Lane et al v. Wells Fargo Bank NA
Filing
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ORDER RE 226 FINAL APPROVAL OF CLASS SETTLEMENT, 224 ATTORNEY'S FEES AND EXPENSES, AND SERVICE AWARD. (whalc2, COURT STAFF) (Filed on 9/2/2014).
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California
United States District Court
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MERCEDES GUERRERO, individually
and for other persons similarly situated,
Plaintiff,
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No. C 12-04026 WHA
v.
ORDER RE FINAL
APPROVAL OF CLASS
SETTLEMENT, ATTORNEY’S
FEES AND EXPENSES, AND
SERVICE AWARD
WELLS FARGO BANK, N.A.,
Defendant.
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INTRODUCTION
In this class action involving force-placed flood insurance on home mortgages, class
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representative and class counsel move for (1) final approval of the proposed class settlement;
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(2) $143,750 for attorney’s fees and expenses; (3) reimbursement for the settlement
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administrator’s expenses, capped at $28,604; (4) a $7,500 service award for class representative;
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and (5) designation of Habitat for Humanity as the cy pres recipient of any residual net
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settlement funds. Moreover, class representative’s former counsel seek to respond and submit
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evidence. To the extent stated below, the requests are GRANTED IN PART AND DENIED IN PART.
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STATEMENT
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The background of this action is set forth in prior orders (see, e.g., Dkt. No. 212). In
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brief, this action began in June 2012. An amended complaint was permitted to add plaintiff
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Mercedes Guerrero, a California resident, as a putative class representative (Dkt. No. 82).
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The other named plaintiffs in this action — Danny and Beverly Lane — already stipulated to
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dismiss their claims, and Wells Fargo Bank, N.A. is the only remaining defendant.
mortgage. Wells Fargo then serviced that mortgage beginning in 2010. Because Guerrero’s
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home was located in a flood-hazard area, she was required to maintain adequate flood insurance;
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otherwise, Wells Fargo was authorized to (and did) force-place flood insurance on her property.
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In doing so, Wells Fargo allegedly entered into exclusive purchasing agreements with two
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insurers — American Security Insurance Company and QBE Insurance Corporation — so that
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ASIC and QBE would pay “kickbacks” in unearned commissions to a Wells Fargo affiliate.
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Wells Fargo also reportedly maximized these kickbacks via a “backdating” practice, i.e., by
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For the Northern District of California
Guerrero obtained a mortgage loan based on a Federal Housing Administration form
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United States District Court
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force-placing flood insurance polices with retroactive effective dates. Guerrero thus sought to
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represent a California class based on Wells Fargo’s alleged commissions and backdating,
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claiming breach of contract, unjust enrichment or restitution, conversion, and violation of
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California’s Unfair Competition Law.
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On June 21, 2013, a California class was conditionally certified with Guerrero as class
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representative. On August 16, 2013, that class was certified under Federal Rule of Civil
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Procedure 23, upon appointment of Hagens Berman Shobol Shapiro LLP as new class counsel
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and counsel for Guerrero in her individual capacity. The parties later agreed to a proposed class
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settlement, and an order filed on April 7, 2014, granted preliminary approval thereof (Dkt. No.
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212).
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Notice of settlement was then sent to class members, pursuant to the requirements of the
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settlement and the April 7 order. Among other items, the class notice provided adequate
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information about the proposed settlement relief, including the total settlement amount and
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injunction against Wells Fargo and its associates. The class notice also detailed the requested
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service award for Guerrero, the attorney’s fees and expenses for class counsel, and the deadlines
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and rights that class members had to object to the settlement or exclude themselves from the
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class.
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A motion is now made for (1) final approval of the proposed class settlement; (2)
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$143,750 for attorney’s fees and expenses; (3) reimbursement for the settlement administrator’s
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expenses, capped at $28,604; (4) a $7,500 service award for Guerrero; and (5) designation of
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Habitat for Humanity as the cy pres recipient of any residual net settlement funds. In addition,
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Guerrero’s former counsel — from before class certification — seek an opportunity to file a
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response and submit evidence in connection with the present request for attorney’s fees and
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costs. Having considered the relevant briefing and oral argument from the fairness hearing, this
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order rules as follows.
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1.
FINAL APPROVAL OF PROPOSED CLASS SETTLEMENT
AND CY PRES DESIGNATION.
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In short, this order approves of the proposed class settlement. As part of that settlement,
For the Northern District of California
United States District Court
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ANALYSIS
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Wells Fargo will pay a total amount of $625,000 to the class, which represents a 180% recovery
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of the best-case damages scenario (i.e., $365,179.08), as calculated by Guerrero’s damages
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expert (Dkt. No. 199-3 at 2). Even if this order were to consider only the net amount of the
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settlement —i.e., $445,146, after taking into account the requested attorney’s fees and costs, the
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administrative expenses, and even the service award — Wells Fargo’s settlement payment still
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comprises a 121.8% recovery of the best-case damages scenario. The amount of the settlement
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payment therefore militates in favor of final approval here.
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But there is more. For three years from the date of final approval, the settlement would
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enjoin Wells Fargo and any of its affiliates from receiving (Loeser Exh. A at ¶ 15):
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[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.
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Such injunctive relief thus provides another benefit. (This order cautions that when the three
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years runs, the bank should not treat it as an invitation to revert to its old way).
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Further supporting final approval is the reaction of class members to the settlement itself.
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After reviewing and consolidating Wells Fargo’s records, the settlement administrator identified
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1,909 class members and mailed class notices thereto. Ninety-seven notices were returned as
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unavailable. The settlement administrator then used “skip trace” databases to find and use
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updated mailing addresses for 49 notices, but ultimately, were still unable to locate current
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mailing addresses for 59 remaining notices. To date, no class member has objected to the
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proposed class settlement, and no requests for exclusion from the class have been received, at
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least as of August 25, 2014 (Solorzano Reply Decl. ¶¶ 12, 13, 19–21). As to the 59 notices that
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were returned as undeliverable, those individuals will not release any claims, under the terms of
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For the Northern District of California
United States District Court
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the proposed class settlement itself (see Loeser Exh. A at ¶ 55).
This order further finds no issues with the proposed plan of allocation. Under that plan,
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there is no claim procedure. The settlement administrator will instead issue and mail checks via
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USPS first-class mail to class members, who will then have 120 days to cash their checks. Any
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leftover settlement funds will be redistributed to those class members who cashed their initial
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checks, if more than ten percent of the settlement amount remains. As for any settlement amount
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still remaining after the second distribution of checks, the parties have picked Habitat for
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Humanity as the cy pres recipient for any residual settlement amount left over (Solorzano Decl. ¶
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23). In other words, none of the settlement funds will revert to Wells Fargo.
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Having considered the above, as well as all relevant submissions and the statements made
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at the fairness hearing, the order finds that the proposed class settlement is fair, reasonable, and
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adequate under Rule 23(e)(2). This order further finds that the notice of settlement and the
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manner in which it was sent to potential class members are reasonable and adequate in providing
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information about the proposed class settlement, the manner in which potential class members
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could participate in or object to the settlement, and the manner in which such class members
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could opt out of the class. Both the notice and the manner of notice therefore satisfy the
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requirements of Rule 23(e)(1).
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With respect to potential class members whose class notices were returned as
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undeliverable, the proposed class settlement already provides that “the Class Release will not
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apply to those Class Members whose Class Notices . . . are ultimately returned as non-
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deliverable” (Loeser Exh. A at ¶ 55). Such individuals will be deemed excluded from
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participating in the proposed class settlement, such that they are not bound by either the
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settlement or its release of claims. Class counsel shall file a final list of names and cities for
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these individuals whose notices were returned as undeliverable — as well as a final list of names
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and cities for those individuals who will be receiving a settlement distribution — pursuant to the
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last paragraph of this order.
Accordingly, final approval of the proposed class settlement and plan of allocation is
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For the Northern District of California
United States District Court
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GRANTED. The request to designate Habitat for Humanity as the cy pres recipient of any
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residual settlement funds is also GRANTED.
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2.
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As class counsel, Hagens Berman Sobol Shapiro LLP seek a total of $143,750 in
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attorney’s fees and expenses. In that connection, a district court must ensure that attorney’s fees
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are “fair, reasonable, and adequate,” even if the parties have entered into a settlement agreement
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that provides for those fees. See Staton v. Boeing Co., 327 F.3d 938, 963–64 (9th Cir. 2003).
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For such fees, “the district court has discretion in common fund cases to choose either the
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percentage-of-the-fund or the lodestar method.” Vizcaino v. Microsoft Corp., 290 F.3d 1043,
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1047 (9th Cir. 2002).
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ATTORNEY’S FEES AND REIMBURSEMENT OF EXPENSES.
Here, class counsel primarily rely on the percentage-of-the-fund method, pointing out
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that the $143,750 amount has two parts: (1) $126,300.48 for net attorney’s fees; and (2) the
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remainder amount for out-of-pocket litigation expenses, such as expert fees and costs for copies,
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postage, court filings, and other items (Loeser Decl. ¶ 46). As to the net attorney’s fees, that
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amount constitutes 20.2% of the total settlement amount, which is below the 25% benchmark set
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forth by our court of appeals under the percentage-of-the-fund method. Hanlon v. Chrysler
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Corp., 150 F.3d 1011, 1029 (9th Cir. 1998). Class counsel have also sufficiently documented the
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types of litigation expenses that comprise the remainder amount (Loeser Decl. ¶ 46; Dkt. No.
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232). Furthermore, the benefits of this action — such as the total settlement amount and
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injunctive relief for the class — support a finding that the request for attorney’s fees and
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expenses is fair and reasonable (Loeser Decl. ¶¶ 22–46). Accordingly, subject to the timing
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restrictions set forth below, Hagens Berman Sobol Shapiro LLP’s request for attorney’s fees and
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expenses is GRANTED.
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Moreover, the request to reimburse the settlement administrator’s fees, capped at
$12,420.59 on this action, and estimates another $13,015.61 in costs to distribute the initial
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checks to class members (Solorzano Decl. ¶¶ 24, 25). The request to pay the $12,420.59 amount
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and reserve the $13,015.61 amount from that total settlement fund is accordingly GRANTED. In
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For the Northern District of California
$28,604, is reasonable. To date, the settlement administrator declares that it has spent
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United States District Court
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the event that there is a second distribution of checks to class members, the fees and costs
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associated with the second distribution will be paid from the remaining settlement funds to be
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issued in that distribution.
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Here the order pauses to address Guerrero’s request for a $7,500 service award. In short,
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this award is sought as “reimbursement for [Guerrero’s] significant time and effort as Class
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Representative” (Br. 15). There is no declaration, however, specifying how much time or effort
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Guerrero spent on this action. At most, class counsel declares that Guerrero (Loeser Decl. ¶¶
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10–13) (emphasis added):
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[A]greed to invest considerable time in the process of
interviewing and selecting replacement Class Counsel . . . .
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[I]nterviewed four sets of interested counsel and had multiple
teleconferences with each team.
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[P]repared several letters concerning the process and submitted
her views to the Court.
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[I]mmediately became involved in the litigation and was of
substantial assistance to Class Counsel in prosecuting this action
on behalf of all Class Members.
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as of substantial assistance to Class Counsel in prosecuting this
action on behalf of all Class Members . . . .
[T]ook on significant risk, real and percieved, in suing a large
bank that serviced her home mortgage loan, and performed her
duties admirably over the course of this case.
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A class representative should not get a bonus. If the settlement is not good enough for
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the representative, it should not be good enough for the class. Only where the class
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representative has actually incurred genuine out-of-pocket costs should those costs be
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considered, and even then we must be careful to avoid an incentive to support a marginal
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settlement. In this case, given the thin record of what Guerrero actually did, she will be awarded
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$1,000, nothing more. Guerrero’s request is therefore GRANTED IN PART.
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3.
FORMER COUNSEL’S RESPONSE.
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Guerrero’s former counsel have filed a response to the request for attorney’s fees and
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costs, arguing that it would be unfair for the undersigned judge to consider certain statements
made by class counsel in their declaration without allowing former counsel to respond and
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For the Northern District of California
United States District Court
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submit evidence. The disputed statements are as follows (Loeser Decl. ¶ 4):
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Ms. Guerrero had sought the assistance of counsel but had been
told that Wells Fargo was too big to fight. Ultimately, Ms.
Guerrero responded to a notice by prior counsel in this case who
were seeking additional class representatives. That notice
campaign occurred after this Court had dismissed the
over-insurance claims. Ms. Guerrero was enlisted as a class
representative plaintiff, but she was not told by prior counsel
that the over-insurance claims, the claims that were most
important to Ms. Guerrero, had already been dismissed.
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Ms. Guerrero learned that there were no over-insurance claims in
this case only after she read the Court’s Order on Conditional
Certification[.]
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This order, however, does not consider the above statements in deciding the present
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motion for attorney’s fees and expenses. Prior counsel’s request to respond and submit evidence
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is thus DENIED AS MOOT.
CONCLUSION
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Accordingly, it is hereby ordered as follows:
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1.
The notice of settlement, as well as the manner in which it was sent to class
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members, fairly and adequately described the proposed class settlement, the
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manner in which class members could object to or participate in the settlement,
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and the manner in which class members could opt out of the class; was the best
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notice practicable under the circumstances; was valid, due, and sufficient notice
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to class members; and complied fully with the Federal Rules of Civil Procedure,
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due process, and all other applicable laws. A full and fair opportunity has been
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afforded to class members to participate in the proceedings convened to determine
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whether the proposed class settlement should be given final approval. As such,
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the undersigned hereby determines that all class members who did not exclude
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themselves from the settlement by filing a timely request for exclusion are bound
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by this settlement order and judgment.
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2.
Class counsel shall file a final list of names and cities for class members whose
class notices were returned as undeliverable with no new addresses found. These
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For the Northern District of California
United States District Court
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individuals are deemed excluded from participating in the proposed class
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settlement, and thus are not bound by either the settlement or its release of claims.
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Class counsel shall also file a final list of name and cities for those individuals
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who will be receiving a settlement distribution.
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3.
This order also finds that the proposed class settlement is fair, reasonable, and
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adequate as to the class, plaintiffs, and defendants; that it is the product of good
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faith, arms-length negotiations between the parties; and that the settlement is
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consistent with public policy and fully complies with all applicable provisions of
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law. The settlement is therefore approved.
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4.
Having considered class counsel’s motion for attorney’s fees and expenses, this
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order hereby awards Hagens Berman Sobol Shapiro LLP attorney’s fees and
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expenses in the amount of $143,750. Both the attorney’s fees and expenses will
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be paid from the total settlement amount. Defendant is authorized to pay half of
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the amount for attorney’s fees to Hagens Berman Sobol Shapiro LLP
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immediately. The rest of the attorney’s fees is authorized to be paid only after
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Hagens Berman Sobol Shapiro LLP certify that all other funds have been
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distributed to the class. Furthermore, class counsel’s remaining expenses may be
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paid immediately.
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5.
This order also grants the request to pay the settlement administrator’s fees,
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capped at $28,604, such that $12,420.59 is authorized to be paid immediately to
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the settlement administrator. Moreover, $13,015.61 shall be held in reserve from
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the total settlement fund, for future payment of the settlement administrator’s
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fees.
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In addition, this order grants $1,000 for class representative Mercedes Guerrero in
this matter (in addition to her settlement distribution).
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IT IS SO ORDERED.
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For the Northern District of California
United States District Court
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Dated: September 2, 2014.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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