MARLA MARIE DAVIS, individually and on behalf of all others similarly situated,

Plaintiff,

vs.

CAVALRY SPV I, LLC, a Delaware limited liability company; and DOES 1 through 10, inclusive,

Defendants.
Case No. 2016-1-CV-301730

TENTATIVE RULING RE: MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT AND PROVISIONAL CLASS CERTIFICATION

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on March 9, 2018, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION

This is a putative class action brought by plaintiff Marla Marie Davis (“Plaintiff”) pursuant to the California Fair Debt Buying Practices Act (“CFDBPA”). According to the Complaint, filed on October 26, 2016, Plaintiff is alleged to have incurred a financial obligation in the form of a consumer credit account issued by Citibank, N.A. (Complaint, ¶ 12.) Plaintiff denies any debt is owed. (Ibid.) On December 8, 2015, the alleged debt was sold to defendant Cavalry SPV I, LLC (“Defendant”) for collection purposes. (Id. at ¶ 15.) On July 2, 2016, Defendant sent a written communication to Plaintiff. (Id. at ¶ 17.) The communication provided the notice required by the CFDBPA in smaller than 12-point type. (Id. at ¶ 19.) The Complaint sets forth a single cause of action for violation of the CFDBPA.

The parties have reached a settlement. Plaintiff and Defendant jointly move for preliminary approval of the settlement.

II. LEGAL STANDARD

Generally, “questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as “the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through 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.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp. 244-245, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624.)

“The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.” (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245.) The court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., quoting Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc., supra, 688 F.2d at p. 625, internal quotation marks omitted.)
The burden is on the proponent of the settlement to show that it is fair and reasonable. However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, citing Dunk, supra, 48 Cal.App.4th at p. 1802.)

III. DISCUSSION

A. Provisions of the Settlement

The case has been settled on behalf of the following class:

[A]ll persons with addresses in California [] to whom CAVALRY sent, or caused to be sent, an initial written communication in the form of Exhibit “1,” attached to Plaintiff’s Complaint [] in an attempt to collect a charged-off consumer debt originally owed to CITIBANK, N.A., [] which was sold or not returned as undeliverable by the U.S. Post Office [] during the period one year prior to the date of filing this action through the date of class certification.

(Declaration of Fred W. Schwinn in Support of Joint Motion for Preliminary Approval of Class Action Settlement and Provisional Class Certification, Settlement Agreement, ¶ 2.3.)
Pursuant to the settlement, Defendant will pay $1,000 to Plaintiff and $84,820 to the class ($10 to each class member). (Settlement Agreement, ¶¶ 4.1-4.2.) Defendant will also pay an incentive award of $3,000 to Plaintiff and attorneys’ fees and costs up to $60,000. (Settlement Agreement, ¶¶ 4.5-4.6.) No information has been provided to the Court regarding settlement administration costs. Settlement checks remaining uncashed after 90 days from the mailing date will be paid to Alexander Community Law Center as a cy pres recipient. (Settlement Agreement, ¶ 4.4.)
B. Fairness of the Settlement

Plaintiff states that “[a]part from seeking a moderate incentive, common in class litigation, Plaintiff seeks to gain nothing personally from this litigation or settlement which is not made available to the Class Members.” (Notice of Joint Motion and Motion for Preliminary Approval of Class Action Settlement and Provisional Class Certification, p. 24:10-13.) The Settlement Agreement, however, provides for a separate and additional payment to Plaintiff of $1,000 that is separate from any incentive award. (Settlement Agreement, ¶ 4.1.) Plaintiff gives no explanation for this payment and, in fact, does not mention it at all in the moving papers.

In the Complaint, Plaintiff requests statutory damages of “not less than $100 nor greater than $1,000” pursuant to Civil Code section 1788.62, subdivision (a)(2). Plaintiff also requests statutory damages for the class “in an amount not to exceed the lesser of five hundred thousand dollars ($500,000) or 1 percent of the net worth of each Defendant, pursuant to California Civil Code § 1788.62(b).” Plaintiff is receiving the maximum amount requested for Plaintiff individually; the class is not receiving the maximum amount sought for the class.
Additionally, class counsel is receiving what appears to be a high attorneys’ fees award in relation to the total class settlement. No distinction is made between fees and costs, so it is not apparent exactly how much is requested for fees and how much has been incurred in costs.

The fact that Plaintiff is receiving the maximum amount requested and class counsel is seeking what may be a high attorneys’ fees award is a signal of potential unfairness to the class. (See Holmes v. Continental Can Co. (11th Cir. 1983) 706 F.2d 1144, 1147 [“When a settlement explicitly provides for preferential treatment for the named plaintiffs in a class action, a substantial burden falls upon the proponents of the settlement to demonstrate and document its fairness.”]; see also La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 871 [“When a plaintiff sues on behalf of a class, he assumes a fiduciary obligation to the members of the class, surrendering any right to compromise the group action in return for an individual gain.”].) The class representative and class counsel may have less incentive to obtain the best result possible for the class because of the disproportionate amounts allocated to them.

C. Conclusion

In light of the Court’s concerns, supplemental briefing is needed. The parties shall submit a single supplemental brief of up to five pages in addition to any relevant supplemental declarations. The supplemental brief shall address the issue of fairness to the class, specifically the justification for awarding a separate and additional payment of $1,000 to the class representative . The brief shall also explain the reason for a potentially large attorneys’ fees award in relation to the total class recovery and provide the amount of actual costs that will likely be incurred separately from the fees to be requested. The brief shall additionally state the amount to be paid for settlement administration expenses. The parties should also comment on the possibility that, should the attorneys’ fees be reduced, the amount of the reduction could be disbursed to the class. The supplemental briefing shall be filed by 4:00 p.m. on March 22, 2018. The hearing on this motion is CONTINUED to March 29, 2018, at 9:00 a.m. in Department 5.

The Court will prepare the final order if this tentative ruling is not contested.