Evans et al v. ZB, N.A.
Filing
101
MEMORANDUM AND ORDER signed by Senior Judge William B. Shubb on 7/29/2022 ORDERING The form and content of the proposed Notice of Class Action Settlement is APPROVED, except to the extent that it must be updated to reflect dates and deadlines specif ied in this preliminary approval Order. No later than 10 calendar days from the date of this Order, the Beverly Group shall mail the Notice of Class Action Settlement to all known members of the class, the Notice shall be posted on counsel's we bsite. No later than 30 days from the date the Notice is mailed, any member of the settlement class who intends to object to, comment upon, or opt out of the settlement shall mail written notice of that intent to the Beverly Group. A Final Fairness H earing is set for 11/7/2022 at 01:30 PM before Senior Judge William B. Shubb, Courtroom 5. No later than 35 days before the final fairness hearing, class counsel shall file with this court a petition for an award of attorney's fees and costs. (Reader, L)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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----oo0oo----
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RONALD C. EVANS, JOAN M. EVANS,
DENNIS TREADAWAY, and all other
similarly situated,
Plaintiffs,
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No. 2:17-cv-01123 WBS DB
MEMORANDUM AND ORDER RE:
MOTION FOR PRELIMINARY
APPROVAL OF CLASS ACTION
SETTLEMENT
v.
ZIONS BANCORPORATION, N.A., dba
California Bank and Trust,
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Defendant.
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ZIONS BANCORPORATION, N.A.,
Third-Party
Plaintiff,
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v.
JTS, LARRY CARTER, JACK SWEIGART
AND BRISTOL INSURANCE,
Third-Party
Defendants.
----oo0oo----
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Plaintiffs Ronald Evans, Joan Evans, and Dennis
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Treadaway brought this putative class action against defendant
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Zions Bancorporation, d/b/a California Bank and Trust (“CB&T”),
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asserting claims based on CB&T’s alleged acquiescence in and
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provision of support for a fraud scheme perpetrated by one of its
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clients against putative class members.
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court is plaintiffs’ motion for preliminary approval of a class
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action settlement.
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statement of non-opposition to the preliminary approval.
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No. 99.)
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I.
Presently before the
(Mot. (Docket No. 98).)
CB&T has filed a
(Docket
Factual and Procedural Background1
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In 2014, Deepal Wannakuwatte admitted to defrauding
12
lenders to a fraudulent medical supply business he had operated,
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International Manufacturing Group, Inc. (“IMG”), via a Ponzi
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scheme he had operated since 2002, and pled guilty to wire fraud.
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(Mot. at 7; First Amended Complaint (“FAC”) at ¶ 2.)
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scheme, Wannakuwatte and IMG banked primarily at CB&T, which
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issued several loans to the scheme and to Wannakuwatte.
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¶ 3.)
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and stopped lending to Wannakuwatte and IMG but retained IMG as a
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banking client.
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after that point, CB&T officials continued to help facilitate the
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scheme by offering extensions on IMG’s loan payments and
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overlooking defaults.
During the
(Id. at
Plaintiffs allege that CB&T discovered the fraud by 2009
(Id. at ¶ 7.)
They further allege that even
(See id. at ¶¶ 11-15.)
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Plaintiffs brought this lawsuit on behalf of a putative
25
class of investors and lenders who were defrauded by Wannakuwatte
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and IMG, based on CB&T’s alleged complicity in the Ponzi scheme.
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All facts recited herein are as alleged by plaintiffs.
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(See FAC.)
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parties’ stipulated class-wide settlement, pursuant to Federal
3
Rule of Civil Procedure 23(e).
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II.
Plaintiffs now seek preliminary approval of the
(Mot.)
Discussion
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Rule 23(e) provides that “[t]he claims, issues, or
6
defenses of a certified class may be settled . . . only with the
7
court’s approval.”
8
first step in that process and analyzes only whether the proposed
9
class action settlement deserves preliminary approval.
Fed. R. Civ. P. 23(e).
This Order is the
See
10
Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 473 (E.D. Cal.
11
2010) (Shubb, J.).
12
to give notice to putative class members of the settlement
13
agreement and lays the groundwork for a future fairness hearing,
14
at which the court will hear objections to (1) the treatment of
15
this litigation as a class action and (2) the terms of the
16
settlement.
17
F.2d 1401, 1408 (9th Cir. 1989).
18
determination as to whether the parties should be allowed to
19
settle the class action on their proposed terms after that
20
hearing.
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Preliminary approval authorizes the parties
See id.; Diaz v. Tr. Territory of Pac. Islands, 876
The court will reach a final
Where the parties reach a settlement agreement prior to
22
class certification, the court must first assess whether a class
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exists.
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“Such attention is of vital importance, for a court asked to
25
certify a settlement class will lack the opportunity, present
26
when a case is litigated, to adjust the class, informed by the
27
proceedings as they unfold.”
28
Windsor, 521 U.S. 591, 620 (1997)).
Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003).
Id. (quoting Amchem Prods. Inc. v.
3
The parties cannot “agree to
1
certify a class that clearly leaves any one requirement
2
unfulfilled,” and consequently the court cannot blindly rely on
3
the fact that the parties have stipulated that a class exists for
4
purposes of settlement.
5
See Amchem, 521 U.S. at 621-22.
“Second, the district court must carefully consider
6
‘whether a proposed settlement is fundamentally fair, adequate,
7
and reasonable,’ recognizing that ‘[i]t is the settlement taken
8
as a whole, rather than the individual component parts, that must
9
be examined for overall fairness . . . .’”
Staton, 327 F.3d at
10
952 (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th
11
Cir. 1998), overruled on other grounds by Wal-Mart Stores, Inc.
12
v. Dukes, 564 U.S. 338 (2011)).
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A.
Class Certification
The proposed class is defined as follows:
All Net Losers, including assignees, but excluding Net
Losers who have already released the Bank from IMGrelated claims, and also excluding any governmental
entities, any judge, justice or judicial officer
presiding over this matter, and the members of his or
her immediate family, the Bank, along with its
corporate parents, subsidiaries and/or affiliates,
successors, and attorneys of any excluded Person or
entity referenced above, and any Person acting on
behalf of any excluded Person or entity referenced
above. . . .
“Net Loser” means any Settlement Class Member who
suffered a Net Loss from lending to or investing money
in IMG’s medical supply-related business(es). . . .
“Net Loss” means the total amount transferred by a
Settlement Class Member to IMG minus the total amount
received back from IMG, including, but not limited to
any return on investment, return of principal, fees,
and other payments by IMG to the Settlement Class
Member. For purposes of this settlement, for each
Participating Class Member, the Net Loss shall be the
amount of the allowed claim as reflected in the Claims
Approval Order, provided that such allowed claim only
includes monies provided to IMG for the purpose of
lending to or investing money in IMG’s medical supply4
1
related business(es).
2
(Settlement Agreement (“Agreement”) at §§ 1.11, 1.12, 1.26
3
(Docket No. 98-1 at 23, 29); see Mot. at 25-26.)
To be certified, the putative class must satisfy both
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the requirements of Federal rule of Civil Procedure 23(a) and
6
(b).
7
2013).
Leyva v. Medline Indus. Inc., 716 F.3d 510, 512 (9th Cir.
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1.
9
Rule 23(a) restricts class actions to cases where:
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Rule 23(a)
(1) the class is so numerous that joinder of all
members is impracticable; (2) there are questions of
law or fact 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.
Fed. R. Civ. P. 23(a).
a.
Numerosity
“A proposed class of at least forty members
17
presumptively satisfies the numerosity requirement.”
Avilez v.
18
Pinkerton Gov’t Servs., 286 F.R.D. 450, 456 (C.D. Cal. 2012),
19
vacated on other grounds, 596 F. App’x 579 (9th Cir. 2015); see
20
also, e.g., Collins v. Cargill Meat Sols. Corp., 274 F.R.D. 294,
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300 (E.D. Cal. 2011) (Wanger, J.) (“Courts have routinely found
22
the numerosity requirement satisfied when the class comprises 40
23
or more members.”).
24
class will contain sixty members, based on the number of
25
investors and lenders who are believed to have been victims of
26
the Ponzi scheme.
27
(“Brace Decl.”) at ¶ 25 (Docket No. 98-1); Agreement at § 3.2.)
28
This satisfies the numerosity requirement.
Here, plaintiffs estimate that the proposed
(See Mot. at 11; Decl. of Robert L. Brace
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b.
2
Commonality
Commonality requires that the class members’ claims
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“depend upon a common contention” that is “capable of classwide
4
resolution -- which means that determination of its truth or
5
falsity will resolve an issue that is central to the validity of
6
each one of the claims in one stroke.”
7
at 350.
8
satisfy the rule,” and the “existence of shared legal issues with
9
divergent factual predicates is sufficient, as is a common core
Wal-Mart Stores, 564 U.S.
“[A]ll questions of fact and law need not be common to
10
of salient facts coupled with disparate legal remedies within the
11
class.”
12
Hanlon, 150 F.3d at 1019.
The proposed class includes, with the exception of
13
certain conflicted parties such as judges overseeing the action,
14
all individuals who suffered financial loss as a result of
15
lending to or investing in IMG’s medical supply business.
16
Mot. at 25-26.)
17
of this class all depend on common questions of law and fact
18
because all claims are premised on the issue of whether CB&T knew
19
Wannakuwatte was using IMG to operate a Ponzi scheme.
20
11-12.)
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proposed class and the issues to presented by the suit.
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the common core of salient facts and legal contentions, the
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proposed class meets the commonality requirement.
24
25
(See
Plaintiffs contend the claims asserted on behalf
(Id. at
The named plaintiffs share the characteristics of this
c.
Due to
Typicality
Typicality requires that named plaintiffs have claims
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“reasonably coextensive with those of absent class members,” but
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their claims do not have to be “substantially identical.”
28
Hanlon, 150 F.3d at 1020.
The test for typicality “is whether
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other members have the same or similar injury, whether the action
2
is based on conduct which is not unique to the named plaintiffs,
3
and whether other class members have been injured by the same
4
course of conduct.”
5
508 (9th Cir. 1992) (citation omitted).
6
Hanon v. Dataproducts Corp., 976 F.2d 497,
The named plaintiffs allege they were defrauded via a
7
Ponzi scheme run by Wannakuwatte and IMG and consequently lost
8
money they had lent to or invested in IMG’s medical supply
9
business.
These alleged injuries also define the putative class.
10
Although the amount lost by each class member varies, the basis
11
for their injuries and the parties responsible for those injuries
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are alleged to be identical for the named plaintiffs and all
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putative class members.
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typicality requirement.
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d.
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The proposed class therefore meets the
Adequacy of Representation
To resolve the question of adequacy, the court must
17
make two inquiries: “(1) [D]o the named plaintiffs and their
18
counsel have any conflicts of interest with other class members
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and (2) will the named plaintiffs and their counsel prosecute the
20
action vigorously on behalf of the class?”
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1020.
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including “the qualifications of counsel for the representatives,
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an absence of antagonism, a sharing of interests between
24
representatives and absentees, and the unlikelihood that the suit
25
is collusive.”
26
Cir. 1992).
27
28
Hanlon, 150 F.3d at
These questions involve consideration of several factors,
Brown v. Ticor Title Ins., 982 F.2d 386, 390 (9th
i.
Conflicts of Interest
First, there do not appear to be any conflicts of
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interest.
2
with the putative class members’.
3
suffered injuries similar or identical to those suffered by the
4
named plaintiffs, and the definition of the class is narrowly
5
tailored and aligns with the class members’ interests.
6
Amchem, 521 U.S. at 625–26 (“[A] class representative must be
7
part of the class and possess the same interest and suffer the
8
same injury as the class members.”); Murillo, 266 F.R.D. at 476
9
(finding that an appropriate class definition ensured that “the
The named plaintiffs’ interests are generally aligned
The putative class members
See
10
potential for conflicting interests will remain low while the
11
likelihood of shared interests remains high”).
12
In this case, plaintiffs represent that the settlement
13
would provide an incentive award of $5,000 to each named
14
plaintiff.
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incentive award raises the possibility that the named plaintiffs’
16
interest in receiving that award will cause their interests to
17
diverge from the class’s interest in a fair settlement, the Ninth
18
Circuit has specifically approved the award of “reasonable
19
incentive payments.”
20
however, must “scrutinize carefully the awards so that they do
21
not undermine the adequacy of the class representatives.”
22
Radcliffe v. Experian Info. Sys., Inc., 715 F.3d 1157, 1163 (9th
23
Cir. 2013).
24
(Brace Decl. at ¶ 30.)
While the provision of an
Staton, 327 F.3d at 977–78.
The court,
Courts have generally found that $5,000 incentive
25
payments are reasonable.
26
EDL, 2009 WL 928133, at *10 (N.D. Cal. Apr. 3, 2009) (citing In
27
re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir.
28
2000)); In re SmithKline Beckman Corp. Sec. Litig., 751 F. Supp.
Hopson v. Hanesbrands Inc., 08-cv-0844
8
1
525, 535 (E.D. Pa. 1990); Alberto v. GMRI, Inc., 252 F.R.D. 652,
2
669 (E.D. Cal. 2008) (Shubb, J.).
3
$5,000 to each named plaintiff and are to be paid separate and
4
apart from the settlement fund.
5
at ¶ 30.)
6
Here, the incentive awards are
(See Mot. at 14-15; Brace Decl.
Plaintiffs estimate that, after deduction of costs,
7
attorneys’ fees, and the incentive awards, the remaining
8
settlement funds will be $9 million.
9
the 60 class members opt out, each member would receive an
(Mot. at 9.)
If none of
10
average of $150,000 from the settlement fund, which far exceeds
11
the value of the incentive payments.
12
are likely to represent a small fraction of the named plaintiffs’
13
overall recovery indicates that the payments are unlikely to
14
cause their interests to diverge from those of the class.
15
Accordingly, the court preliminarily finds that the proposed
16
incentive awards do not render the named plaintiffs inadequate
17
representatives of the class.
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ii.
That the incentive payments
Vigorous Prosecution
The second prong of the adequacy inquiry examines the
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vigor with which the named plaintiffs and their counsel have
21
pursued the common claims.
22
standards by which ‘vigor’ can be assayed, considerations include
23
competency of counsel and, in the context of a settlement-only
24
class, an assessment of the rationale for not pursuing further
25
litigation.”
26
“Although there are no fixed
Hanlon, 150 F.3d at 1021.
Plaintiffs’ counsel have significant experience
27
litigating class action suits involving Ponzi schemes and have
28
litigated numerous such cases against banks for aiding and
9
1
abetting.
2
Denver (“Denver Decl.”) at ¶¶ 3-5 (Docket No. 98-2).)
3
Plaintiffs’ attorney Robert Brace has previously served as class
4
counsel in class actions involving Ponzi schemes and has
5
recovered hundreds of millions of dollars for class members in
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previous class actions.
7
finds no reason to doubt that plaintiffs’ attorneys are qualified
8
to conduct the proposed litigation and assess the value of the
9
settlement.
10
(See Brace Decl. at ¶¶ 15-20; Decl. of Michael P.
(Brace Decl. at ¶¶ 16-17.)
The court
In addition, plaintiffs’ counsel seem to have seriously
11
considered the risks of continued litigation in deciding to
12
settle this action.
13
dedicating thousands of hours, filing and briefing numerous
14
motions, engaging in extensive discovery, and participating in
15
two mediations.
16
7-8.)
17
strengths and weaknesses of this case when they decided to accept
18
the terms of the mediator’s proposed settlement agreement.
19
Brace Decl. at ¶ 7; Mot. at 8.)
20
They have aggressively litigated the case,
(See id. at ¶¶ 1-7; Denver Decl. at ¶ 9; Mot. at
Plaintiffs’ counsel were therefore informed about the
(See
Accordingly, the court concludes that the absence of
21
conflicts of interest and the vigor of counsel’s representation
22
satisfy Rule 23(a)’s adequacy assessment for the purpose of
23
preliminary approval.
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2.
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An action that meets all the prerequisites of Rule
Rule 23(b)
26
23(a) may be certified as a class action only if it also
27
satisfies the requirements of one of the three subdivisions of
28
Rule 23(b).
Leyva, 716 F.3d at 512.
10
Plaintiffs seek
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certification under Rule 23(b)(3), which provides that a class
2
action may be maintained only if (1) “the court finds that
3
questions of law or fact common to class members predominate over
4
questions affecting only individual members” and (2) “that a
5
class action is superior to other available methods for fairly
6
and efficiently adjudicating the controversy.”
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23(b)(3).
8
9
a.
Fed. R. Civ. P.
Predominance
“Because Rule 23(a)(3) already considers commonality,
10
the focus of the Rule 23(b)(3) predominance inquiry is on the
11
balance between individual and common issues.”
12
F.R.D. at 476 (citing Hanlon, 150 F.3d at 1022); see also Amchem,
13
521 U.S. at 623 (“The Rule 23(b)(3) predominance inquiry tests
14
whether proposed classes are sufficiently cohesive to warrant
15
adjudication by representation.”).
16
Murillo, 266
The class members’ contentions appear to be similar, if
17
not identical.
18
funds lent to or invested in IMG by class members, there is no
19
indication that those variations are “sufficiently substantive to
20
predominate over the shared claims.”
21
476 (quoting Hanlon, 150 F.3d at 1022).
22
finds that common questions of law and fact predominate over the
23
class members’ claims.
24
25
Although there are differences in the amount of
b.
See Murillo, 266 F.R.D. at
Accordingly, the court
Superiority
Rule 23(b)(3) also sets forth four non-exhaustive
26
factors to consider in determining whether “a class action is
27
superior to other available methods for fairly and efficiently
28
adjudicating the controversy”:
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1
2
3
4
5
(A) the class members’ interests in individually
controlling the prosecution or defense of separate
actions; (B) the extent and nature of any litigation
concerning the controversy already begun by or against
class members; (C) the desirability or undesirability
of concentrating the litigation of the claims in the
particular forum; and (D) the likely difficulties in
managing a class action.
6
Fed. R. Civ. P. 23(b)(3).
7
to certification, making factors (C) and (D) inapplicable.
8
Murillo, 266 F.R.D. at 477 (citing Amchem, 521 U.S. at 620).
9
The parties settled this action prior
See
Here, although class members’ individual claims may be
10
valuable, it is unclear that they would outweigh the costs of
11
litigation given the complexity of the case.
12
though class members’ claims arise from events that concluded in
13
2014, only one other non-bankruptcy litigation has been filed
14
against CB&T (which has already settled), (see Mot. at 16-17),
15
indicating that class members do not intend to pursue individual
16
litigation, though objectors at the final fairness hearing may
17
reveal otherwise.
18
19
Moreover, even
See Alberto, 252 F.R.D. at 664.
At this stage, the class action device appears to be
the superior method for adjudicating this controversy.
20
3.
Rule 23(c)(2)
21
If the court certifies a class under Rule 23(b)(3), it
22
“must direct to class members the best notice that is practicable
23
under the circumstances, including individual notice to all
24
members who can be identified through reasonable effort.”
25
R. Civ. P. 23(c)(2)(B).
26
content of a proposed notice.
27
651, 658 (N.D. Cal. 1997) (citing Eisen v. Carlisle & Jacquelin,
28
417 U.S. 156, 172–77 (1974)).
Fed.
Rule 23(c)(2) governs both the form and
See Ravens v. Iftikar, 174 F.R.D.
Although that notice must be
12
1
“reasonably certain to inform the absent members of the plaintiff
2
class,” actual notice is not required.
3
1449, 1454 (9th Cir. 1994) (citation omitted).
4
Silber v. Mabon, 18 F.3d
The settlement agreement provides that the Beverly
5
Group will serve as claims administrator and will provide notice
6
to the class.
7
already possesses what is believed to be the last known address
8
for each class member and will utilize that list to provide
9
notice.
(Agreement at §§ 3.2, 4.2.)
(Id. at § 3.2.)
The administrator
The administrator will also receive and
10
catalogue any opt-outs.
11
the notice to known class members within ten days of this Order,
12
the notice will be posted on plaintiffs’ counsel’s website and
13
published in the Sacramento Bee.
14
(Id. at § 4.2.)
In addition to mailing
(Brace Decl. at ¶ 38.)
Plaintiffs have provided the court with a proposed
15
notice to class members.
16
explains the proceedings; defines the scope of the class; informs
17
class members who did not receive the notice by mail that they
18
are required to submit a claim; informs class members of the
19
binding effect of the class action; describes the procedure for
20
opting out and objecting; provides the time and date of the
21
fairness hearing; and directs interested parties to more detailed
22
information on the settlement website.
23
explains what the settlement provides and how much each class
24
member can expect to receive in compensation.
25
The content of the notice therefore satisfies Rule 23(c)(2)(B).
26
See Fed. R. Civ. P. 23(c)(2)(B); see also Churchill Vill., L.L.C.
27
v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004) (“Notice is
28
satisfactory if it ‘generally describes the terms of the
(Docket No. 98-1 at 87-100.)
13
(Id.)
It
The notice
(Id. at 94-95.)
1
settlement in sufficient detail to alert those with adverse
2
viewpoints to investigate and to come forward and be heard.’”)
3
(quoting Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338, 1352
4
(9th Cir. 1980)).
5
Under the circumstances of this case, the court is
6
satisfied that this system is reasonably calculated to provide
7
notice to class members and is the best form of notice available
8
under the circumstances as required under Rule 23(c)(2).
9
10
B.
Preliminary Settlement Approval
After determining that the proposed class satisfies the
11
requirements of Rule 23(a) and (b), the court must determine
12
whether the terms of the parties’ settlement appear fair,
13
adequate, and reasonable.
14
150 F.3d at 1026.
15
number of factors,” including:
16
17
18
19
20
21
22
See Fed. R. Civ. P. 23(e)(2); Hanlon,
This process requires the court to “balance a
the strength of the plaintiff[s’] 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.
Many of these factors cannot be considered until the
23
final fairness hearing, so the court need only conduct a
24
preliminary review at this time to resolve any “glaring
25
deficiencies” in the settlement agreement before authorizing
26
notice to class members.
27
DAD, 2014 WL 3057506, at *12 (E.D. Cal. July 7, 2014) (citing
28
Murillo, 266 F.R.D. at 478).
Ontiveros v. Zamora, 2:08-cv-00567 WBS
This requires the court only to
14
1
“determine whether the proposed settlement is within the range of
2
possible approval,” which in turn requires consideration of
3
“whether the proposed settlement discloses grounds to doubt its
4
fairness or other obvious deficiencies, such as unduly
5
preferential treatment of class representatives or segments of
6
the class, or excessive compensation of attorneys.”
7
F.R.D. at 479 (quoting Gautreaux v. Pierce, 690 F.2d 616, 621 n.3
8
(7th Cir. 1982); West v. Circle K Stores, Inc., 04-cv-00438 WBS
9
GGH, 2006 WL 1652598, at *11-12 (E.D. Cal. June 13, 2006)).
Murillo, 266
10
1.
11
Courts often begin by examining the process that led to
12
the settlement’s terms to ensure that those terms are “the result
13
of vigorous, arms-length bargaining” and then turn to the
14
substantive terms of the agreement.
15
Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1080 (N.D. Cal.
16
2007) (“[P]reliminary approval of a settlement has both a
17
procedural and a substantive component.”).
18
represent that the parties reached the settlement after 5 years
19
of litigation, two arms-length mediations, and thorough motions
20
practice, including an appeal to the Ninth Circuit.
21
8, 21; Brace Decl. ¶¶ 3-7, 19); see La Fleur v. Med. Mgmt. Int’l,
22
Inc., 5:13-cv-00398, 2014 WL 2967475, at *4 (N.D. Cal. June 25,
23
2014) (“Settlements reached with the help of a mediator are
24
likely non-collusive.”).
25
Negotiation of the Settlement Agreement
See, e.g., id.; In re
Plaintiffs’ counsel
(Mot. at 7-
The extent of this process indicates that plaintiffs’
26
counsel’s decision to accept the settlement agreement takes into
27
account the risks and delays associated with continuing
28
litigating.
In light of these considerations, the court finds no
15
1
reason to doubt the parties’ representations that the settlement
2
was the result of vigorous, arms-length bargaining.
3
2.
4
In determining whether a settlement agreement is
Amount Recovered and Distribution
5
substantively fair to the class, the court must balance the value
6
of expected recovery against the value of the settlement offer.
7
See Tableware, 484 F. Supp. 2d at 1080.
8
consideration of the uncertainty class members would face if the
9
case were litigated to trial.
10
This inquiry may involve
See Ontiveros, 2014 WL 3057506, at
*14.
11
Although counsel for plaintiffs estimates that the
12
class’s total claims could be worth approximately $55 million, he
13
states that CB&T “has legitimate defenses to those claims” which
14
“could reduce or even eliminate Plaintiffs’ recovery at trial.”
15
(Brace Decl. at ¶ 41.)
16
more than 25% of that best-case recovery.
The proposed $14 million settlement is
17
The court notes that the settlement agreement requires
18
class members who are not directly notified of the settlement --
19
i.e., those not already known to plaintiffs and the settlement
20
administrator -- by mail to take the affirmative step of opting
21
in to receive payment, and requires all class members to out if
22
they do not wish to be part of the settlement class.
23
98-1 at 89.)
24
request to be excluded will release defendant from any underlying
25
claims.
26
(Docket No.
Class members who are directly notified and do not
(Id.)
Nevertheless, there are many uncertainties associated
27
with pursuing litigation that justify this recovery.
28
counsel contend that plaintiffs would have been required to prove
16
Plaintiffs’
1
CB&T was aware IMG was using the bank to operate a Ponzi scheme
2
to defraud investors.
3
certification on a contested motion would have been “far from
4
certain” and suggests denial would have led to one or more
5
additional appeals.
6
(Mot. at 7.)
They also contend that class
(See Brace Decl. at ¶ 41.)
In light of the uncertainties associated with pursuing
7
litigation, the court will grant preliminary approval to the
8
settlement because it is “within the range of possible approval.”
9
Murillo, 266 F.R.D. at 479 (quoting Gautreaux, 690 F.2d at 621
10
n.3).
11
3.
12
If a negotiated class action settlement includes an
Attorney’s Fees
13
award of attorney’s fees, that fee award must be evaluated in the
14
overall context of the settlement.
15
312 F.3d 1123, 1126 (9th Cir. 2002); Monterrubio v. Best Buy
16
Stores, L.P., 291 F.R.D. 443, 455 (E.D. Cal. 2013) (England, J.).
17
The court “ha[s] an independent obligation to ensure that the
18
award, like the settlement itself, is reasonable, even if the
19
parties have already agreed to an amount.”
20
Headset Prods. Liab. Litig., 654 F.3d 935, 941 (9th Cir. 2011).
21
Knisley v. Network Assocs.,
In re Bluetooth
The settlement agreement provides that plaintiffs’
22
counsel will seek a fee award of up to 30% of the net settlement
23
payment remaining after approved litigation costs, costs for the
24
claims administrator, and incentive payments to the named
25
plaintiffs have been deducted.
26
plaintiffs have not provided an estimate of how much those fees
27
would be, based on estimated cost figures provided by plaintiffs,
28
the court estimates that a fee award of 30% would equal roughly
(Agreement at § 3.6.)
17
Although
1
$4 million.2
2
fund.
3
the fee award in whole or in part, that will not prevent the
4
settlement agreement from becoming effective or be grounds for
5
termination.
6
Attorney’s fees are to be paid from the settlement
(Id.; Brace Decl. ¶ 10.)
If the court does not approve
(Agreement at § 3.6.)
In deciding the attorney’s fees motion, the court will
7
have the opportunity to assess whether the requested fee award is
8
reasonable by multiplying a reasonable hourly rate by the number
9
of hours counsel reasonably expended.
See Van Gerwen v. Gurantee
10
Mut. Life. Co., 214 F.3d 1041, 1045 (9th Cir. 2000).
11
this lodestar calculation, the court may take into account
12
factors such as the “degree of success” or “results obtained” by
13
plaintiffs’ counsel.
14
F.2d 481, 488 (9th Cir. 1988).
15
fees motion, finds that the amount of the settlement warrants a
16
fee award at a rate lower than what plaintiffs’ counsel requests,
17
then it will reduce the award accordingly.
18
therefore not evaluate the fee award at length here in
19
considering whether the settlement is adequate.
20
As part of
See Cunningham v. Cnty. of Los Angeles, 879
If the court, in ruling on the
The court will
IT IS THEREFORE ORDERED that plaintiffs’ motion for
21
preliminary certification of a conditional settlement class and
22
preliminary approval of the class action settlement be, and the
23
same hereby is, GRANTED.
24
25
26
27
28
Plaintiffs estimate that litigation costs will not
exceed $200,000, that settlement administration costs will be
approximately $150,000, and that the three named plaintiffs will
each receive $5,000. (Mot. at 9; Brace Decl. at ¶ 10.) After
deducting these estimated payments from the proposed $14 million
settlement, (see id.), the settlement fund would contain $13.635
million, 30% of which equals $4.09 million.
18
2
1
2
3
4
IT IS FURTHER ORDERED that:
(1)
The class is provisionally certified for the purpose of
settlement as:
“All Net Losers, including assignees, but
5
excluding Net Losers who have already released the Bank
6
from IMG-related claims, and also excluding any
7
governmental entities, any judge, justice or judicial
8
officer presiding over this matter, and the members of
9
his or her immediate family, the Bank, along with its
10
corporate parents, subsidiaries and/or affiliates,
11
successors, and attorneys of any excluded Person or
12
entity referenced above, and any Person acting on
13
behalf of any excluded Person or entity referenced
14
above.
15
‘Net Loser’ is defined as any Settlement Class
16
Member who suffered a Net Loss from lending to or
17
investing money in IMG’s medical supply-related
18
business(es), and ‘Net Loss’ is defined as: ‘[T]he
19
total amount transferred by a Settlement Class Member
20
to IMG minus the total amount received back from IMG,
21
including, but not limited to any return on investment,
22
return of principal, fees, and other payments by IMG to
23
the Settlement Class Member.
24
settlement, for each Participating Class Member, the
25
Net Loss shall be the amount of the allowed claim as
26
reflected in the Claims Approval Order, provided that
27
such allowed claim only includes monies provided to IMG
28
for the purpose of lending to or investing money in
19
For purposes of this
1
2
IMG’s medical supply-related business(es).’”;
(2)
The proposed settlement is preliminarily approved as
3
fair, just, reasonable, and adequate to the members of
4
the settlement class, subject to further consideration
5
at the final fairness hearing after distribution of
6
notice to members of the settlement class;
7
(3)
For purposes of carrying out the terms of the
8
settlement only:
9
(a)
Ronald Evans, Joan Evans, and Dennis Treadaway are
10
appointed as the representatives of the settlement
11
class and are provisionally found to be adequate
12
representatives within the meaning of Federal Rule
13
of Civil Procedure 23;
14
(b)
Attorneys Robert L. Brace and Michael P. Denver
15
are provisionally found to be fair and adequate
16
representatives of the settlement class and are
17
appointed as class counsel for the purpose of
18
representing the settlement class conditionally
19
certified in this Order;
20
(4)
21
22
The Beverly Group is appointed as the settlement
administrator;
(5)
The form and content of the proposed Notice of Class
23
Action Settlement is approved, except to the extent
24
that it must be updated to reflect dates and deadlines
25
specified in this preliminary approval Order.
26
Notice shall also inform recipients that it is possible
27
that the Final Fairness Hearing on November 7, 2022
28
will be held remotely, so, in the weeks prior to the
20
The
1
Hearing, Notice recipients should check Plaintiffs’
2
Counsel’s website, www.Rusty.Lawyer, for updates and
3
instructions on how to attend remotely, if applicable;
4
(6)
No later than ten (10) calendar days from the date of
5
this Order, the Beverly Group shall mail the Notice of
6
Class Action Settlement to all known members of the
7
class, the Notice shall be posted on counsel’s website
8
at www.Rusty.Lawyer, and a short form notice shall be
9
published one time in the Sacramento Bee;
10
(7)
No later than thirty (30) days from the date the Notice
11
is mailed, any member of the settlement class who
12
intends to object to, comment upon, or opt out of the
13
settlement shall mail written notice of that intent to
14
the Beverly Group pursuant to the instructions in the
15
Notice of Class Action Settlement;
16
(8)
A final fairness hearing shall be set to occur before
17
this Court on Monday, November 7, 2022, at 1:30 p.m. in
18
Courtroom 5 of the Robert T. Matsui United States
19
Courthouse, 501 I Street, Sacramento, California, to
20
determine whether the proposed settlement is fair,
21
reasonable, and adequate and should be approved by this
22
court; whether the settlement class’s claims should be
23
dismissed with prejudice and judgment entered upon
24
final approval of the settlement; whether final class
25
certification is appropriate; and to consider class
26
counsel’s applications for attorney’s fees, costs, and
27
an incentive award to each class representative;
28
(9)
No later than thirty-five (35) days before the final
21
1
fairness hearing, class counsel shall file with this
2
court a petition for an award of attorney’s fees and
3
costs.
4
should be filed no later than twenty-one (21) days
5
before the final fairness hearing.
6
file a reply to any objections no later than eleven
7
(11) days before the final fairness hearing;
Any objections or responses to the petition
Class counsel may
8
(10) No later than thirty-five (35) days before the final
9
fairness hearing, class counsel shall file and serve
10
upon the court and defendant’s counsel all papers in
11
support of final approval of the settlement and the
12
incentive award requested for the class
13
representatives.
14
motion should be filed no later than twenty-one (21)
15
days before the final fairness hearing.
16
may file a reply to any objections no later than eleven
17
(11) days before the final fairness hearing;
18
Any objections or responses to the
Class counsel
(11) No later than thirty-five (35) days before the final
19
fairness hearing, the Beverly Group shall prepare, and
20
class counsel shall file and serve upon the court and
21
defendant’s counsel, a declaration setting forth the
22
services rendered, proof of mailing, a list of all
23
class members who have opted out of the settlement, or
24
the amount of the class member’s adjudicated claim;
25
(12) Any person who has standing to object to the terms of
26
the proposed settlement may themselves appear at the
27
final fairness hearing or appear through counsel and be
28
heard to the extent allowed by the court in support of,
22
1
or in opposition to, (a) the fairness, reasonableness,
2
and adequacy of the proposed settlement; (b) the
3
requested award of attorney’s fees, reimbursement of
4
costs, and incentive award to the class
5
representatives; and/or (c) the propriety of class
6
certification.
7
fairness hearing, a person must, no later than sixty
8
(60) days from the date this Order is signed, (a) serve
9
by hand or through the mails written notice of his or
To be heard in opposition at the final
10
her intention to appear, stating the name and case
11
number of this action and each objection and the basis
12
therefor, together with copies of any papers and
13
briefs, upon class counsel and counsel for defendant;
14
and (b) file said appearance, objections, papers, and
15
briefs with the court, together with proof of service
16
of all such documents upon counsel for the parties.
17
Responses to any such objections shall be
18
served by hand or through the mails on the objectors,
19
or on the objector’s counsel if there is any, and filed
20
with the court no later than fourteen (14) calendar
21
days before the final fairness hearing.
22
file optional replies no later than seven (7) calendar
23
days before the final fairness hearing in the same
24
manner described above.
25
who does not make his or her objection in the manner
26
provided herein shall be deemed to have waived such
27
objection and shall forever be foreclosed from
28
objecting to the fairness or adequacy of the proposed
23
Objectors may
Any settlement class member
1
settlement, the judgment entered, and the award of
2
attorney’s fees, costs, and an incentive award to the
3
class representative unless otherwise ordered by this
4
court;
5
(13) Pending final determination of whether the settlement
6
should be ultimately approved, the court preliminary
7
enjoins all class members (unless and until the class
8
member has submitted a timely and valid request for
9
exclusion) from filing or prosecuting any claims,
10
suits, or administrative proceedings regarding claims
11
to be released by the settlement.
12
IT IS SO ORDERED.
13
Dated: July 29,2022
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
24
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