O 11

22

33

44 55 66 77 United States District Court 88 Central District of California 99 1100

1111 LISA SILVEIRA, on behalf of herself and Case No. 2:19-cv-06958-ODW(KSx) all others similarly situated, 1122 ORDER DENYING PRELIMINARY Plaintiff, APPROVAL [21] 1133 v. 1144

M&T BANK,

1155 Defendant. 1166

1177 1188 I. INTRODUCTION 1199 Plaintiff Lisa Silveira initiated this putative class action against Defendant 2200 M&T Bank (“M&T”), on behalf of a class of homeowners, alleging that M&T 2211 charged borrowers convenience fees when they made mortgage payments online and 2222 over the phone (“Pay-to-Pay Fees”). (See Compl. ¶ 1, ECF No. 1.) The parties have 2233 reached a settlement on behalf of the class. Silveira now moves, without opposition, 2244 for preliminary approval of the parties’ agreement (“Proposed Settlement Agreement” 2255 or “Proposed Settlement”). (Mot. for Prelim. Approval (“Motion” or “Mot.”), ECF 2266 No. 21.) The Court has reviewed Silveira’s Motion and finds that Silveira fails to 2277 provide the Court with adequate information by which to determine the fairness, 2288 1 adequacy, and reasonableness of the settlement. As a result, the Court DENIES 2 Silveira’s Motion without prejudice. 3 II. BACKGROUND 4 In December 2008, Silveira purchased a home in San Luis Obispo County, 5 California, through a loan that was secured by a mortgage on the property. (Compl. 6 ¶ 23.) In 2016, M&T acquired the loan and became the loan servicer. (Id.) Silveira 7 alleges she frequently pays her mortgage over the phone, and that M&T has charged 8 her a $15 fee each time (“Pay-to-Pay Fee”). (Id. ¶¶ 26–27.) Silveira contends the 9 Pay-to-Pay Fees are a direct breach of her mortgage agreement and a violation of 10 federal and state laws. (Id. ¶ 29.) 11 On August 9, 2019, Silveira filed this lawsuit on behalf of homeowner 12 borrowers throughout the United States, including California, whose mortgage loans 13 are serviced by M&T. (Id. ¶ 36.) Silveira alleges that M&T’s conduct breached the 14 class members’ mortgage agreements and violated the federal Fair Debt Collection 15 Practices Act (“FDCPA”), California’s Rosenthal Fair Debt Collection Practices Act 16 (“Rosenthal Act”), and California’s Unfair Competition Law (“UCL”). (Id. ¶¶ 48–81.) 17 On February 12, 2020, the parties reached a settlement; now Silveira seeks the 18 Court’s preliminary approval of the Proposed Settlement Agreement. (Mot. 2.) 19 III. DISCUSSION 20 The Court is troubled by several aspects of the parties’ Proposed Settlement 21 Agreement, specifically: (1) the adequacy of the settlement fund; (2) the anticipated 22 attorneys’ fees request; (3) the anticipated incentive award request; and (4) the 23 proposed notice to class members. The Court addresses each in turn. 24 A. Settlement Fund 25 Federal courts have interpreted Federal Rule of Civil Procedure 23(e) “to 26 require the district court to determine whether a proposed settlement is fundamentally 27 fair, adequate, and reasonable.” In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 28 (9th Cir. 2000). Prior to class certification, courts are obligated to apply a higher 1 standard of fairness to protect against inherent pre-certification dangers. Id.; 2 Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998) (“The dangers of 3 collusion between class counsel and the defendant, as well as the need for additional 4 protections when the settlement is not negotiated by a courtdesignated class 5 representative, weigh in favor of a more probing inquiry than may normally be 6 required under Rule 23(e).”), overruled on other grounds by Wal-Mart Stores, Inc. v. 7 Dukes, 564 U.S. 338 (2011). 8 The proposed settlement fund does not appear fair, adequate, and reasonable to 9 compensate the class members. Silveira contends that the total settlement fund 10 represents approximately 35% of damages, which according to her counsel, “is an 11 excellent result.” (See Decl. of Hassan A. Zavareei (“Zavareei Decl.”) Ex. 1 12 (“Settlement Agreement” or “SA”) 16, ECF No. 21-1; Zavareei Decl. ¶ 12.) The 13 Court is not convinced; Silveira fails to show how the $3,325,000 settlement fund will 14 adequately compensate class members for their harm. While the parties estimate that 15 the proposed class contains “approximately 112,000” potential class members (SA 16 ¶ 1.27), they fail, for instance, to identify the harm to these members (e.g., 17 approximately how much each class member paid in fees). Without some concept of 18 the extent of the alleged harm to class members, the Court cannot determine the 19 fairness of the Proposed Settlement. 20 The Court notes, however, that according to Silveira, borrowers were charged 21 $15 each time they paid their mortgages over the phone or online. (Compl. ¶¶ 26–27.) 22 And the proposed class period is defined as August 9, 2015, to the date that the Court 23 grants a motion for preliminary approval. (SA ¶ 1.7.) Based on the Court’s rough 24 calculations, a class member who routinely pays their mortgage online or over the 25 phone could have been charged $180 a year, and that same borrower could have been 26 charged at least $720 from August 9, 2015, up to the date the Complaint was filed. If 27 each class member paid roughly half that amount, the total damages would exceed $40 28 million. Again, this is merely a rough estimation of the magnitude of the total 1 damages and the Court concedes these calculations are likely incorrect, but the point is 2 that the Court would not know one way or the other because the Motion lacks the 3 requisite information. 4 Therefore, the Court requires additional information from the parties to better 5 understand how the proposed pro rata distribution in this case adequately 6 compensates the class members. In any renewed request for preliminary approval, 7 Silveira should attempt to estimate a general range—or series of ranges—of damages 8 sustained by each class member during the class period, and how much class members 9 will receive in different scenarios based on the proposed pro rata distribution. For 10 example, how much will a class member receive if they routinely paid their mortgage 11 online or over the phone throughout the class period? What if a class member only 12 paid their mortgage online or over the phone for a year, or three months? 13 At bottom, Silveira fails to provide the Court with basic information required to 14 determine whether the Proposed Settlement is fair, adequate, and reasonable. 15 Consequently, the Court cannot grant preliminary approval at this time. 16 B. Attorneys’ Fees 17 The Proposed Settlement Agreement authorizes Silveira’s counsel to petition 18 the Court for approval of attorneys’ fees and costs in an amount not to exceed one- 19 third of the Settlement Fund (i.e., $1,108,333). (SA § 8.1.) Silveira’s counsel plans to 20 file a separate motion seeking approval of attorneys’ fees. (Mot. 17.) 21 While attorneys’ fees and costs may be awarded in a certified class action 22 where so authorized by law or the parties’ agreement . . . courts have an independent 23 obligation to ensure that the award, like the settlement itself, is reasonable, even if the 24 parties have already agreed to an amount.” In re Bluetooth Headset Prods. Liab. 25 Litig., 654 F.3d 935, 941 (9th Cir. 2011). Twenty-five percent recovery is the 26 benchmark for attorneys’ fees, although courts in the Ninth Circuit have found upward 27 departures to fall within the acceptable range. See id. at 942 (noting 25% benchmark); 28 Powers v. Eichen, 229 F.3d 1249, 1256–57 (9th Cir. 2000) (discussing that upward 1 departure is acceptable when expressly explained). The Ninth Circuit has identified a 2 number of factors that may be relevant in determining if the award is reasonable: 3 (1) the results achieved; (2) the risks of litigation; (3) the skill required and the quality 4 of work; (4) the contingent nature of the fee; (5) the burdens carried by class counsel; 5 and (6) the awards made in similar cases. Vizcaino v. Microsoft Corp., 290 F.3d 1043, 6 1048–50 (9th Cir. 2002). 7 At present, the Court is aware of no reason to award attorneys’ fees that exceed 8 the Ninth Circuit’s 25% benchmark, as Silveira’s counsel has not demonstrated that 9 any special circumstances exist warranting an upward departure. For instance, they 10 have not asserted this case was complex, or that the risks were significant or unique in 11 relation to other class actions. The case was filed in August of 2019, and the docket 12 does not show any motion practice or discovery disputes—this case went straight to 13 settlement. Thus, the attorneys’ fee allocation, as proposed, is unreasonable. 14 C. Incentive Award 15 Silveira seeks approval of a $10,000 incentive award for serving as Class 16 Representative. (Mot. 8; SA § 8.2.) “[D]istrict courts [should] scrutinize carefully 17 [incentive] awards so that they do not undermine the adequacy of the class 18 representatives.” Radcliffe v. Experian Info. Sols. Inc., 715 F.3d 1157, 1163 (9th Cir. 19 2013). In evaluating incentive awards, the court should look to “the number of named 20 plaintiffs receiving incentive payments, the proportion of the payments relative to the 21 settlement amount, and the size of each payment.” In re Online DVD-Rental Antitrust 22 Litig., 779 F.3d 934, 947 (9th Cir. 2015) (quoting Staton v. Boeing, Co., 327 F.3d 938, 23 977 (9th Cir. 2003)). “Generally, in the Ninth Circuit, a $5,000 incentive award is 24 presumed reasonable.” Bravo v. Gale Triangle, Inc., No. CV 16-03347 BRO (GJSx), 25 2017 WL 708766, at *19 (C.D. Cal. Feb. 16, 2017) (citing Harris v. Vector Mktg. 26 Corp., No. C-08-5198 EMC, 2012 WL 381202, at *7 (N.D. Cal. Feb. 6, 2012)). 27 A $10,000 incentive award is double the presumptively reasonable amount, and 28 it would be substantially disproportionate to class members’ anticipated recovery. As 1 mentioned, this case settled at an early stage, and Silveira has not demonstrated how 2 her role warrants an incentive award so far from the $5,000 benchmark. Thus, the 3 allocation of a $10,000 incentive award, as proposed, is unreasonable. 4 D. Notice 5 Rule 23(c)(2)(B) requires the Court to “direct to class members the best notice 6 that is practicable under the circumstances, including individual notice to all members 7 who can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). 8 Similarly, Rule 23(e)(1) requires a proposed settlement may only be approved after 9 notice is directed in a reasonable manner to all class members who would be bound by 10 the agreement. Fed. R. Civ. P. 23(e)(1). 11 The purpose of sending notice to class members is to ensure that the notice is 12 read and considered by the recipient. Here, the parties propose that notice is sent via 13 first class mail; however, the Court is not convinced that the proposed notice is 14 indistinguishable from junk mail that will be discarded by the potential class 15 members. For instance, the proposed notice (SA Ex. 1 (“Notice”), ECF No. 21-1) 16 does not prominently display M&T’s name or logo on the first page, indeed the name 17 “M&T” is buried in the text. As such, the Court recommends that the parties seriously 18 reconsider the design of the proposed notice and, at a minimum, prominently display 19 the M&T logo on the first page of the notice. 20 To further increase the likelihood that class members receive notice, the parties 21 should also consider providing notice electronically by e-mail, as it is likely M&T 22 already possesses that information, or such information may be easily accessible. See, 23 e.g., Byrne v. Santa Barbara Hosp. Servs., Inc., No. EDCV 17-00527 JGB (KKx), 24 2018 WL 10483678, at *9 (C.D. Cal. Dec. 14, 2018) (citing cases and finding that the 25 combination of notice by mail and email may be the best notice practicable under the 26 circumstances). 27 /// 28 /// 1 IV. CONCLUSION 2 In light of the Court’s concerns, the Court cannot grant preliminary approval at 3 || this time. Silveira’s Motion (ECF No. 21) is therefore DENIED without prejudice. 4 || Silveira may renew her request no later than December 9, 2020. If the Court does not 5 || receive an amended motion for preliminary approval by December 8, it will reset the 6 || trial and pretrial dates in this matter and proceed with the litigation. 7 8 IT IS SO ORDERED. 9 10 October 28, 2020 a . ll es Bf 12 eee

OTIS D: WRIGHT, II

14 UNITED STATES DISTRICT JUDGE

15 16 17 18 19 20 21 22 23 24 25 26 27 28