Plaintiff Addie Caine brings this action on behalf of herself and members of the putative class against Defendants Advance America Cash Advance Centers of California LLC dba Advance America Cash Advance (“Defendant”) alleging various unfair collection practices under the Rosenthal Fair Debt Collection Practices Act, California Civil Code Section 1788 et. seq.  Defendant Advance America sent out a series of form letters to consumers like the Plaintiff to collect on unpaid cash advance loans.  The initial letters stated that if the consumer failed to pay, Advance America might take further action regarding their account, implying that a collection lawsuit was imminent.  Plaintiff sought relief against Defendant on a class action basis because she contends that the collection letters threatened suit when none was intended.  The Plaintiff’s Complaint was filed on December 7, 2012 and alleges a violation of the California Rosenthal Fair Debt Collection Practices Act, Civil Code Section 1788 et. seq.

 

Plaintiff now moves for preliminary approval of class action settlement.

 

According to the preliminary approval papers, the parties engaged in formal mediation with Retired Judge Read Ambler in December of 2013 after conducting some preliminary discovery.  Although the case did not settle at that time, the parties continued to discuss settlement with the assistance of Judge Ambler which ultimately resulted in a settlement.  The
Class Action Settlement and Agreement (the “Settlement”) is attached to the moving papers and appears to have been executed by the Parties on or about June 6, 2014.  The Settlement provides for a gross payment of $385,000 and is broken down as follows:  (1)  the costs of class notice and settlement administration not to exceed $65,000; (2)  an incentive award of $1500 shall be paid to plaintiff for her role as class representative and assistance in the prosecution of the case; (3) attorney’s fees and costs based upon the lodestar but not to exceed $103,500; and (4) a minimum of $215,000 shall be available as the Net Common Fund to be distributed on a pro rata basis to each Settlement Class Member (“Class Member”) who submits a valid and timely verified Claim Form.  In addition, any remaining funds due to uncashed checks will be distributed to a cy pres award subject to Court approval.

 

The preliminary approval papers indicate that there are approximately 60,647 potential Class Members who originated loans in California.  The putative Class Members are defined as: “All consumers who, according to Advance America’s records: (a) Advance America sent or caused to be sent its form of collection letters that included the term “civil collection efforts;” (b) based on a loan originated in California; (c) between December 11, 2011 and December 31, 2012.  Excluded from the Settlement Class are persons who have filed for bankruptcy or against whom a judgment for the alleged dept to Advance America was entered.”  The Settlement Class shall have 45 days to send in a claim form, opt out or object to the proposed Settlement Agreement.  Those Class Members that submit a timely and valid (verified) Claim Form will receive a pro rata distribution of the net settlement fund.  The settling parties estimate that the net settlement is reasonably anticipated to net a range of between $30.00 and $35.00 per claimant.  The purported cy pres beneficiary has not been identified.

 

Analysis:  “The well-recognized factors that the trial court should consider in evaluating the reasonableness of a class action settlement agreement include ‘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.’ [Citations.]  This list ‘is not exhaustive and should be tailored to each case.’ [Citation.]”  (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128.)  “[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.  [Citation.]”  (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.)
Here, the settlement is entitled to a presumption of fairness.  The settlement was reached through arm’s-length bargaining with the assistance of mediator Retired Judge Read Ambler over the course of several months and extended negotiations between the parties.  Prior to mediation and settlement, there was some investigation and discovery regarding defendant’s policies and practices.  The case has been litigated over the course of the past two years.  Regarding counsels’ experience, Plaintiff’s counsel submits that they have been involved in numerous class action and Fair Debt lawsuits and the moving papers list several cases in which counsel were involved (See Footnote 4 on Pg. 7 of Plaintiff’s Memorandum of Points and Authorities).

 

“Although [t]here is usually an initial presumption of fairness when a proposed class settlement … was negotiated at arm’s length by counsel for the class, … it is clear that the court should not give rubber-stamp approval.  Rather, to protect the interests of absent class members, the court must independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished.  To make this determination, the factual record before the … court must be sufficiently developed… . The proposed settlement cannot be judged without reference to the strength of plaintiffs’ claims.  The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.  The court must stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case, but nonetheless it must eschew any rubber stamp approval in favor of an independent evaluation.”  (Kullar, supra, 168 Cal.App.4th at p. 130, internal citations and quotation marks omitted.)

 

In the preliminary approval moving papers, counsel submits that the Rosenthal Act limited Defendant’s potential exposure to $500,000 for statutory damages and that the total available distribution to the potential claimants is approximately 43% of the maximum statutory damages recoverable under the Rosenthal Act.  Counsel further submits that defendants vehemently disputed liability under the Rosenthal Act and that there would be contested issues regarding class certification and anticipated dispositive motions brought by defendant.  Given the risks of continuing the litigation combined with a cap on the statutory damages, counsel submits that the settlement is fair and reasonable.  With a potential class size of 60,647, the Court does have some question about the estimated range of recovery being “$30.00 to $35 per claimant” as set forth in the moving papers.  Counsel refers to Footnote 5 in support of this estimate, but there is very little discussion or analysis to support this conclusion.  In order to fully assess the issues relating to fairness and class recovery, the Court invites counsel to submit supplemental briefing on this issue.

 

The Court also has an independent right and responsibility to review the attorney fee provision of the settlement agreement and award only so much as it determines reasonable.  Plaintiff’s Counsel seeks a fee award in the amount of $103,500 which they contend reflects the expected lodestar amount through final approval and settlement administration.  In advance of the final approval hearing, counsel should submit evidence to support a lodestar award as a further way of evaluating the reasonableness of the attorney’s fee award.

 

Regarding class representative awards, “‘[t]he rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.’ [Citation.]  An incentive award is appropriate ‘“if it is necessary to induce an individual to participate in the suit[.]” … [Citation.]’  [Citation.]  ‘[C]riteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. [Citations.]’ [Citation.]  These ‘incentive awards’ to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. [Citation.]”  (Cellphone Termination Fee Cases (2010) 186 Cal.App.4th 1380, 1394-1395.)  The requested one time payment of $1500 to Plaintiff is facially reasonable and is supported by the statements of Plaintiffs’ counsel regarding the Plaintiff’s involvement in the litigation.  Thus, the Court will preliminarily approve the incentive award.

 

Regarding the class notice procedures, the Court has reviewed Exhibit A to the Settlement Agreement and approves the content of the Notice.  Plaintiff’s counsel proposes that the Court enter an Order directing mailed notice of the Settlement Agreement to the last known address of all potential Settlement Class Members.  “The content of a class notice is subject to court approval.  If class members are to be given the right to request exclusion from the class, the notice must include the following:”

 

A brief explanation of the case, including the basic contentions or denials of the parties;
A statement that the court will exclude the member from the class if the member so requests by a specified date;
A procedure for the member to follow in requesting exclusion from the class;
A statement that the judgment, whether favorable or not, will bind all members who do not request exclusion; and
A statement that any member who does not request exclusion may, if the member so desires, enter an appearance through counsel.

 

(Cal. Rules of Court, rule 3.766(d).)  Here, the Notice is Exhibit A to the Settlement Agreement and it complies with rule 3.766(d) in all respects.  It is unclear from the moving papers what procedure, if any, will be employed if an envelope is returned or an address proves to be wrong.  Additionally, it is unclear whether the notice will be sent out by first class mail.  Although the actual content of the Notice is approved, counsel needs to submit additional information about the actual process of notifying class members in more detail.  For example, what happens to those individuals who do not receive the notice because their address in defendant’s records is no longer current or accurate.  The moving papers lack some detail about the Notice process and Plaintiff is invited to submit supplemental information to address this issue.

 

Plaintiffs also move for provisional certification of a settlement class.  “The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members.  [Citations.]  The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.  [Citation.]  [¶]  The certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’  [Citation.]  A trial court ruling on a certification motion determines ‘whether … the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.’  [Citations.]”  (Sav-On, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

 

A class is ascertainable if it can be readily identified without unreasonable time and expense.  (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932.)  The numerosity requirement requires that it is impracticable to join all of the class members all before the court.”  (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.)  “Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.  [Citations.]”  (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450-451.)  “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.”  (Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.)  The party moving for class certification must also establish “by a preponderance of the evidence that the class action proceeding is superior to alternate means for a fair and efficient adjudication of the litigation.”  (Washington Mutual Bank v. Superior Court (Briseno) (2001) 24 Cal.4th 906, 914 [class treatment must “provide substantial benefits both to the courts and the litigants”].)

 

In the immediate case, the proposed settlement class is ascertainable because all Class Members are consumers who obtained a loan in California between December 11, 2011 and December 31, 2012 and received a collection letter with the term “civil collection efforts” from Defendant.  According to the Defendant’s records, the settlement class size is approximately 60,647 members, so numerosity is not an issue.  Also, it would appear that common questions of law and fact would predominate over individualized issues as each class member received a collection letter which included the term “civil collection efforts,” and each of the letters falsely threatened imminent litigation when none was intended.  Since Plaintiff’s claims allege violations of the Rosenthal Act’s prohibition against false statements, there is sufficient commonality of facts and law that predominate.  Based upon these factors, the Court grants provisional certification of the class for settlement purposes.

 

In light of some of the issues mentioned above, this Court will invite further briefing (no more than 8 pages) to address the Court’s concern regarding the approximate recovery per Plaintiff and the procedural issues regarding Notice which are referenced above.  This Preliminary Approval hearing will be continued to December 5, 2014 at 9 a.m. and Plaintiff is instructed to submit any further briefing no later than Nov. 21, 2014.