Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_13-cv-03105/USCOURTS-cand-3_13-cv-03105-3/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1681 Fair Credit Reporting Act

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United 

States District 

Court

For the Northern District of California 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

JOSE RUBIO-DELGADO, SHALANDA 

BURGESS, AND HARRIETTA HUBBARD, 

INDIVIDUALLY, ON BEHALF OF OTHER 

SIMILARLY SITUATED INDIVIDUALS, 

AND ON BEHALF OF THE GENERAL 

PUBLIC, 

 Plaintiffs, 

 v. 

AEROTEK, INC., 

 Defendant. 

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Case No. 13-cv-03105-SC

ORDER DENYING MOTION FOR 

PRELIMINARY APPROVAL OF THE 

PROPOSED SETTLEMENT 

I. INTRODUCTION 

This case involves alleged violations of the Fair Credit 

Reporting Act ("FCRA"). See 15 U.S.C. § 1681. Plaintiffs Jose 

Rubio-Delgado, Shalanda Burgess, and Harrietta Hubbard purport to 

represent a class of persons aggrieved by Defendant Aerotek, Inc. 

("Aerotek"). Aerotek is a recruiting and staffing agency, and 

Plaintiffs allege that Aerotek obtained information about its 

employees and prospective employees without proper notice and 

authorization. ECF No. 1 ("Compl.") ¶¶ 2, 5-10. The parties have 

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reached a settlement agreement and now seek the Court's preliminary 

approval. See ECF No. 52 ("Mot."). Plaintiffs have moved for 

preliminary approval without oral argument, and the motion is 

unopposed. 

Upon reviewing Plaintiffs' motion, the Court had serious 

concerns about the settlement and ordered supplemental briefing to 

show that the proposed Settlement Agreement was not obviously 

deficient, outside the range of possible approval, and/or the 

result of collusive negotiations. ECF Nos. 53 ("Suppl. Br. 

Order"), 56 ("Pl. Suppl. Br."), 57 ("Def. Suppl. Br."). Because 

the parties' motion and supplemental briefs failed to adequately 

address the Court's concerns, Plaintiffs' motion for preliminary 

approval is DENIED. 

II. BACKGROUND 

A. Allegations 

The claims in this case relate to the Defendant's disclosures 

and authorizations regarding background checks obtained on 

employees and job applicants. 

The FCRA requires employers who are procuring a privately run 

background check upon applicants or employees to provide those 

applicants or employees with written notice that such a report may 

be obtained for employment purposes. This notice must include "a 

clear and conspicuous disclosure . . . in writing . . . in a 

document that consists solely of the disclosure, that a consumer 

report may be obtained for employment purposes." 15 U.S.C. § 

1681b(b)(2)(A)(i). 

Employers who procure consumer reports on job applicants and 

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employees violate the FCRA if their disclosures include language 

releasing the employer from liability associated with the 

procurement of consumer reports. See Singleton v. Dominos Pizza, 

No. 11-1823, 2012 WL 245965, at *9 (D. Md. Jan. 25, 2012) ("[B]oth 

the statutory text and FTC advisory opinions indicate that an 

employer violates the FCRA by including a liability release in a 

disclosure document"); Reardon v. Closetmaid Corp., No. 08-1730, 

2013 WL 6231606, at *10-11 (W.D. Pa. Dec. 2, 2013) (finding that a 

FCRA disclosure with liability waiver was "facially contrary to the 

statute at hand, and all of the administrative guidance"). 

Employers also violate the FCRA if they provide the required 

disclosure in a document that does not consist solely of the 

disclosure, such as when the disclosure is integrated as part of a 

job application. See E.E.O.C. v. Video Only, Inc., No. CIV. 06-

1362-KI, 2008 WL 2433841, at *11 (D. Or. June 11, 2008) (granting 

summary judgment against the defendant-employer who made the 

disclosure "as part of its job application which is not a document 

consisting solely of the disclosure"). 

To make a claim under the FCRA, Plaintiffs must prove willful 

noncompliance with FCRA's disclosure requirements. 15 U.S.C. § 

1681n. Where willful noncompliance can be proven, statutory 

damages are available in an amount of not less than $100 and not 

more than $1,000 for each violation, plus possible punitive damages 

and reasonable attorney's fees and costs. Id. 

Plaintiffs alleged in their Complaint that Aerotek "willfully 

and systematically violated [FCRA] by procuring consumer reports on 

Plaintiff and other putative class members for employment purposes, 

without first making proper disclosures in the format required." 

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Compl. ¶ 7. Aerotek disputes those allegations and asserts that it 

provided Plaintiffs with two documents that independently satisfy 

FCRA's disclosure requirements: (1) a one-page notice document, 

captioned "NOTICE TO APPLICANTS REGARDING BACKGROUND CHECKS AND 

EMPLOYEE INVESTIGATIONS" ("Notice") (Compl., Ex. 3); and (2) a 

separate one-page authorization form, entitled "AUTHORIZATION AND 

RELEASE FOR THE PROCURMENT OF A CONSUMER AND/OR INVESTIGATIVE 

CONSUMER REPORT" ("Authorization") (Compl., Ex. 2). See Def. 

Suppl. Br. at 3-4. 

Plaintiffs assert that neither the Notice nor the 

Authorization comply with FCRA. Plaintiffs allege that the Notice 

violates FCRA because it includes extraneous information1 and was 

provided as part of a larger job application. Compl. ¶ 12. 

Plaintiffs claim that the Authorization violates FCRA because it 

includes a liability release. Compl. ¶ 13. Further, Plaintiffs 

allege that "Aerotek's decision to turn a document that is supposed 

to serve as a notice of a consumer's rights into a document which 

purports to serve as a waiver of those same legal rights is 

virtually conclusive evidence of the willfulness of Aerotek's 

willful violation of the FCRA." Compl. ¶ 14. 

B. Litigation History 

On July 3, 2013, Plaintiffs filed their Class Action Complaint 

 

1

 Specifically, Plaintiffs' Complaint states that the Notice 

includes the following: (1) "A reservation of Aerotek's right to 

refuse to hire anyone who does not authorize a background 

investigation;" (2) "A statement regarding Aerotek's policy that 

all employees are required to cooperate with the Company's internal 

investigations;" (3) "A statement that employees who fail to 

cooperate with internal investigations will be disciplined;" and 

(4) "A statement encouraging all employees to report any 

potentially threatening or harmful behavior they observe." Compl. 

¶ 30. 

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against Aerotek. On behalf of themselves and the proposed class, 

Plaintiffs sought statutory damages of between $100 and $1000 per 

violation, plus punitive damages, attorneys’ fees, costs, and all 

other available relief. 

On September 12, 2014, Defendant filed a motion for judgment 

on the pleadings asserting that Plaintiffs could not prove that 

Aerotek acted willfully -- an essential element of Plaintiffs' FCRA 

claim. See generally ECF. No. 42 ("Mot. to Dismiss"). Before 

Plaintiffs' opposition was due, the parties agreed to a stay 

pending mediation. ECF. No. 43. The parties first attempted to 

mediate this matter on June 18, 2014, though that attempt was 

unsuccessful. A second mediation took place on September 16, 2014, 

resulting in a terms sheet that served as the basis for a 

Settlement Agreement. 

On March 5, 2015, Plaintiffs filed an unopposed motion for 

preliminary approval of the proposed settlement. On April 1, 2015, 

the Court ordered supplemental briefing to address the Court's 

concerns regarding the fairness and adequacy of the Settlement 

Agreement, including: (1) the requirement that class members fill 

out a claim form in order to receive their share of the settlement 

even though the Defendant already had the class members' addresses 

and the settlement was to be distributed pro rata; and (2) the 

amount of the settlement given that when divided across all 588,000 

class members it offers only 6.7 percent of the minimum amount 

recoverable and 0.67 percent of the maximum recovery. Plaintiffs 

and Defendant filed their supplemental brief on April 22, 2015 and 

May 6, 2015, respectively. 

/// 

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C. Overview of the Settlement Agreement 

1. Settlement Class and Payment Terms 

The Settlement Agreement proposes a settlement class consisting 

of the approximately 588,000 persons who Aerotek identified as (1) 

having been provided with Aerotek's disclosure form, and (2) upon 

whom Aerotek obtained a background report for employment purposes 

in the period from July 3, 2011 through the present. ECF No. 50-2 

("Settlement") ¶ 2. 

The Settlement Agreement calls for Aerotek to pay $5,000,000 

into a "Common Fund" without reversion to Aerotek for any reason. 

Settlement ¶ 27. If enough class members submit claims, however, 

the agreement requires Aerotek to make an additional contribution 

to the settlement fund, up to a maximum of $262,500, for a total of 

$5,262,500. 

After deductions for attorneys' fees, litigation costs, 

settlement administration costs, and incentive awards, the 

Settlement Agreement instructs the Settlement Administrator to 

distribute the balance of funds pro rata to class members who 

timely return properly-completed claim forms. Id. ¶ 29. If enough 

class members were to claim their shares of the settlement, Aerotek 

would be required to make the maximum possible contribution of 

$5,262,500. Once the proposed attorneys' fees, incentive awards, 

and settlement administration costs are deducted, $3,572,476 would 

remain in the fund. Thus, if every class member submitted a claim, 

each class member would receive $6.08. The parties estimate, 

however, that only 15 percent of class members will complete and 

return claim forms, resulting in approximately $40 for each of 

those class members. Pl. Suppl. Br. at 7. 

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2. Injunctive Relief 

As part of the Settlement Agreement, the parties submitted a 

proposed "Injunctive Relief Order." Settlement ¶ 32. The proposed 

order states that "Aerotek will refrain from including any 

liability release in the disclosure forms it provides to applicants 

or employees prior to procuring background checks." Id., Ex. H ¶ 

2. The proposed order also provides that Aerotek shall use a 

specified disclosure form; however, the order states that 

"Defendant shall retain the right to modify the text in [the 

proposed disclosure form] in order to effect revisions for 

compliance and other business purposes so long as Aerotek believes 

in good faith that the form used remains legally compliant with the 

Fair Credit Reporting Act." Id. ¶¶ 2-3. 

3. Attorneys' Fees and Costs 

The Settlement Agreement provides for Plaintiffs' lawyers to 

recover up to 25 percent of the settlement -- $1,315,625. Id. ¶ 33. 

4. Incentive Payment 

The Settlement Agreement indicates that the parties have 

agreed to pay a total of $5,000 from the settlement fund to the 

three named plaintiffs -- specifically, $3,000 to Plaintiff RubioDelgado and $1,000 each to Harrietta Hubbard and Shalanda Burgess.2

 

Id. ¶ 34. 

5. Releases 

Class members who have not timely and properly opted out of the 

settlement class will release all claims arising under the FCRA, 

 

2

 The parties attach a First Amended Complaint as exhibit A to 

their proposed Settlement Agreement. They request leave to file 

the First Amended Complaint in order to add Harrietta Hubbard and 

Shalanda Burgess as named plaintiffs. Settlement Agreement ¶ 1. 

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with the exception of individual claims for actual damages based on 

failure to provide pre-adverse-action notice. Settlement ¶¶ 40-42. 

6. Procedure for Claims and Settlement 

The "Short Form Class Notice and Claim Form"--a double-sided 

postcard with prepaid postage--will apprise class members of the 

existence of the settlement and provide them with a means to file a 

claim. Id. ¶¶ 6, 11, Ex. B. In order to receive their share, 

class members must complete and return the postcard with the 

following information: current name, former name, address, 

telephone number, email address, the last four digits of the class 

member's social security number, and a certification under penalty 

of perjury that all information on the form is true and correct. 

Id. ¶ 16. In order to receive a settlement check, the postcard 

must be completely and accurately filled out and postmarked no 

later than 60 days after the Settlement Administrator mails the 

postcard to the class members. Id. ¶ 17. The Settlement 

Administrator will determine the amount of payment to be disbursed 

pro rata based on the number of class members who submit a timely 

claim form. 

7. Unclaimed Settlement Funds 

Settlement checks issued to class members will expire 150 days 

after they are issued. Id. ¶ 36. Any undelivered checks, returned 

checks, uncashed checks, or non-negotiated checks will be returned 

to the settlement fund. Any amount remaining in the Settlement 

Fund will be redistributed to individuals who negotiated their 

initial settlement check.3

 If there are funds remaining after the 

 

3

 Redistribution will only occur if the amount remaining would 

result in class members receiving at least an additional $10 each. 

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redistribution, they will be donated to the parties' cy pres 

organization, the National Consumer Law Center. Id. ¶¶ 37-38. 

8. Objections 

Any class member who wishes to object to the settlement must 

do so no later than 60 days following the mailing of the Short Form 

Class Notice and Claim Form by filing a written statement of 

objection with the Court stating the factual and legal basis for 

the objection as well as other information. Id. ¶ 24. 

III. LEGAL STANDARD 

Federal Rule of Civil Procedure 23(e) requires judicial 

approval of any settlement by a certified class and demands that 

the settlement be "fair, reasonable, and adequate." When 

evaluating a class settlement agreement that applies to a class, 

courts may consider some or all of the following factors: 

[1] the strength of plaintiffs' case; [2] the risk, 

expense, complexity, and likely duration of further 

litigation; [3] the risk of maintaining class action 

status throughout the trial; [4] the amount offered in 

settlement; [5] the extent 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] the reaction of the class members to 

the proposed settlement. 

Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 963 (9th Cir. 2009). 

 At the preliminary approval stage, however, the Court need not 

make a final determination as to the fairness, reasonableness, and 

adequacy of the settlement. Instead, the Court may grant 

preliminary approval of a settlement if the settlement agreement 

/// 

 

Otherwise, the remaining funds will be donated to the parties' cy 

pres organization. 

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(1) appears to be the product of serious, informed, noncollusive negotiations; (2) has no obvious deficiencies; 

(3) does not improperly grant preferential treatment to 

class representatives or segments of the class; and (4) 

falls within the range of possible approval. 

Harris v. Vector Mktg. Corp., No. C-08-5198 EMC, 2011 WL 1627973, 

at *7 (N.D. Cal. Apr. 29, 2011); see also Joseph M. McLaughlin, 

McLaughlin on Class Actions: Law and Practice § 6.6 (7th ed. 2011) 

("Preliminary approval is an initial evaluation by the court of the 

fairness of the proposed settlement, including a determination that 

there are no obvious deficiencies such as indications of a 

collusive negotiation, unduly preferential treatment of class 

representatives or segments of the class, or excessive compensation 

of attorneys . . . ."). 

IV. DISCUSSION 

A. The Settlement Process 

The Court first examines the means by which the parties 

arrived at settlement. "An initial presumption of fairness is 

usually involved if the settlement is recommended by class counsel 

after arm's-length bargaining." Riker v. Gibbons, No. 3:08-cv00115-LRH-VPC, 2010 WL 4366012, at *2 (D. Nev. Oct. 28, 2010) 

(citing 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions 

§ 11:42 (4th ed.2002)). 

The settlement in this case was the product of two day-long 

mediation sessions held before an experienced mediator, Professor 

Eric Green. See generally ECF. No. 56-4 ("Green Decl."). The 

parties conducted informal pre-mediation discovery, and exchanged 

mediation briefs setting out their respective positions. Mot. at 

2. As part of this process, Defendant produced, and Plaintiff 

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reviewed, over 500 pages of documents. Id. The first mediation 

session was held on June 18, 2014. This first mediation was 

unsuccessful. Id. 

After failing to come to an agreement, Plaintiff served a 

number of discovery requests upon Defendant. Id. The parties then 

agreed to mediate for a second time on September 16, 2014, again 

with mediator Green. Id. After a full day of negotiations, the 

parties reached an agreement as to the material terms of a 

settlement. Id. 

After reviewing the parties' briefs and supplemental papers, 

including Professor Green's declaration, the Court concludes that 

the settlement was the result of extensive, arms'-length 

negotiations between the parties after some discovery, motion 

practice, and pre-trial preparation. Further, "[t]he assistance of 

an experienced mediator in the settlement process confirms that the 

settlement is non-collusive." Satchell v. Fed. Exp. Corp., No. C 

03–2659 SI, 2007 WL 1114010, at *4 (N.D. Cal. Apr. 13, 2007); see 

also Carter v. Anderson Mech., LP, 2010 WL 1946784, at *7 (C.D. 

Cal. May 11, 2010); Green Decl. ¶¶ 1-12 (detailing mediator Green's 

experience and the arms-length nature of the mediation). 

B. The Presence of Obvious Deficiencies 

The second factor the Court considers is whether there are 

obvious deficiencies in the Settlement Agreement. Plaintiff 

asserts that the settlement does not contain any "deficiencies 

which can stand in the way of judicial approval." Mot. at 18. 

Specifically, Plaintiffs note that the totality of the settlement 

will be paid out without reversion to the Defendant; deductions 

such as attorneys' fees, administrative expenses, and Named 

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Plaintiff service awards require judicial approval; and the 

settlement is not contingent upon approval of the requested 

amounts. Mot. at 18-19. Nevertheless, the Court has serious 

concerns. 

1. Claim Forms 

The Settlement Agreement requires class members to complete a 

claim form in order to receive their share of the settlement. 

There is nothing inherently objectionable about requiring a claim 

form. However, where requiring a claim form imposes unnecessary 

costs or limits the number of class members who will receive a 

settlement, some justification is required before the Court will 

grant preliminary approval. See Sullivan v. DB Invs., Inc., 667 

F.3d 273, 319 (3d Cir. 2011) (stating that "trial judges bear the 

important responsibility of protecting absent class members"); 

Maywalt v. Parker & Parsley Petroleum Co., 67 F.3d 1072, 1078 (2d 

Cir. 1995) (noting that "the district court has a fiduciary 

responsibility" to the class); Fed. Judicial Ctr., Managing Class 

Action Litig.: A Pocket Guide for Judges, 30 (3d ed. 2010) ("If the 

claims process deters class members from filing claims, the 

settlement may have less value to the class than the parties assert 

. . . Avoid imposing unnecessary hurdles on potential claimants. 

First, consider whether a claims process is necessary at all. The 

defendant may already have the data it needs to automatically pay 

the claims of at least a portion of class members who do not opt 

out."); 2 McLaughlin on Class Actions § 6:23 (11th ed. 2014) ("In 

addition to ensuring a higher level of class member participation 

in the recovery, eliminating the claim form reduces costs of 

administration, and may increase the fee awarded."). 

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In this case, requiring a claim form will reduce the amount 

available to the class given the cost of producing, processing, and 

purchasing prepaid return postage for 588,000 forms. Furthermore, 

only about 15 percent of eligible class members will receive their 

share of the settlement as a result of requiring a claim form. Pl. 

Suppl. Br. at 14. To be sure, courts have approved settlements 

requiring class members to submit claim forms where class members 

were difficult to identify or where calculating each class member's 

share of the settlement required information the parties did not 

have. See, e.g., Trombley v. Nat'l City Bank, 759 F. Supp. 2d 20, 

25-26 (D.D.C. 2011) (finding claim forms appropriate where the 

share of damages could not be calculated without additional 

information from class members). However, neither concern is at 

issue here. Class members are readily identifiable from Aerotek's 

records, and each class member's share is simply a pro rata portion 

of the settlement fund (after costs, fees, etc. are deducted). 

After reviewing Plaintiffs' motion and the parties' 

supplemental briefing on the issue, the Court finds the parties' 

justifications unconvincing. In their motion for preliminary 

approval, Plaintiffs argue that a claim form is appropriate for 

three reasons: 

First, use of the Claim Form helps to ensure that all 

class members will have the opportunity to receive a 

share of the settlement . . . . Second, the Claim Form in 

this case is not unduly burdensome . . . . Third and 

finally, there is no reversion of any settlement funds to 

the Defendant. 

Mot. at 19. 

 It is entirely unclear how, as compared to simply sending a 

check, a claim form "helps to ensure that all class members have 

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the opportunity to receive a share of the settlement." Id. 

Plaintiffs assert that "[g]iven the brevity of Defendant's 

interaction with many members of the class, many class members may 

not be inclined to negotiate their checks, or their addresses may 

be outdated." Id. Even if that were true, the claim form will not 

increase the number of class members who are inclined to negotiate 

their checks, nor will it provide the Settlement Administrator with 

updated addresses. On the contrary, it is likely to significantly 

reduce the number class members who receive a settlement payment.4 

 Plaintiffs urge the Court to approve the Settlement Agreement 

because the claim form is not unduly burdensome. The Court agrees 

that the claim form does not place a significant burden on class 

members in terms of the effort required to submit a claim. Many 

class members may be reluctant to send their personal information 

through the mail on a postcard, however. Moreover, whether the 

burden on class members is undue depends, in part, on the 

underlying justification for requiring the claim form in the first 

place. Insofar as a claim form is unnecessary, the burden, while 

low, can still be undue. 

Finally, Plaintiffs' motion argues that the parties have no 

incentive to make the claims process more onerous than necessary 

because funds that are not claimed will be donated as opposed to 

reverted to the Defendant. The Court agrees that this is an 

important consideration, but it disagrees that there is no other 

 

4

 The proposed claim form requires class members to submit their 

personal information -- including the last four digits of their 

Social Security number -- through the mail on a postcard that can 

be easily viewed by anyone who comes into contact with it. This is 

sufficiently burdensome that the parties estimate that only 15 

percent of class members will return them. Pl. Suppl. Br. at 14. 

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incentive to drive down the claims rate. The parties have asked 

the Court to evaluate the adequacy of the settlement assuming that 

class members will receive approximately $40 each. Pl. Suppl. Br. 

at 14. A $40 award is only possible under the terms of the 

Settlement Agreement, however, if one assumes a claims rate of 15 

percent. In order to keep the claims rate as low as 15 percent, 

however, claim forms are necessary. 

In their supplemental brief, Plaintiffs provide several 

examples of courts approving settlements requiring claim forms. 

The claim forms in the cited cases, however, were clearly justified 

and/or outweighed by other considerations that do not apply here. 

See Shames v. Hertz Corp., No. 07-CV-2174-MMA WMC, 2012 WL 5392159, 

at *12 (S.D. Cal. Nov. 5, 2012) ("The actual intent of the claims 

process is to allow class members the opportunity to choose between 

several payment options."); Weeks v. Kellogg Co., No. CV 09-08102 

MMM RZX, 2013 WL 6531177, at *4 (C.D. Cal. Nov. 23, 2013) 

(approving the use of a claim form where the defendant did not 

already have class members' addresses); Arthur v. Sallie Mae, Inc., 

No. C10-0198JLR, 2012 WL 90101, at *4 (W.D. Wash. Jan. 10, 2012) 

(approving the use of a claim form where the defendant did not have 

class members' addresses and the intent of form was to allow class 

members to choose between settlement options); Schulte v. Fifth 

Third Bank, 805 F. Supp. 2d 560, 590-91 (N.D. Ill. 2011) (approving 

the use of a claim form where additional information was needed in 

order for the claims administrator to process claims); Trombley, 

759 F. Supp. 2d at 28 (same); Milliron v. T-Mobile USA, Inc., No. 

CIV.A. 08-4149 (JLL), 2009 WL 3345762, at *6 (D.N.J. Sept. 10, 

2009), as amended (Sept. 14, 2009), aff'd, 423 F. App'x 131 (3d 

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Cir. 2011) (same); Lemus v. H & R Block Enter. LLC., No. C 09-3179 

SI, 2012 WL 3638550, at *5 (N.D. Cal. Aug. 22, 2012) (granting 

final approval notwithstanding the claims-made nature of the 

settlement because a significant portion of the class participated 

and the average class member's recovery was at least $1,200.80). 

 Plaintiffs again argue in their supplemental brief that 

"requiring claim forms is perfectly justified . . . [b]ecause . . . 

there is doubt as to whether Defendant has current contact 

information" due to the "transitory nature" of class members' 

interactions with Defendant. Pl. Suppl. Br. at 12-13. Plaintiffs 

fail to explain, however, why a "transitory" interaction is more 

likely to yield inaccurate addresses. Addresses were provided to 

the Defendant relatively recently -- "from July 3, 2011 through the 

present." Settlement ¶ 2. It seems unlikely, therefore, that a 

significant number of checks would go undelivered or mis-delivered. 

Regardless, to the extent that the accuracy of addresses is an 

issue, the Court fails to see how claim forms are an effective 

remedy. Mailing claim forms would not increase the likelihood that 

the intended class members would receive their share of the 

settlement. Moreover, undelivered or mis-delivered checks can 

simply be redistributed according to the provisions of the 

settlement plan. See Settlement ¶¶ 36-38. 

 Finally, Plaintiffs argue that increasing the number of class 

members who receive a settlement payment by simply mailing checks 

to the 588,000 class member addresses on record "would not be the 

best way to administer the settlement" because it would result in 

class members receiving checks of less than $10, which are unlikely 

to be cashed. Pl. Suppl. Br. at 13 n.6. This is undesirable 

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according to the Plaintiffs because it will result in the class 

incurring the cost of a second distribution. Id. Intentionally 

reducing the number of class members who receive a payment by 

requiring them to jump through unnecessary hoops, however, is a 

highly dubious means of reducing costs. All else equal, the goal 

should be to distribute settlement payments to as many class 

members as possible. Moreover, even if the Court were to assume 

that mailing checks to every class member would result in a second 

distribution (and that mailing claim forms first would prevent a 

second distribution), mailing checks directly would eliminate other 

costs, including the cost of printing, processing, and purchasing 

prepaid return postage for thousands of claim forms. 

 Similar FCRA class action settlements involving employers who 

had applicants' addresses on file have not required class members 

to fill out and return a claim form. See, e.g., Motion for 

Preliminary Approval of Class Action Settlement at 8, Ford v. CEC 

Ent., Inc., No. 14-00677-JLS-JLB (S.D. Cal.), ECF No. 36 ("All 

Class Members are entitled to receive a check for approximately $38 

without having to submit a claim form."); Settlement Agreement at 

13, Brown v. Delhaize Am., LLC, No. 14-00195-TDS-JLW (M.D.N.C.) ECF 

No. 65-2 ("The Net Settlement Fund will be distributed pro rata in 

the form of a check to each member of the Settlement Classes."). 

Here, a claim form will result in additional costs to the class 

while reducing the number of class members who will receive a 

settlement payment. In the absence of any reason to require a 

claim form other than to inflate the appearance of an adequate pro 

rata settlement amount, the Court cannot grant preliminary 

approval. 

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2. Attorneys' Fees 

The Court's fiduciary duty to protect the interests of the 

class is especially important when the interests of the class and 

its counsel negotiating on its behalf are not aligned. See Reynolds 

v. Beneficial Nat'l Bank, 288 F.3d 277, 279–80 (7th Cir. 2002) 

(stating that the problem that class counsel "may, in derogation of 

their professional and fiduciary obligations, place their pecuniary 

self-interest ahead of that of the class . . . requires district 

judges to exercise the highest degree of vigilance in scrutinizing 

proposed settlements of class actions"). This is particularly true 

when reviewing the reasonableness of proposed attorneys' fees. 

See, e.g., Pokorny v. Quixtar Inc., No. 07-0201-SC, 2011 WL 

2912864, *1 (N.D. Cal. July 20, 2011) (examining the reasonableness 

of attorneys' fees at the preliminary approval stage and requiring 

additional information including documentation of attorney and 

staff hours and billing rates before approval was granted). 

There has been very little litigation in this case. Moreover, 

the settlement provides less than $6.08 per class member. 

Nevertheless, the Settlement Agreement authorizes Plaintiffs' 

counsel to petition the Court for up to $1,315,625 in attorneys' 

fees. The Ninth Circuit has established 25 percent of a common 

fund as a benchmark award for attorneys' fees. See Larsen v. 

Trader Joe's Company, No. 11-cv-05188-WHO, 2014 WL 3404531, *9 

(N.D. Cal. July 11, 2014). The proposed amount falls within that 

benchmark, but upon a motion for attorneys' fees, the Court would 

likely require additional evidence to show that the proposed fees 

are reasonable in light of the litigation conducted and the 

settlement's benefit to the class. 

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C. Preferential Treatment 

Under the third factor, the Court examines whether the 

Settlement Agreement provides preferential treatment to any class 

member. Here, the settlement agreement calls for the certification 

of a single class, with no sub-classes. Every class member will be 

treated equally, and have an equal opportunity to claim a pro rata 

share of the settlement fund. 

The settlement also calls for service awards for the Named 

Plaintiffs -- $3,000 to Plaintiff Rubio-Delgado and $1,000 each to 

Harrietta Hubbard and Shalanda Burgess. The Ninth Circuit has 

recognized that service awards to named plaintiffs in a class 

action are permissible and do not render a settlement unfair or 

unreasonable. See Stanton v. Boeing Co., 327 F.3d 938, 977 (9th 

Cir. 2003); Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 958–69 (9th 

Cir. 2009); but see Chavez v. Lumber Liquidators, No. 09-cv-4812, 

2015 WL 2174168, at *3 (N.D. Cal. May 8, 2015) (denying preliminary 

approval when the incentive award made up 7 percent of the entire 

settlement pool). The service awards in this case are subject to 

the Court's review and approval. If preliminary approval had been 

granted, the Court would determine what portion of the service 

awards is actually justified based on evidence of Plaintiffs' 

involvement in this case. See W. v. Circle K Stores, Inc., No. 

CIV. S-04-0438-WBS-GGH, 2006 WL 1652598, at *12 (E.D. Cal. June 13, 

2006). At this stage, however, the Court is not concerned that the 

Settlement Agreement provides preferential treatment to any class 

member given that it only represents 0.1% of the total settlement 

amount. 

/// 

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D. Whether the Settlement Falls Within the Range of Possible 

Approval 

Finally, the Court must consider whether the Settlement 

Agreement falls within the range of possible approval. "To evaluate 

the range of possible approval criterion, which focuses on 

substantive fairness and adequacy, courts primarily consider 

plaintiffs' expected recovery balanced against the value of the 

settlement offer." Vasquez v. Coast Valley Roofing, Inc., 670 F. 

Supp. 2d 1114, 1125 (E.D. Cal. 2009) (internal quotations omitted). 

Additionally, to determine whether a settlement is fundamentally 

fair, adequate, and reasonable, the Court may preview the factors 

that ultimately inform final approval: (1) the strength of the 

plaintiffs' case; (2) the risk, expense, complexity, and likely 

duration of further litigation; (3) the risk of maintaining class 

action status throughout the trial; (4) the amount offered in 

settlement; (5) the extent 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) the reaction of 

class members to the proposed settlement. In re Bluetooth Headset 

Prods. Liab. Litig. (In re Bluetooth), 654 F.3d 935, 943 (9th Cir. 

2011) (citing Churchill Village v. Gen. Elec., 361 F.3d 566, 575 

(9th Cir. 2004)). Although the Court undertakes a more in-depth 

investigation of the foregoing factors at the final approval stage, 

these factors inform whether the Settlement Agreement falls within 

the "range of possible approval." 

1. Comparison of Expected Recovery with Settlement 

The Court first considers the classes' expected recovery 

balanced against the value of the settlement offer. The Ninth 

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Circuit and several district courts have held that a court should 

measure the expected recovery at trial based on "the 'maximum 

amount of damages recoverable in a successful litigation.'" 

Harris, No. C-08-5198-EMC, 2011 WL 1627973, at *11 (quoting Glass 

v. UBS Fin. Serv., Inc., No. 2007 WL 221862, at *4 (N.D. Cal. Jan. 

26, 2007)); In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 459 

(9th Cir. 2000)). At this stage in the analysis, "[t]he maximum 

amount of damages if Plaintiffs are successful at trial is not 

discounted by the litigation risk." Id. This figure "serves as a 

comparative base, reflecting the full verdict value if the 

Plaintiff class were successful at trial." Id. 

Plaintiffs' claim for relief seeks $100 to $1,000 for each 

violation of FCRA. See Compl. ¶ 60. Those amounts are based on 

the statutory damages provided for by FCRA. See 15 U.S.C. § 

1681n(a)(1)(A). Plaintiffs also seek punitive damages, costs, and 

attorney's fees. Compl. ¶¶ 61-62. Aerotek's records indicate that 

the number of class members is about 588,000. Settlement Agreement 

at ¶ 2. Thus, even if one were to discount Plaintiffs' claims of 

punitive damages and attorneys' fees and costs, "the maximum amount 

of damages if Plaintiffs are successful at trial" would be $1,000 

per class member, for a total of $588,000,000, assuming only one 

violation per class member. 

The parties assert that comparing the settlement with the 

maximum amount of damages recoverable in a successful litigation is 

inappropriate in light of the Plaintiffs' litigation risks and 

other factors which make it highly unlikely that plaintiffs would 

receive the maximum amount of damages. Pl. Suppl. Br. at 7. 

Plaintiffs' litigation risks are of course relevant to the Court's 

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ultimate determination. The parties are incorrect that litigation 

risks are relevant at this stage of the analysis, however. 

Accordingly, the Court finds that the expected recovery is 

$588,000,000, or $1,000 per class member. 

Next, the parties argue that the Court should compare 

Plaintiffs' pro rata expected recovery at trial with the pro rata 

expected payment to each class member who completes and returns a 

claim form. The parties estimate that only 15 percent of class 

members will complete and return a claim form. Mot. at 20; 

Settlement Agreement Ex. C at 4. If only 15 percent of class 

members receive a settlement payment, each of those class members 

will receive approximately $40. Id. This is 4 percent of the 

maximum amount of statutory damages recoverable in a successful 

litigation and 40 percent of the minimum. The parties' proposed 

comparison, however, is inappropriate because it effectively 

inflates the pro rata settlement value by the "leakage resulting 

from a claims process where less than all members file claims." 

Harris, 2011 WL 1627973, at *11. 

Both the expected recovery at trial and the expected 

settlement payment must be based on the same number of class 

members (588,000). The total expected recovery is $588,000,000. 

The total settlement value ($5,262,500), less attorneys' fees 

($1,315,625), incentive payments ($5,000), and settlement 

administration costs ($369,999), is $3,572,476. The total 

settlement value is therefore 0.61 percent of the expected 

recovery. Even if one were to calculate the expected recovery 

based on the minimum statutory damages amount of $100 per 

violation, the total settlement value would still only be 6.07 

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percent of the expected recovery, even less once settlement 

administration costs are deducted. 

2. Other Factors 

Although the proposed settlement is only a small percentage of 

the total expected recovery at trial, "there is no reason, at least 

in theory, why a satisfactory settlement could not amount to a 

hundredth or even a thousandth part of a single percent of the 

potential recovery." In re Ionosphere Clubs, Inc., 156 B.R. 414, 

427 (S.D.N.Y. 1993). Whether a settlement that is between 0.67 

percent and 6.7 percent of the expected recovery is within the 

range of possible approval depends on the strength of the 

plaintiffs' case; the risk, expense, complexity, and likely 

duration of further litigation; the risk of maintaining class 

action status throughout the trial; the extent of discovery 

completed and the stage of the proceedings; and the experience and 

views of counsel. In re Bluetooth, 654 F.3d at 943. The parties 

have identified several reasons why the proposed settlement amount 

might be reasonable, including several weaknesses in the 

Plaintiffs' case. Because preliminary approval is being denied due 

to deficiencies in the Settlement Agreement, however, the Court 

declines to examine the merits of Plaintiffs' case at this stage 

given the potential impact on future negotiations and/or 

litigation. 

/// 

/// 

/// 

/// 

/// 

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V. CONCLUSION 

For the reasons given herein, Plaintiffs' Motion for 

Preliminary Approval of the Proposed Settlement is DENIED. 

 

 IT IS SO ORDERED. 

 Dated: June , 2015 

UNITED STATES DISTRICT JUDGE 

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