CYNTHIA BASHANT, District Judge.
On May 24, 2013, Plaintiffs Blanca Watkins and Spencer Hoyt commenced this class action in San Diego Superior Court, alleging that Defendant Hireright, Inc., a consumer reporting agency, violated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., by reporting old charges that were dismissed and failing to provide consumers with full-file disclosures despite written requests to do so. (ECF No. 1.) On June 19, 2013, Hireright removed the action to federal court. (ECF No. 1.) On September 19, 2014, at the parties' joint request, Plaintiff Blanca Watkins and her individual claims were dismissed from the case. (ECF No. 101.)
On January 30, 2015, the parties filed a joint motion for preliminary approval of class action settlement. (ECF No. 119.) On February 11, 2015, Defendant filed a Notification of Bankruptcy with this court, staying all matters before the Court. (ECF No. 122.) Hence, the Court terminated the joint motion for preliminary settlement approval. (ECF No. 124.) Plaintiff Hoyt now seeks to reinstate the Motion for Preliminary Settlement Approval. (ECF No. 125.) He informs the Court that he has reached an agreement with Defendant's bankruptcy counsel, in connection with Hireright's plan of reorganization to "assume the settlement agreement and resume its agreement under the agreement post-bankruptcy." (ECF No. 125.) According to Plaintiff's counsel, "[t]he assumption of the settlement agreement has been incorporated into the bankruptcy court's confirmation order." (ECF No. 125.) Therefore, as a preliminary matter, this Court
The proposed settlement agreement ("Settlement" or "Settlement Agreement") applies to class members ("Class" or "Class Members") defined as "all individuals for whom Hireright's records indicate that the individual made a request for information from the consumer's file from May 23, 2008 through the date of preliminary approval."
The Settlement contemplates that Class Members will be required to return a properly completed Claim Form within the Claims Deadline to be eligible for monetary relief. (Id. at § 29.) Completed Claim Forms must be postmarked no later than 60 days after mailing of the Class Notices. (Id. at § 48.) The Class Members are divided into three categories. The first category, Class Members who Hireright records reflect made a request for their full file two years prior to the filing of the Complaint until the date of the preliminary approval, only need return a pre-paid postcard claim form. (Id. at § 46.) The parties estimate that there are 35,000 members of this group. (Id. at § 31). The second category are those who made a request for their full file within the same time frame but for whom Hireright's records do not explicitly reflect that they made this request. They will be required to provide either a copy of their request letter or a declaration indicating they requested their full file when they return the pre-paid postcard claim form. (Id. at § 46.) The parties estimate there are 135,000 members of this group. (Id. at § 31.) The third category consists of individuals who made a request for their full file between May 23, 2008 and May 23, 2011. They must submit a claim form, a copy of their letter requesting their file or a declaration indicating they requested the file and a representation that they did not know about the legal violation prior to May 23, 2011. (Id. at § 46.) The parties estimate there are 73,000 members of the group. (Id. at § 31.) If a Claim Form is deficient for any reason, other than timeliness, the Settlement Administrator shall mail the Class Member a notice of deficient claim, and the Class Member will have 14 days to cure the deficiency. (Id. at § 49.)
Hireright will establish a common fund of $460,000, exclusive of attorney's fees and costs of administration. (Id. at § 43.) This will be distributed pro rata to Class Members who timely return properly completed Claim Forms. (Id. at §§ 45, 65, 67.) Individual payouts will be capped at $200.00. (Id. at § 45.) The parties estimate each Class Member will receive approximately $58.00.
The Settlement Agreement also anticipates that the Class Members receive Injunctive Relief as reflected in the Injunctive Relief Order. (Settlement Agreement, Exh. E.) On all reports pertaining to a consumer who was adjudicated by Hireright, Hireright will include the following on the report (both on the consumer copy and the file disclosure copy, if any):
The proposed Settlement further requires an independent Settlement Administrator to provide notice of the proposed Settlement by first class mail, providing, among other things, a description of the terms of the Settlement, instructions for submitting a claim, and directions for accessing the Settlement website. (Id. at §§ 33, 38.) In addition to mailed notice, the Settlement Administrator will establish a Settlement website on which the Settlement Administrator will make available the Settlement Agreement, relevant pleadings including the operative complaint, the order granting preliminary approval, and Class Counsel's petition for attorneys' fees and expenses when filed. (Id. at § 35.) The notice will also include a toll-free number, hosted by the Settlement Administrator, where Class Members can obtain additional information about the proposed Settlement. (Id. at § 35.) For any notice returned by the U.S. Postal Service with a forwarding address, the Settlement Administrator shall mail notice to the forwarding address. (Id. at § 39.)
Any Class Member shall have the right to request exclusion from the Settlement Class by sending written notice via first class mail to the Settlement Administrator within 60 days of the mailing of the Class Notices. (Id. at § 41.)
Class Counsel will file a motion requesting an award of attorneys' fees and expenses (not to exceed $655,000.00 in fees and $60,000.00 in costs). (Settlement, at § 65.) That motion will also request an incentive award for the Named Plaintiff not to exceed $10,000. (Id. at § 66.) The parties agree the Settlement Administration Costs will be capped at $400,000. (Id. at § 67.) None of the attorneys' fees, expenses or costs will come from the common Settlement Fund, and the amounts are subject to the Court's approval.
Any Class Member who wishes to object to the Settlement Agreement must file a written statement of objection with the Court and mail a copy of the objection to the Settlement Administrator postmarked no later than 60 days following mailing of the Class Notices. (Id. at § 42.)
Following final court approval of the proposed Settlement, Plaintiff and Settlement Class Members shall be deemed to have released and discharged Defendant from claims for any violations arising pursuant to 15 U.S.C. §1681(b) or (g) or any state law equivalents. (Id. at §§ 68, 70.)
The Ninth Circuit maintains a "strong judicial policy" that favors the settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). However, Federal Rule of Civil Procedure 23(e) first "require[s] the district court to determine whether a proposed settlement is fundamentally fair, adequate, and reasonable." In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000) (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)). Where the "parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement." Stanton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). In these situations, settlement approval "requires a higher standard of fairness and a more probing inquiry than may normally be required under Rule 23(e)." Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012) (internal quotation marks omitted).
Before granting preliminary approval of a class-action settlement, the Court must first determine whether the proposed class can be certified. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) (indicating that a district court must apply "undiluted, even heightened, attention [to class certification] in the settlement context" in order to protect absentees).
The class action is "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 131 S.Ct. 2541, 2550 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)). In order to justify a departure from that rule, "a class representative must be part of the class and `possess the same interest and suffer the same injury' as the class members." Id. (citing E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977)). In this regard, Rule 23 contains two sets of class-certification requirements set forth in Rule 23(a) and (b). United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union v. ConocoPhillips Co., 593 F.3d 802, 806 (9th Cir. 2010). "A court may certify a class if a plaintiff demonstrates that all of the prerequisites of Rule 23(a) have been met, and that at least one of the requirements of Rule 23(b) have been met." Otsuka v. Polo Ralph Lauren Corp., 251 F.R.D. 439, 443 (N.D. Cal. 2008).
"Rule 23(a) provides four prerequisites that must be satisfied for class certification: (1) the class must be so numerous that joinder of all members is impracticable; (2) questions of law or fact exist that are common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class." Otsuka, 251 F.R.D. at 443 (citing Fed. R. Civ. P. 23(a)). "A plaintiff must also establish that one or more of the grounds for maintaining the suit are met under Rule 23(b), including: (1) that there is a risk of substantial prejudice from separate actions; (2) that declaratory or injunctive relief benefitting the class as a whole would be appropriate; or (3) that common questions of law or fact predominate and the class action is superior to other available methods of adjudication." Id. (citing Fed. R. Civ. P. 23(b)).
The parties seek class certification under Rule 23(b)(3). (Joint Motion at 29.) In the context of a proposed settlement class, questions regarding the manageability of the case for trial are not considered. See Wright v. Linkus Enter., Inc., 259 F.R.D. 468, 474 (E.D. Cal. 2009) (citing Amchem Prods., Inc., 521 U.S. at 620 (1997) ("Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems . . . for the proposal is that there be no trial.")).
Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). "[C]ourts generally find that the numerosity factor is satisfied if the class comprises 40 or more members and will find that it has not been satisfied when the class comprises 21 or fewer." Celano v. Marriott Int'l, Inc., 242 F.R.D. 544, 549 (N.D. Cal. 2007).
The proposed Class consists of approximately 243,000. Thus, the Court finds joinder of all members is impracticable for the purposes of Rule 23(a)(1).
Under Rule 23(a)(2), the named plaintiff must demonstrate that there are "questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). "Commonality requires the plaintiff to demonstrate that the class members `have suffered the same injury[.]'" Dukes, 131 S. Ct. at 2551 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 (1982)). However, "[a]ll questions of fact and law need not be common to satisfy this rule." Hanlon, 150 F.3d at 1019. "The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class." Id.
In this case, Plaintiff alleges that all Class Members make the same claim: that Defendant responded to their request for their consumer file, but did not include a copy of the Adjudication Notification Email it sent to the report's initial recipient. In addition to the same injury, Class Members share this "common core of salient facts." Class Members also share a common legal issue: Hireright's willfulness, a prerequisite to liability. Accordingly, the Court finds Rule 23(a)(2) is satisfied.
To satisfy Rule 23(a)(3), the named plaintiff's claims must be typical of the claims of the class. Fed. R. Civ. P. 23(a)(3). The typicality requirement is "permissive" and requires only that the named plaintiff's claims "are reasonably coextensive with those of absent class members." Hanlon, 150 F.3d at 1020. "The test of typicality `is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.'" Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)). "[C]lass certification should not be granted if `there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.'" Id. (quoting Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 180 (2d Cir. 1990)).
Like the other Class Members, the named Plaintiff, Hoyt, requested a copy of his consumer file from Defendant, and Defendant's response did not include a copy of the Adjudication Notification Email that Defendant sent to its customer regarding Hoyt. Thus, Hoyt and the Class Members assert the same violation of 15 U.S.C. §1681(g), arising from the same course of conduct. Plaintiff and Class Members also seek the same relief for this alleged wrongful conduct, that is injunctive relief and monetary compensation for the failure. Therefore, the Court finds Plaintiff's claim is typical of the claims of the Class Members, satisfying Rule 23(a)(3).
Rule 23(a)(4) requires that the representative plaintiff "will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "To satisfy constitutional due process concerns, absent class members must be afforded adequate representation before entry of a judgment which binds them." Hanlon, 150 F.3d at 1020 (citing Hansberry v. Lee, 311 U.S. 32, 42-43 (1940)). "Resolution of two questions determines legal adequacy: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?" Id. (citing Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978)).
The Court has no reason to believe that Plaintiff and his counsel have any conflict of interest with the Class Members and they appear to have vigorously investigated and litigated this action. Thus, the interests of Plaintiff and the Class Members are aligned. Additionally, Plaintiff's counsel are qualified in class-action litigation, having extensive experience in class action and consumer litigation, including FCRA class actions. (See Drake Dec., Exh 3, ECF No. 119-5.) Therefore, the Court finds Plaintiff and his counsel adequately represent the Class Members, satisfying Rule 23(a)(4)'s adequacy requirement.
"The predominance inquiry focuses on `the relationship between the common and individual issues' and `tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.'" Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009). As stated in Vinole:
Here, a common issue predominates over any individual issue—specifically, the legality of Hireright's conduct under the FCRA. Plaintiff states that this issue can be proven with the same class-wide evidence. (Joint Motion at pgs. 30-31.) Because resolution of the issue can arguably be resolved for all Class Members in a single adjudication, the Court finds the proposed Class is sufficiently cohesive to warrant adjudication by representation, and that Rule 23(b)(3)'s predominance requirement is satisfied.
"Plaintiffs must also demonstrate that a class action is `superior to other available methods for fairly and efficiently adjudicating the controversy.'" Otsuka, 251 F.R.D. at 448 (citing Fed. R. Civ. P. 23(b)(3)). "Where classwide litigation of common issues will reduce litigation costs and promote greater efficiency, a class action may be superior to other methods of litigation," and it is superior "if no realistic alternative exists." Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234-35 (9th Cir. 1996). The following factors are pertinent to this analysis:
Fed. R. Civ. P. 23(b)(3).
In this case, the alternative to a class action would be to have the individual Class Members, who total approximately 243,000 individuals, file separate lawsuits. Requiring Class Members to pursue individual actions would potentially produce lawsuits numbering in the tens of thousands. That would be both impractical and inefficient. Such individual litigation would consume judicial resources, impose additional burdens and expenses on the litigants, and present a risk of inconsistent rulings. In addition, the potential monetary relief under the statute could be as low as $100 (See Joint Motion at 16). Therefore each Class Member may not have an interest in bringing an individual action. For these reasons, the Court finds Rule 23(b)(3)'s superiority requirement is also satisfied.
For the foregoing reasons, with respect to the Class, the Court provisionally finds the prerequisites for a class action under Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been met.
Having certified the class, the court must next make a preliminary determination of whether the class-action settlement is "fair, reasonable, and adequate" pursuant to Rule 23(e)(2). "It is the settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness." Hanlon, 150 F.3d at 1026. A court may not "delete, modify or substitute certain provisions" of the settlement; rather, "[t]he settlement must stand or fall in its entirety." Id.
"[S]ettlement approval that takes place prior to formal class certification requires a higher standard of fairness." Hanlon, 150 F.3d at 1026. Consequently, a district court "must be particularly vigilant not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations." In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011). Other relevant factors to this determination include, among others, "the strength of the plaintiffs' case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class-action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement." Hanlon, 150 F.3d at 1026; see also Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004).
Preliminary approval of a settlement and notice to the proposed class is appropriate if "the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval." In re Tableware Antitrust Litig., 484 F.Supp.2d 1078, 1079 (N.D. Cal. 2007) (internal quotation marks and citations omitted).
Here, the parties' proposed Settlement Agreement complies with all of these requirements. The Court will address the relevant factors in further detail below.
"[T]he very essence of a settlement is compromise, `a yielding of absolutes and an abandoning of highest hopes.'" Officers for Justice v. Civil Serv. Comm'n of the City & Cty. of San Francisco, 688 F.2d 615, 624 (9th Cir. 1982). As explained by the Supreme Court, "[n]aturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with litigation." United States v. Armour & Co., 402 U.S. 673, 681 (1971).
Here, presumably recognizing the merits of each side's case, the parties agree that Plaintiff and other Class Members would face substantial hurdles prior to certification and trial. (Joint Motion at 20-21.) The parties recognize, "[t]he claim asserted in this litigation is an unprecedented theory of liability under the FRCA." (Joint Motion at 20.) Furthermore, in order to recover statutory damages, Class Members would have to prove not only liability, but willfulness on the part of Hireright.
The parties also recognize that further litigation would be "complex, costly and lengthy" and that settlement provides the benefits of litigation to all Class Members without the risk and delays of continued litigation, trial, and appeal. (Joint Motion at 21.) The parties anticipate that continued litigation of this matter would include motions for summary judgment, trial and appeal. (Id.) Absent settlement, the parties anticipate that further litigation would have "significantly delayed" any relief to Class Members.
The Court agrees with the parties that the proposed Settlement eliminates the litigation risks and ensures that the Class Members receive some compensation for their claims. Therefore, on balance, the strength of Plaintiff's case and risk of further litigation favor approving the proposed Settlement.
The proposed settlement caps a Class Member's monetary recovery at $200.00. The ultimate settlement amount depends on the number of Class Members submitting Claim Forms, but the parties estimate each Class member will receive approximately $58.00. (Joint Motion at 12.) The Class Members will also all receive the benefit of the Injunctive Relief Order.
This is reasonable in light of the amount Class Members were likely to achieve through litigation, that is, statutory damages between $100 and $1000. The parties agree that "were this case to proceed in litigation, the likely range of statutory damages would have been much closer to $100 than $1000." (Joint Motion at 16.) Nor, as detailed by the parties, is it likely that the parties would have been able to recover actual damages under the FCRA for this kind of a claim. (Joint Motion at 17.) Therefore, the Court finds the amount and details of the proposed Settlement are reasonable.
"The Court assesses the stage of proceedings and the amount of discovery completed to ensure the parties have an adequate appreciation of the merits of the case before reaching a settlement." Selk v. Pioneers Mem'l Healthcare Dist., — F. Supp. 3d —, 2016 WL 519088, at *7 (S.D. Cal. Jan. 29, 2016) (citation omitted). Prior to Settlement, the parties actively litigated the matter for two years, including discovery—both written and depositions, and motion practice. (Drake Dec., ¶4.) The parties also engaged in more than 12-hours of arms-length negotiation before a neutral mediator. (Drake Dec. ¶7.) Thus, the Court concludes that this factor favors approval.
As discussed above, Plaintiff and Class Member's Counsel are experienced lawyers. All Counsel agree this Settlement is reasonable. "The recommendations of plaintiffs' counsel should be given a presumption of reasonableness." Boyd v. Benchtel Corp., 485 F.Supp. 610, 622 (N.D. Cal. 1979). Accordingly, giving the appropriate weight to Class Counsel's recommendation, the Court concludes that this factor also weighs in favor of approval. See id.
The proposed Settlement Agreement requires the Settlement Administrator to notify the Class Members by first class mail. Consequently, Class Members will have an opportunity to object or opt out of the Settlement. Thus, at this time, this factor weighs in favor of approving the Settlement.
Based on the foregoing, the Court finds the Settlement falls within the range of reasonableness meriting possible final approval. The Court therefore preliminarily approves the Settlement Agreement and the terms and conditions of settlement set forth therein, subject to further consideration at the Final Approval Hearing.
Under Rule 23(c)(2)(B), "the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed. R. Civ. P. 23(c)(2)(B). The Rule directs:
"[T]he mechanics of the notice process are left to the discretion of the court subject only to the broad `reasonableness' standards imposed by due process." Grunin v. Int'l House of Pancakes, 513 F.2d 114, 120 (8th Cir. 1975).
The proposed settlement agreement anticipates that the Settlement Administrator will provide notice of the Settlement via first class mail, providing a description of the Settlement, instructions for submitting a claim along with claim forms, and a detailed description of each Class Member's rights (including the right to "opt out" of the Class). In addition to mailed notice, the Settlement Administrator will establish a Settlement website on which the Settlement Administrator will make available the Settlement Agreement, relevant pleadings including the operative complaint, the order granting preliminary approval, and Class Counsel's petition for attorneys' fees and expenses when filed. (Id. at § 35.) The notice will also include a toll-free number, hosted by the Settlement Administrator, where Class Members can obtain additional information about the proposed Settlement. (Id. at § 35.) For any notice returned by the U.S. Postal Service with a forwarding address, the Settlement Administrator shall mail notice to the forwarding address. (Id. at § 39.)
Having reviewed the proposed class notices, the Court finds that the methods and contents of the notices comply with due process and Rule 23, are the best notice practicable under the circumstances, and shall constitute due and sufficient notice to all persons entitled thereto. Therefore, the Court approves, as to form and content, the proposed notices to be provided to Settlement Class Members as set forth in Exhibit A of the Settlement Agreement. (ECF No. 119-3.)
In light of the foregoing, the Court
