Camberis v. Ocwen Financial Corporation

Filing 80

ORDER by Judge Edward M. Chen Granting 67 Plaintiffs' Motion for Final Approval. (emcsec, COURT STAFF) (Filed on 12/7/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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Plaintiffs,

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Docket No. 67

OCWEN LOAN SERVICING LLC,
Defendant.

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For the Northern District of California

United States District Court

ORDER GRANTING PLAINTIFFS'
MOTION FOR FINAL APPROVAL

v.

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Case No. 14-cv-02970-EMC

GEORGE L. CAMBERIS, et al.,

I.

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INTRODUCTION

Plaintiffs George and Claudia Camberis filed the instant class action suit against Defendant

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Ocwen Financial Corporation on June 26, 2014. Plaintiffs alleged that Defendant failed to report

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Negative Amortization mortgage interest that was actually paid to it by Class Members on the IRS

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Forms 1098 it issued the for the tax-year 2013. Docket No. 1 (Compl.) at ¶¶ 2, 4. This allegedly

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resulted in Class Members losing substantial tax deductions for that year. Id. at ¶ 5.
The parties eventually settled the case. On August 11, 2015, the Court granted preliminary

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approval of the case, including certification of a temporary settlement class, appointing class

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counsel, directing notice, and setting a fairness hearing. Docket No. 62. Plaintiffs‟ motion for

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final approval of the class action settlement, class counsel‟s fees, and an incentive award came on

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for hearing before the Court on November 9, 2015. For the reasons stated at the hearing and

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below, the Court GRANTS Plaintiffs‟ motion.
II.

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A.

BACKGROUND

Procedural History

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Plaintiffs filed suit on June 26, 2014, seeking the following relief: (1) changing

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Defendant‟s Form 1098 reporting practices to include payments of Negative Amortization; (2)

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requiring Defendant to issue corrected Forms 1098 to include payment of Negative Amortization;

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and (3) seeking damages to class members to compensate for the time and expenses of amending

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prior tax returns to correct Defendant‟s error. Compl. at 29-30. After the suit was filed,

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Defendant filed a motion to dismiss Plaintiffs‟ complaint. Docket No. 19. Following the

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completion of briefing on the motion to dismiss, settlement discussions between the parties began.

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Docket No. 67-4 (Brown Dec.) at ¶ 11.
The parties participated in formal mediation before Judge John Leo Wagner on February 6,

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briefs addressing two cases that were decided in the days immediately prior to mediation. Id.

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After the February 6, 2015 mediation concluded with no settlement, the parties continued with

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their settlement discussions, reaching a tentative agreement on March 17, 2015. Id. at ¶ 9.

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For the Northern District of California

2015. Docket No. 67-6 (Wagner Dec.) at ¶ 6. The parties submitted extensive supplemental

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United States District Court

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B.

Terms of Proposed Settlement

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Defendant has agreed to issue corrected Forms 1098 for the year 2013 to all Class

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Members, which will report the proper amount of mortgage interest they paid in 2013, including

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repayments of Negative Amortization. See Docket No. 50-2 (Settlement Agreement) at § 2.01.

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Defendant will also pay each Class Member $35 for every amended Form 1098 that Defendant

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files for that Class Member to help defray the cost of filing amended tax returns. Id. at § 2.02. In

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addition, Defendant has made a system-wide correction so that repayments of Negative

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Amortization will be properly reported in future years, which included the 2014 tax-year. Id. at §

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2.05. Finally, Defendant has agreed to pay the class counsel‟s fees and costs, an incentive award

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to named Plaintiffs, and all costs of class administration. Id. at §§ 3.07, 4.02, 4.03.

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The expected total economic benefit includes:

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(1)

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Cash: $556,080 ($35.00 multiplied by 15,888, the number of corrected Forms 1098

that Defendant has sent to Class Members pursuant to the Settlement)

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(2)

Increased tax-deductions for tax-year 2013 from corrected Forms 1098: $9,154,990

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(3)

Increased tax-deductions for tax-year 2014 from system-wide correction:

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$10,310,595
(4)

Class counsel fees and costs: $425,000
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(5)

Class administration costs: $55,000

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(6)

Class representative enhancement award: $7,500 ($3,750 for each named Plaintiff)

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These amounts do not include the expected increased tax-deductions for tax-years after

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2014.
III.

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In determining whether a settlement agreement is fair, adequate, and reasonable to all

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concerned, a court typically considers the following factors:

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(1) the strength of the plaintiff‟s case; (2) the risk, expense,
complexity, and likely duration of further litigation; (3) the risk of
maintaining class action status throughout the trial; (4) the amount
offered in settlement; (5) the extent of discovery completed and the
stage of the proceedings; (6) the experience and views of counsel;
(7) the presence of a governmental participant; and (8) the reaction
of the class members of the proposed settlement.

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For the Northern District of California

United States District Court

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DISCUSSION

Churchill Vill., LLC v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004).

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When the settlement agreement is negotiated prior to formal class certification, the Ninth

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Circuit has found that “consideration of these eight Churchill factors alone is not enough to

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survive appellate review.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th

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Cir. 2011). This is because:

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[p]rior to formal class certification, there is an even greater potential
for a breach of fiduciary duty owed the class during settlement.
Accordingly, such agreements must with-stand an even higher level
of scrutiny for evidence of collusion or other conflicts of interest
that is ordinarily required under rule 23(e) before securing the
court‟s approval as fair.

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Id. In other words, “[t]he district court‟s approval order must show not only that it has explored

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the Churchill factors comprehensively, but also that the settlement is not the product of collusion

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among the negotiating parties.” Id. at 947 (citation and internal modifications omitted).

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A.

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Class Settlement
The Court finds that the Churchill factors strongly support final approval of the settlement.

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In particular, the case was vigorously litigated, and there were substantial litigation risks to both

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sides. For example, Plaintiffs contend that their case was based on a “novel” theory for imposing

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liability, which were challenged by Defendant‟s two motions to dismiss (although neither were
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decided upon by the Court). Immediately prior to the original mediation session with Judge

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Wagner, two district court decisions came out that suggested Plaintiffs‟ case should have been

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subject to the exclusive enforcement jurisdiction or primary jurisdiction of the IRS. Mot. at 10-11.

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Defendant in turn faced the possibility of increased liability if the litigation had continued, as 26

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U.S.C. § 6511 imposes a three-year period to file an amended tax return. If the three-year period

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had passed before resolution of the case, Class Members would not have been able to recover their

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lost deductions from the IRS, and would have instead had to seek compensation from Defendant.
In addition, the benefits conferred by the settlement to the class supports final approval.

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While the cash amount being paid by Defendant to the class is not high, Defendant has issued

contrary guidance). See Mot. at 7; Settlement Agreement at 2.05. This injunctive relief will

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For the Northern District of California

revised Forms 1098 and agrees to continue reporting negative amortization on Forms 1098 (absent

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United States District Court

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confer actual benefits to the class that have substantial value, and which can be reasonably

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calculated. Furthermore, there is no requirement that Class Members “opt in” to the settlement,

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and thus no risk that any unclaimed funds will revert back to Defendant.

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Also supporting final approval is the very positive class response to the settlement. Of the

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19,2551 notices sent out by the class administrator, there have been only 25 requests for exclusion

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from the settlement (an approximately .13% opt-out rate). See Docket No. 72 (10/7/15 Robin

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Dec.), Exh. A; Docket No. 73 (individual opt-out letter); Docket No. 79 at 10. The class

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administrator received only two objections, both of which have since been withdrawn. See

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10/7/15 Robin Dec., Exh. B; Docket No. 74; Docket No. 76.

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Finally, there is no evidence of collusion per In re Bluetooth. There is no arrangement for

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funds to revert back to Defendant, as Class Members are not required to opt in the settlement, and

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no suggestion that class counsel is receiving money that could have gone to Class Members

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instead. Judge Wagner reports that he informed the parties “that there would not be any

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discussions regarding attorney‟s fees, or class incentive awards, until all settlement terms

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regarding the relief to be afforded to the class were agreed upon,” and that “[t]his process was

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Of these notices, 390 were undeliverable, and an additional 77 notices were re-mailed on
September 11, 2015. Docket No. 67-7 (9/11/15 Robin Dec.), Exh. A.
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followed.” Wagner Dec. at ¶ 7. Given the substantial litigation risks, the substantial benefits

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conferred to the class, and the very positive response by the class, the Court will grant final

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approval of the class settlement.

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B.

Award of Attorney‟s Fees
Class counsel seeks $425,000 in attorney‟s fees and costs. “[I]n common fund cases, the

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„benchmark‟ award is 25 percent of the recovery obtained.” Vizcaino v. Microsoft Corp., 290 F.3d

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1043, 1047 (9th Cir. 2002). Here, the total value of the settlement is $20,076,665, including

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$19,465,585 in estimated tax benefits, $556,080 in $35.00 cash payments to each class member to

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defray costs of filing amended tax returns, and $55,000 in class administration costs. Mot. at 18.
Class counsel‟s fees and costs request of $425,000 is approximately 2.12% of the total amount,

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well below the 25% benchmark. Based on the common fund approach, the request is fair.
The Court also finds that the request is fair under the lodestar approach. The Court has

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For the Northern District of California

United States District Court

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reviewed class counsel‟s time records and billing reports, in which class counsel reports

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$440,163.50 in fees and costs for work up to September 13, 2015. Docket No. 67-1 (Vendler

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Dec.) at ¶ 22, Exh. A; Docket No. 67-4 (Brown Dec.) at ¶ 26. The Court will grant Plaintiffs‟

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request for an award of attorney‟s fees and costs in the amount of $425,000.

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C.

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Motion for Incentive Award
Finally, Plaintiffs request a $7,500 incentive award, or $3,750 award to each of the named

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Plaintiffs. Mot. at 19. “It is well-established in this circuit that named plaintiffs in a class action

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are eligible for reasonable incentive payments, also known as service awards.” Harris v. Vector

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Mktg. Corp., Case No. Case No. C-08-5198-EMC, 2012 U.S. Dist. LEXIS 13797, at *18 (N.D.

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Cal. Feb. 6, 2012) (citation omitted). As this Court has recognized, “[s]everal courts in this

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District have indicated that incentive payments of $10,000 or $25,000 are quite high and/or that,

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as a general matter, $5,000 is a reasonable amount.” Id. at *20.

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Here, the named Plaintiffs spent time attempting to resolve the matter with Defendant

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before litigation, securing qualified counsel, conferring with counsel to help formulate the

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complaint, participating in strategy and reviewing major pleadings, and participating in the

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mediation. Vendler Dec. at ¶ 34. The Court will award the requested incentive award of $7,500
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($3,750 to each named Plaintiff).
IV.

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CONCLUSION

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For the reasons explained above and on the record at the final approval hearing, the Court

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grants final approval to the proposed class action settlement. The Court also grants class counsel

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$425,000 in attorney‟s fees and costs. Finally, the Court grants the request for $7,500 in incentive

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awards the named plaintiffs.

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The case is dismissed with prejudice and without costs to any party, other than as specified

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in the settlement agreement and this order. Upon entry of this order, Plaintiffs and the settlement

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class members who have not opted out of the settlement shall be deemed to have released the

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Without affecting the finality of this judgment in any way, the Court retains jurisdiction

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For the Northern District of California

United States District Court

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“Released Parties” of the “Released Claims” (as defined in the settlement agreement).

over this settlement and all Parties hereto for the purpose of construing, enforcing, or

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administering the settlement.

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The Court instructs the Clerk of the Court to enter judgment in accordance with this
opinion.
This order disposes of Docket No. 67.

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IT IS SO ORDERED.

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Dated: December 7, 2015
______________________________________
EDWARD M. CHEN
United States District Judge

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