Latasha McLaughlin v. Wells Fargo Bank NA

Filing 158

ORDER GRANTING PRELIMINARY APPROVAL OF 151 CLASS ACTION SETTLEMENT. Signed by Judge Alsup on 11/18/2016. Motions due by 1/12/2017. Motion Hearing set for 3/9/2017 08:00 AM in Courtroom 8, 19th Floor, San Francisco before Hon. William Alsup. (whalc2, COURT STAFF) (Filed on 11/18/2016)

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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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LATASHA MCLAUGHLIN, on behalf of
herself and all others similarly situated,
Plaintiff,

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No. C 15-02904 WHA

ORDER GRANTING
PRELIMINARY APPROVAL OF
CLASS ACTION SETTLEMENT

v.

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WELLS FARGO BANK N.A., d/b/a
WELLS FARGO HOME MORTGAGE,

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Defendant.
/

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INTRODUCTION

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In this TILA class action, plaintiff moves for preliminary approval of a proposed

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settlement agreement (Dkt. No. 151). The motion is GRANTED.

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STATEMENT
The background of this case has been set forth in detail in a prior order (Dkt. No. 123)

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and does not need to be repeated here. In brief, plaintiff Latasha McLaughlin asserts class

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claims against defendant Wells Fargo Bank for violations of the Truth in Lending Act. Plaintiff

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alleges defendant failed to provide an “accurate statement of the total outstanding balance that

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would be required to pay the consumer’s obligation in full as of a specific date” based on the

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“best information available,” as required by TILA, because defendant’s payoff statements did

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not include insurance proceeds held by defendant in restricted escrow accounts (Dkt. Nos. 123

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at 1–4, 151 at 4).

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Previous orders held that TILA required payoff statements to reflect insurance proceeds

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(Dkt. No. 36), denied defendant’s subsequent motion for reconsideration and certificate of

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immediate appealability of the aforementioned decision (Dkt. No. 46), and certified two classes

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of plaintiff borrowers (Dkt. No. 123). One class of borrowers who, within one year prior to the

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filing of the complaint, received payoff statements that failed to disclose insurance proceeds

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was certified to pursue damages. Another class of borrowers for whom defendant held

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insurance proceeds on the date of the class certification order was certified to pursue declaratory

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relief (id. at 12–13). Defendant’s petition for permission to appeal the class certification order

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was denied (Dkt. No. 149).

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For the Northern District of California

United States District Court

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ANALYSIS
Preliminary approval is appropriate if “the proposed settlement appears to be the product

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of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not

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improperly grant preferential treatment to class representatives or segments of the class, and

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falls within the range of possible approval.” In re Tableware Antitrust Litig., 484 F. Supp. 2d

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1078, 1079 (N.D. Cal. Apr. 12, 2007) (Chief Judge Vaughn Walker). The proposed settlement

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agreement satisfies these requirements.

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1.

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The proposed settlement agreement establishes a damages class fund of $880,000.00, to

BENEFIT TO CLASS MEMBERS.

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be distributed evenly among accounts held by class members (Dkt. No. 151-1 Exh. 1 § 1.9).

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Since TILA caps statutory damages in class actions at one million dollars, the damages class

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fund represents 88 percent of the best possible outcome the damages class could have obtained

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through litigation (Dkt. No. 151 at 13). See 15 U.S.C. 1640(a)(2)(B). The difference between

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the maximum possible recovery and the damages class fund accounts for avoided risks of

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litigation, including the risk that a jury might return a defense verdict and the risks and costs of

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an “inevitable appeal” even if the class plaintiff prevailed at trial. Given that this proposed

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settlement agreement comes after over a year of litigation, discovery, and motion practice, both

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sides have had ample opportunity to carefully assess and weigh the relative strengths and

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weaknesses of their legal positions. The discounted payout seems to reflect those

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considerations.

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In addition to monetary benefits to the class, the proposed settlement agreement compels

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defendant to change its business practices to address the issues raised in this lawsuit.

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Specifically, the agreement provides that defendant “will revise the templates used to generate

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payoff statement letters for all residential mortgage loans that it services to include . . .

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language” disclosing insurance proceeds held by defendant (Dkt. No. 151-1 Exh. 1 § 4.3). This

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corrective measure, combined with the monetary payout to the damages class, falls within the

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range of possible approval.
2.

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For the Northern District of California

United States District Court

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SCOPE OF THE RELEASE.

The proposed settlement agreement defines the classes using the exact definitions set

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forth in the class certification order (compare Dkt. No. 123 at 12–13 with Dkt. No. 151-1 Exh. 1

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§§ 1.8, 1.10). Moreover, the proposed settlement agreement releases only claims actually

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asserted in this action. Importantly, the release “expressly exclude[s]” any class member’s

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“claims for actual damages as a result of” defendant’s failure to disclose insurance proceeds in

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payoff statements (id. at § 1.20). This accounts for TILA’s provision for actual damages, in

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addition to statutory damages as described above. See 15 U.S.C. 1640(a)(1). The scope of the

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class definition and release in the proposed settlement agreement is appropriately tailored and

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thus falls within the range of possible approval.
ATTORNEYS’ FEES AND INCENTIVE AWARD.

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3.

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Plaintiff’s motion indicates that “Class Counsel intends to request an attorney fee award

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no greater than $1.95 million” (Dkt. No. 151 at 18). TILA provides for “a reasonable attorney’s

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fee as determined by the court” in “any successful action to enforce . . . liability.” 15 U.S.C.

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1640(a)(3). This order does not determine what a “reasonable” fee would be in this situation,

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but notes that any attorneys’ fees awarded would not diminish the damages class fund (Dkt. No.

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151-1 Exh. 1 § 4.6). The proposed settlement agreement does not provide for a specific

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attorneys’ fees award and notes that defendant “may oppose any such motion” for attorneys’

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fees (id. at § 4.4). Additionally, “Plaintiff may apply to the Court for a service award of up to
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Five Thousand Dollars ($5,000) to be paid by Wells Fargo for her services as the Class

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Representative in the Action” (Dkt. No. 151-1 Exh. 1 § 4.5). While the prospect of these

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forthcoming requests does not prevent preliminary approval at this stage, the parties are advised

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that the requested amounts are subject to reduction at the final approval stage.

for Any Proposed Class Settlement, the request for an incentive award to the class plaintiff is a

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“red flag” (Dkt. No. 17 at 5). Plaintiff notes that “the Settlement is in no way conditioned on

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receiving this award nor would the award be paid out of the Damages Class Fund or in any way

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diminish the amount of the pro rata payment to each member of the Damages Class” (Dkt. Nos.

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151 at 15, 151-1 Exh. 1 § 4.6). These factors, while helpful, do not automatically eliminate the

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For the Northern District of California

In particular, and as cautioned in the Court’s Notice Regarding Factors to be Evaluated

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United States District Court

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risk that the proposed award might make a flawed or inadequate settlement more “palatable” to

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the class plaintiff (Dkt. No. 17 at 5). Nonetheless, because the proposed settlement agreement

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does not provide for an automatic incentive award, no request for such an award has been made

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yet, and the proposed settlement agreement is not contingent on the outcome of any such

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request, preliminary approval remains appropriate.

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4.

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Several other factors weigh in favor of granting preliminary approval. For example, the

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parties participated in “an all-day mediation session and continued telephonic negotiations with

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Magistrate Judge Donna Ryu, which commenced only after the parties had the benefit of the

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Court’s Motion to Dismiss and Class Certification rulings,” in reaching the proposed settlement

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agreement (Dkt. No. 151 at 11). This background is relevant to, albeit not dispositive of, the

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question of whether the agreement appears to be “the product of serious, informed, non-

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collusive negotiations.” Moreover, the proposed settlement agreement does not require class

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members to participate in a claims process in order to claim their share of the damages class

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fund (id. at 3), and “[u]nder no circumstances will any portion of the Damages Fund revert to

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Defendant” (id. at 18). Any balance remaining in the damages class fund after distribution will

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be “distributed to the Eviction Defense Project of the San Francisco Bar Association, Justice

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and Diversity Center, a non-sectarian §501(c)(3) charitable organization” (ibid).

OTHER CONSIDERATIONS.

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CONCLUSION
Subject to the foregoing, plaintiff’s motion for preliminary approval of the proposed

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settlement agreement is GRANTED. Provided that all required dates and deadlines are filled in,

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the proposed mail notice is APPROVED.

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Notice has been given as required by the Class Action Fairness Act (Dkt. No. 154). The

Class counsel shall file a motion for final approval, as well as any motion for attorneys’ fees or

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an incentive award, by JANUARY 12, 2017. The last day for class members to object or opt out,

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for defendant to oppose the attorneys’ fees motion, and for the claims administrator to file proof

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of mailing notice shall be FEBRUARY 9, 2017. Class counsel shall respond to any objections or

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For the Northern District of California

following dates are set: Mail notice shall be disseminated to class members by DECEMBER 8.

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United States District Court

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opposition by FEBRUARY 23, 2017. Attorneys who intend to appear at the final approval

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hearing shall file their notices of appearance by MARCH 2, 2017. The final approval hearing

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shall take place on MARCH 9, 2017.

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The final pretrial conference and trial dates are VACATED, subject to reset if final
approval is not granted.
IT IS SO ORDERED.

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Dated: November 18, 2016.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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