complete mediation. (Dkt. Nos. 42, 43.) 16 On April 25, 2023, the parties participated in a mediation session resulting in settlement. (Dkt. 17 No. 44.) The parties finalized a settlement agreement on July 18, 2023. (Dkt. No. 48-2 ¶ 20.) 18 Plaintiff’s counsel claims the settlement emerged from communication with Plaintiff, 19 research into her causes of action, the drafting and filing of the complaint, the issuance of and 20 responses to written discovery, review of Defendants’ document production, confirmatory 21 discovery on the proposed class list, mediation, negotiation of a settlement agreement, and 22 preparation of preliminary approval papers. (Id. ¶ 23.) “In the context of class action settlements, 23 formal discovery is not a necessary ticket to the bargaining table where the parties have sufficient 24 information to make an informed decision about settlement.” Linney v. Cellular Alaska P’ship, 25 151 F.3d 1234, 1239 (9th Cir. 1998) (cleaned up). But here the parties did engage in formal 26 discovery, including document review. (Dkt. No. 48-2 ¶¶ 15-19.) Further, the settlement resulted 27 from a mediation session with the Court’s appointed mediator, who required submission of 1 mediator and presence of discovery supports the conclusion Plaintiffs were armed with sufficient 2 information to broker a fair settlement. Dixon v. Cushman & Wakefield W., Inc., No. 18-CV- 3 05813-JSC, 2021 WL 3861465, at *10 (N.D. Cal. Aug. 30, 2021); In re Wireless Facilities, Inc. 4 Sec. Litig. II, 253 F.R.D. 607, 610 (S.D. Cal. 2008) (“Settlements that follow sufficient discovery 5 and genuine arms-length negotiation are presumed fair.”). As such, the settlement agreement 6 appears to be the product of serious, informed, non-collusive negotiations. Accordingly, this 7 factor weighs in favor of preliminary approval. 8 ii. Obvious Deficiencies 9 The Court must next consider whether there exists any obvious deficiencies in the 10 settlement agreement. Harris, 2011 WL 1627973, at *8. Though the Court had concerns 11 regarding the class notice and required more information to evaluate the amount of the settlement, 12 (see Dkt. No. 51), the parties’ supplemental briefing resolved the Court’s issues. (Dkt. Nos. 53, 13 54.) No obvious deficiencies exist on the face of the settlement agreement to preclude preliminary 14 approval. 15 iii. Lack of Preferential Treatment 16 The Court must next examine whether the settlement agreement “provides preferential 17 treatment to any class member.” Villegas v. J.P. Morgan Chase & Co., No. CV 09-00261 SBA 18 EMC, 2012 WL 5878390, at *7 (N.D. Cal. Nov. 21, 2012). Under the proposed settlement, all 19 class members are treated the same in that each will receive the same pro rata monetary 20 distribution from the settlement fund, which will amount to no less than $175.00 to each member 21 who does not timely opt out. 22 The settlement agreement also provides Defendants shall pay Plaintiff $2,000 in statutory 23 damages, pursuant to 15 U.S.C. § 1692k(a)(2)(A) and California Civil Code § 1788.17. (Dkt. No. 24 48-2 ¶ 4.2.) Plaintiff will also receive $2,000 from Defendants as a service award. (Id. ¶ 4.6.) 25 “Incentive awards are fairly typical in class action cases.” Rodriguez v. W. Publ’g Corp., 563 F.3d 26 948, 958 (9th Cir. 2009) (distinguishing incentive awards from incentive agreements, the latter of 27 which are “entered into as part of the initial retention of counsel” and “put class counsel and the 1 intended to compensate class representatives for work done on behalf of the class, to make up for 2 financial or reputation risk undertaken in bringing the action, and, sometimes to recognize their 3 willingness to act as a private attorney general.” Id. at 958-59. Although service awards are 4 viewed more favorably than incentive agreements, excessive awards “may put the class 5 representative in a conflict with the class and present a considerable danger of individuals bringing 6 cases as class actions principally to increase their own leverage to attain a remunerative settlement 7 for themselves and then trading on that leverage in the course of negotiations.” Id. at 960 (cleaned 8 up). 9 The settlement includes a service award to Plaintiff “for her time and effort in bringing and 10 presenting the action.” (Dkt. No. 48-1 at 10.) The Court will defer ruling on the appropriateness 11 of the amount of the requested settlement and service award until final approval. However, at this 12 stage, there is no indication the service award constitutes “preferential treatment” or should defeat 13 preliminary approval. 14 iv. Range of Possible Approval 15 In determining whether the settlement agreement “falls within the range of possible 16 approval,” the Court must focus on “substantive fairness and adequacy” and consider the 17 “expected recovery balanced against the value of the settlement offer.” See Tableware, 484 F. 18 Supp. 2d at 1080; see also Harris, 2011 WL 1627973, at *11 (noting courts “must estimate the 19 maximum amount of damages recoverable in a successful litigation and compare that with the 20 settlement amount” in determining “the value of the settlement against the expected recovery at 21 trial.” (cleaned up)). “A proposed settlement may be acceptable even though it amounts only to a 22 fraction of the potential recovery that might be available to class members at trial.” Nat’l Rural 23 Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 527 (C.D. Cal. 2004). 24 Given Defendants’ net worth, Plaintiff’s counsel believes the recovery of $51,975.00 is fair 25 and reasonable under 15 U.S.C. § 1692k(a)(2), and it is in the best interest of the putative class to 26 accept a compromise guaranteeing an immediate recovery. (Dkt. No. 48-2 ¶ 24.) While Plaintiff 27 believes her claims are legally meritorious and present a reasonable probability of a favorable 1 members to avoid the significant litigation risk of class certification proceedings, trial, and appeal. 2 (Dkt. No. 48-1 at 19); Linney, 151 F.3d at 1242 (“[I]t is the very uncertainty of outcome in 3 litigation and avoidance of wasteful and expensive litigation that induce consensual settlements. 4 The proposed settlement is not to be judged against a hypothetical or speculative measure of what 5 might have been achieved by the negotiators.”). The parties note the “bona fide error” affirmative 6 defense was available to Defendants, which could constitute a complete defense to Plaintiff’s 7 claims and result in no recovery for Plaintiff or the putative class if Defendants were to prove the 8 offending collection communications resulted from a “bona fide error” notwithstanding the 9 maintenance of procedures reasonably adopted to avoid such errors. (Dkt. No. 48-1 at 19-20.) 10 The settlement agreement provides each class member will receive a payment of no less 11 than $175.00. (Dkt. No. 48-2 ¶ 4.1.) Plaintiff’s counsel argues this pro rata share constitutes 12 substantial monetary recovery far exceeding the relief provided in other class action settlements 13 approved in fair debt collection cases. (Dkt. No. 48-2 ¶ 25); see, e.g., del Campo v. Am. 14 Corrective Counseling Servs., Inc., 254 F.R.D. 585, 596 (N.D. Cal. 2008) (approving settlement of 15 $0.0027 to a sub-class of 667,574 because the debt collector “represented its net worth to be 16 $180,517. If this is indeed the case, the entire class of Plaintiffs would share $1805 between them 17 as a measure of statutory damages under the FDCPA.” (cleaned up)); Abels, 227 F.R.D. at 546–47 18 (“Here, the Defendants admit that Defendant JBC’s net worth is $250,000. . . .[I]f liability is 19 established and statutory damages are due to the class members, the Court would necessarily 20 award less than $2,500. Distributed pro-rata to a class of 10,000 people, these damages would be 21 $.25 per person.”). 22 Under 15 U.S.C. § 1692k(a)(2), the recovery of statutory damages by successful plaintiffs 23 may not exceed $1,000 in an individual action and may not exceed the lesser of $500,000 or 1 per 24 centum of the net worth of the debt collector in a class action. In determining the amount of 25 liability, the Court considers the frequency and persistence of Defendants’ noncompliance, the 26 nature of such noncompliance, the extent to which the noncompliance was intentional, 27 Defendants’ resources, and the number of persons adversely affected. 15 U.S.C.A. § 1692k(b). 1 Collection Practices Act. Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1068 (9th Cir. 2 2011) (“[P]ermitting recovery under the Rosenthal Act and the FDCPA is not inconsistent with 3 section 1692k of the FDCPA.”). 4 A class recovery of $51,975.00 far exceeds 1% of Defendants’ combined net worth, (see 5 Dkt. No. 53), which is the maximum recovery of statutory damages pursuant to 15 U.S.C. § 6 1692k(a)(2). Considering the risks and costs of continued litigation and availability of a complete 7 defense, this amount supports preliminary approval. 8 * * * 9 Accordingly, the fairness factors warrant preliminary approval of the settlement agreement. 10 b. Class Notice Plan 11 The class members of any class certified under Rule 23(b)(3) must be afforded “the best 12 notice that is practicable under the circumstances, including individual notice to all members who 13 can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). Such notice must clearly 14 state the following:

15 (i) the nature of the action; (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; (iv) that a class member may 16 enter an appearance through an attorney if the member so desires; (v) that the court will exclude from the class any member who requests 17 exclusion; (vi) the time and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members under Rule 18 23(c)(3). 19 Id. “Notice is satisfactory if it generally describes the terms of the settlement in sufficient detail to 20 alert those with adverse viewpoints to investigate and to come forward and be heard.” Churchill 21 Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004) (cleaned up). 22 Here, the parties agree the “best form of notice practicable” is to send the settlement notice 23 via first class mail to the last known address of each class member as indicated by Defendants’ 24 business records and a search of the national change-of-address registry. (Dkt. No. 48-1 at 23.) 25 As previously discussed, American Legal Claim Services will mail the class notice to each class 26 member no later than 25 days after the preliminary approval date. (Dkt. No. 48-2 ¶ 3.4.) All 27 envelopes in which American Legal Claim Services mails the class notice to class members will 1 American Legal Claim Services will resend the class notice to the new address. (Id.) American 2 Legal Claim Services is not responsible for the postal service’s failure to timely deliver the class 3 notice to class members and will not have any obligation to resend a notice that is not returned by 4 the postal service before the final fairness hearing. (Id.) Defendants will bear the cost of 5 distributing the class notice and related expenses. (Id. ¶ 3.5.) 6 To resolve the Court’s concerns, the parties submitted a revised class notice. (Dkt. No. 54- 7 1.) The revised notice includes instructions for class members who wish to opt out or object to the 8 settlement and a placeholder for a website link where class members can find key deadlines and 9 case documents. (Id.) It also explains the date and time of the final approval hearing may change 10 without further notice. (Id.) The revised notice advises the class they can object to the request for 11 attorneys’ fees and costs, as well as the service award, when the motion for fees will be filed, and 12 how class members can access and object to the motion. (Id.) While the revised notice adequately 13 addresses the Court’s concerns, it shall be further amended to reflect the schedule as approved by 14 the Court. 15 These procedures appear sufficient to ensure class members receive adequate notice of the 16 settlement and an opportunity to object. Accordingly, the revised class notice and notice plan 17 support preliminary approval. 18 c. Attorneys’ Fees and Costs 19 Under the settlement agreement, Defendants will pay all costs associated with class notice 20 and administration. (Dkt. No. 48-2 ¶ 4.7.) The settlement agreement further provides:

21 Defendants shall pay attorneys’ fees and costs to Class Counsel pursuant to 15 U.S.C. § 1692k(a)(3) and California Civil Code § 1788.17, in an amount 22 agreed by the parties or to be decided by the Court upon noticed motion if the parties cannot agree. The application for approval of such attorneys’ fees and 23 costs will be made separately, upon noticed motion, and determined at the Final Fairness Hearing, or at the Court’s discretion. 24 25 (Id. ¶ 4.8.) 26 “In a certified class action, the court may award reasonable attorney’s fees and nontaxable 27 costs that are authorized by law or by the parties’ agreement.” Fed. R. Civ. P. 23(h). “[C]ourts 1 even if the parties have already agreed to an amount.” In re Bluetooth Headset Prod. Liab. Litig., 2 654 F.3d 935, 941 (9th Cir. 2011). Courts typically apply the lodestar method to calculate 3 reasonable attorneys’ fees. Gonzalez v. City of Maywood, 729 F.3d 1196, 1202 (9th Cir. 2013). 4 “The lodestar figure is calculated by multiplying the number of hours the prevailing party 5 reasonably expended on the litigation (as supported by adequate documentation) by a reasonable 6 hourly rate for the region and for the experience of the lawyer.” Bluetooth, 654 F.3d at 941. The 7 Court may adjust the resulting figure based on several factors, including the benefit obtained for 8 the class, quality of representation, complexity and novelty of the issues presented, and risk of 9 nonpayment. Id. at 941-42. The fee-requesting party must submit billing records to establish the 10 number of hours it requested are reasonable, see Gonzalez v. City of Maywood, 729 F.3d 1196, 11 1202 (9th Cir. 2013), and produce satisfactory evidence “the requested rates are in line with those 12 prevailing in the community for similar services by lawyers of reasonably comparable skill, 13 experience, and reputation.” Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 980 (9th Cir. 2008). 14 As of now the parties have not agreed to an amount of attorneys’ fees, but Plaintiff’s 15 counsel intends to seek attorneys’ fees and costs pursuant to 15 U.S.C. § 1692k(a)(3) and 16 California Civil Code § 1788.17. (Dkt. No. 48-2 ¶ 21.) Plaintiff will move for reasonable 17 attorneys’ fees and costs separately, upon noticed motion, and such fees will include all work 18 remaining to be performed in documenting, securing approval of, and administering the settlement 19 agreement. (Id. ¶ 22.) The estimated lodestar for Plaintiff’s representation is anticipated to be 20 approximately $123,500.00. (Id.) The Court currently has insufficient information to evaluate the 21 reasonableness of the approximation. Accordingly, Plaintiff’s motion for attorneys’ fees shall 22 include declarations and detailed billing records so the Court may determine an appropriate 23 lodestar figure and class members and Defendant may object to the requested fees. 24 In connection with final approval, Plaintiff’s counsel must submit an itemized summary of 25 each category of costs with its motion for attorneys’ fees so the Court may evaluate whether such 26 costs are reasonable expenses incurred for the benefit of the class. 27 // 1 CONCLUSION 2 Accordingly, the Court GRANTS the parties’ motion for preliminary approval of class 3 action settlement and provisional class certification. Within seven days of mailing the notice to 4 || class members, the parties shall file a copy of the actual notice distributed to the class. The parties 5 shall appear before this Court for a final approval hearing on March 14, 2024 at 9:00 a.m. via 6 Zoom. 7 This Order disposes of Docket No. 48. 8 IT IS SO ORDERED. 9 Dated: November 16, 2023 10 ne JACQUELINE SCOTT CORLEY 12 United States District Judge

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