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

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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

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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

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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

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defenses of a certified class may be settled . . . only with the

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court’s approval.”

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first step in that process and analyzes only whether the proposed

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class action settlement deserves preliminary approval.

Fed. R. Civ. P. 23(e).

This Order is the

See

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Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 473 (E.D. Cal.

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2010) (Shubb, J.).

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to give notice to putative class members of the settlement

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agreement and lays the groundwork for a future fairness hearing,

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at which the court will hear objections to (1) the treatment of

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this litigation as a class action and (2) the terms of the

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settlement.

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F.2d 1401, 1408 (9th Cir. 1989).

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determination as to whether the parties should be allowed to

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settle the class action on their proposed terms after that

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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

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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

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certify a settlement class will lack the opportunity, present

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when a case is litigated, to adjust the class, informed by the

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proceedings as they unfold.”

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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.

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The parties cannot “agree to

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certify a class that clearly leaves any one requirement

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unfulfilled,” and consequently the court cannot blindly rely on

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the fact that the parties have stipulated that a class exists for

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purposes of settlement.

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See Amchem, 521 U.S. at 621-22.

“Second, the district court must carefully consider

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‘whether a proposed settlement is fundamentally fair, adequate,

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and reasonable,’ recognizing that ‘[i]t is the settlement taken

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as a whole, rather than the individual component parts, that must

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be examined for overall fairness . . . .’”

Staton, 327 F.3d at

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952 (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th

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Cir. 1998), overruled on other grounds by Wal-Mart Stores, Inc.

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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

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related business(es).

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(Settlement Agreement (“Agreement”) at §§ 1.11, 1.12, 1.26

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(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

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(b).

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2013).

Leyva v. Medline Indus. Inc., 716 F.3d 510, 512 (9th Cir.

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1.

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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

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presumptively satisfies the numerosity requirement.”

Avilez v.

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Pinkerton Gov’t Servs., 286 F.R.D. 450, 456 (C.D. Cal. 2012),

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vacated on other grounds, 596 F. App’x 579 (9th Cir. 2015); see

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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

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the numerosity requirement satisfied when the class comprises 40

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or more members.”).

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class will contain sixty members, based on the number of

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investors and lenders who are believed to have been victims of

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the Ponzi scheme.

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(“Brace Decl.”) at ¶ 25 (Docket No. 98-1); Agreement at § 3.2.)

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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.

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Commonality

Commonality requires that the class members’ claims

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“depend upon a common contention” that is “capable of classwide

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resolution -- which means that determination of its truth or

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falsity will resolve an issue that is central to the validity of

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each one of the claims in one stroke.”

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at 350.

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satisfy the rule,” and the “existence of shared legal issues with

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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

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of salient facts coupled with disparate legal remedies within the

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class.”

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Hanlon, 150 F.3d at 1019.
The proposed class includes, with the exception of

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certain conflicted parties such as judges overseeing the action,

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all individuals who suffered financial loss as a result of

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lending to or investing in IMG’s medical supply business.

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Mot. at 25-26.)

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of this class all depend on common questions of law and fact

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because all claims are premised on the issue of whether CB&T knew

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Wannakuwatte was using IMG to operate a Ponzi scheme.

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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.

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(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.”

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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

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is based on conduct which is not unique to the named plaintiffs,

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and whether other class members have been injured by the same

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course of conduct.”

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508 (9th Cir. 1992) (citation omitted).

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Hanon v. Dataproducts Corp., 976 F.2d 497,

The named plaintiffs allege they were defrauded via a

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Ponzi scheme run by Wannakuwatte and IMG and consequently lost

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money they had lent to or invested in IMG’s medical supply

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business.

These alleged injuries also define the putative class.

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Although the amount lost by each class member varies, the basis

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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

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make two inquiries: “(1) [D]o the named plaintiffs and their

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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

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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

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representatives and absentees, and the unlikelihood that the suit

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is collusive.”

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Cir. 1992).

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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.

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with the putative class members’.

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suffered injuries similar or identical to those suffered by the

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named plaintiffs, and the definition of the class is narrowly

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tailored and aligns with the class members’ interests.

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Amchem, 521 U.S. at 625–26 (“[A] class representative must be

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part of the class and possess the same interest and suffer the

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same injury as the class members.”); Murillo, 266 F.R.D. at 476

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(finding that an appropriate class definition ensured that “the

The named plaintiffs’ interests are generally aligned
The putative class members

See

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potential for conflicting interests will remain low while the

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likelihood of shared interests remains high”).

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In this case, plaintiffs represent that the settlement

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would provide an incentive award of $5,000 to each named

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plaintiff.

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incentive award raises the possibility that the named plaintiffs’

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interest in receiving that award will cause their interests to

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diverge from the class’s interest in a fair settlement, the Ninth

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Circuit has specifically approved the award of “reasonable

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incentive payments.”

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however, must “scrutinize carefully the awards so that they do

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not undermine the adequacy of the class representatives.”

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Radcliffe v. Experian Info. Sys., Inc., 715 F.3d 1157, 1163 (9th

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Cir. 2013).

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(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

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payments are reasonable.

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EDL, 2009 WL 928133, at *10 (N.D. Cal. Apr. 3, 2009) (citing In

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re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir.

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2000)); In re SmithKline Beckman Corp. Sec. Litig., 751 F. Supp.

Hopson v. Hanesbrands Inc., 08-cv-0844

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525, 535 (E.D. Pa. 1990); Alberto v. GMRI, Inc., 252 F.R.D. 652,

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669 (E.D. Cal. 2008) (Shubb, J.).

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$5,000 to each named plaintiff and are to be paid separate and

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apart from the settlement fund.

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at ¶ 30.)

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Here, the incentive awards are

(See Mot. at 14-15; Brace Decl.

Plaintiffs estimate that, after deduction of costs,

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attorneys’ fees, and the incentive awards, the remaining

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settlement funds will be $9 million.

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the 60 class members opt out, each member would receive an

(Mot. at 9.)

If none of

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average of $150,000 from the settlement fund, which far exceeds

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the value of the incentive payments.

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are likely to represent a small fraction of the named plaintiffs’

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overall recovery indicates that the payments are unlikely to

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cause their interests to diverge from those of the class.

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Accordingly, the court preliminarily finds that the proposed

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incentive awards do not render the named plaintiffs inadequate

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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

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pursued the common claims.

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standards by which ‘vigor’ can be assayed, considerations include

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competency of counsel and, in the context of a settlement-only

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class, an assessment of the rationale for not pursuing further

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litigation.”

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“Although there are no fixed

Hanlon, 150 F.3d at 1021.

Plaintiffs’ counsel have significant experience

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litigating class action suits involving Ponzi schemes and have

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litigated numerous such cases against banks for aiding and
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abetting.

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Denver (“Denver Decl.”) at ¶¶ 3-5 (Docket No. 98-2).)

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Plaintiffs’ attorney Robert Brace has previously served as class

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counsel in class actions involving Ponzi schemes and has

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recovered hundreds of millions of dollars for class members in

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previous class actions.

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finds no reason to doubt that plaintiffs’ attorneys are qualified

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to conduct the proposed litigation and assess the value of the

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settlement.

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(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

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considered the risks of continued litigation in deciding to

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settle this action.

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dedicating thousands of hours, filing and briefing numerous

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motions, engaging in extensive discovery, and participating in

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two mediations.

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7-8.)

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strengths and weaknesses of this case when they decided to accept

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the terms of the mediator’s proposed settlement agreement.

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Brace Decl. at ¶ 7; Mot. at 8.)

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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

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conflicts of interest and the vigor of counsel’s representation

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satisfy Rule 23(a)’s adequacy assessment for the purpose of

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preliminary approval.

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2.

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An action that meets all the prerequisites of Rule

Rule 23(b)

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23(a) may be certified as a class action only if it also

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satisfies the requirements of one of the three subdivisions of

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Rule 23(b).

Leyva, 716 F.3d at 512.
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Plaintiffs seek

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certification under Rule 23(b)(3), which provides that a class

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action may be maintained only if (1) “the court finds that

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questions of law or fact common to class members predominate over

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questions affecting only individual members” and (2) “that a

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class action is superior to other available methods for fairly

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and efficiently adjudicating the controversy.”

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23(b)(3).

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a.

Fed. R. Civ. P.

Predominance

“Because Rule 23(a)(3) already considers commonality,

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the focus of the Rule 23(b)(3) predominance inquiry is on the

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balance between individual and common issues.”

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F.R.D. at 476 (citing Hanlon, 150 F.3d at 1022); see also Amchem,

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521 U.S. at 623 (“The Rule 23(b)(3) predominance inquiry tests

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whether proposed classes are sufficiently cohesive to warrant

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adjudication by representation.”).

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Murillo, 266

The class members’ contentions appear to be similar, if

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not identical.

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funds lent to or invested in IMG by class members, there is no

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indication that those variations are “sufficiently substantive to

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predominate over the shared claims.”

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476 (quoting Hanlon, 150 F.3d at 1022).

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finds that common questions of law and fact predominate over the

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class members’ claims.

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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

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factors to consider in determining whether “a class action is

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superior to other available methods for fairly and efficiently

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adjudicating the controversy”:
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2
3
4
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(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.

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Fed. R. Civ. P. 23(b)(3).

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to certification, making factors (C) and (D) inapplicable.

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Murillo, 266 F.R.D. at 477 (citing Amchem, 521 U.S. at 620).

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The parties settled this action prior
See

Here, although class members’ individual claims may be

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valuable, it is unclear that they would outweigh the costs of

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litigation given the complexity of the case.

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though class members’ claims arise from events that concluded in

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2014, only one other non-bankruptcy litigation has been filed

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against CB&T (which has already settled), (see Mot. at 16-17),

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indicating that class members do not intend to pursue individual

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litigation, though objectors at the final fairness hearing may

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reveal otherwise.

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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.

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3.

Rule 23(c)(2)

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If the court certifies a class under Rule 23(b)(3), it

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“must direct to class members the best notice that is practicable

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under the circumstances, including individual notice to all

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members who can be identified through reasonable effort.”

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R. Civ. P. 23(c)(2)(B).

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content of a proposed notice.

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651, 658 (N.D. Cal. 1997) (citing Eisen v. Carlisle & Jacquelin,

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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
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“reasonably certain to inform the absent members of the plaintiff

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class,” actual notice is not required.

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1449, 1454 (9th Cir. 1994) (citation omitted).

4

Silber v. Mabon, 18 F.3d

The settlement agreement provides that the Beverly

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Group will serve as claims administrator and will provide notice

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to the class.

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already possesses what is believed to be the last known address

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for each class member and will utilize that list to provide

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notice.

(Agreement at §§ 3.2, 4.2.)

(Id. at § 3.2.)

The administrator

The administrator will also receive and

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catalogue any opt-outs.

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the notice to known class members within ten days of this Order,

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the notice will be posted on plaintiffs’ counsel’s website and

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published in the Sacramento Bee.

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(Id. at § 4.2.)

In addition to mailing

(Brace Decl. at ¶ 38.)

Plaintiffs have provided the court with a proposed

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notice to class members.

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explains the proceedings; defines the scope of the class; informs

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class members who did not receive the notice by mail that they

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are required to submit a claim; informs class members of the

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binding effect of the class action; describes the procedure for

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opting out and objecting; provides the time and date of the

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fairness hearing; and directs interested parties to more detailed

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information on the settlement website.

23

explains what the settlement provides and how much each class

24

member can expect to receive in compensation.

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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

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satisfied that this system is reasonably calculated to provide

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notice to class members and is the best form of notice available

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under the circumstances as required under Rule 23(c)(2).

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B.

Preliminary Settlement Approval
After determining that the proposed class satisfies the

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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.

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number of factors,” including:

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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

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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

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“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

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the class, or excessive compensation of attorneys.”

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F.R.D. at 479 (quoting Gautreaux v. Pierce, 690 F.2d 616, 621 n.3

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(7th Cir. 1982); West v. Circle K Stores, Inc., 04-cv-00438 WBS

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GGH, 2006 WL 1652598, at *11-12 (E.D. Cal. June 13, 2006)).

Murillo, 266

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1.

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Courts often begin by examining the process that led to

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the settlement’s terms to ensure that those terms are “the result

13

of vigorous, arms-length bargaining” and then turn to the

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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

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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

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22
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