# Richards v. Chime Financial, Inc.

> District Court, N.D. California · October 28, 2020

URL: https://www.frixlaw.com/law-library/cases/10065612

## Case

- **Court:** District Court, N.D. California
- **Decided:** October 28, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10065612

## How later opinions describe it (automated extraction)

- finding that “[i]ncentive awards 23 are fairly typical in class action cases” and “are discretionary” (emphasis omitted)

## Opinion text

1
2
3
4 UNITED STATES DISTRICT COURT
5 NORTHERN DISTRICT OF CALIFORNIA
6
7 RYAN RICHARDS, et al., Case No. 19-cv-06864-HSG

8 Plaintiffs, ORDER GRANTING MOTION FOR
PRELIMINARY APPROVAL
9 v.
Re: Dkt. No. 40
10 CHIME FINANCIAL, INC., et al.,
11 Defendants.

12
13 Pending before the Court is the unopposed motion for preliminary approval of class action
14 settlement filed by Plaintiffs Ryan Richards, Ruba Ayoub, Brandy Terbay, and Tracy Cummings.
15 Dkt. No. 40. The parties have reached a settlement regarding Plaintiffs’ claims and now seek the
16 required court approval. The Court held a hearing on September 24, 2020. See Dkt. No. 44. For
17 the reasons detailed below, the Court GRANTS Plaintiffs’ motion for preliminary approval of
18 class action settlement.
19 I. BACKGROUND
20 A. Factual Background
21 Plaintiffs filed this putative class action against Defendant Chime Financial, Inc., The
22 Bancorp Inc., and Galileo Financial Technologies, LLC based on a disruption in Defendant
23 Chime’s online-only banking services.1 See Dkt. No. 1. (“Compl.”). Plaintiffs allege that on
24 October 16, 2019, Chime had a system-wide service outage (the “Service Disruption”) that lasted
25 approximately 72 hours. See id. at ¶ 22. During this Service Disruption, Chime’s customers,
26
1 Plaintiffs allege that Chime is an online-only bank; Galileo makes the Application Programming
27
Interfaces that Chime uses to offer credit and debit cards, as well as banking and money transfer
1 approximately 5 million people, could not access their accounts. Id. During this time, customers
2 could not access their funds, including through card purchases and ATM withdrawals. See id. at
3 ¶¶ 23, 31, 36, 43, 50–51. Following the Service Disruption, some customers reported incorrect
4 account balances and unauthorized charges. See id. at ¶¶ 28, 33, 40.
5 Plaintiffs bring this action on behalf of a putative nationwide class of Chime customers
6 who were denied access to their accounts beginning on October 16, 2019, as well as subclasses of
7 customers denied access to their accounts who reside in Florida, Texas, Illinois, and Georgia. See
8 id. at ¶ 57. And on the basis of the above facts, Plaintiffs allege causes of action for negligence;
9 unjust enrichment; breach of contract; conversion; breach of fiduciary duty; violation of the
10 Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201; violation of the Illinois
11 Consumer Fraud Act, 815 Ill. Comp. Stat. §§ 505/1 et seq.; and violation of the Illinois Uniform
12 Deceptive Trade Practices Act, 815 Ill. Comp. Stat. §§ 510/2 et seq. See Compl. at ¶¶ 70–127.
13 B. Procedural History
14 Plaintiffs initially filed this action on November 22, 2019. See Dkt. No. 1. The parties did
15 not engage in motions practice. Instead, the parties engaged in settlement conferences with
16 Magistrate Judge Laurel Beeler. See Dkt. No. 28. On February 6, 2020, the parties attended an
17 initial settlement conference with Judge Beeler. See id. Following the conference, the parties
18 exchanged settlement proposals and discussed resolution of this action. See Dkt. No. 40-8, Ex. B
19 at ¶¶ 18–19. On March 20, 2020, the Court granted the parties’ request to stay the matter while
20 they continued their settlement negotiations. See Dkt. No. 31. On May 7, 2020, the parties
21 attended an additional settlement conference before Judge Beeler. See Dkt. No. 35. On May 12,
22 2020, with Judge Beeler’s assistance, the parties reached an agreement in principle. See Dkt. No.
23 40-8, Ex. B at ¶ 19. The parties entered into a written settlement agreement in early August 2020.
24 See Dkt. No. 40-1, Ex. A. Plaintiffs then filed the unopposed motion for preliminary settlement
25 approval on August 7, 2020. See Dkt. No. 40.
26 During the hearing on the motion for preliminary approval, the Court raised concerns with
27 the scope of the release, as well as the process for any objectors to object to the proposed
1 report regarding any revised settlement agreement in light of these concerns. Id. In response, the
2 parties submitted a revised settlement agreement on October 8, 2020, with minor modifications.
3 See Dkt. No. 45-1, Ex. A (“SA”). The amended settlement agreement (1) simplifies the process
4 for objecting to the proposed settlement; and (2) clarifies the release language. See id.
5 i. Settlement Agreement
6 The key terms of the parties’ settlement are as follows:
7 Class Definition: The Settlement Class is defined as:

8 All consumers who attempted to and were unable to access or utilize
the functions of their accounts with Chime, as confirmed by a failed
9 transaction or a locked card as recorded in Chime’s business records,
beginning on October 16, 2019 through October 19, 2019, as a result
10 of the Service Disruption.
11 SA at ¶ III.1.
12 Settlement Benefits:
13 The parties have agreed to monetary relief that incorporates an offset for credits that Chime
14 already provided to the accounts of active customers because of the outage:
15 • Approximately a month after the outage, Chime credited $10 to the accounts of all
16 active customers as a “courtesy payment” because of the outage. SA at ¶ IV.1.a.
17 • Chime also credited the accounts of those customers who incurred “certain
18 transaction fees” during the outage to cover those fees as a “transaction credit.” Id.
19 at ¶ IV.1.b.
20 The parties agree that these courtesy payments and transaction credits total $5,960,563.00 already
21 paid to active Chime account holders due to the outage. Id. at ¶ IV.1.c. Defendants also concede
22 that this litigation was “a motivation” for making these payments. SA at ¶ X.3. Pursuant to the
23 settlement agreement, Defendants have agreed to further compensate settlement class members
24 who submit verified claims under a two-tier system:
25 • Tier 1: Class members who claim they suffered loss due to the outage, but who do
26 not have or do not wish to provide documentation to substantiate their loss will be
27 entitled to up to $25 for verified claims. See id. at ¶ IV.2. Defendants’ aggregate
1 claims under Tier 1 is less than $4 million, Defendants will retain any unclaimed
2 amount, except to the extent that such funds are necessary to fully or partially
3 satisfy Tier 2 claims. Id.
4 • Tier 2: Class members who claim they suffered loss due to the outage and have
5 “reasonable documentation” to substantiate their loss will be entitled to up to $750,
6 but not more than their verified loss. See id. at ¶ IV.3. Those who fail to provide
7 documentation will be considered under Tier 1. Defendants’ aggregate payment
8 under Tier 2 is $1.5 million, plus any residual money unclaimed under Tier 1. See
9 id. at ¶ IV.6.d.
10 All claims under both Tiers will be verified using a two-step system. See id. at ¶ IV.6.b.
11 Under both Tiers, putative class members will have to submit a brief explanation, under penalty of
12 perjury, as to how the outage caused them loss and what amount of loss they purport to have
13 suffered. See id. Those submitting claims under Tier 2 will also be required to submit reasonable
14 documentation to support their claims. Id. at ¶ IV.6.c. Defendants and the settlement
15 administrator will then confirm through Chime’s business records that the putative class member
16 (a) held a Chime account at the time; and (b) either attempted a financial transaction that failed or
17 had their card locked as a result of the outage. Id. at ¶ IV.6.b. During the hearing, Defendants
18 confirmed that despite the service disruption, they have accurate records of attempted transactions
19 during the relevant time period.
20 And under the settlement agreement, “[a]ny prior money received by a Settlement Class
21 Member from Chime in connection with the Service Disruption will be offset against” the
22 payment. See id. at ¶¶ IV.3.a, IV.3.b. Thus, any verified claims under Tier 1 and Tier 2 will be
23 reduced by the amount the class member already received as a (1) courtesy payment; or
24 (2) transaction credit. See id. At a minimum, however, Defendants will pay $1.5 million under
25 the settlement agreement. See id. at ¶ IV.5.
26 Cy Pres Distribution: If the claim payments under Tiers 1 and 2 do not reach the $1.5
27 million minimum under the settlement agreement, Defendants will distribute funds to reach this
1 Defendants will, however, keep any money available for settlement but unclaimed above this $1.5
2 million threshold. Id.
3 Release: All settlement class members will release:

4 [A]ny and all claims, demands, rights, actions or causes of action,
liabilities, damages, losses, obligations, judgments, suits, penalties,
5 remedies, matters and issues of any kind or nature whatsoever,
whether known or unknown, contingent or absolute, existing or
6 potential, suspected or unsuspected, disclosed or undisclosed,
matured or unmatured, liquidated or unliquidated, legal, statutory or
7 equitable, that have been or could have been asserted, or in the future
might be asserted, in the Actions or in any court, tribunal or
8 proceeding by or on behalf of the Named Plaintiffs, any and all of the
members of the Settlement Class, and their respective present or past
9 heirs, spouses, executors, estates, administrators, predecessors,
successors, assigns, parents, subsidiaries, associates, affiliates,
10 employers, employees, agents, consultants, independent contractors,
insurers, directors, managing directors, officers, partners, principals,
11 members, attorneys, accountants, financial and other advisors,
investment bankers, underwriters, lenders, and any other
12 representatives of any of these Persons, whether individual, class,
direct, representative, legal, equitable or any other type or in any other
13 capacity whether based on federal, state, local, statutory or common
law or any other law, rule or regulation, including the law of any
14 jurisdiction outside the United States, against any or all of the
Released Parties, which the Named Plaintiffs or any member of the
15 Settlement Class ever had, now has, or hereinafter may have, by
reason of, resulting from, arising out of, relating to, or in connection
16 with, the allegations, facts, events, transactions, acts, occurrences,
statements, representations, omissions, or any other matter, thing or
17 cause whatsoever, or any series thereof, embraced, involved, set forth
or otherwise related to the alleged claims or events in the Action or
18 the Service Disruption, including, but not limited to, use by a class
member of their Chime Account up to and extending through the
19 Service Disruption.
20
SA at ¶ II.20. In addition, class members:
21
waive any rights they may have under California Civil Code Section
22 1542, Section 20-7-11 of the South Dakota Codified Laws, and any
other similar law, each of which provides that a general release does
23 not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which if known
24 by him must have materially affected his settlement with the debtor,
and a waiver of any similar, comparable, or equivalent provisions,
25 statute, regulation, rule, or principle of law or equity of any other state
or applicable jurisdiction.
26
27 Id. at ¶ IX.4.
1 Program,” which includes (1) an email Notice and (2) a Notice on the Settlement Website. See
2 SA at ¶¶ V.I–VII.11; see also Dkt. No. 45-2, Ex. 2. The settlement administrator will send the
3 Notice to class members by email within 30 days of the Court’s order preliminarily approving the
4 settlement. See id. at ¶ II.15, VII.1, VII.5. The settlement administrator will make reasonable
5 efforts to locate updated email addresses for class members whose Notices are returned as
6 undeliverable. Id. at ¶ VII.1. The Notice will include: the nature of the action, a summary of the
7 settlement terms, and instructions on how to object to and opt out of the settlement, including
8 relevant deadlines. See Dkt. No. 45-2, Ex. 2.
9 Opt-Out Procedure: Putative class members may opt out of or object to the settlement
10 and/or Class Counsel’s application for attorneys’ fees, costs, and expenses. SA at ¶¶ II.17–II.18,
11 VII.4–VIII.
12 Incentive Award: Named Plaintiffs as class representatives may apply for incentive
13 awards of no more than $500 each. SA at ¶ X.1.
14 Attorneys’ Fees and Costs: Class Counsel may file an application for attorneys’ fees not to
15 exceed $750,000. SA at ¶ X.2.
16 II. PROVISIONAL CLASS CERTIFICATION
17 The plaintiff bears the burden of showing by a preponderance of the evidence that class
18 certification is appropriate under Federal Rule of Civil Procedure 23. See Wal-Mart Stores, Inc. v.
19 Dukes, 564 U.S. 338, 350–51 (2011). Class certification is a two-step process. First, a plaintiff
20 must establish that each of the four requirements of Rule 23(a) is met: numerosity, commonality,
21 typicality, and adequacy of representation. Id. at 349. Second, he must establish that at least one
22 of the bases for certification under Rule 23(b) is met. Where, as here, a plaintiff seeks to certify a
23 class under Rule 23(b)(3), he must show that “questions of law or fact common to class members
24 predominate over any questions affecting only individual members, and that a class action is
25 superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.
26 R. Civ. P. 23(b)(3).
27 “The criteria for class certification are applied differently in litigation classes and
1 (“Hyundai II”). When deciding whether to certify a litigation class, a district court must consider
2 manageability at trial. Id. However, this concern is not present in certifying a settlement class.
3 Id. at 556–57. Thus, in deciding whether to certify a settlement class, a district court “must give
4 heightened attention to the definition of the class or subclasses.” Id. at 557.
5 Because the parties reached settlement before the Court considered class certification in
6 this case, the Court must determine whether provisional certification is appropriate. As detailed
7 below, the Court finds that it is appropriate under the circumstances.
8 A. Rule 23(a)
9 i. Numerosity
10 Rule 23(a) requires that the putative class be “so numerous that joinder of all members is
11 impracticable.” See Fed R. Civ. P. 23(a)(1). Here, Defendants have identified 528,000 account
12 holders who experienced a transaction failure or had an account or card locked during the Service
13 Disruption. See Dkt. No. 40 at 2. A class of several hundred thousand putative class members
14 readily satisfies the numerosity requirement. Id. at 10.
15 ii. Commonality
16 Rule 23(a)(2) requires that “there are questions of law or fact common to the class.” A
17 contention is sufficiently common where “it is capable of classwide resolution—which means that
18 determination of its truth or falsity will resolve an issue that is central to the validity of each one of
19 the claims in one stroke.” Dukes, 564 U.S. at 350. Commonality exists where “the circumstances
20 of each particular class member vary but retain a common core of factual or legal issues with the
21 rest of the class.” Parra v. Bashas’, Inc., 536 F.3d 975, 978–79 (9th Cir. 2008). “What matters to
22 class certification . . . is not the raising of common ‘questions’—even in droves—but rather the
23 capacity of a classwide proceeding to generate common answers apt to drive the resolution of the
24 litigation.” Dukes, 564 U.S at 350 (citation omitted) (emphasis omitted). Even a single common
25 question may do to satisfy the commonality requirement. See id. at 359.
26 Here, Plaintiffs allege that all members of the proposed class were Chime account holders
27 who were unable to access or utilize functions of their Chime accounts during the same Service
1 deriving from the Service Disruption, including whether as a result (1) Defendants breached their
2 contracts with Plaintiffs and class members; (2) Defendants breached any duties to Plaintiffs and
3 class members; and (3) Defendants’ subsequent conduct was unfair or unlawful. See id.
4 iii. Typicality
5 Next, Rule 23(a)(3) requires that “the claims or defenses of the representative parties are
6 typical of the claims or defenses of the class.” Fed R. Civ. P. 23(a)(3). “The test of typicality is
7 whether other members have the same or similar injury, whether the action is based on conduct
8 which is not unique to the named plaintiffs, and whether other class members have been injured by
9 the same course of conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992)
10 (quotation omitted). Under the “permissive standards” of Rule 23(a)(3), the claims need only be
11 “reasonably co-extensive with those of absent class members,” rather than “substantially
12 identical.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). In other words,
13 typicality is “satisfied when each class member’s claim arises from the same course of events, and
14 each class member makes similar legal arguments to prove the defendant’s liability.” Rodriguez v.
15 Hayes, 591 F.3d 1105, 1124 (9th Cir. 2010) (quotation omitted). “The commonality and typicality
16 requirements of Rule 23(a) tend to merge.” Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157–
17 158, & n.13 (1982). However, typicality—like adequacy—looks at whether the plaintiffs are
18 proper parties to proceed with the suit. Id.
19 As with all putative class members, Plaintiffs were Chime account holders during the
20 Service Disruption and were denied access to their funds. See Dkt. No. 40 at 10. There is no
21 evidence before the Court to suggest that Plaintiffs’ claims differ in any way from those of the
22 putative class members. Thus, the typicality requirement is satisfied.
23 iv. Adequacy
24 Finally, Rule 23(a)(4) requires that the “representative parties will fairly and adequately
25 represent the interests of the class.” Fed. R. Civ. P. 23(a)(4). On this question of adequacy, the
26 Court must address two legal questions: (1) whether the named plaintiffs and their counsel have
27 any conflicts of interest with other putative class members; and (2) whether the named plaintiffs
1 Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000). This inquiry too “tend[s] to
2 merge” with the commonality and typicality criteria. See Falcon, 457 U.S. at 158, n.13.
3 There is no indication that Plaintiffs have any conflict of interest with any putative class
4 member. See Dkt. No. 40 at 10–11. Moreover, Plaintiffs have secured representation by
5 competent counsel experienced in class actions. See, e.g., id. at 11; Dkt. No. 40-8 at ¶¶ 3–14
6 (collecting cases). The Court accordingly finds the adequacy requirement is satisfied.
7 B. Rule 23(b)(3)
8 Additionally, to certify a class, a plaintiff must satisfy the two requirements of Rule
9 23(b)(3). First, “questions of law or fact common to class members [must] predominate over any
10 questions affecting only individual members.” Fed. R. Civ. P. 23(b)(3). Second, “a class action
11 [must be] superior to other available methods for fairly and efficiently adjudicating the
12 controversy.” Id.
13 i. Predominance
14 The “predominance inquiry tests whether proposed classes are sufficiently cohesive to
15 warrant adjudication by representation.” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045
16 (2016) (quotation omitted). The Supreme Court has defined an individualized question as one
17 where “members of a proposed class will need to present evidence that varies from member to
18 member.” Id. (quotations omitted). A common question, on the other hand, is one where “the
19 same evidence will suffice for each member to make a prima facie showing [or] the issue is
20 susceptible to generalized, class-wide proof.” Id. (quotation omitted).
21 The Court concludes that for purposes of settlement, common questions predominate here,
22 because the putative class members’ claims turn on whether Defendants are liable for the Service
23 Disruption, which prevented putative class members from accessing their Chime accounts.
24 ii. Superiority
25 The superiority requirement tests whether “a class action is superior to other available
26 methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The
27 Court considers four non-exclusive factors: (1) the interest of each class member in individually
1 litigation concerning the controversy already commenced by or against the class; (3) the
2 desirability of concentrating the litigation of the claims in the particular forum; and (4) the
3 difficulties likely to be encountered in the management of a class action. Id.
4 The Court concludes that a class action enables the most efficient use of Court and attorney
5 resources and reduces costs to the putative class members by allocating costs among them.
6 Further, this forum is appropriate, and there are no obvious difficulties in managing this class
7 action.
8 The Court therefore finds that the predominance and superiority requirements of Rule
9 23(b)(3) are met.
10 C. Class Representative and Class Counsel
11 Because the Court finds that Plaintiff meets the commonality, typicality, and adequacy
12 requirements of Rule 23(a), the Court appoints named Plaintiffs as class representatives. When a
13 court certifies a class, it must also appoint class counsel. Fed. R. Civ. P. 23(c)(1)(B). Factors that
14 courts must consider when making that decision include:

15 (i) the work counsel has done in identifying or investigating potential
claims in the action;
16 (ii) counsel’s experience in handling class actions, other complex
litigation, and the types of claims asserted in the action;
17 (iii) counsel’s knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class.
18
19 Fed. R. Civ. P. 23(g)(1)(A).
20 Counsel have investigated and litigated this case throughout its existence and have listed
21 their many cases representing plaintiffs in consumer class actions. See Dkt. No. 40-8 at ¶¶ 3–14;
22 Dkt. No. 40-9, Ex. 1. Accordingly, the Court appoints John A. Yanchunis of Morgan & Morgan
23 Complex Litigation Group, Patrick A. Barthle II of Morgan & Morgan Complex Litigation Group,
24 and Joshua H. Watson of Clayeo C. Arnold, APC as Class Counsel.
25 III. PRELIMINARY SETTLEMENT APPROVAL
26 A. Legal Standard
27 Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or defenses of a
1 only with the court’s approval.” Fed. R. Civ. P. 23(e). “The purpose of Rule 23(e) is to protect
2 the unnamed members of the class from unjust or unfair settlements affecting their rights.” In re
3 Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). Accordingly, before a district court
4 approves a class action settlement, it must conclude that the settlement is “fundamentally fair,
5 adequate and reasonable.” In re Heritage Bond Litig., 546 F.3d 667, 674–75 (9th Cir. 2008).
6 Where the parties reach a class action settlement prior to class certification, district courts
7 apply “‘a higher standard of fairness’ and ‘a more probing inquiry than may normally be required
8 under Rule 23(e).’” Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012). Such settlement
9 agreements “must withstand an even higher level of scrutiny for evidence of collusion or other
10 conflicts of interest than is ordinarily required under Rule 23(e) before securing the court’s
11 approval as fair.” Roes, 1-2 v. SFBSC Mgmt., LLC, 944 F.3d 1035, 1048–49 (9th Cir. 2019)
12 (quoting In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011)). A more
13 “‘exacting review’ is warranted ‘to ensure that class representatives and their counsel do not
14 secure a disproportionate benefit at the expense of the unnamed plaintiffs who class counsel had a
15 duty to represent.’” Id. (quotations omitted).
16 Courts may preliminarily approve a settlement and notice plan to the class if the proposed
17 settlement: (1) appears to be the product of serious, informed, non-collusive negotiations; (2) does
18 not grant improper preferential treatment to class representatives or other segments of the class;
19 (3) falls within the range of possible approval; and (4) has no obvious deficiencies. In re Lenovo
20 Adware Litig., No. 15-MD-02624-HSG, 2018 WL 6099948, at *7 (N.D. Cal. Nov. 21, 2018).
21 Courts lack the authority, however, to “delete, modify or substitute certain provisions. The
22 settlement must stand or fall in its entirety.” Hanlon, 150 F.3d at 1026.
23 B. Analysis
24 i. Evidence of Conflicts and Signs of Collusion
25 The first factor the Court considers is whether there is evidence of collusion or other
26 conflicts of interest. See Roes, 944 F.3d at 1049. The Ninth Circuit has directed district courts to
27 look for “subtle signs of collusion,” which include whether counsel will receive a disproportionate
1 arrangement where defendant will not object to a certain fee request by class counsel),” and
2 whether the parties agree to a reverter that returns unclaimed funds to the defendant. Id.
3 As discussed above, Defendants have already paid $5,960,563.00 to active Chime account
4 holders due to the Service Disruption, and $1.5 million of the additional $5.5 million that
5 Defendants are making available to pay claims under Tiers 1 and 2 is non-reversionary. See SA at
6 IV. Thus, although some portion of the funds is reversionary, Defendants have agreed to pay up
7 to $7 million based on the Service Disruption. However, the Settlement Agreement contains a
8 clear sailing arrangement, which states that “Defendants agree not to oppose Class Counsel’s
9 request for fees and reimbursement of costs and expenses up to seven hundred fifty thousand
10 dollars ($750,000.00).” See id. at ¶ X.
11 a. Clear Sailing Provision
12 Clear sailing provisions are not prohibited, though they “‘by [their] nature deprive[] the
13 court of the advantages of the adversary process’ in resolving fee determinations and are therefore
14 disfavored.” Id. at 1050 (quoting In re Bluetooth, 654 F.3d at 949) (alterations in original). The
15 Ninth Circuit has noted that clear sailing arrangements are “important warning signs of collusion,”
16 because “‘[t]he very existence of a clear sailing provision increases the likelihood that class
17 counsel will have bargained away something of value to the class.’” Id. at 1051 (quoting In
18 re Bluetooth, 654 F.3d at 948). Accordingly, when confronted with a clear sailing provision, the
19 district court has a heightened duty to “scrutinize closely the relationship between attorneys’ fees
20 and benefit to the class, being careful to avoid awarding ‘unreasonably high’ fees simply because
21 they are uncontested.” Id. (quotation omitted).
22 Here, Class Counsel may request fees and costs of up to $750,000. See SA at ¶ X.2. Such
23 fees and costs, even were the Court to award them in their entirety, however, do not diminish the
24 recovery to the class members under the settlement. See id.; see also Dkt. No. 40 at 18. The
25 payments to each class member under Tiers 1 and 2 are unaffected by any requested attorneys’
26 fees. See id. The Court also recognizes that Class Counsel obtained tangible results for the
27 putative class members, as discussed in Section III.B.iii. below.
1 fee basis, and incurring costs without the guarantee of payment for its litigation efforts. See Dkt.
2 No. 40-8 at ¶ 3. Under the circumstances, the Court does not find it unreasonable that Class
3 Counsel may request attorneys’ fees of up to $750,000. The Court is cognizant of its obligations
4 to review class fee awards with particular rigor, and at the final approval stage will carefully
5 scrutinize the circumstances and determine what attorneys’ fees award is appropriate in this case.
6 Accordingly, given that at least a portion of the settlement is non-reversionary, and any attorneys’
7 fees will not diminish the class recovery, the Court does not find that the clear sailing provision
8 weighs against preliminary approval.
9 b. Cy Pres Distribution
10 The Court must also evaluate whether the parties’ proposed cy pres recipient is
11 appropriate. A cy pres award must qualify as “the next best distribution” to giving the funds to
12 class members. Dennis, 697 F.3d at 865. “Not just any worthy recipient can qualify as an
13 appropriate cy pres beneficiary,” and there must be a “‘driving nexus between the plaintiff class
14 and the cy pres beneficiaries.’” Id. (citation omitted). That is to say, a cy pres award must be
15 “‘guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class
16 members, and must not benefit a group too remote from the plaintiff class.’” Id. (citations
17 omitted). A cy pres distribution is not appropriate if there is “‘no reasonable certainty’ that any
18 class member would benefit from it.” Id. (citation omitted).
19 Here, to the extent the aggregate claims under Tiers 1 and 2 do not reach the $1.5 million
20 minimum payment, the parties have selected the East Bay Community Law Center as their cy pres
21 recipient. See SA at ¶ IV.5. The East Bay Community Law Center is a non-profit organization in
22 Berkeley, California, providing legal services and policy advocacy responsive to the needs of low-
23 income communities and affords legal training to future attorneys committed to addressing the
24 causes and conditions of racial and economic injustice and poverty. See Dkt. No. 40-8 at ¶ 50.
25 Accordingly, the Court preliminarily finds that there is a sufficient nexus between the cy pres
26 recipient and the class, as the East Bay Community Law Center shares the interests of the class
27 members in protecting access to justice, regardless of socioeconomic status.
1 ii. Preferential Treatment
2 The Court next considers whether the settlement agreement provides preferential treatment
3 to any class member. The Ninth Circuit has instructed that district courts must be “particularly
4 vigilant” for signs that counsel have allowed the “self-interests” of “certain class members to
5 infect negotiations.” In re Bluetooth, 654 F.3d at 947. For that reason, courts in this district have
6 consistently stated that preliminary approval of a class action settlement is inappropriate where the
7 proposed agreement “improperly grant[s] preferential treatment to class representatives.” Lenovo,
8 2018 WL 6099948, at *8 (quotations omitted).
9 Although the Settlement Agreement authorizes named Plaintiffs to seek an incentive award
10 of no more than $500 for their role in this lawsuit, see SA at ¶ X.1, the Court will ultimately
11 determine whether they are entitled to such an award and the reasonableness of the amount
12 requested. Incentive awards “are intended to compensate class representatives for work done on
13 behalf of the class, to make up for financial or reputational risk undertaken in bringing the action.”
14 Rodriguez v. West Publ’g Corp., 563 F.3d 948, 958–59 (9th Cir. 2009). Plaintiffs must provide
15 sufficient evidence to allow the Court to evaluate their awards “individually, using relevant factors
16 includ[ing] the actions the plaintiff[s have] taken to protect the interests of the class, the degree to
17 which the class has benefitted from those actions, . . . [and] the amount of time and effort the
18 plaintiff[s] expended in pursuing the litigation . . . .” Stanton v. Boeing Co., 327 F.3d 938, 977
19 (9th Cir. 2003) (quotation omitted). The Court will consider the evidence presented at the final
20 fairness hearing and evaluate the reasonableness of any incentive award request. Nevertheless,
21 because incentive awards are not per se unreasonable, the Court finds that this factor weighs in
22 favor of preliminary approval. See Rodriguez, 563 F.3d at 958 (finding that “[i]ncentive awards
23 are fairly typical in class action cases” and “are discretionary” (emphasis omitted)).
24 iii. Settlement within Range of Possible Approval
25 The third factor the Court considers is whether the settlement is within the range of
26 possible approval. To evaluate whether the settlement amount is adequate, “courts primarily
27 consider plaintiffs’ expected recovery balanced against the value of the settlement offer.” Lenovo,
1 Here, putative class members already received $5,960,563 from Defendants, including a
2 $10 courtesy payment received by all class members and transaction credits to cover certain fees
3 that some Chime account holders incurred during the Service Disruption. The parties
4 acknowledged during the hearing the difficulty in assessing the precise scope of any further
5 damages. Still, the Settlement Agreement provides a means for putative class members to receive
6 compensation for losses without the burden of providing documentation to support their damages.
7 They may recoup up to $25 without documentation and up to $750 if they provide documentation.
8 Under this process, Defendants have agreed to pay up to $5.5 million to putative class members
9 for any verified damages suffered during the 72-hour Service Disruption. Plaintiffs acknowledge
10 that, absent the settlement, they would face substantial risk in continuing to litigate this case, such
11 as opposing a motion to compel arbitration, certifying a class, and prevailing at trial. Dkt. No. 40
12 at 14–15. The Court finds that the settlement amount, given these risks, weighs in favor of
13 granting preliminary approval.
14 iv. Obvious Deficiencies
15 The fourth and final factor that the Court considers is whether there are obvious
16 deficiencies in the settlement agreement. The Court finds no obvious deficiencies, and therefore
17 finds that this factor weighs in favor of preliminary approval.
18 * * *
19 Having weighed the relevant factors, the Court preliminarily finds that the settlement
20 agreement is fair, reasonable, and adequate, and GRANTS preliminary approval. The Court
21 DIRECTS the parties to include both a joint proposed order and a joint proposed judgment when
22 submitting their motion for final approval.
23 IV. PROPOSED CLASS NOTICE PLAN
24 For Rule 23(b)(3) class actions, “the court must direct notice to the class members the best
25 notice that is practicable under the circumstances, including individual notice to all members who
26 can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). Individual notice must
27 be sent to all class members “whose names and addresses may be ascertained through reasonable
1 Here, the notice plan provides direct notice via email to class members. See SA at ¶¶ V.I–
2 VII.11; see also Dkt. No. 45-2, Ex. 2. During the hearing, counsel confirmed that email is one of
3 the primary means through which Chime, an online-only bank, communicates with its account
4 holders. The Court finds that the proposed notice process is thus “‘reasonably calculated, under
5 all the circumstances,’ to apprise all class members of the proposed settlement.” Roes, 944 F.3d at
6 1045.
7 With respect to the content of the Notice itself, the notice must clearly and concisely state
8 in plain, easily understood language:
9 (i) the nature of the action;
(ii) the definition of the class certified;
10 (iii) the class claims, issues, or defenses;
(iv) that a class member may enter an appearance through an attorney if
11 the member so desires;
(v) that the court will exclude from the class any member who requests
12 exclusion;
(vi) the time and manner for requesting exclusion; and
13 (vii) the binding effect of a class judgment on members.
14
15 Fed. R. Civ. P. 23(c)(2)(B). The Court finds that the content of the proposed Notice, Dkt. No. 45-
16 2, Ex. 2, provides sufficient information about the case and thus conforms with due process
17 requirements. See Hyundai II, 926 F.3d at 567 (“Notice is satisfactory if it generally describes the
18 terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and
19 to come forward and be heard.” (quotations omitted)).
20 V. CONCLUSION
21 For the foregoing reasons, the Court GRANTS Plaintiffs’ motion for preliminary approval
22 of class action settlement. The parties are DIRECTED to meet and confer and stipulate to a
23 schedule of dates for each event listed below, which shall be submitted to the Court within seven
24 days of the date of this Order:
25
Event Date
26
Deadline for Settlement Administrator to mail
27 notice to all putative Class Members
Filing deadline for attorneys’ fees and costs motion
I Deadline for Class Members to opt-out or object to
settlement and/or application for attorneys’ fees and
2 costs and incentive payment
Filing deadline for final approval motion Pe
3 Final fairness hearing and hearing on motions Pe
4 The parties are further DIRECTED to implement the proposed class notice plan.
5 IT IS SO ORDERED.
6 || Dated: 10/28/2020 ! | | |
’
g HAYWOOD S. GILLIAM, JR.
United States District Judge
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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10065612. Public record. Not legal advice.