Lane et al v. Wells Fargo Bank NA

Filing 212


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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 MERCEDES GUERRERO, individually and for other persons similarly situated, No. C 12-04026 WHA Plaintiff, 12 13 14 15 v. ORDER GRANTING PRELIMINARY APPROVAL OF CLASS SETTLEMENT WELLS FARGO BANK, N.A., Defendant. / 16 17 18 INTRODUCTION In this class action involving force-placed flood insurance on home mortgages, class 19 representative moves for preliminary approval of a proposed class settlement. Reserving on final 20 approval of the settlement and to the extent stated below, the motion is GRANTED. 21 STATEMENT 22 The background of this action is set forth in prior orders (Dkt. Nos. 157, 167, and 191). 23 In brief, this action began in June 2012. An amended complaint was permitted to add plaintiff 24 Mercedes Guerrero, a California resident, as a putative class representative (Dkt. No. 82). The 25 other named plaintiffs in this action — Danny and Beverly Lane — have already stipulated to 26 dismissal of their claims, and Wells Fargo Bank, N.A. is the only remaining defendant. 27 28 According to the amended complaint, Guerrero obtained a mortgage loan based on a Federal Housing Administration form mortgage. Wells Fargo then serviced that mortgage beginning in 2010. Because Guerrero’s home was located in a flood-hazard area, she was 1 required to maintain adequate flood insurance; otherwise, Wells Fargo was authorized to (and 2 did) force-place flood insurance on her property. In doing so, however, Wells Fargo allegedly 3 entered into exclusive purchasing agreements with two insurers — American Security Insurance 4 Company and QBE Insurance Corporation — so that ASIC and QBE would pay “kickbacks” in 5 unearned commissions to a Wells Fargo affiliate. The amended complaint further claims that 6 Wells Fargo maximized these kickbacks via a “backdating” practice, i.e., by force-placing flood 7 insurance polices with retroactive effective dates. Guerrero thus sought to represent a California 8 class based on Wells Fargo’s alleged commissions and backdating, claiming breach of contract, 9 unjust enrichment or restitution, conversion, and violation of California’s Unfair Competition 11 For the Northern District of California United States District Court 10 Law. On June 21, 2013, a California class was conditionally certified with Guerrero as class 12 representative. That class was then certified under Rule 23 on August 16, 2013, upon 13 appointment of new class counsel and counsel for Guerrero in her individual capacity. Since 14 then, the parties have agreed to a proposed class settlement (Dkt. No. 203), for which Guerrero 15 now moves for preliminary approval. At the hearing on April 7, 2014, counsel for Guerrero and 16 the class systematically went through all of the factors set forth in the earlier-filed notice by the 17 Court regarding factors to be evaluated for any proposed class settlement (Dkt. No. 39), and 18 explained how each factor militates in favor of preliminary approval. Accordingly, the order 19 decides as follows. 20 21 ANALYSIS “A settlement should be approved if it is fundamentally fair, adequate and reasonable.” 22 Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993) (internal quotations 23 omitted). 24 1. 25 The proposed class settlement would offer several benefits to the California class. First, BENEFITS TO CLASS MEMBERS. 26 Wells Fargo would pay a gross settlement amount of $625,000, to be distributed on a pro rata 27 basis to class members. Guerrero flags, however, her request that the $625,000 amount be 28 reduced by the following, subject to the undersigned judge’s approval: (1) attorney’s fees and 2 1 costs, which will not exceed 23% of the $625,000 amount (i.e., $143,750); (2) the claims 2 administrator’s fees and costs, which are both estimated and limited at $28,604 (see Loeser Exh. 3 A at ¶ 35; Loeser Exh. D at 11); and (3) a $7,500 “service award” for Guerrero as compensation 4 for her time and effort in prosecuting this action. The net settlement amount would thus be 5 $445,146, if all of the foregoing deductions are made. 6 This order need not decide whether to approve of these requested reductions at this stage, any service award to [Guerrero]” (Br. 3) (emphasis added). While it is unlikely that the 9 undersigned judge would approve of the full service award as requested for Guerrero, class 10 counsel should instead move for any attorney’s fees and costs, administrative expenses, and 11 For the Northern District of California as “the settlement is not conditioned on the Court’s approval of attorney[’]s fees and costs, or 8 United States District Court 7 service award for Guerrero when they move for final approval of the class settlement, as detailed 12 in the last paragraph of this order. It is worth noting, however, that even the net amount of 13 $445,146 would be an adequate recovery for the class. In fact, the $445,146 amount would 14 comprise a 121.8% recovery of the best-case amount for claim relief, which is calculated to be 15 $365,179.08 by Guerrero’s damages expert (Loeser Exh. C at 2). 16 17 18 19 20 Second, the settlement would enjoin Wells Fargo and any of its affiliates from receiving the following (Loeser Exh. A at ¶ 15): [C]ommissions in connection with the placement of lender[]placed flood insurance on any residential California real estate that serves as collateral for an FHA Loan unless the receipt of such commissions is specifically authorized by statute, regulation or a federal or state regulatory body with appropriate jurisdiction. 21 This injunction would last for three years from the date of final approval of the settlement. Of 22 note, the settlement states that the monetary value of the injunction will be calculated and 23 presented by Guerrero when she moves for final approval of the settlement (id. ¶ 16). 24 Third, there would be no claim procedure. Wells Fargo’s records already identify the 25 1,886 class members, while providing enough data for Guerrero’s damages expert to calculate 26 class members’ pro rata portion of the net settlement amount (see id. ¶¶ 22–23; Loeser Exh. C at 27 1). Upon final approval, settlement checks would be mailed to each eligible class member, 28 based on mailing addresses given by Wells Fargo and updated as needed by the claims 3 1 administrator (Loeser Exh. A at ¶¶ 25–26). Importantly, any remaining portion of the net 2 settlement amount would not revert to Wells Fargo. The money instead would be redistributed 3 to eligible class members (if more than ten percent of the settlement amount remained), or 4 escheated to the state of California (if less than ten percent remained) (id. ¶¶ 28–29). At the 5 April 7 hearing, counsel were advised to discuss the possibility of a cy pres distribution of any 6 remaining net settlement amount, instead of an escheat to California. reversion to Wells Fargo, the order finds that these benefits to the class support preliminary 9 approval. 10 2. 11 For the Northern District of California Give the monetary recovery, the injunctive relief, and the lack of claim procedure or 8 United States District Court 7 The settlement would limit the scope of release to “claims or causes of actions actually SCOPE OF RELEASE. 12 asserted on behalf of [Guerrero] and Class Members in the First Amended Complaint” (id. at ¶¶ 13 2(aa), 53). Among other allegations, this includes “claims that Wells Fargo’s business 14 arrangements with lender-placed insurers were collusive, exploitative, or constituted self- 15 dealing; that commission paid by lender-placed insurers to Wells Fargo or its affiliate Wells 16 Fargo Insurance, Inc. for lender-placed flood insurance were wrongful or constituted 17 ‘kickbacks’; . . . [and] that Wells Fargo ‘backdated’ insurance” (id. at ¶ 2(aa)). In other words, 18 the release would apply to claims relating to those certified for class treatment. 19 The release would also be restricted to class members who actually receive the proposed 20 notice of class settlement. Specifically, the settlement states: “[T]he Class Release will not 21 apply to those Class Members whose Class Notices, after the parties take the steps set forth in 22 this Settlement Agreement and Release, are ultimately returned as non-deliverable” (id. ¶ 55) 23 (emphasis added). 24 In a joint statement filed on April 2, 2014, the parties clarify the definition of the class 25 certified in this action. Although prior orders had certified the California class as borrowers with 26 FHA mortgages who were charged by Wells Fargo “or an affiliate of [Wells Fargo]” for force- 27 placed flood insurance, the settlement’s class definition left out the aforementioned quote (see id. 28 ¶ 2(e)). The joint statement now explains that the phrase, “or an affiliate of [Wells Fargo],” was 4 1 inadvertently omitted from the settlement, but that Wells Fargo’s class list still includes 2 California FHA borrowers who may have been charged by a Wells Fargo affiliate, as opposed to 3 Wells Fargo itself. Moreover, the parties have submitted an amended settlement to include the 4 omitted phrase back in the class definition. 5 6 The scope of release for the certified class would thus be sufficiently narrow to favor preliminary approval. 7 3. 8 Guerrero also proposes a notice of class settlement, for which several edits were 9 suggested at the April 7 hearing (see Loeser Exh. B). The notice will be sent as follows. The claims administrator will use first-class mail to 11 For the Northern District of California United States District Court 10 CLASS NOTICE. send the notice to class members, within thirty days of receiving Wells Fargo’s list of class 12 members’ names and last-known billing addresses (this, in turn, will be provided by Wells Fargo 13 within ten business days of preliminary approval). In addition, the claims administrator will set- 14 up a telephone call center facility and a website to provide more information about the 15 settlement. The website, for instance, will post copies of the settlement, the notice of class 16 settlement, and this order (see Loeser Exh. A at ¶¶ 37–42). 17 This order therefore approves of the proposed notice of class settlement. 18 CONCLUSION 19 Subject to final approval of the settlement and to the extent stated, the motion for 20 preliminary approval is GRANTED. The proposed notice of class settlement is also APPROVED. 21 Please note that jurisdiction over all matters relating to the interpretation, administration, 22 implementation, effectuation, and enforcement of the settlement would be retained for only three 23 years from the date of final approval. 24 The following dates are hereby set in this action. Within TEN BUSINESS DAYS of this 25 order, Wells Fargo will transmit the list of class members’ names and last-known billing 26 addresses, as described in Paragraph 21 of the settlement, to the claims administrator. This will 27 be done pursuant to the parties’ “agreed protective order” under Paragraph 38 of the settlement. 28 Within THIRTY CALENDAR DAYS of receiving that list, the claims administrator will send the 5 1 notice of class settlement to class members, using first-class mail; the claims administrator will 2 also arrange for a telephone call center facility as well as a website, to provide information about 3 the settlement by that date that the notice of class settlement is mailed to the class. 4 Class counsel shall then file a motion for (1) final approval of the settlement, (2) any 5 attorney’s fees and costs, (3) any fees and costs by the claims administrator, and (4) any service 6 award for Guerrero, by JULY 2, 2014. Class members must postmark and mail to the claims 7 administrator any written objections to the settlement, by JULY 25, 2014. Class members must 8 also postmark and mail any written requests to opt out of the class, by JULY 25, 2014. Class 9 counsel will then file a reply brief in support of the final approval motion by AUGUST 4, 2014. The final approval hearing will begin at 9 AM ON AUGUST 18, 2014. 11 For the Northern District of California United States District Court 10 12 IT IS SO ORDERED. 13 14 Dated: April 7, 2014. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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