ORDER GRANTING MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT AND FOR CERTIFICATION OF SETTLEMENT CLASS Re: ECF No. 103
JON S. TIGAR, District Judge.
Before the Court is Plaintiffs' unopposed motion for preliminary approval of the settlement and for certification of the settlement class. ECF No. 103. For the reasons discussed below, the Court will GRANT the motion, with some modifications, conditionally certify the settlement class, appoint class counsel and class representatives, direct the distribution of class notice, and make a preliminary determination that the settlement is "fair, reasonable, and adequate" under Rule 23(e)(2) of the Federal Rules of Civil Procedure.
This is a putative class action against Umpqua Bank, brought on behalf of debit card account holders who incurred overdraft fees on their Umpqua bank accounts. ECF No. 1. Generally, Plaintiffs allege that Umpqua uses a practice of re-ordering debit card transactions, so that higher dollar amount transactions are assessed against Plaintiffs' accounts first, even if they occurred later in time than lower dollar amount transactions.
Plaintiffs amended their complaint in February 2012, ECF No. 15, and Defendant filed a motion to dismiss the complaint in March 2013, ECF No. 18. The Court dismissed Plaintiffs' unconscionability claim, but otherwise denied the motion. ECF No 32.
Shortly after the Court's ruling on the motion to dismiss, in May 2012, the parties began preliminary settlement discussions. ECF No. 104, Ex. B, ¶ 9. Defendant then provided information regarding its overdraft fee revenue to Plaintiffs for review by Plaintiffs' counsel and expert.
The parties then proceeded to litigate the action by engaging in discovery. ECF No. 104 at 3. They served written discovery requests, interrogatories, and requests for admission, and Umpqua turned over more than 64,000 pages of documents and electronically stored information, which Plaintiffs' counsel reviewed and analyzed.
On May 7, 2013, Umpqua filed a motion for judgment on the pleadings, ECF No. 40, which the Court granted in part and denied in part in October 2013, ECF No. 58. The Court granted the motion as to Plaintiffs' claims for violation of one prong of California's Unfair Competition Law, breach of the implied covenant of good faith and fair dealing, breach of contract, and unjust enrichment.
Plaintiffs then sought leave to file a third amended complaint, which the Court granted. ECF No. 81.
In April 2014, the parties agreed on the material terms of a settlement and signed a summary agreement memorializing the results of their negotiations, including Defendant's agreement to pay $2.9 million as a common-fund class settlement, subject to this Court's approval. ECF No. 104 at 4-5. After three additional months of negotiation, in June 2014, the parties signed the settlement agreement at issue here.
II. CONDITIONAL CLASS CERTIFICATION
Class certification under Rule 23 is a two-step process. First, a plaintiff must demonstrate that the four requirements of Rule 23(a) are met: numerosity, commonality, typicality, and adequacy. "Class certification is proper only if the trial court has concluded, after a `rigorous analysis,' that Rule 23(a) has been satisfied."
Second, a plaintiff must establish that one of the bases for certification in Rule 23(b) is met. Here, by invoking Rule 23(b)(3), Plaintiff must establish that "questions of law or fact common to class members predominate over any questions affecting only individual members, and . . . [that] a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
The party seeking class certification bears the burden of demonstrating by a preponderance of the evidence that all four requirements of Rule 23(a) and at least one of the three requirements under Rule 23(b) are met.
A. Rule 23(a)(1)—Numerosity
Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Numerosity is satisfied here because the proposed settlement class includes approximately 48,500 members. ECF No. 104 at 17.
In addition, while not enumerated in Rule 23, "courts have recognized that `in order to maintain a class action, the class sought to be represented must be adequately defined and clearly ascertainable.'"
The Court finds that the class definition contained in the settlement agreement satisfies this requirement.
B. Rule 23(a)(2)—Commonality
A Rule 23 class is certifiable only if "there are questions of law or fact common to the class." Fed. R. Civ. P. 23(a)(2). For the purposes of Rule 23(a)(2), even a single common question is sufficient.
The Court finds that the proposed class satisfies the commonality requirement because, at a minimum, the issue of the order in which Defendant assessed overdraft fees, as well as Defendant's defenses, apply to the class as a whole.
C. Rule 23(a)(3)—Typicality
In certifying a class, courts must find that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed R. Civ. P. 23(a)(3). "The purpose of the typicality requirement is to assure that the interest of the named representative aligns with the interests of the class."
The Court finds that the proposed class representatives, Plaintiffs Amber Hawthorne, and Christopher and Victoria Kneer, are typical of the class they seek to represent. They allege they suffered the same injury, in the same manner, as the proposed class. Moreover, the claims of the entire class are based on Defendant's uniform conduct in assessing overdraft fees.
D. Rule 23(a)(4)—Adequacy of Representation
"The adequacy of representation requirement . . . requires that two questions be addressed: (a) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (b) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?"
No evidence in the record suggests the proposed class representatives or proposed class counsel have a conflict of interest with other class members. Plaintiffs' counsel are qualified and competent, and have had extensive experience prosecuting complex class actions, including consumer actions similar to the present case. The Court finds that proposed class counsel and the named Plaintiffs have and will continue to prosecute this action vigorously on behalf of the class. The adequacy requirement is therefore satisfied.
E. Rule 23(b)(3)—Predominance and Superiority
To certify a Rule 23 damages class, the Court must find that "questions of law or fact common to class members predominate over any questions affecting only individual members, and . . . [that] a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). The predominance inquiry "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation."
Here, the Court finds that the common questions raised by Plaintiffs' claims predominate over any questions affecting only individual members of the proposed class. In particular, Plaintiffs allege that Defendant improperly assessed overdraft fees to its customers' debit accounts in highest to lowest order, in a manner that resulted in customers being charged excessive overdraft fees. All class members are alleged to have been subject to the same practice of assessing fees. The predominance requirement is therefore satisfied.
Next, "[t]he superiority inquiry under Rule 23(b)(3) requires determination of whether the objectives of the particular class action procedure will be achieved in the particular case."
* * *
Because each element of Rules 23(a) and 23(b)(3) are satisfied, the Court finds that conditional certification of the proposed settlement class defined below is appropriate:
F. Appointment of Class Representatives and Class Counsel
Because the Court finds that Plaintiffs Amber Hawthorne, and Victoria and Christopher Kneer meet the commonality, typicality, and adequacy requirements of Rule 23(a), the Court appoints Plaintiffs as class representatives.
In addition, when a court certifies a class, the court must appoint class counsel and must consider:
Fed. R. Civ. P. 23(g)(1)(A). Additionally, a court "may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class." Fed. R. Civ. P. 23(g)(1)(B).
Plaintiffs' counsel have thus far vigorously prosecuted this action by: (1) filing and amending Plaintiffs' complaint three times; (2) defending against a motion to dismiss and motion for judgment on the pleadings, and partially succeeding in both instances; (3) investigating class members' potential claims; (4) propounding and reviewing discovery; (5) analyzing, with the help of an expert, data Defendant provided in discovery; (6) taking two Rule 30(b)(6) depositions of Defendant; (7) participating in a mediation session; (8) negotiating a summary settlement agreement and then negotiating for a further three months to come to a final settlement agreement; and (9) briefing the instant motion for preliminary approval. In addition, Plaintiffs' counsel has significant prior experience prosecuting overdraft-fee class actions. For these reasons, the Court will appoint Jeffrey M. Ostrow as lead class counsel and the remaining Plaintiffs' counsel as class counsel pursuant to Federal Rule of Civil Procedure 23(g).
III. PRELIMINARY APPROVAL OF CLASS SETTLEMENT
The Ninth Circuit maintains a "strong judicial policy" that favors the settlement of class actions.
The Court's task at the preliminary approval stage is to determine whether the settlement falls "within the range of possible approval."
Preliminary approval of a settlement 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."
Here, the Court finds that the settlement is "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."
First, nothing in the record suggests the settlement negotiation process was collusive. The settlement was reached at arms-length with the use of a professional mediator and over the course of months of effort by both parties.
Second, the settlement amount is adequate when compared to the total potential damages in the case. Plaintiffs estimate that class members will receive 37.6% of the total damages they would receive at trial should they prevail. The Court finds that a net recovery of 37.6% is fair, adequate, and reasonable in light of the strength of Plaintiffs' case, and the risk, expense, complexity, and likely duration of this litigation.
Third, the stage of the proceedings weighs in favor of approval. Though the settlement was reached prior to class certification, the parties engaged in adequate discovery: Plaintiffs took two Rule 30(b)(6) depositions of Defendant, Defendant provided Plaintiffs 64,000 pages of documents, which Plaintiffs' counsel reviewed with the help of an expert, and the parties exchanged written discovery requests, interrogatories and requests for admissions. Moreover, the parties actively litigated this case for more than two years before they agreed to this settlement. Plaintiffs have amended their complaint three times, and the action has proceeded through a motion to dismiss, a motion for judgment on the pleadings, and a mediation session.
Fourth, Plaintiffs' counsel is experienced in overdraft-fee litigation, has actively participated in the litigation of this action, and endorses the settlement. ECF No. 104 at 1, 19-20.
Fifth, no governmental actor is relevant to this action, rendering the factor immaterial to the settlement approval process.
Sixth, the Court must wait until the final approval hearing to assess class members' reaction to the settlement.
Finally, the Court finds the parties' agreement with respect to attorneys' fees and service enhancement awards for named Plaintiffs Amber Hawthorne, and Christopher and Victoria Kneer falls "within the range of possible approval." The Court will evaluate the requests for fees and service enhancement awards at the final approval hearing, after Plaintiffs' counsel file their motion for fees and costs, and the class has an opportunity to object.
For the foregoing reasons, the Court will preliminarily approve the class action settlement.
IV. CONDITIONAL APPROVAL OF NOTICE PLAN
The class notice in a Rule 23(b)(3) class action must comport with the requirements of due process. "[T]he plaintiff must receive notice plus an opportunity to be heard and participate in litigation, whether in person or through counsel." The notice must be "the best practicable," "reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."
Additionally, "an absent plaintiff [must] be provided with an opportunity to remove himself from the class by executing and returning an `opt out' or `request for exclusion' form to the court."
The parties propose to use Epiq Systems, Inc. as the claims administrator for the class. Epiq will provide notice; establish and maintain a post office box, a website, and a toll-free telephone line in order to communicate with class members; calculate awards; process requests for exclusion; process and transmit distributions to settlement class members; perform certain tax-related services; verify that Defendant has correctly made distributions to settlement class members who currently have accounts with Defendant; and provide weekly reports and a final report to counsel for the parties. ECF No. 104-1 at 10-11.
The parties' proposed notice plan has three parts: mailed notice via a direct-mail postcard, publication notice via newspaper, and a long-form notice posted to the settlement website (and which the parties will provide by U.S. mail upon request).
The postcard notice briefly explains that a settlement has been reached, who is included in the settlement, the gross settlement terms, and that class members may opt-out or object to the settlement.
Publication notice will involve a one-time 3-column-by-10.5" advertisement placed in one weekday edition each of the following newspapers, which cover the major markets in which Defendant operated bank branches during the class period: The Eugene Register-Guard, Medford Mail Tribune, Sacramento Bee, San Francisco Chronicle, Seattle Times, and the Oregonian.
The long-form notice, which will be available on the settlement website, www.umpquabankoverdraftsettlement.com, contains more information than the postcard and publication notices do. ECF No. 104 at 9. For example, it contains specific opt-out and objection instructions.
To opt-out of the settlement, putative class members must send a letter containing certain information to the settlement administrator. ECF No. 104-1, Ex. 3 at 5. The letter must be postmarked no later than the last day of the opt-out period. ECF No. 104 at 9.
To object to the settlement or to class counsel's application for attorneys' fees, costs, expenses, and service awards, class members must send a letter to the Clerk of the Court, class counsel, and Umpqua Bank's counsel. ECF No. 104-1 at 12. As proposed, any objection must contain fairly detailed information about the objector (e.g., a description of the number of times the objector or objector's counsel has objected to a class settlement in the last five years, and any agreement related to the settlement between the objector or the objector's counsel and any third person or entity).
Umpqua Bank will serve CAFA notice within 10 days of the date of this order. ECF No. 104 at 25.
The Court finds the parties' notice plan comports with due process requirements. In addition, the Court will approve the form of the proposed notices, subject to the following alterations:
The parties may elect to use this format, or adopt a different format requesting the same, but not more, information.
For the foregoing reasons, the Court hereby: