1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 THOMAS MCCOY, on behalf of himself Case No.: 15cv2366 DMS(AGS) and all others similarly situated, 11

ORDER GRANTING CONDITIONAL

Plaintiff, 12 FINAL APPROVAL OF CLASS v. ACTION SETTLEMENT 13 NATIONSTAR MORTGAGE, LLC, a 14 Delaware Limited Liability Company; 15 DOES 1-100, inclusive, 16 Defendants. 17 18 This case comes before the Court on Plaintiffs’ motion for final approval of class 19 action settlement. Class members Taquelia Washington Toland and Georgia Toland filed 20 objections to the proposed settlement. The motion came on for hearing on February 14, 21 2020. Michael Vivoli appeared on behalf of Plaintiffs, Jon Hubbard and Jessica Lohr 22 appeared on behalf of Defendant, and Kristin Kemnitzer and Arthur Levy appeared on 23 behalf of the Tolands. After reviewing the parties’ briefs, the written objections and the 24 responses thereto, and the record on file in this case, and after hearing oral argument from 25 counsel, the Court grants final approval of the settlement subject to the conditions set out 26 below. 27 / / / 28 / / / 1 I. 2 BACKGROUND 3 In July 2005, Plaintiff Thomas McCoy purchased the home at 11364 Hoydale Row 4 in San Diego, California. To purchase the home, Plaintiff obtained a first and second 5 mortgage from Countrywide Home Loans. Plaintiff refinanced those loans with 6 Countrywide in 2006. In 2009, Plaintiff began experiencing financial difficulties, and 7 stopped making payments on his second mortgage. In 2011, he sold the Hoydale property 8 in a short sale approved by Bank of America, which bought out Countrywide. As part of 9 that sale, Bank of America waived its “right to pursue collection of any deficiency 10 following the completion of [the] short sale” and considered Plaintiff’s debt “settled.” 11 Despite these events, on July 15, 2013, Bank of America transferred servicing rights 12 for Plaintiff’s second mortgage to Defendant Nationstar “as part of a larger Mortgage 13 Servicing Rights Purchase and Sale Agreement (the ‘MSR Agreement’).” Pursuant to the 14 MSR Agreement, Defendant sent Plaintiff a letter stating his second mortgage had been 15 transferred to Defendant. Defendant also sent Plaintiff a payment coupon listing the total 16 amount due on Plaintiff’s loan as $32,111.66 and the total amount owed as $110,261.63. 17 In response to that letter, Plaintiff contacted Defendant by phone and letter to dispute 18 the alleged debt. Defendant thereafter sent a letter to Plaintiff, confirming its receipt of 19 Plaintiff’s letter and stating it was reviewing the short sale of Plaintiff’s property. 20 That letter was the last communication from Defendant to Plaintiff until December 21 24, 2014. On that date, Defendant sent Plaintiff a letter stating it “intends to enforce the 22 provisions of the Note and related Security Instrument.” Defendant stated, “You must pay 23 the full amount of the default on this loan by the thirty-fifth (35th) day from the date of this 24 letter which is 01/28/2015 (or if said date falls on a Saturday, Sunday, or legal holiday, 25 then on the first business day thereafter).” Defendant also stated that as of December 24, 26 2014, “the amount of the debt owed is $43,871.76, which includes the sum of payments 27 that have come due on and after the date of default 07/01/2009, any late charges, periodic 28 1 adjustments to the payment amount (if applicable), attorney fees and expenses of 2 collection.” 3 As before, Plaintiff notified Defendant that he disputed the debt by phone and by 4 letter. Nevertheless, Defendant reported the debt to the credit reporting agencies for a four 5 month period of time starting in January 2015 and continuing through April 20, 2015, at 6 which time it “deleted the tradeline associated with Plaintiff’s loan … in connection with 7 Plaintiff’s dispute.” Defendant thereafter voided Plaintiff’s loan on May 31, 2015, and has 8 ceased its collection efforts. 9 Notably, Plaintiff never made any payments to Defendant in connection with its 10 effort to collect on the loan. Nevertheless, on October 19, 2015, he filed the present case 11 against Defendant on behalf of himself and all others similarly situated asserting claims 12 under the Fair Debt Collection Practices Act (“FDCPA”), the Rosenthal Fair Debt 13 Collection Practices Act (“RFDCPA”), California’s Credit Reporting Agencies Act 14 (“CCRAA”), California’s Unfair Competition Law (“UCL”), and claims for intentional 15 and negligent misrepresentation. 16 Defendant moved for partial summary judgment on Plaintiff’s debt collection claims 17 to the extent they relied on conduct before October 19, 2014, and for summary judgment 18 on all other claims. The Court granted that motion, and thereafter granted Plaintiff’s 19 motion for class certification on the debt collection claims arising from conduct occurring 20 on or after October 19, 2014. Defendant later moved to decertify the class, which the Court 21 denied. 22 Approximately four months later, the parties reached a settlement. The settlement 23 agreement provides for a settlement fund of $172,750.00, to cover the payment of $150 to 24 each class member and a $10,000 service award to Plaintiff. It also provides that Defendant 25 will pay Class Counsel $375,000 in attorneys’ fees from a separate fund. In exchange, 26 class members would: 27 finally and forever release and discharge the Released Parties of and from the Released Claims.... The Released Claims are released regardless of whether 28 1 the Released Claims are known or unknown, concealed or hidden, suspected or unsuspected, anticipated or unanticipated, asserted or unasserted, foreseen 2 or unforeseen, actual or contingent, liquidated or unliquidated, fixed or 3 contingent. 4 The “Released Parties” are defined as “Nationstar Mortgage, LLC and each of its 5 respective present, former and future affiliates, parents, subsidiaries, corporate family 6 members, insurers, indemnitors, officers, directors, partners, employees, agents, attorneys, 7 servants, heirs, administrators, executors, members, member entities, shareholders, 8 predecessors, successors, representatives, trustees, principals, vendors, and assigns, 9 individually, jointly and severally.” The “Released Claims” are defined as “all claims 10 under the FDCPA, RFDCPA, and FDCPA State Equivalents based upon the FDCPA 11 Letters, regardless of whether the claims were asserted in the Litigation.” The “FDCPA 12 Letter” is defined as “all correspondence sent to the Settlement Class Members, after 13 October 19, 2014, including any Welcome Letter, Demand Letter, Account Statement, or 14 any other correspondence, in an attempt to collect the purported debt.” 15 The parties moved for preliminary approval of the settlement, which the Court 16 denied due to problems with the cy pres recipient. The parties addressed that problem and 17 filed another motion for preliminary approval of the settlement, which the Court granted. 18 Notice of the settlement was then provided to class members. The Notice informed 19 class members that if the settlement was approved, they would receive a check in the 20 amount of $150, Mr. McCoy would receive a service award of $10,000 and Class Counsel 21 would receive fees in the amount of $375,000 from a separate fund. It also informed class 22 members of their right to opt-out and their right to object to the settlement. Although the 23 Notice provided an opt-out deadline, it did not provide a deadline to file objections. That 24 deadline was included in the Court’s order granting preliminary approval of the settlement, 25 but that order was not included with the Notice. 26 The parties anticipated there would be 1,085 class members, but the total number of 27 class members was 1,488. The Settlement Administrator attempted to provide Notice to 28 all of those individuals, but as of December 23, 2019, sixty-eight notices were returned as 1 undeliverable. As of that date, the Settlement Administrator had received two requests for 2 exclusion, and no objections. 3 However, on December 13, 2019, the Tolands filed their first set of objections to the 4 settlement. In addition to apparently being members of the Class in this case, the Tolands 5 are plaintiffs in another pending case against Nationstar and its subsidiary Veripro in the 6 Northern District of California. See Toland v. Nationstar, Case No. 17cv2575-JD, United 7 States District Court for the Northern District of California. In that class action case, the 8 Tolands raise claims similar to those alleged in this case, specifically claims under the 9 RFDCPA, the CCRAA and the UCL, based on conduct by Nationstar and Veripro similar 10 to Nationstar’s conduct in this case. Although Nationstar and its counsel had an obligation 11 to file a Notice of Related Case in this case and the Toland case, see United States District 12 Court for the Southern District of California, Civil Local Rule 40.1(f) (imposing obligation 13 on party); United States District Court for the Northern District of California, Civil Local 14 Rule 3-13 (imposing obligation on counsel), it did not do so. The only reason the Tolands 15 were able to file objections is they received Notice of the settlement in this case, and their 16 counsel were able to access the docket in this case and file objections by the court-ordered 17 deadline. 18 After reviewing those initial objections and Plaintiff’s response, the Court issued an 19 order setting a briefing schedule on Plaintiff’s motion for final approval of the settlement 20 and any motion for attorneys’ fees, and continued the final approval hearing. Plaintiff has 21 now filed his motion for final approval, the Tolands have filed a second set of objections, 22 and Plaintiff has filed a response. 23 The Tolands raise numerous objections to the proposed settlement, specifically its 24 notice and release provisions as well as other aspects of the settlement. On the notice, they 25 argue (1) it did not provide adequate information about the settlement, e.g., by way of a 26 settlement website, (2) it did not provide contact information for Class Counsel or the 27 Settlement Administrator, (3) it did not provide sufficient information about objections, 28 specifically when and how to file them, and (4) it does not satisfy Federal Rule of Civil 1 Procedure 23(h). On the settlement itself, the Tolands raise other objections. First, they 2 argue Class Counsel did not analyze the factors set out in Churchill Village, L.L.C. v. 3 General Electric, 361 F.3d 566, 575-76 (9th Cir. 2004). Second, they assert the settlement 4 does not reimburse class members who made payments to Nationstar. Third, the Tolands 5 claim Class Counsel did not analyze any of the statutory factors for settlement under the 6 FDCPA. Fourth, the Tolands object to the lack of any injunctive relief in the settlement. 7 Fifth, the Tolands object to the lack of information about Plaintiff’s separate settlement 8 agreement with Nationstar. Sixth, the Tolands assert Nationstar’s agreement to increase 9 the settlement fund to include additional class members requires re-notice of the settlement 10 to the Class. In challenging the Release, the Tolands argue it is overbroad in releasing (1) 11 parties other than Nationstar, (2) claims based on letters sent by entities other than 12 Nationstar, and (3) claims for emotional distress. 13 II. 14 DISCUSSION 15 Because of the unique due process concerns relating to absent class members and the inherent risk of collusion between class counsel and defense 16 counsel, Federal Rule of Civil Procedure 23(e) requires district courts to 17 review proposed class action settlements for fairness, reasonableness, and adequacy. Prior to Congress’ 2018 codification of a new multifactor test for 18 this review, 19 20 the Ninth Circuit applied a number of factors in assessing whether a proposed settlement 21 was fair, reasonable and adequate. Roes v. SFSBC Management, LLC, 944 F.3d 1035, 22 1048 (9th Cir. 2019). Those factors included: 23 “[1] the strength of plaintiffs’ case; [2] the risk, expense, complexity, and likely duration of further litigation; [3] the risk of maintaining class action 24 status throughout the trial; [4] the amount offered in settlement; [5] the extent 25 of discovery completed, and the stage of the proceedings; [6] the experience and views of counsel; [7] the presence of a governmental participant; and [8] 26 the reaction of the class members to the proposed settlement.” 27 28 1 Id. (quoting Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 963 (9 Cir. 2009)). Rule 23(e) 2 now states the court may approve a class action settlement 3 only on finding that it is fair, reasonable, and adequate after considering whether: 4

5 (A) the class representatives and class counsel have adequately represented the class; 6

7 (B) the proposal was negotiated at arm’s length;

8 (C) the relief provided for the class is adequate, taking into account: 9 (i) the costs, risks, and delay of trial and appeal; 10

11 (ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class member claims; 12

13 (iii) the terms of any proposed award of attorney’s fees, including timing of payment; and 14

15 (iv) any agreement required to be identified under Rule 23(e)(3); and

16 (D) the proposal treats class members equitably relative to each other. 17 18 Fed. R. Civ. P. 23(e)(2). “’To survive appellate review, the district court must show it has 19 explored comprehensively all factors, and must give a reasoned response to all non- 20 frivolous objections.’” In re Volkswagen ‘Clean Diesel’ Marketing, Sales Practices, and 21 Products Liability Litig., 895 F.3d 597, 612 (9th Cir. 2018) (quoting Dennis v. Kellogg Co., 22 697 F.3d 858, 864 (9th Cir. 2012)). The Court addresses the Tolands’ objections and all of 23 the other relevant factors below. 24 A. Standing 25 Before turning to the Tolands’ objections, Plaintiff argues initially the Tolands lack 26 standing to object to the settlement because they did not receive any letters from Nationstar. 27 It appears the Tolands received letters from Veripro, not Nationstar, but that does not 28 necessarily mean they are not members of the class. Clearly, the Settlement Administrator 1 considered the Tolands to be class members as they received notice of the settlement. That 2 determination having been made, Plaintiff cannot now assert the Tolands are not class 3 members. Accordingly, the Court rejects this argument, and finds the Tolands have 4 standing to object. 5 B. Objections to the Notice 6 Turning to those objections, the Tolands first object to the Class Notice. As stated 7 above, they argue the Notice (1) did not provide adequate information about the settlement, 8 (2) did not provide contact information for Class Counsel or the Settlement Administrator, 9 (3) did not provide sufficient information about objections, specifically when and how to 10 file them, and (4) does not satisfy Federal Rule of Civil Procedure 23(h). 11 “Notice provided pursuant to Rule 23(e) must ‘generally describe[ ] the terms of the 12 settlement in sufficient detail to alert those with adverse viewpoints to investigate and to 13 come forward and be heard.’” Lane v. Facebook, Inc., 696 F.3d 811, 826 (9th Cir. 2012) 14 (quoting Rodriguez, 563 F.3d at 962). With just one exception, the Notice in this case 15 meets that standard. It explains the relief available to class members under the settlement, 16 their rights to opt-out and their right to object. It sets out the factual and legal basis for that 17 relief and the class definition. It describes the proposed service award to Plaintiff, the 18 amount of attorneys’ fees requested and the source of those funds, and identifies Class 19 Counsel. It explains what rights the class members will be giving up in exchange for their 20 receipt of the $150, explains how to opt-out, the details of the fairness hearing, and how to 21 get more information. The Tolands are correct that the Settlement Administrator did not 22 set up a settlement website and that it did not provide specific contact information for Class 23 Counsel, but neither of those things is required. And as for Class Counsel, the Notice 24 identified them by name and law firm, which would have enabled any interested class 25 member to find counsel’s contact information. Accordingly, these objections to the Notice 26 are overruled. 27 The Tolands’ other objection to the Notice, i.e., the exception mentioned above, 28 concerns the details for objecting to the settlement. As stated above, the Notice informed 1 class members of their right to object and how to object, but unlike with opt-outs, it did not 2 identify the deadline by which any objections were to be filed. This information was an 3 important detail that should have been included in the Notice. See In re Online DVD- 4 Rental Antitrust Litig., 779 F.3d 934, 946 (9th Cir. 2015) (noting inclusion of objection 5 deadline in discussing whether notice violated Rule 23 or due process). Accordingly, the 6 Court sustains this objection. 7 The Tolands also object to the Notice on the ground it fails to comply with Federal 8 Rule of Civil Procedure 23(h). That Rule requires that notice of a motion for attorneys’ 9 fees “must be served on all parties and for motions by class counsel, directed to class 10 members in a reasonable manner.” Fed. R. Civ. P. 23(h)(1). The Tolands argue this Rule 11 requires that the motion itself be provided to class members, but the Court disagrees. The 12 plain language of the Rule requires that “notice” of the motion be served, and here, notice 13 of the motion was provided to the class. Accordingly, the Court overrules this objection. 14 C. Objections to the Settlement 15 Turning to the terms of the actual settlement, the Tolands argued in their original 16 objections that Class Counsel failed to address the Churchill factors. However, it appears 17 Class Counsel addressed those factors in their motion for final approval. Accordingly, the 18 Court overrules this objection. 19 The Tolands also object that the settlement does not reimburse class members who 20 made payments to Nationstar. Class Counsel responds there is no evidence any class 21 members made unlawful payments to Nationstar, and thus this objection is invalid. The 22 Court agrees with Class Counsel, and thus overrules this objection also. 23 Next, the Tolands argue Class Counsel failed to analyze the factors relevant to the 24 amount of any statutory damages awarded under the FDCPA and the RFDCPA. However, 25 the Tolands fail to cite any authority that requires either Class Counsel or the Court to 26 analyze these factors in the context of a motion for approval of a settlement. Accordingly, 27 the Court overrules this objection. 28 1 The Tolands also object to the settlement on the ground it does not provide for any 2 injunctive relief. Class Counsel and counsel for Nationstar respond that injunctive relief 3 is unnecessary because Nationstar is no longer engaging in the disputed conduct, but even 4 if it was, the settlement does not release future claims. At the hearing, Class Counsel and 5 counsel for Nationstar represented they would be willing to modify the settlement 6 agreement to clarify that the release does not bar claims based on future conduct. That 7 modification should resolve this objection, but the Court invites Counsel to consider 8 including an injunctive relief component as part of their modifications to the settlement 9 agreement. 10 Next, the Tolands object to Class Counsel’s failure to disclose the terms of a separate 11 settlement agreement between Mr. McCoy and Nationstar concerning his claim for 12 emotional distress. Notably, this agreement was not disclosed to the Court in the motion 13 for preliminary approval. Indeed, the first mention of the agreement was in Plaintiff’s 14 motion for final approval, which was filed after the Tolands’ first set of objections. It 15 appears Class Counsel disclosed the agreement pursuant to Federal Rule of Civil Procedure 16 23(e)(3), which requires the parties seeking approval of a settlement “file a statement 17 identifying any agreement made in connection with the proposal.” Fed. R. Civ. P. 23(e)(3). 18 Pursuant to counsel’s offer at the hearing, the Court ordered that this agreement by 19 produced to the Court in camera.1 The Court has now reviewed the agreement, and 20 overrules the Tolands’ objections. Generally, the agreement settles Mr. McCoy’s 21 individual emotional distress claim, which was carved out of class treatment, and as 22 indicated below, the settlement agreement allows other class members to pursue their 23 individual emotional distress claims if they wish to do so. Furthermore, the agreement was 24 25 1 The Tolands argued that the agreement must be produced to the class, but they failed to 26 cite any authority to support that argument. Other courts have reviewed similar agreements 27 in camera, see, e.g., Rowe v. E.I. DuPont de Nemours and Co., Nos. 06-1810 (RMB/AMD), 06-2080 (RMB/AMD), 2011 WL 3837106, at *5 (D.N.J. Aug. 26, 2011), 28 1 negotiated with the assistance and oversight of the Magistrate Judge, and the payment on 2 Mr. McCoy’s individual claim is separate from and does not come out of the settlement 3 fund for the class claims. For these reasons, the Court is satisfied that the agreement does 4 not evidence any collusion between Nationstar and Class Counsel and/or Mr. McCoy. 5 The Tolands’ other objections concern the scope of the release, specifically, they 6 object that, as currently worded, the release bars the Tolands’ claims against Veripro, 7 claims based on letters sent by entities other than Nationstar, and claims for emotional 8 distress. At the hearing, counsel for the Class and counsel for Nationstar represented they 9 would be willing to modify the settlement agreement to address these concerns. 10 D. Other Factors 11 Aside from the Tolands’ objections, the Court has considered the Churchill factors 12 and the factors set out in Rule 23(e)(2), and finds the settlement is otherwise fair, 13 reasonable and adequate. As set out in the Court’s class certification order, Plaintiff and 14 his counsel have adequately represented the class in this case. They litigated the case for 15 nearly five years, battling through discovery and motion practice. They negotiated the 16 settlement at arm’s length with the assistance of the Magistrate Judge based on a full 17 understanding of the facts and the law and the risks that remained if the case proceeded to 18 trial. Given those risks, and the FDCPA’s $500,000 cap on statutory damages, see 15 19 U.S.C. § 1692k(a)(2)(B), the proposed settlement, which provides for payment of $150 to 20 every class member without the need to submit a claim, and payment of attorneys’ fees 21 separately from payment to the class, is fair, reasonable and adequate. 22 III. 23 CONCLUSION 24 In light of the discussion above, the Court grants final approval of the settlement, 25 subject to the following conditions: 26 (1) Pursuant to their agreement and representations at the hearing, Class Counsel and 27 counsel for Nationstar shall modify the settlement agreement to clarify that the release does 28 not cover (a) claims for future misconduct on the part of Nationstar, (b) the claims at issue 1 in the Tolands’ case, (c) claims based on letters sent by entities other than Nationstar, and 2 (d) claims for emotional distress;2 3 (2) Notice of the modified settlement agreement is provided to the Class, and class 4 members are provided an additional opportunity to opt-out or object to the settlement, with 5 specific deadlines for each of those options; and 6 (3) No further valid objections to the settlement are received after re-notice. 7 Counsel shall file a status report with the Court on or before April 14, 2020, 8 indicating whether they will be fulfilling these conditions, and if so, set out the deadlines 9 identified above and propose a date for a continued hearing on final approval. 10 IT IS SO ORDERED. 11 DATED: March 31, 2020 ____________________________________

DANA M. SABRAW

12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26

27 2 Counsel may also want to modify the agreement to reflect the new total of the settlement fund for class members given the Tolands’ objection that the settlement fund, as currently 28