In Re GEICO General Insurance Company

Opinion

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 Case No. 19-cv-03768-HSG

7 ORDER GRANTING PRELIMINARY 8 In Re GEICO General Insurance Company APPROVAL OF CLASS ACTION SETTLEMENT 9 Re: Dkt. No. 139 10

11 12

13 Pending before the Court is the unopposed motion for preliminary approval of class action 14 settlement filed by Plaintiffs Cindy Ventrice-Pearson, Poonam Subbaiah, and Kristen Perez, on 15 behalf of themselves and as representatives of the Settlement Class. See Dkt. No. 139. The 16 parties have reached a settlement regarding Plaintiffs’ claims and now seek the required court 17 approval. Id. The Court held telephonic hearings on February 10, 2022 and July 7, 2022. See 18 Dkt. Nos. 147, 157. In support of the motion for preliminary approval, Plaintiffs submitted 19 supplemental filings following each hearing. See Dkt. Nos. 150, 159. For the reasons set forth 20 below, the Court GRANTS Plaintiffs’ motion. 21 I. BACKGROUND 22 A. Factual Background 23 Plaintiffs bring this consolidated class action against Defendant GEICO General Insurance 24 Company, alleging that Defendant breached private passenger auto insurance policies issued to 25 Plaintiffs and similarly situated insureds by failing to properly include or calculate sales tax (as to 26 leased vehicles) and regulatory fees (as to all vehicles). Dkt. No. 139, at 12.1 Plaintiffs allege that 27 1 Defendant’s insurance policies require payment of actual cash value (“ACV”) upon the total loss 2 of a covered auto and define ACV as the “replacement cost” of the auto, less depreciation. Id. 3 Plaintiffs argue that (1) the insurance policies require Defendant to include sales tax on the cost to 4 purchase a replacement vehicle when paying leased-vehicle claims; and (2) under Cal. Ins. Code § 5 2695.8(b)(1), registration fees for the “remaining term of the loss vehicle’s current registration” 6 should be calculated on an end-of-month (rather than, as Defendant contends, a beginning-of- 7 month) basis or, alternatively, on a daily (not monthly) basis. Dkt. No. 139-3 Declaration of Jacob 8 Phillips in Support of Motion for Preliminary Approval (“Phillips Decl.”) ¶ 13. 9 Named Plaintiff Ventrice-Pearson owned/financed and insured a 2010 Mini Cooper which, 10 as the result of an accident, was determined to be a total loss. Dkt. No. 75 ¶¶ 24–27. Defendant 11 paid Plaintiff Ventrice-Pearson $8,508.76, including a base value of $7,408.00, sales tax of 12 $703.76, state and local regulatory fees of $97.00, and a post-tax adjustment of $300.00. Id. ¶¶ 27, 13 29. However, Plaintiffs allege that Defendant underpaid the true state and local regulatory fees 14 owed. Id. ¶ 30. 15 Named Plaintiff Subbaiah leased and insured a 2017 Porsche 911 Carrera which, as a result 16 of theft, was determined to be a total loss. Id. ¶¶ 16–17. Defendant agreed to an ACV payment of 17 $87,345, comprised of the payoff amount to the lienholder, a $500 policy deductible, and 18 $17,211.26 paid to Plaintiff Subbaiah. Id. ¶ 18. Plaintiffs allege that Defendant breached its 19 policy terms by determining that because the vehicle was leased and not owned by Plaintiff 20 Subbaiah, no ACV Sales Tax was owed under the policy. Id. ¶ 19. Plaintiffs also allege 21 Defendant’s payment for state and regulatory fees constituted only a portion of the state and 22 regulatory fees owed under the Policy. Id. ¶ 21. 23 Named Plaintiff Kristin Perez leased and insured a 2018 Honda Clarity Plug-In Touring, 24 which, as the result of an accident, was determined to be a total loss. Perez v. Geico Indemnity 25 Company, No. 20-cv-07436-HSG, Dkt. No. 1 ¶¶ 37–38. Defendant agreed to an ACV payment of 26 $35,924.00, comprised of the payoff amount to the lienholder, added state and regulatory fees of 27 1 $385.00, and a $1,000.00 deductible. Id. ¶¶ 39–41. Plaintiffs allege that Defendant paid none of 2 the estimated $2,769.30 in sales tax Plaintiffs allege was owed under the insurance policy. Id. 3 ¶ 42. 4 B. Procedural History 5 Named Plaintiff Ventrice-Pearson filed a claim on behalf of herself and all others similarly 6 situated on June 27, 2019. See Dkt. No. 1.2 Named Plaintiff Subbaiah filed her claim on July 3, 7 2019, and Named Plaintiff Perez filed her claim on October 23, 2020. Phillips Decl. ¶¶ 4–5. The 8 Perez and Subbaiah cases have since been transferred to this Court and consolidated with the 9 Ventrice-Pearson case for purposes of settlement. Dkt. Nos. 72, 142. 10 Over the course of two years, the parties engaged in motion practice, see, e.g., Dkt. Nos. 11 30, 120; engaged in extensive production and review of documents and class-wide data, Phillips 12 Decl. ¶ 15–16; and took multiple depositions, including the depositions of corporate 13 representatives, class representatives, and expert witnesses. See id. After multiple mediation 14 sessions, see id. ¶ 25, the parties reached a settlement, see Dkt. No. 135. 15 C. Settlement Agreement 16 The key terms of the parties’ Settlement Agreement, Dkt. No. 139-4, Ex. 1 (“Settlement 17 Agreement” or “SA”), are as follows: 18 Class Definition: The Settlement Class is defined as 19 Regulatory Fees Class: 20 All individual insureds under an Automobile Insurance Policy covering a vehicle with private-passenger auto physical damage 21 coverage with comprehensive or collision coverage, whose claim was adjusted under Section III of the GEICO’s Automobile Insurance 22 Policy (i.e. comprehensive or collision coverage) during the Class Period, that was determined by GEICO to be a covered claim and 23 where GEICO determined that the vehicle was a total loss and did not pay to repair the damage to the vehicle and where the 24 insured did not retain the salvage vehicle.

25 Sales Tax Class: All individual insureds under an Automobile Insurance Policy 26

27 2 Ms. Martisha Ann Munoz joined Ms. Ventrice-Pearson in bringing the original complaint on covering a leased vehicle with private-passenger auto physical 1 damage coverage with comprehensive or collision coverage, who’s claim was adjusted under Section III of the GEICO’s Automobile 2 Insurance Policy (i.e. comprehensive or collision coverage), during the Class Period, that was determined by GEICO to be a covered 3 claim and where GEICO determined that the vehicle was a total loss and did not pay to repair the damage to the vehicle, where the 4 insured did not retain the total-loss vehicle and where GEICO did not include ACV Sales Tax in the Total Loss Claim Payment(s). 5 SA ¶ ll. 6 The “Regulatory Fees Class” and the “Sales Tax Class” are referred to collectively as the 7 “Settlement Class.” Id. Excluded from the Settlement Class are (1) Defendant, all present or 8 former officers and/or directors and/or employees of Defendant, the Neutral Evaluator, class 9 counsel, and any Judge of this Court; (2) claims for which Defendant received a valid and 10 executed release; and (3) individual claims for first-party property damage for which the process 11 of appraisal or arbitration or litigation has been completed or initiated at the time this Settlement 12 Agreement is filed. Id. 13 Settlement Benefits: 14 Defendant has agreed to: (1) upon submission of a valid claim by a Regulatory Fees Class 15 member, pay $6.88, representing one-half of an average monthly payment in regulatory fees, and 16 (2) upon submission of a valid claim by a Sales Tax Class member, pay $6.88 in regulatory fees 17 plus the sales tax at the applicable state and county rate at the time of loss to all insureds. SA ¶¶ 18 27–28. Claims will be paid on a claims-made basis. SA ¶ 26. Additionally, absent a clarifying 19 change in statutory law or a contrary opinion by the Ninth Circuit or California appellate court, in 20 the future Defendant will, for total loss covered vehicles, (a) pay sales tax at the applicable rate to 21 leased-vehicle insureds and (b) calculate and pay regulatory fees as a daily proration, rather than 22 subtracting the monthly amount at the beginning of each month. Id. ¶ 60. 23 Release: Under the settlement agreement, all class members will release: 24

25 any and all known and unknown claims, rights, actions, suits or causes of action of whatever kind or nature, whether ex contractu or ex 26 delicto, statutory, common law or equitable, including but not limited to breach of contract, bad faith or extracontractual claims, and claims 27 for punitive or exemplary damages, or prejudgment or postjudgment Settlement Class Members with respect to any Covered Total Loss 1 Claim during the Class Period under an Automobile Insurance Policy. Released Claims do not include any claims, actions, or causes of 2 action alleging that GEICO failed to properly calculate the base or adjusted value of total loss vehicles except to the extent that such 3 claims, actions, or causes of action relate to failure to pay sufficient sales tax and/or regulatory fees. 4 SA ¶ gg; see also id. ¶ 48. 5 Class Notice: KCC, a third-party settlement administrator, will mail class notices to all 6 reasonably identifiable class members on two occasions, with pre-filled, detachable, and postage- 7 prepaid claim forms. SA ¶ 8; see Phillips Decl. ¶ 33. For any physical addresses that Defendant 8 does not have or that are incomplete, the Settlement Administrator will search the National 9 Change of Address Database. SA ¶ 10. Notice will also be provided twice by email to Settlement 10 Class Members for whom Defendant possesses an email address. Id. Each of the email notices 11 will allow class members to “click through” to the settlement website, which includes an 12 electronic claim form. Phillips Decl. ¶ 33; see SA ¶¶ 11–12. 13 The notice will include a summary of the claims and the settlement terms, the average 14 claim size, the released claims, and instructions on how to object to and opt out of the settlement, 15 including relevant deadlines. Dkt. No. 159, Exs. A and B (“Mail Notices”); Dkt. No. 139-6, Ex. 3 16 (“Email Notices”) (together, “Notices” or “Notice”). The Mail Notices will also include the 17 average individual claim payment for each class. See Mail Notices. Defendant will extract 18 available information from its claim records to pre-fill information on the claim forms. SA ¶¶ 9, 19 11. To receive a Claim Payment, the Settlement Class member will need to submit a claim form, 20 declaring that the pre-filled Claim information is correct and that they were a GEICO insured who 21 suffered a total-loss during the Settlement Class period who did not receive ACV Sales Tax and/or 22 full Regulatory Fees. See Dkt. No. 139-7, Ex. 4; Dkt. No. 139-8, Ex. 5 (together, “Claim Form”); 23 see also Phillips Decl. ¶ 33. 24 Service Award: Plaintiff Subbaiah will apply for an incentive award of no more than 25 $15,000, Plaintiff Ventrice-Pearson will apply for an incentive award of no more than $10,000, 26 and Plaintiff Perez will apply for an incentive award of no more than $5,000. SA ¶ 39. Any 27 service award payments are separate from and in addition to the payments available to Settlement 1 Class Members and will not impact the amount owed to Settlement Class Members. Id. ¶ 40. 2 Defendant agrees not to oppose these requests. Id. ¶ 42. 3 Attorneys’ Fees and Costs: Class counsel will file an application for attorneys’ fees and 4 costs not to exceed $3,900,000. SA ¶¶ 38–42. Defendant agrees not to oppose these requests. Id. 5 II. PROVISIAL 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. 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, it must establish that at least one of 11 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), it 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. 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 A. Rule 23(a) Certification 23 i. Numerosity 24 Rule 23(a)(1) requires that the putative class be “so numerous that joinder of all members 25 is impracticable.” The Court finds that the numerosity requirement is satisfied because joinder of 26 the estimated 220,000 class members would be impracticable. See Dkt. No. 139, at 21; Phillips 27 Decl. ¶ 38. ii. Commonality 1 Rule 23(a)(2) requires that “there are questions of law or fact common to the class.” A 2 contention is sufficiently common where “it is capable of class wide resolution — which means 3 that determination of its truth or falsity will resolve an issue that is central to the validity of each 4 one of the claims in one stroke.” Dukes, 564 U.S. at 350. Commonality exists where “the 5 circumstances of each particular class member vary but retain a common core of factual or legal 6 issues with the rest of the class.” Parra v. Bashas’, Inc., 536 F.3d 975, 978–79 (9th Cir. 2008). 7 “What matters to class certification . . . is not the raising of common ‘questions’ ― even in droves 8 — but rather the capacity of a class wide proceeding to generate common answers apt to drive the 9 resolution of the litigation.” Dukes, 564 U.S. at 350 (citation omitted) (emphasis in original). 10 Even a single common question is sufficient to meet this requirement. Id. at 359. 11 Common questions of law and fact in this action include whether Defendant’s policy 12 language is reasonably interpreted to include sales tax and/or regulatory fees, how regulatory fees 13 should be calculated under Cal. Ins. Code § 2695.8(b)(1), and whether Defendant’s alleged failure 14 to include full sales tax on leased-vehicle total-loss claims and its methodology for prorating 15 regulatory fees constitute a breach of contract. See generally Dkt. No. 139. Although the amount 16 of reimbursement to which each class member is entitled will differ, the issues described above are 17 common across the proposed Settlement Class. Accordingly, the Court finds that the commonality 18 requirement is met. 19 iii. Typicality 20 Rule 23(a)(3) requires that “the claims or defenses of the representative parties are typical 21 of the claims or defenses of the class.” “The test of typicality is whether other members have the 22 same or similar injury, whether the action is based on conduct which is not unique to the named 23 plaintiffs, and whether other class members have been injured by the same course of conduct.” 24 Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quotation omitted). That said, 25 under the “permissive standards” of Rule 23(a)(3), the claims “need not be substantially identical.” 26 Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (quotation omitted). 27 The Named Plaintiffs’ claims are both factually and legally similar to those of the 1 Settlement Class members. Named Plaintiffs allege that, like other class members, they paid for 2 Defendant’s insurance policy, suffered a total loss of an insured vehicle, were owed full sales 3 taxes and/or regulatory fees under the insurance policy, and were detrimentally affected by 4 Defendant’s policy of not paying full sales tax and regulatory fees. See Dkt. No. 139, at 12–13; 5 Dkt. No. 75, at 2–11. Accordingly, the typicality requirement is satisfied. 6 iv. Adequacy of Representation 7 Rule 23(a)(4) requires that the “representative parties will fairly and adequately represent 8 the interests of the class.” The Court must address two legal questions: (1) whether the named 9 plaintiffs and their counsel have any conflicts of interest with other class members and (2) whether 10 the named plaintiffs and their counsel will prosecute the action vigorously on behalf of the class. 11 See In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000). This inquiry “tend[s] to 12 merge” with the commonality and typicality criteria. Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 13 147, 158 n.13 (1982). In part, these requirements determine whether “the named plaintiff’s claim 14 and the class claims are so interrelated that the interests of the class members will be fairly and 15 adequately protected in their absence.” Id. 16 The Court is unaware of any actual conflicts of interest in this matter and no evidence in 17 the record suggests that either the Named Plaintiffs or Plaintiffs’ counsel have a conflict with other 18 class members. Plaintiffs have secured representation by competent counsel, including counsel 19 experienced in automobile total-loss insurance litigation matters, and consulted with a mediator 20 experienced in class actions. See Phillips Decl. ¶¶ 46–49, Dkt. No. 139-1 Declaration of Scott 21 Edelsberg in Support of Motion for Preliminary Approval (“Edelsberg Decl.”) ¶ 1, Dkt. No. 139-2 22 Declaration of Rodney Max in Support of Motion for Preliminary Approval (“Max Decl.”) ¶¶ 2–9. 23 The Court finds that Named Plaintiffs and Plaintiffs’ counsel have prosecuted this action 24 vigorously on behalf of the class to date and will continue to do so. The adequacy of 25 representation requirement, therefore, is satisfied. 26 B. Rule 23(b)(3) Certification 27 To certify a class, a plaintiff must satisfy the two requirements of Rule 23(b)(3). First, 1 affecting only individual members.” Fed. R. Civ. P. 23(b)(3). And second, “a class action [must 2 be] superior to other available methods for fairly and efficiently adjudicating the controversy.” Id. 3 i. Predominance 4 The “predominance inquiry tests whether proposed classes are sufficiently cohesive to 5 warrant adjudication by representation.” Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 453 6 (2016) (quotations omitted). The Supreme Court has defined an individualized question as one 7 where “members of a proposed class will need to present evidence that varies from member to 8 member.” Id. (quotations omitted). A common question, on the other hand, is one where “the 9 same evidence will suffice for each member to make a prima facie showing [or] the issue is 10 susceptible to generalized, class-wide proof.” Id. (quotations omitted). 11 The Court concludes that, for purposes of settlement, common questions of contract 12 interpretation and application raised by Plaintiffs’ claims predominate over individualized issues. 13 Plaintiffs allege that Defendant breached its insurance policy obligations by failing to pay sales tax 14 (as to leased vehicles) and by failing to properly calculate and pay regulatory fees (as to all 15 vehicles). Dkt. No. 139, at 12. All class members are affected by Defendant’s alleged violations 16 of the policy terms. Id. Although class members will need to rely upon individual evidence to 17 show whether they are owed reimbursement for sales tax and regulatory fees, the “mere fact that 18 there might be differences in damage calculations is not sufficient to defeat class certification.” 19 Hyundai II, 926 F.3d at 560 (quotations omitted). Additionally, the methodology for measuring 20 damages is applicable class wide. Dkt. No. 139, at 23. 21 ii. Superiority 22 The superiority requirement tests whether “a class action is superior to other available 23 methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The 24 Court considers four non-exclusive factors: (1) the interest of each class member in individually 25 controlling the prosecution or defense of separate actions; (2) the extent and nature of any 26 litigation concerning the controversy already commenced by or against the class; (3) the 27 desirability of concentrating the litigation of the claims in the particular forum; and (4) the 1 Here, the Court concludes that a class action enables the most efficient use of Court and 2 attorney resources and reduces costs to the class members by allocating costs among them. Three 3 cases with substantially similar allegations were consolidated for purposes of this class action 4 settlement to save substantial time and effort. See Dkt. Nos. 72, 142. Further, this forum is 5 appropriate, and there are no obvious difficulties in managing this class action. 6 The Court finds that the predominance and superiority requirements of Rule 23(b)(3) are 7 met. 8 iii. Class Representative and Class Counsel 9 Because the Court finds that Named Plaintiffs meet the commonality, typicality, and 10 adequacy requirements of Rule 23(a), the Court appoints the Named Plaintiffs as class 11 representatives. When a court certifies a class, it must also appoint class counsel. Fed. R. Civ. P. 12 23(c)(1)(B). Factors that courts must consider when making that decision include: 13 (i) the work counsel has done in identifying or investigating potential 14 claims in the action; (ii) counsel’s experience in handling class actions, other complex 15 litigation, and the types of claims asserted in the action; (iii) counsel’s knowledge of the applicable law; and 16 (iv) the resources that counsel will commit to representing the class. 17 Fed. R. Civ. P. 23(g)(1)(A). 18 Plaintiffs’ counsel have efficiently investigated and litigated this case. Between them, 19 counsel have many years of experience with class action litigation and have handled multiple 20 automobile insurance class actions, including other cases materially similar to the one here. See 21 Phillips Decl. ¶¶ 46–68, Dkt. No. 91-1 Declaration of Annick M. Persinger in Support of 22 Plaintiffs’ Motion for Class Certification, Exs. M–Q. Accordingly, the Court appoints Normand 23 PLLC, Tycko & Zavareei LLP, Kirtland & Packard LLP, Shamis & Gentile, P.A., and Edelsberg 24 Law, P.A. as class counsel. 25 III. PRELIMINARY SETTLEMENT APPROVAL 26 Finding that provisional class certification is appropriate, the Court considers whether it 27 should preliminarily approve the parties’ class action settlement. A. Legal Standard 1 Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or defenses of a 2 certified class—or a class proposed to be certified for purposes of settlement—may be settled . . . 3 only with the court’s approval.” Fed. R. Civ. P. 23(e). “The purpose of Rule 23(e) is to protect 4 the unnamed members of the class from unjust or unfair settlements affecting their rights.” In re 5 Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). Accordingly, before a district court 6 approves a class action settlement, it must conclude that the settlement is “fundamentally fair, 7 adequate and reasonable.” In re Heritage Bond Litig., 546 F.3d 667, 674–75 (9th Cir. 2008). 8 Where the parties reach a class action settlement prior to class certification, district courts 9 apply “a higher standard of fairness and a more probing inquiry than may normally be required 10 under Rule 23(e).” Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012) (quotations omitted). 11 Such settlement agreements “‘must withstand an even higher level of scrutiny for evidence of 12 collusion or other conflicts of interest than is ordinarily required under Rule 23(e) before securing 13 the court’s approval as fair.’” Roes, 1-2 v. SFBSC Mgmt., LLC, 944 F.3d 1035, 1049 (9th Cir. 14 2019) (quoting In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011)). A 15 more “exacting review is warranted to ensure that class representatives and their counsel do not 16 secure a disproportionate benefit at the expense of the unnamed plaintiffs who class counsel had a 17 duty to represent.” Id. (quotations omitted). 18 Courts may preliminarily approve a settlement and notice plan to the class if the proposed 19 settlement: (1) appears to be the product of serious, informed, non-collusive negotiations; (2) does 20 not grant improper preferential treatment to class representatives or other segments of the class; 21 (3) falls within the range of possible approval; and (4) has no obvious deficiencies. In re Lenovo 22 Adware Litig., No. 15-MD-02624-HSG, 2018 WL 6099948, at *7 (N.D. Cal. Nov. 21, 2018) 23 (citation omitted). Courts lack the authority, however, to “delete, modify or substitute certain 24 provisions. The settlement must stand or fall in its entirety.” Hanlon, 150 F.3d at 1026 (quotation 25 and citations omitted). 26 B. Analysis 27 1 The first factor the Court considers is whether there is evidence of collusion or other 2 conflicts of interest. See Roes, 944 F.3d at 1049. The Ninth Circuit has directed district courts to 3 look for “subtle signs of collusion,” which include whether counsel will receive a disproportionate 4 distribution of the settlement, whether the parties negotiate a “‘clear sailing’ arrangement (i.e., an 5 arrangement where defendant will not object to a certain fee request by class counsel),” and 6 whether the parties agree to a reverter that returns unclaimed funds to the defendant. Id. 7 At this stage, class counsel’s requested fee award does not appear to constitute a 8 disproportionate share of the settlement agreement. Under the Settlement Agreement, class 9 counsel can request up to $3,900,000 in attorneys’ fees, which is 19% of the total cash benefit 10 available to the class, not including prospective relief. Dkt. No. 139, at 16. 3 Ultimately, the 11 reasonableness of any requested fees will have to be evaluated in light of the actual benefit to the 12 class and class counsel’s lodestar at the final approval stage. 13 Variations of the other two possible signs of collusion are present here. First, Defendant 14 agreed not to oppose class counsel’s requests for attorneys’ fees and costs and incentive awards. 15 SA ¶¶ 38–42. Second, although there is not a reversion in the formal sense, there is the functional 16 equivalent of a reversion because Defendant will only pay for those class members who submit 17 valid claims. The money that would revert to Defendant in a common fund case never leaves 18 Defendant’s possession given the structure of this settlement. See Tait v. BSH Home App. Corp., 19 No. SACV 10-0711-DOC (ANx), 2015 WL 4537463, at *6 (C.D. Cal. July 27, 2015) (“Although 20 the claims-made settlement does not contain a reverter provision, ‘[a] claims-made settlement is . . 21 . the functional equivalent of a common fund settlement where the unclaimed funds revert to the 22 defendant.” (citation omitted)); see also Stanikzy v. Progressive Direct Ins. Co., Case No. 2:20- 23 cv-118 BJR, 2022 WL 1801671, at *6 (W.D. Wash. June 2, 2022). 24 That said, the Court recognizes that class counsel obtained significant results for the 25 prospective class members, as discussed below in Section III.B.iii. Sales Tax Class members who 26 submit a valid claim will receive 100% of the car’s sales tax value, and Regulatory Fees Class 27 1 members who submit a valid claim will receive a flat payment of $6.88, representing half of a 2 monthly regulatory fee payment. Id. ¶¶ 27–28. The Court is cognizant of its obligations to ensure 3 that any class settlement is “fair, reasonable, and adequate” and to review class fee awards with 4 particular rigor. See Briseño v. Henderson, 998 F.3d 1014, 1023-28 (9th Cir. 2021). At the final 5 approval stage, the Court will carefully scrutinize the claim rate and other relevant data to evaluate 6 the fairness of the settlement and the request for attorneys’ fees. Accordingly, the Court finds that 7 this factor does not preclude preliminary approval. 8 ii. Preferential Treatment 9 The Court next considers whether the settlement agreement provides preferential treatment 10 to any class member. The Ninth Circuit has instructed that district courts must be “particularly 11 vigilant” for signs that counsel have allowed the “self-interests” of “certain class members to 12 infect negotiations.” In re Bluetooth, 654 F.3d at 947. For that reason, courts in this district have 13 consistently stated that preliminary approval of a class action settlement is inappropriate where the 14 proposed agreement “improperly grant[s] preferential treatment to class representatives.” Lenovo, 15 2018 WL 6099948, at *8 (quotations omitted). 16 Although Named Plaintiffs are authorized to seek incentive awards, the Court will 17 ultimately determine whether each Plaintiff’s individual award is appropriate in light of their role 18 and responsibilities as Named Plaintiff. Incentive awards “are intended to compensate class 19 representatives for work done on behalf of the class, to make up for financial or reputational risk 20 undertaken in bringing the action.” Rodriguez v. West Publ’g Corp., 563 F.3d 948, 958–59 (9th 21 Cir. 2009). Class representatives must provide sufficient evidence to allow the Court to evaluate 22 their award “individually, using ‘relevant factors includ[ing] the actions the plaintiff has taken to 23 protect the interests of the class, the degree to which the class has benefitted from those actions, 24 . . . [and] the amount of time and effort the plaintiff expended in pursuing the litigation . . . .’” 25 Stanton v. Boeing Co., 327 F.3d 938, 977 (9th Cir. 2003) (citation omitted). Under the Settlement 26 Agreement, Named Plaintiff Subbaiah will apply for an incentive award of no more than $15,000, 27 Named Plaintiff Ventrice-Pearson will apply for an incentive award of no more than $10,000, and 1 Court will consider the evidence presented at the final fairness hearing and evaluate the 2 reasonableness of any incentive award request. Nevertheless, because incentive awards are not 3 per se unreasonable, the Court finds that this factor weighs in favor of preliminary approval. See 4 Rodriguez, 563 F.3d at 958 (finding that “[i]ncentive awards are fairly typical in class action 5 cases” and “are discretionary” (emphasis omitted)). 6 iii. Settlement within Range of Possible Approval 7 The third factor the Court considers is whether the settlement is within the range of 8 possible approval. To evaluate whether the settlement amount is adequate, “courts primarily 9 consider plaintiffs’ expected recovery balanced against the value of the settlement offer.” Lenovo, 10 2018 WL 6099948, at *8. This requires the Court to evaluate the strength of Plaintiffs’ case. 11 Plaintiffs have explained the significant risks that they would face in continuing to litigate this 12 case. See Dkt. No. 139, at 14. According to Plaintiffs, litigation of these claims through trial 13 presents significant challenges to prevailing on the merits since no California court, state or 14 federal, has held that insureds who leased a vehicle are entitled, upon a total-loss determination, to 15 full payment of sales tax. Id. 16 Plaintiffs represent that there are approximately 218,023 Regulatory Fees Class members. 17 Id. ¶ 31.4 Every Regulatory Fees Class member who submits a timely and valid claim will be paid 18 $6.88, approximately half of what Plaintiffs estimate could have been recovered at trial. Id.; Dkt. 19 No. 150 ¶ 19. 5 Based on the class size and claim payment amount, Plaintiffs estimate the total 20 4 According to Plaintiffs, “following a total loss, GEICO normally takes the totaled vehicle (after 21 paying the actual cash value) and sells the vehicle at a salvage auction. However, [GEICO] gives the insured the option to keep the salvage vehicle instead . . . . In such cases, GEICO would 22 deduct the estimated salvage value from its ACV payment.” Dkt. No. 150 ¶ 25. The settlement does not include those insureds who chose to retain their salvage vehicle because their claims 23 could be subject to unique defense arguments. Id. ¶ 28. Plaintiffs represent that, after working with Defendant, they have identified approximately 22,000 insureds who “during the Class Period 24 chose to retain their salvage vehicle and are thus not included in the Settlement Agreement Classes.” Id. ¶ 24. These individuals, absent retention of the salvage vehicle, would have been a 25 part of the Regulatory Fees Class. Id. Those who retained their salvage vehicles are explicitly excluded from the Settlement Agreement, and are not barred from separately asserting claims for 26 any underpaid regulatory fees. Id. ¶¶ 24, 31–32. 5 Plaintiffs acknowledge that “GEICO calculated the registration fees it included in total-loss 27 settlements based on the remaining term of a total-loss vehicle’s registration at the time of the loss 1 available damages for the Regulatory Fees Class to be $1,500,000. Phillips Decl. ¶ 31. 2 As for the Sales Tax Class, Plaintiffs represent that there are approximately 8,772 3 members. Phillips Decl. ¶ 30.6 Every Sales Tax Class member who submits a timely and valid 4 claim will be paid “100% of the sales tax at the applicable CA state and local sales tax rates based 5 on the adjusted vehicle value, plus $6.88 in regulatory fees.” SA ¶ 28. Plaintiffs predict that the 6 average Sales Tax Class claim will be $2,051.98, which is based on an average vehicle value of 7 $23,318.00 and an 8.8% average sales tax rate. Phillips Decl. ¶ 30. With approximately 8,772 8 Sales Tax Class members and an average claim of $2,051.98, Plaintiffs estimate that “the total 9 available compensatory damages in sales tax is $18,000,000.00,” and allege that the settlement 10 represents “100% of the damages for sales tax recoverable at trial.” Id. ¶¶ 29–30. 11 Class counsel estimates that the total damages recoverable at trial would have been $21 12 million. Class counsel therefore asserts that the total available compensatory damages of $19.5 13 million—$1,500,000 for the Regulatory Fees Class and $18 million for the Sales Tax Class— 14 represents approximately 92.8% of total damages. Id. ¶¶ 29–31. It is important to note, however, 15 that Plaintiffs’ numbers assume a 100% claim rate by the Settlement Class members. The actual 16 value paid will likely be much lower because of the claims-made structure of the settlement. 17 Based on the experience of Plaintiffs’ counsel and claim rates in comparable settlements, Plaintiffs 18 estimate that 25 to 30% of Sales Tax Class members and 20 to 25% of Regulatory Fees Class 19 members will claim their settlements. See Phillips Supplemental Decl. ¶¶ 34–39. 20 Plaintiffs argue that the settlement also provides valuable injunctive relief because 21 Defendant promises to “include the full applicable sales tax necessary to purchase a replacement 22 vehicle for leased-vehicle insures, and to calculate the ‘remaining term’ of registration fees on a 23

24 month in which a collision occurs. Id. ¶¶ 6–13. Contrary to Defendant’s practice of not paying any prorated amount for the month in which the collision occurs, Plaintiffs argue that registration 25 fees should be paid for the entirety of the month in which the collision occurs. Id. ¶¶ 10–12. Therefore, Plaintiffs’ theory of maximum recovery for the Regulatory Fees Class is one month’s 26 worth of regulatory fees, on average $13.76. Id. ¶ 12. Plaintiffs arrived at $13.76 by computing the average regulatory fees owed in a full year, $165.12, and dividing by 12 months. Id. ¶¶ 14–15. 27 6 Plaintiffs represent that neither they nor Defendant have identified any salvage-retained insureds 1 daily basis, rather than the monthly basis GEICO . . . used . . . .” Dkt. No. 139 at 3-4. All told, 2 Plaintiffs calculate that one year’s worth of prospective relief is worth approximately $4.8 million. 3 Phillips Decl. ¶ 83.7 4 Plaintiffs believe their claims are meritorious, but acknowledge the significant risk of the 5 Court ruling against Plaintiffs’ claims. See Dkt. No. 139, at 4. The Court finds that, given these 6 risks and the expected claim rate, the settlement amount weighs in favor of granting preliminary 7 approval. 8 iv. Obvious Deficiencies 9 The Court also considers whether there are obvious deficiencies in the settlement 10 agreement. The Court finds no obvious deficiencies, and therefore finds that this factor weighs in 11 favor of preliminary approval. 12 * * * 13 Having weighed the relevant factors, the Court preliminarily finds that the settlement 14 agreement is fair, reasonable, and adequate, and GRANTS preliminary approval. The Court 15 DIRECTS the parties to include both a joint proposed order and a joint proposed judgment when 16 submitting their motion for final approval. 17 IV. PROPOSED CLASS NOTICE PLAN 18 For Rule 23(b)(3) class actions, “the court must direct to class members the best notice that 19 is practicable under the circumstances, including individual notice to all members who can be 20 identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). Individual notice must be sent 21 to all class members “whose names and addresses may be ascertained through reasonable effort.” 22 Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974). 23 With respect to the content of the notice itself, the notice must clearly and concisely state 24 in plain, easily understood language: (i) the nature of the action; 25 (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; 26

27 7 Plaintiffs estimation is based on 43,600 total loss-owned vehicles per year multiplied by an (iv) that a class member may enter an appearance through an attorney if 1 the member so desires; (v) that the court will exclude from the class any member who requests 2 exclusion; (vi) the time and manner for requesting exclusion; and 3 (vii) the binding effect of a class judgment on members[.] 4 Fed. R. Civ. P. 23(c)(2)(B). 5 The parties have agreed that a third-party settlement administrator, KCC, will mail class 6 notice to those members of the class that may be identified through reasonable efforts. SA ¶¶ 8– 7 10. “For each Settlement Class Member, Defendant shall provide the insured’s (1) name, (2) 8 mailing address, (3) email address, (4) policy number, and (5) claim number.” Id. ¶ 5. KCC will 9 mail Notice and Claim Forms to each Settlement Class member, with a second Mail Notice to 10 follow approximately thirty days after the Mail Notice Date. Id. ¶ 8. For any notices returned as 11 undeliverable, KCC will log the Notice as undeliverable and provide copies of the log to 12 Defendant and class counsel upon request. Id. ¶ 17. KCC will use reasonable efforts, including an 13 Experian search or skip tracing, to obtain a new address and re-mail each undeliverable Notice. 14 Id. KCC will also send an E-mail Notice to each Settlement Class Member for whom Defendant 15 provides an associated e-mail address. Id. ¶ 11. 16 The Court finds that the proposed notice process is “reasonably calculated, under all the 17 circumstances, to apprise all class members of the proposed settlement.” Roes, 944 F.3d at 1045 18 (quotation omitted). 19 As to the substance of the notice, the parties have attached a copy of their proposed Mail 20 Notice, Email Notice, and Claim Form. Dkt. No. 159, Exs. A and B; Phillips Decl., Exs. 3–5. 21 The notice includes information on the definition of the class, the settlement benefits, how to 22 submit a Claim for Reimbursement, how to request exclusion from the Settlement, how to support 23 or object to the Settlement, and the final fairness hearing. See id. The notice also informs 24 Settlement Class Members that class counsel will file a motion for attorneys’ fees and costs, not to 25 exceed a total sum of $3,900,000, and service awards for the three Class Representatives, ranging 26 from $5,000 to $15,000. Id. The Mail Notice includes expected average recoveries for each class. 27 Dkt. No. 159, Exs. A and B. 1 thus conforms with due process requirements. See Hyundai IT, 926 F.3d at 567 (‘Notice is 2 satisfactory if it generally describes the terms of the settlement in sufficient detail to alert those 3 || with adverse viewpoints to investigate and to come forward and be heard.” (quotation omitted)). 4 || V. | CONCLUSION 5 The Court GRANTS Plaintiffs’ motion for preliminary approval. The parties are 6 || DIRECTED to meet and confer and file a stipulation and proposed order stipulating to a schedule 7 of dates for each event listed below, which shall be submitted to the Court within seven days of 8 || the date of this Order: 9 10 Deadline for Settlement Administrator to mail 11 notice to all putative Class Members Filing deadline for attorneys’ fees and costs motion | = ti(‘C;SsSs*zY %L Filing deadline for incentive payment motion Po Deadline for Class Members to opt-out or object to 13 , settlement and/or application for attorneys’ fees and 14 costs and incentive payment, at least 45 days after S the filing of the motion for attorneys’ fees and 15 incentive payments Filing deadline for final approval motion PO a 16 Final fairness hearing and hearing on motions PO

= 17

Z 18 The parties are further DIRECTED to implement the proposed class notice plan. 19 20 IT IS SO ORDERED. 21 || Dated: 7/28/2022 Abipenl 5 ML | 3 HAYWOOD S. GILLIAM, JR. United States District Judge 24 25 26 27 28