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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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 13 RONALD C. EVANS, JOAN M. EVANS, DENNIS TREADAWAY, and all other similarly situated, Plaintiffs, 14 15 16 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, 17 Defendant. 18 19 ZIONS BANCORPORATION, N.A., Third-Party Plaintiff, 20 21 22 23 24 25 26 v. JTS, LARRY CARTER, JACK SWEIGART AND BRISTOL INSURANCE, Third-Party Defendants. ----oo0oo---- 27 28 Plaintiffs Ronald Evans, Joan Evans, and Dennis 1 1 Treadaway brought this putative class action against defendant 2 Zions Bancorporation, d/b/a California Bank and Trust (“CB&T”), 3 asserting claims based on CB&T’s alleged acquiescence in and 4 provision of support for a fraud scheme perpetrated by one of its 5 clients against putative class members. 6 court is plaintiffs’ motion for preliminary approval of a class 7 action settlement. 8 statement of non-opposition to the preliminary approval. 9 No. 99.) 10 I. Presently before the (Mot. (Docket No. 98).) CB&T has filed a (Docket Factual and Procedural Background1 11 In 2014, Deepal Wannakuwatte admitted to defrauding 12 lenders to a fraudulent medical supply business he had operated, 13 International Manufacturing Group, Inc. (“IMG”), via a Ponzi 14 scheme he had operated since 2002, and pled guilty to wire fraud. 15 (Mot. at 7; First Amended Complaint (“FAC”) at ¶ 2.) 16 scheme, Wannakuwatte and IMG banked primarily at CB&T, which 17 issued several loans to the scheme and to Wannakuwatte. 18 ¶ 3.) 19 and stopped lending to Wannakuwatte and IMG but retained IMG as a 20 banking client. 21 after that point, CB&T officials continued to help facilitate the 22 scheme by offering extensions on IMG’s loan payments and 23 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.) 24 Plaintiffs brought this lawsuit on behalf of a putative 25 class of investors and lenders who were defrauded by Wannakuwatte 26 and IMG, based on CB&T’s alleged complicity in the Ponzi scheme. 27 28 1 All facts recited herein are as alleged by plaintiffs. 2 1 (See FAC.) 2 parties’ stipulated class-wide settlement, pursuant to Federal 3 Rule of Civil Procedure 23(e). 4 II. Plaintiffs now seek preliminary approval of the (Mot.) Discussion 5 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. 21 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 23 exists. 24 “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)). 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 4 5 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. 8 1. 9 Rule 23(a) restricts class actions to cases where: 10 11 12 13 14 15 16 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, 21 300 (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 5 1 b. 2 Commonality Commonality requires that the class members’ claims 3 “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.) 21 proposed class and the issues to presented by the suit. 22 the common core of salient facts and legal contentions, the 23 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 26 “reasonably coextensive with those of absent class members,” but 27 their claims do not have to be “substantially identical.” 28 Hanlon, 150 F.3d at 1020. The test for typicality “is whether 6 1 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 12 are alleged to be identical for the named plaintiffs and all 13 putative class members. 14 typicality requirement. 15 d. 16 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 19 and (2) will the named plaintiffs and their counsel prosecute the 20 action vigorously on behalf of the class?” 21 1020. 22 including “the qualifications of counsel for the representatives, 23 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 7 1 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. 15 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. 18 19 ii. That the incentive payments Vigorous Prosecution The second prong of the adequacy inquiry examines the 20 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 6 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. 24 2. 25 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 1 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.” 7 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”: 11 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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