Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-01329/USCOURTS-cand-3_15-cv-01329-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1692 Fair Debt Collection Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DANIEL SCHUCHARDT, et al.,

Plaintiffs,

v.

LAW OFFICE OF RORY W. CLARK,

Defendant.

Case No. 15-cv-01329-JSC 

ORDER GRANTING PRELIMINARY 

APPROVAL OF CLASS ACTION 

SETTLEMENT

Re: Dkt. No. 45

Plaintiffs Daniel Schuchardt (“Schuchardt”) and Michelle Muggli (“Muggli” and, together, 

“Plaintiffs”) bring this pre-certification class action on behalf of themselves and a putative class of 

consumers against Defendant Law Office of Rory W. Clark, A Professional Law Corporation 

(“Defendant”), alleging violations of the Fair Debt Collections Practices Act (“FDCPA”), 15 

U.S.C. § 1692, and corresponding sections of the Rosenthal Fair Debt Collection Practices Act 

(“Rosenthal Act”), Cal. Civ. Code § 1788, arising out of the language in the initial debt collection 

letters that Defendant sent to Plaintiffs and the rest of the putative class. Specifically, Plaintiffs 

contend that the initial communication notice misrepresented their rights by failing to notify them 

that certain statutory rights would be triggered only by the recipients’ disputing the debt in 

writing, not just orally. Now pending before the Court is Plaintiffs’ unopposed motion for 

preliminary approval of a class action settlement. (Dkt. No. 44.)

1

 After reviewing the proposed 

settlement, and with the benefit of oral argument and post-hearing submissions, the Court 

GRANTS the motion as outlined below.

 

1 Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the 

ECF-generated page numbers at the top of the documents.

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BACKGROUND

A. Factual Background

The following undisputed facts are based on the parties’ recitation of undisputed facts 

described in their briefing on Defendant’s motion for summary judgment. 

Defendant is a law firm that engages in debt collection on behalf of several clients, 

including Bank of America, N.A. Plaintiffs, who are “consumers” within the meaning of the 

FDCPA, incurred debts to Bank of America primarily for personal, family, or household purposes. 

When their debts became delinquent, Bank of America referred them to Defendant to initiate 

collection litigation. On January 2, 2015, Defendant mailed Plaintiffs collection letters regarding 

their Bank of America debts. (Dkt. Nos. 1-1, 1-2.) These letters were the initial communication 

between Plaintiffs and Defendant, and they were the only communication sent to Plaintiffs for the 

next five days. The letters provide, in relevant part:

If you notify this firm within thirty (30) days after your receipt of 

this letter, that the debt, or any portion thereof, is disputed, we will 

obtain verification of the debt or a copy of the judgment, if any, and 

mail a copy of such verification or judgment to you. Upon your 

written request within the same thirty-day period mentioned above, 

we will provide you with the name and address of the original 

creditor, if different from the current creditor.

Unless you dispute the validity of the debt or any portion thereof 

within thirty (30) days after your receipt of this letter, we will 

assume that the debt is valid.

(Id.) Neither Plaintiff contacted Defendant, either orally or in writing, to lodge a dispute about the 

debt, request a validation, or otherwise seek more information about the debt within 30 days of 

receipt of the debt collection letter.

B. Procedural History

Plaintiffs filed the instant class action complaint on March 23, 2015 under Section 

1692g(a)(4) of the FDCPA and Section 1788.17 Rosenthal Act, alleging that the statement 

misrepresented the rights of consumers by failing to inform Plaintiffs that their dispute of debt 

must be in writing. (Dkt. No. 1.) Defendant answered soon after, and the parties commenced 

limited discovery. At the case management conference on July 16, 2015, they agreed to stay 

discovery and class certification briefing until after resolution of a discrete, dispositive legal issue: 

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whether the language in the letter is misleading insofar as it misrepresents Plaintiffs’ statutory 

rights to request a debt validation. In accordance with that discussion, the parties fully briefed 

Defendant’s motion for summary judgment (Dkt. Nos. 30-32), but prior to the hearing the parties 

submitted a joint notice of class action settlement. (Dkt. No. 34.) Plaintiffs filed the instant 

motion for preliminary approval of the parties’ agreement, and the Court held a hearing on the 

motion on January 7, 2016. Plaintiffs subsequently filed a supplemental submission addressing 

concerns the Court raised at the hearing. (Dkt. No. 49.) This submission included a revised 

Settlement Agreement, revised Class Notice, and a declaration of Matthew Kumar, counsel for, 

and president and sole shareholder of, Defendant.

2

 (Dkt. Nos. 49-1, 49-2.)

SETTLEMENT PROPOSAL

At some point after the complaint was filed, the parties engaged in settlement discussions. 

The Court presumes these were informal settlement negotiations, as the parties’ chosen 

Alternative Dispute Resolution (“ADR”) process was not set to begin until later in the year. (See 

Dkt. No. 28.) After fully briefing Defendant’s summary judgment motion in September 2015, the 

parties apparently engaged in further informal settlement negotiations that led to the instant 

settlement agreement. At that point, this action had been pending for a total of six months. The 

parties had engaged in limited discovery before all discovery was stayed, and their deadline to 

complete Early Neutral Evaluation had been stayed as well. (Dkt. No. 26, 29.) There is no 

information before the Court about the scope of the parties’ negotiations or whether a neutral third 

party participated. The parties ultimately agreed to the Settlement Agreement before the Court. 

(Dkt. No. 44-1.) The key provisions are as follows. 

A. Estimated Class Size

The parties define “Class Members” to include:

All persons with a California address to whom Law Office of Rory 

W. Clark, A Professional Law Corporation mailed an initial debt 

collection communication that stated: “If you notify this firm within 

thirty (30) days after your receipt of this letter, that the debt or any 

portion thereof, is disputed, we will obtain verification of the debt or 

 

2

In this Order, the Court refers to the revised settlement agreement and revised class notice 

submitted after the hearing as the Settlement Agreement and Class Notice, respectively.

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a copy of the judgment, if any, and mail a copy of such verification 

or judgment to you,” between June 1, 2014 and June 1, 2015, in 

connection with the collection of a consumer debt.

(Dkt. No. 49-1 ¶ 1.C.) Excluded from the Class is any person already subject to an existing 

agreement about the debt collection communication, any person who is deceased, and any person 

who has filed for bankruptcy protection under Title 11 of the United States Code. (Id.) In the 

Settlement Agreement, Defendant represents that there are 1,361 Class Members, including 

Plaintiffs. (Id.)

B. Settlement Consideration

The Settlement Agreement provides for a Settlement Fund of $13,610, which amounts to 

$10 for each of the 1,361 Class Members. (Dkt. No. 49-1 ¶ 17.A.) However, “[s]hould the Parties 

discover that there are additional, or fewer, Class Members, the Settlement Fund will be adjusted 

accordingly such that the Settlement Fund consists of $10.00 per Class Member.” (Id.) In short, 

the Settlement Fund may be adjusted up or down so that each Class Member receives a $10.00 

award. (See id.)

Separate from the Settlement Fund, the Settlement Agreement provides that Defendant will 

pay $1,000.00 to each named Plaintiff pursuant to 15 U.S.C. § 1692k(a)(2)(B)(i).3 Apart from this 

statutory award, neither Plaintiff seeks an incentive award for their service to the Class. Also 

separate from the Settlement Fund, the Settlement Agreement provides that Defendant will pay 

Class Counsel’s attorneys’ fees, costs, and expenses, as well as the costs of settlement 

administration. (Dkt. No. 49-1 ¶¶ 17.D, E.) With respect to attorneys’ fees and costs, the 

Settlement Agreement provides that Class Counsel will not seek more than $55,000, and that 

Defendant will not challenge any requested fees, costs, and expenses up to $40,000. (Id. ¶ 17.D.) 

As for settlement administration, the Settlement Agreement itself does not set a maximum amount 

for such costs, nor does the Notice include any estimate of administration costs. (Id. ¶ 17.E.) 

 

3

Section 1692k(a)(2)(B)(i) provides that “any debt collector who fails to comply with any 

provision of this subchapter with respect to any person is liable to such person in an amount equal 

to the sum of . . . in the case of a class action, (i) such amount for each named plaintiff as could be 

recovered under subparagraph (A)[.]” Subparagraph (A), in turn, provides for liability for “such 

additional damages as the court may allow, but not exceeding $1,000[.]”

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Lastly, the Settlement Agreement includes a non-monetary term of relief: Defendant will 

no longer use the language at issue in this case in its initial debt collection letters. (Id. ¶ 17.C.) 

Specifically, instead of stating that if recipients “notify this firm within thirty (30) days after your 

receipt of this letter, that the debt . . . is disputed” the firm will verify the debt and mail the 

verification to the recipient, the letter will notify recipients that they must notify Defendant in 

writing if they dispute all or a portion of the debt in order trigger Defendant’s obligation to verify 

the debt and mail the recipient any such verification. (Id.) 

C. Claims & Exclusion Procedures

Class Members may request exclusion by mailing an electronic or written request for 

exclusion identifying their name, address, telephone number, and email address along with a 

statement that he or she wishes to be excluded. (Dkt. No. 49-1 ¶ 9-10.) Any Class Member who 

submits a valid and timely exclusion request will not be bound by the Settlement Agreement

terms. (Id. ¶ 11.) Any Class Member who does not submit a written claim form within 60 days 

from the deadline for dissemination of Class Notice will be bound by the Settlement Agreement. 

(Id. ¶ 9.)

The Settlement Fund will then be distributed to the Class Members who do not opt out of 

the Class. Class Members need not submit a claim form; instead, Class Members who do nothing 

will become part of the Class, be bound by the Settlement Agreement, and receive their $10 share.

Class Members may object to the Settlement Agreement by filing a written objection 

within 90 days of the Court’s grant of Preliminary Approval. (Id. ¶ 12.) Within the same time 

period Class Members must provide a copy of any objection via mail or email to Class Counsel 

and defense counsel. (Id.) The written objection must include the name of the case and case 

number, the Class Member’s full name and contact information, the reason for the objection, 

whether the Class Member intends to appear at the final fairness hearing herself or through 

counsel (in which case contact information for counsel must be provided), and a list of any legal 

authority she intends to present at the hearing. (Id. ¶ 13.) Objectors are part of the Class.

D. Release of Claims

Class Members agree to release all “Released Claims” against “Released Parties.” The 

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scope of “Released Claims” is defined as follows:

[A]ll claims under 15 U.S.C. § 1692g(a)(4), between June 1, 2014 

and June 1, 2015, that arise out of the following language in the 

initial debt collection letters sent by Law Office of Rory W. Clark, 

A Professional Law Corporation[,] to Plaintiffs or Class Members 

on behalf of Bank of America, N.A.: “If you notify this firm within 

thirty (30) days after your receipt of this letter, that the debt or any 

portion thereof, is disputed, we will obtain verification of the debt or 

a copy of the judgment, if any, and mail a copy of such verification 

or judgment to you.”

(Dkt. No. 49-1 ¶ 1.D.) The Settlement Agreement defines “Released Parties” as Defendant and 

“each of its past, present, and future directors, officers, employees, partners, principals, insurers, 

co-insurers, re-insurers, clients (of which includes Bank of America, N.A.), shareholders, 

attorneys, and any related or affiliated company, including any parent, subsidiary, predecessor, or 

successor company.” (Id. ¶ 1.E.) 

E. Cy Pres Distribution

The Settlement Agreement gives each Class Member 90 days from the date the Class 

Administrator mails settlement checks to cash the checks. (Dkt. No. 44-1 ¶ 17.A.) To the extent 

that any funds remain in the Settlement Fund after the void date—that is, uncashed checks sent to 

Class Members—the amount will be paid to Bay Area Legal Aid as a cy pres recipient. (Id.)

F. Deadlines

Following Preliminary Approval, the Class Administrator, Kurtzman Carson Consultants, 

LLC, has 60 days to provide notice of the Settlement Agreement to the Class Members in the form 

of written notice. (Id. ¶ 7.) Class Counsel’s motion for attorneys’ fees is due no later than 30 days 

after the deadline for dissemination of Class Notice. (Id. ¶ 17.D.) Within 60 days of Notice being 

mailed, requests for exclusion and objections are due. (Id. ¶¶ 9, 12.) Within 10 days of Final 

Approval, Defendant, in consultation with the Class Administrator, will transfer the appropriate 

amount into the Settlement Fund. (Id. ¶ 17.A.) The Class Administrator has 15 days from the 

order granting Final Approval of the Settlement Agreement to mail checks to Class Members. 

(Id.) If Class Members do not cash their checks within 90 days after mailing, the check becomes 

void and the amount will be distributed to Bay Area Legal Aid as cy pres recipient. 

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DISCUSSION

A class action settlement must be fair, adequate, and reasonable. Fed. R. Civ. P. 23(e)(2). 

When, as here, parties reach an agreement before class certification, “courts must peruse the 

proposed compromise to ratify both the propriety of the certification and the fairness of the 

settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). If the Court temporarily 

certifies the class and finds the settlement appropriate after “a preliminary fairness evaluation,” 

then the class will be notified and a final “fairness” hearing scheduled to determine if the 

settlement is fair, adequate, and reasonable pursuant to Federal Rule of Civil Procedure 23. 

Villegas v. J.P. Morgan Chase & Co., No. CV 09-00261 SBA (EMC), 2012 WL 5878390, at *5 

(N.D. Cal. Nov. 21, 2012).

A. Conditional Certification of the Settlement Class

Congress has expressly recognized the propriety of a class action under the FDCPA by 

providing special damages provisions and criteria in 15 U.S.C. § 1692(k) and (b) for FDCPA class 

action cases. These sections provide in relevant part:

(b) In determining the amount of liability in any action under 

subsection (a), the court shall consider, among other relevant 

factors: (2) in any class action under subsection (a)(2)(B), the 

frequency and persistence of noncompliance by the debt collector, 

the nature of such noncompliance, the resources of the debt

collector, the number of persons adversely affected, and the extent 

to which the debt collector’s noncompliance was intentional.

A plaintiff seeking a remedy under 15 U.S.C. § 1692k must meet the requirements of Rule 

23. Under that rule, class actions must meet the following requirements prior to certification:

1) the class is so numerous that joinder of all members is 

impracticable; 2) there are questions of law or fact common to the 

class; 3) the claims or defenses of the representative parties are 

typical of the claims or defenses of the class; and 4) the 

representative parties will fairly and adequately protect the interests 

of the class.

Fed. R. Civ. P. 23(a). 

In addition to meeting the requirements of Rule 23(a), a potential class must also meet one 

of the conditions outlined in Rule 23(b)—of relevance here, the condition that “the court finds that 

the questions of law or fact common to class members predominate over any questions affecting 

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only individual members, and that a class action is superior to other available methods for fairly 

and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). In evaluating the proposed 

class, “pertinent” matters include:

(A) the class members’ interests in individually controlling the 

prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the 

controversy already begun or against the class members;

(C) the desirability or undesirability of concentrating the litigation 

of the claims in the particular forum; and 

(D) the likely difficulties in managing a class action.

Fed. R. Civ. P. 23(b)(3). Prior to certifying the class, the Court must determine that Lead Plaintiff 

has satisfied his burden to demonstrate that the proposed class satisfies each element of Rule 23.

1. Rule 23(a)

a. Numerosity

“Under the first Rule 23(a)(1) factor, the class must be ‘so numerous that joinder of all 

members is impracticable.’” Dukes v. Wal-Mart Stores, Inc., 222 F.R.D. 137, 144 (N.D. Cal. 

2004) (citing Fed. R. Civ. P. 23(a)(1)); Staton, 327 F.3d at 953. Here, Defendant admits that it 

sent materially similar, if not identical, debt collection letters to approximately 1,361 California 

residents within the class period. “Joinder of 1,000 or more co-plaintiffs is clearly impractical.” 

Palmer v. Stassinos, 233 F.R.D. 546, 549 (N.D. Cal. 2006). The numerosity requirement is 

therefore met.

b. Commonality

Second, to certify a class there must be “questions of law or fact common to the class.” 

Fed. R. Civ. P. 23(a)(2). “[C]ommonality requires that the class members’ claims ‘depend on a 

common contention’ such that ‘determination of its truth or falsity will resolve an issue that is 

central to the validity of each [claim] in one stroke.’” Mazza v. Am. Honda Motor Co., 666 F.3d 

581, 588 (9th Cir. 2012). Commonality can be satisfied “by even a single common question.” 

Trahan v. U.S. Bank N.A., No. C 09-03111 JSW, 2015 WL 75139, at *5 (N.D. Cal. Jan. 6, 2015). 

“[A] debt collector’s liability under § 1692e of the FDCPA is an issue of law[.]” Gonzales 

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v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1061 (9th Cir. 2011). Thus, commonality is generally 

found in FDCPA cases “where . . . the defendants have engaged in standardized conduct towards 

members of the proposed class by mailing to them allegedly illegal form letters.” Palmer, 233 

F.R.D. at 549; Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1124-25 (9th Cir. 2015);

see, e.g., Hunt v. Check Recovery Sys., Inc., 241 F.R.D. 505, 510 (N.D. Cal. 2007); Abels v. JBV 

Legal Grp., P.C., 227 F.R.D. 541, 544-45 (N.D. Cal. 2005). So it is here, where Plaintiffs allege 

that Defendant sent the same purportedly unlawful form debt collection letter to Plaintiffs and the 

other members of the class. The commonality requirement has been satisfied.

c. Typicality

Rule 23(a)(3) requires that “the [legal] claims or defenses of the representative parties [be] 

typical of the claims or defenses of the class.” “Typicality refers to the nature of the claim or 

defense of the class representative and not on facts surrounding the claim or defense.” Hunt, 241 

F.R.D. at 510 (citing Hanon v. Dataprods. Corp., 976 F.2d 497, 508 (9th Cir. 1992)). “The test of 

typicality is whether other members have the same or similar injury, whether the action is based 

on conduct which is not unique to the named plaintiffs, and whether other class members have 

been injured by the same course of conduct.” Evon v. Law Offices of Sidney Mickell, 688 F.3d 

1015, 1030 (9th Cir. 2012) (internal quotation marks and citation omitted).

Here, Plaintiffs allege a pattern of wrongdoing based on Defendant having sent materially 

identical collection letters to the putative class. Plaintiffs’ claims and those of the rest of the Class 

Members are based on the same legal theory—that the text of the letters failed to include certain 

FDCPA disclosures—and seek the same recovery—statutory damages and an end to the allegedly

unlawful letters. At oral argument, Defendant confirmed that there are no Class Members who 

received Defendant’s letter then disputed the debt orally only but did not receive validation of the 

debt. Thus, none of the Class Members has suffered any harm besides receipt of the unlawful 

letter. Accordingly, the harm to all Class Members is the same. Because the Class Members were 

sent the same letter as Plaintiffs, suffered the same harm, and seek the same recovery, the 

typicality requirement is met. See Gonzales v. Arrow Fin. Servs., LLC, 489 F. Supp. 2d 1140, 

1155 (S.D. Cal. 2007) (“[T]his Court is persuaded that typicality is sufficiently established if the 

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class representative received the same collection letters as the class members.”); Abels, 227 F.R.D. 

at 545 (concluding that typicality was met where “[e]ach of the class members was sent the same 

collection letter as [plaintiff] and each was allegedly subjected to the same violations of the 

FDCPA”).

d. Adequacy of Representation

Adequacy requires that “the representative parties will fairly and adequately protect the 

interests of the class.” Fed. R. Civ. P. 23(a)(4). To answer this question, the Court must ask: “(1) 

do the named plaintiffs and their counsel have any conflicts of interest with other class members 

and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the 

class?” Evon, 688 F.3d at 1031 (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 

1988)); see also Brown v. Ticor Title Ins., 982 F.2d 386, 390 (9th Cir. 1992) (noting that adequacy 

of representation “depends on the qualifications of counsel for the representatives, an absence of 

antagonism, a sharing of interests between representatives and absentees, and the unlikelihood that 

the suit is collusive”); Fed. R. Civ. P. 23(g)(1)(B) (stating that “class counsel must fairly and 

adequately represent the interests of the class”).

With respect to Plaintiffs’ adequacy, as Defendant confirmed at the hearing, both Plaintiffs 

were allegedly harmed in the same manner as the rest of the Class Members and seek the same 

relief, which supports their adequacy. There is nothing in the record that gives the Court pause as 

to whether Plaintiffs have any conflicts with the Class Members, nor anything that otherwise 

causes the Court to question Plaintiffs’ adequacy. The same is true of Plaintiffs’ counsel. 

Plaintiffs are represented by Aaron D. Radbil of Greenwald Davidson Radbil PLLC. The firm, 

and Mr. Rabdil in particular, have been appointed class counsel in class actions around the 

country, including FDCPA cases, and including courts within the Ninth Circuit. (Dkt. No. 44-1 ¶ 

4 (collecting cases).) Thus, it appears that the named representatives are able to prosecute this 

action vigorously through qualified counsel.

* * *

Plaintiffs have shown for the purposes of preliminary approval that they meet all of the 

Rule 23(a) requirements. 

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2. Rule 23(b)

Plaintiffs must also meet one of the provisions of Rule 23(b) to succeed on his motion for 

class certification of the federal claims. See Fed. R. Civ. P. 23(b); Berger v. Home Depot USA, 

Inc., 741 F.3d 1061, 1067 (9th Cir. 2014). Plaintiffs contend that they have met the requirements 

of Rule 23(b)(3), which requires establishing predominance of common questions of law or fact 

and the superiority of a class action relative to other available methods for the fair and efficient 

adjudication of the controversy. 

To meet the predominance requirement of Rule 23(b)(3), “the common questions must be 

a significant aspect of the case that can be resolved for all members of the class in a single 

adjudication.” Berger, 741 F.3d at 1068 (internal quotation marks and alterations omitted). 

Notably, “the predominance inquiry presumes that there is commonality and entails a more 

rigorous analysis[.]’” Gold v. Midland Credit Mgmt., Inc., 306 F.R.D. 623, 633 (N.D. Cal. 2014) 

(quoting Hanlon, 150 F.3d at 1022). While Rule 23(a)(2) asks only whether there is a common 

issue, the predominance inquiry considers the common questions, “focuses on the relationship 

between the common and individual issues,” Hanlon, 150 F.3d at 1022, and requires the court to 

weigh the common issues against the individual issues. See Dukes, 131 S. Ct. at 2556. 

Predominance is found when common questions represent a significant portion of the case and can 

be resolved for all class members in a single adjudication. Hanlon, 150 F.3d at 1022.

Here, the Court has already determined that the legality of the debt collection letters is a 

question of law that is common to the class. If the Court were to find that the text violated the 

FDCPA, that single adjudication would reach the claims of all Class Members. Other courts in 

this District have reached similar conclusions. See, e.g., Gold, 306 F.R.D. at 633-34 (“At bottom, 

the broad remedial purpose of the FDCPA compels this Court to conclude that the Rule 23(b)(3) 

requirement of predominance is satisfied where, as here, statutory damages are sought to deter 

debt collectors from engaging in prohibited behavior.”); Abels, 227 F.R.D. at 547 (“Here, the 

issues common to the class—namely, whether the Defendants’ systematic policy of sending 

collection letters, and whether those letters violate the FDCPA—are predominant.”). Defendant 

has not offered any argument that any individualized inquiry is necessary that might preclude a 

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finding of predominance, and the Court sees none. Predominance is therefore satisfied. 

The second prong—that a class action is the superior means to adjudicate the claims 

raised—is also easily met. If Plaintiffs and all Class Members each brought individual actions, 

they would each be required to prove the same wrongdoing to establish Defendant’s liability. 

Every separate action would involve the same evidence—the debt collection letter—and the same 

legal theory. Different courts could interpret the claims differently, resulting in inconsistent 

rulings or unfair results. The Settlement Agreement efficiently resolves the claims of all Class 

Members at once. Thus, classwide resolution is superior to other methods and will avoid the 

possibility of repetitious litigation.

B. Preliminary Approval of the Class Action Settlement

In determining whether a settlement agreement is fair, adequate, and reasonable to all 

concerned, a court typically considers the following factors: “(1) the strength of the plaintiff’s 

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.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th 

Cir. 2011) (quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)).

However, when “a settlement agreement is negotiated prior to formal class certification, 

consideration of these eight . . . factors alone is” insufficient. Id. In these cases, courts must show 

not only a comprehensive analysis of the above factors, but also that the settlement did not result 

from collusion among the parties. Id. at 947. Because collusion “may not always be evident on 

the face of the settlement, . . . [courts] must be particularly vigilant not only for explicit collusion, 

but also for more subtle signs that class counsel have allowed pursuit of their own self-interests 

and that of certain class members to infect the negotiations.” Id. In Bluetooth, the court identified 

three such signs:

(1) when class counsel receives a disproportionate distribution of the 

settlement, or when the class receives no monetary distribution but 

counsel is amply rewarded;

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(2) when the parties negotiate a “clear sailing” arrangement 

providing for the payment of attorney’s fees separate and apart from 

class funds without objection by the defendant (which carries the 

potential of enabling a defendant to pay class counsel excessive fees 

and costs in exchange for counsel accepting an unfair settlement); 

and

(3) when the parties arrange for fees not awarded to revert to 

defendants rather than be added to the class fund.

Id. The Ninth Circuit noted that this list is not exclusive, but offered it as guidance to district 

courts regarding types of provisions that require “greater scrutiny than ordinarily demanded” when 

assessing the overall fairness of a settlement. Id. at 949.

The Court cannot fully assess all of these fairness factors until after the final approval 

hearing; thus, “a full fairness analysis is unnecessary at this stage.” Alberto v. GMRI, Inc., 252 

F.R.D. 652, 665 (E.D. Cal. 2008) (internal quotation marks and citation omitted). Instead, “the 

settlement need only be potentially fair, as the Court will make a final determination of its 

adequacy at the hearing on Final Approval, after such time as any party has had a chance to object 

and/or opt out.” Acosta v. Trans Union, LLC, 243 F.R.D. 377, 386 (C.D. Cal. 2007). At this 

juncture, “[p]reliminary approval of a settlement and notice to the class is appropriate if [1] the 

proposed settlement 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.” Cruz 

v. Sky Chefs, Inc., No. 12-02705, 2014 WL 2089938, at *7 (N.D. Cal. May 19, 2014) (quoting In 

re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1079 (N.D. Cal. 2007)). Ultimately, “[t]he 

initial decision to approve or reject a settlement proposal is committed to the sound discretion of 

the trial judge.” Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615, 625-26 (9th Cir. 1982).

1. The Fairness Factors

a. Means at Which Parties Arrived at Settlement

The first factor concerns “the means by which the parties arrived at settlement.” Harris v. 

Vector Mktg. Corp., No. 08-5198, 2011 WL 1627973, at *8 (N.D. Cal. Apr. 29, 2011). For the 

parties “to have brokered a fair settlement, they must have been armed with sufficient information 

about the case to have been able to reasonably assess its strengths and value.” Acosta, 243 F.R.D. 

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at 396. Particularly with pre-certification settlements, enough information must exist for the court 

to assess “the strengths and weaknesses of the parties’ claims and defenses, determine the 

appropriate membership of the class, and consider how class members will benefit from 

settlement” to determine if it is fair and adequate. Id. at 397 (internal quotation marks omitted).

The use of a mediator and the presence of discovery “support the conclusion that the 

Plaintiff was appropriately informed in negotiating a settlement.” Villegas, 2012 WL 5878390, at 

*6; Harris, 2011 WL 1627973, at *8 (noting that the parties’ use of a mediator “further suggests 

that the parties reached the settlement in a procedurally sound manner and that it was not the result 

of collusion or bad faith by the parties or counsel”). However, the use of a neutral mediator “is 

not on its own dispositive of whether the end product is a fair, adequate, and reasonable settlement 

agreement.” Bluetooth, 654 F.3d at 948. And indeed, courts in this District have approved 

settlement agreements reached through information negotiations. See, e.g., Perez v. Tilton, No. C 

05-05241 JSW, 2008 WL 686723, at *1 (N.D. Cal. Mar. 10, 2008) (noting that the court granted 

the parties’ motion for preliminary approval of settlement reached through information 

negotiations).

Here, prior to reaching the Settlement Agreement, the parties engaged in only limited, 

informal discovery before all discovery was stayed so that the parties could brief a dispositive 

legal issue on summary judgment. The parties have not made any representations about what 

exactly was exchanged, which ordinarily would help the Court determine whether the Settlement 

Agreement was the result of arm’s length negotiations. But discovery beyond the number of letter 

recipients, which the parties appear to have exchanged, may be of limited importance in a case like 

this that turns on the legal issue of identical form letters.

Nor have the parties described the scope of their settlement negotiations. The Court has no 

information about how long the parties spent negotiating, whether any statements were exchanged 

before the parties began negotiating, and whether the parties used a neutral third party in 

connection with their negotiations. Given the absence of this type of information, it appears that 

the parties merely engaged in informal settlement discussions on their own without the use of a 

mediator. Still, Courts have approved settlements reached through informal settlement 

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negotiations. See, e.g., Perez, 2008 WL 686723, at *1.

On the other hand, the parties had fully briefed Defendant’s motion for summary judgment 

on that dispositive legal issue, which was whether the language of Defendant’s initial collection 

letters violated the FDCPA, but settled before the Court held oral argument or ruled on the motion. 

In that briefing, Defendant contended that the letters accurately informed Plaintiffs and other 

putative class members of their FDCPA rights and, if anything, provided Plaintiffs with more 

expansive rights than the FDCPA requires. Plaintiffs, for their part, urged that the language of the 

letters flatly violated the FDCPA. Through this briefing, the parties gained a fulsome 

understanding of their respective positions on the primary legal issue in this case before reaching 

the Settlement Agreement, which suggests that it was the product of arm’s length negotiation. 

Further, both parties were represented by experienced counsel during the course of settlement 

negotiations, which supports the fairness of the settlement. See Hanlon, 150 F.3d at 1026.

On balance, while the parties only engaged in limited discovery and appeared to reach the 

Settlement Agreement only through informal negotiations, given their familiarity with each 

other’s positions and representation by experienced counsel, the Settlement Agreement appears to 

be the product of serious, informed, non-collusive negotiation, which weighs in favor of 

preliminary approval.

b. Obvious Deficiencies

The Court next considers “whether there are obvious deficiencies in the Settlement 

Agreement.” Harris, 2011 WL 1627973, at *8.

The first Bluetooth red flag is whether class counsel receives a disproportionate 

distribution of the settlement, or the class receives no monetary distribution but counsel is amply 

rewarded. 654 F.3d at 947. So it is here. The Settlement Agreement provides for a Settlement 

Fund of $13,610. (Dkt. No. 49-1 ¶ 17.A.) In contrast, Class Counsel will seek between $40,000 

and $55,000. (Id. ¶ 17.D.) This amount is between three and over four times as large as the 

recovery that all 1,361 Class Members stand to receive, which, taken alone, may be a sign of 

collusion. On the other hand, the attorneys’ fees and Class Members’ recovery are not coming 

from a common fund. And the amount Class Members stand to recover—$10.00 each—is 

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reasonable compared to the attorneys’ fees sought given that it is a greater recovery than the 

FDCPA itself would allow. See infra, Subsection d., Range of Possible Approval (explaining that 

the total Settlement Fund exceeds one percent of Defendant’s net worth, the cap that the FDCPA 

imposes). Thus, this Bluetooth warning sign, though initially a red flag, is not a sign of collusion.

The second sign of collusion is whether the parties’ agreement contains a “clear sailing” 

agreement, which “is one where the party paying the fee agrees not to contest the amount to be 

awarded by the fee-setting court so long as the award falls beneath a negotiated ceiling.” In re 

Toys R Us-Del., Inc.—Fair & Accurate Credit Transactions Act (FACTA) Litig., 295 F.R.D. 438, 

458 (C.D. Cal. Jan. 17, 2014) (quotation marks and citation omitted). A version of a clear sailing 

agreement is present here: the Settlement Agreement provides that Defendant “will not challenge 

any requested fees, costs, and expenses that do not exceed $40,000, and Class Counsel will not 

seek more than $55,000 for attorneys’ fees, costs, and expenses.” (Dkt. No. 49-1 ¶ 17.D.) But 

Defendant will pay the attorneys’ fees, costs, and expenses “separate and apart from the 

Settlement Fund, costs of Settlement Administration, and the payments to Plaintiffs.” (Id.) Courts 

consistently have found that clear sailing provisions do not signal collusion where the attorneys’ 

fees award does not involve a common fund apportioned between relief for the class and 

attorneys’ fees. See, e.g., Roberts v. Electrolux Home Prods., Inc., No. SACV12-1644-

CAS(VBKx), 2014 WL 4568632, at *14 (C.D. Cal. Sept. 11, 2014) (“[T]he Court notes that this 

Settlement does not involve a common fund apportioned between relief and fees—and the 

attorneys’ fee award will not reduce any benefits received by the Class. Thus, any objection 

regarding a so-called ‘clear-sailing’ provision is also overruled.”) (citations omitted); Eisen v. 

Porsche Cars N. Am., Inc., No. 2:11-cv-09405-CAS-FFMx, 2014 WL 4390006, at *10 (C.D. Cal. 

Jan. 30, 2014) (“The Settlement Agreement merely provides that [defendant] will not object to a 

fee petition by plaintiffs’ counsel so long as the requested fees and costs do not exceed $950,000. 

This type of provision is appropriate when, as here, it does not impact the substantive benefits 

offered to the class.”); Calloway v. Cash Am. Net of Cal. LLC, No. 09-CV-04858 RS, 2011 WL 

1467356, at *2 (N.D. Cal. Apr. 12, 2011) (noting that where no common fund exists, no 

adversarial relationship exists between class counsel and the class concerning fees). So it is here. 

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Thus, the clear sailing provision, though a Bluetooth warning sign, does not signal collusion under 

the circumstances presented here.

The third warning sign—whether the parties have arranged for fees not awarded to the 

class to revert to defendants rather than be added to the Settlement Fund, see Bluetooth, 654 F.3d 

at 948—is not present here, where the non-reversionary Settlement Agreement provides that any 

remaining funds be distributed to Bay Area Legal Aid. See infra, Subsection e, Cy Pres 

Distribution.

Despite the existence of two of the three Bluetooth factors, the Settlement Agreement does 

not appear to be the result of, nor influenced by, collusion. At least for the purposes of 

preliminary approval, the Settlement Agreement appears to satisfy the Class Members’ claims. 

Class Members, most of whom are otherwise unaware of their FDCPA claim, stand to receive $10

for having received Defendant’s debt collection letter. Moreover, the injunctive relief provided 

for in the Settlement Agreement ensures that no more consumers will receive Defendant’s letter in 

the future. Thus, the three Bluetooth factors for the Court to consider at this stage of the approval 

process do not represent a sign of collusion.

In short, though two of the three Bluetooth red flags are present, they do not appear to be 

signs of collusion under the circumstances presented here. Provided that counsel can address the 

other matters discussed in this section by amending the Settlement Agreement, the Court should 

grant preliminary approval.

c. Lack of Preferential Treatment

Under this factor, “the Court examines whether the Settlement [Agreement] provides 

preferential treatment to any class member.” Villegas, 2012 WL 5878390, at *7. Here, each 

proposed class member stands to receive $10 based on their receipt of Defendant’s debt collection 

letter. Plaintiffs also stand to receive payments of $1,000 each pursuant 15 U.S.C. 

§ 1692k(a)(2)(B)(i), which provides for an additional recovery for each named plaintiff of up to 

$1,000 per plaintiff. Besides their additional statutory payments, the Settlement Agreement does 

not provide that either named Plaintiff will receive an incentive award or any additional payment 

in exchange for their release of claims against Defendant. While the $1,000 additional statutory 

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payment to each named Plaintiff might have otherwise reduced the per-Class-Member recovery, 

the inclusion of additional fees for named Plaintiffs in the FDCPA suggests that such awards are 

proper, and the absence of an incentive award supports this conclusion. Accordingly, the Court is 

satisfied that there is no preferential treatment for the named Plaintiffs that rises to the level of 

jeopardizing the fairness and reasonableness of the Settlement Agreement.

d. Range of Possible Approval

To determine whether a settlement “falls within the range of possible approval,” courts 

focus on “substantive fairness and adequacy” and “consider plaintiffs’ expected recovery balanced 

against the value of the settlement offer.” Tableware, 484 F. Supp. 2d at 1080. Here, each Class 

Member will receive $10 in damages for the FDCPA violation. The FDCPA limits the recovery 

for Class Members to the lesser of $500,000 or one percent of the defendant’s net worth. 15 

U.S.C. § 1692k(a)(2)(B)(ii). “Net worth” for the purposes of the FDCPA means balance sheet net 

worth, not fair market net worth including goodwill. Sanders v. Jackson, 209 F.3d 998, 1000 (7th 

Cir. 2000) (cited with approval by Gonzales, 660 F.3d at 1068). Defendant has submitted the 

declaration of Matthew Kumar, its president and sole shareholder, who avers that the proposed 

Settlement Fund exceeds one percent of Defendant’s net worth. (Dkt. No. 49-2 ¶ 2.) Thus, the 

Settlement Fund represents more monetary relief to each Class Member than the FDPCA itself 

would allow, which suggests that the Settlement Agreement is fair and reasonable.4

In addition to the per-Class Member recovery apparently exceeding the statutory 

maximum, Plaintiffs contend that the $10 that each Class Member stands to recover compares 

favorably with other FDCPA cases, citing FDCPA class actions from around the country where 

the per-class member recovery ranged between $1.24 and $15. (See Dkt. No. 44 at 20-21 

(citations omitted); Dkt. No. 47 ¶¶ 2-4.) None of the cases Plaintiffs cite were from the Ninth 

 

4

The Settlement Agreement provides that the Settlement Fund may be reduced if the total number 

of Class Members is less than the 1,361 currently anticipated as each Class Member stands to 

receive exactly $10.00. (See Dkt. No. 49-1 ¶ 17.A.) If there are fewer Class Members and the 

Settlement Fund is reduced, Defendant will need to submit another declaration informing the 

Court whether the adjusted total Settlement Fund still exceeds one percent of Defendant’s net 

worth. However, as the Court is satisfied that the Settlement Fund does so given the Class 

Members now anticipated, the Settlement Fund appears to be fair and reasonable for the purposes 

of Preliminary Approval.

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Circuit, and the amount compares less favorably with recoveries here. See, e.g., Durham v. 

Continental Cent. Credit, Inc., No. 07cv1763 BTM (WMc), 2011 WL 2173769, at *2 (S.D. Cal. 

June 2, 2011) (approving a $17,750 settlement fund for 97 class members, totaling $186 per class 

member); Holman v. Experian Fabiani v. Oreck Corp., No. C 05-2140 JSW, 2006 WL 1390458, 

at *1-2 (N.D. Cal. May 19, 2006) & Dkt. No. 51 (approving a $45,000 settlement fund for 195 

class members, totaling $230 per class member). However, because the statutory limit on 

recovery varies by the defendant’s net worth, the higher recovery in other actions does not mean 

the recovery is inadequate here, where Plaintiffs’ potential recovery is limited by Defendant’s 

more modest net worth.

In short, because Defendant’s net worth limits the scope of the Class Members’ possible 

recovery, and the Settlement Fund provides for recovery exceeding that limit, the value of the 

settlement offer exceeds the value of potential recovery in proceeding with litigation. This is 

particular true given that proceeding with litigation comes with its own costs, including the costs 

of briefing a motion for class certification, motions for summary judgment, and potentially trial. 

e. Cy Pres Distribution

A cy pres award must qualify as “the next best distribution” to giving the funds directly to 

class members. Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012). As a result, “[n]ot just 

any worthy recipient can qualify as an appropriate cy pres beneficiary.” Id. The Ninth Circuit 

“require[s] that there be a driving nexus between the plaintiff class and the cy pres beneficiaries.” 

Id. (citation omitted). A cy pres award must be “guided by (1) the objectives of the underlying 

statute(s) and (2) the interests of the silent class members, and must not benefit a group too remote 

from the plaintiff class[.]” Id. (internal quotation marks and citations omitted).

Here, the cy pres distribution, which consists of the amount of any uncashed settlement 

checks issued to Class Members, is to Bay Area Legal Aid. (Dkt. No. 49-1 ¶ 17.A.) This 

organization provides services to low-income Bay Area residents, including among other things, 

consumer law and debtor’s rights assistance.5 Accordingly, the Court is satisfied that the chosen 

 

5

See Bay Area Legal Aid, What We Do, https://www.baylegal.org/what-we-do/ (last visited Jan. 

19, 2016).

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cy pres recipient has a close enough nexus to the plaintiff class here.

* * *

In consideration of these factors, the Court concludes that the proposed Settlement 

Agreement is fair, adequate, and reasonable and in the best interest of the Class Members given 

the uncertainty of continued litigation.

C. Proposed Class Notice

Affected natural persons are entitled to due process, so they must be given notice of the 

proposed settlement and their rights, including the right to exclude themselves and the opportunity 

to be heard. Phillips v. Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985). For any class 

certified under Rule 23(b)(3), class members must be afforded the best notice practicable under 

the circumstances, which includes individual notice to all members who can be identified through 

reasonable effort. The notice must clearly and concisely state in plain, easily understood 

language:

(i) the nature of the action;

(ii) the definition of the class certified;

(iii) the class claims, issues, or defenses;

(iv) that a class member may enter an appearance through an 

attorney if the member so desires;

(v) that the court will exclude from the class any member who 

requests exclusion;

(vi) the time and manner for requesting exclusion; and(vii) the 

binding effect of a class judgment on members under Rule 23(c)(3).

Fed. R. Civ. P. 23(c)(2)(B). “Notice is satisfactory if it generally describes the terms of the 

settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come 

forward and be heard.” Churchill Vill., 361 F.3d at 575 (internal quotations omitted).

Here, Plaintiff submitted a 6-page Notice, which adequately informs each Class Member 

that he or she stands to receive $10 by participating in the Class, and participation will be deemed 

unless the Class Member opts out. The Notice indicates that all relevant pleadings in the case will 

be available online at Class Counsel’s website. (Dkt. No. 44-1 at 31.) The Settlement Agreement 

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provides that Defendant is to provide a list of Class Members to the Claims Administrator, which 

will disseminate notice via U.S. mail within 60 days of Preliminary Approval. See Chao v. 

Aurora Loan Servs., LLC, No. C 10-3118 SBA, 2014 WL 4421308, at *6 (N.D. Cal. Sept. 5, 

2014) (noting that service by mail has been found to be “clearly adequate”) (citation omitted). 

Similarly, the Notice explains that Class Members need not take any action to receive a monetary 

recovery (and, relatedly, to waive their related claims against Defendant), a procedure which is 

often approved. See, e.g., id. Nevertheless, this memo identifies three minor deficiencies in the 

Notice.

The Notice Plan itself is likewise adequate. See supra Settlement Proposal, Section F. 

Plaintiffs’ motion for final approval and motion for attorneys’ fees are due 30 days before the 

deadline to object to the Settlement Agreement. (See Dkt. No. 49-1 ¶¶ 12, 17.D.) Thus, Class 

Members have sufficient time to object to the fee motion in advance of the Final Approval 

hearing. See In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 993 (9th Cir. 2010) 

(requiring the “court to set the deadline for objections to counsel’s fee request on a date after the 

motion and documents supporting it have been filed”).

In addition, Class Counsel will keep “relevant pleadings” on its website for Class Members 

to review. (Dkt. No. 49-1 at 32.) The Notice does not specify what documents will be made 

available online. At a minimum, however, Class Counsel should ensure that the website has a 

complete copy of the Settlement Agreement, the Notice, the Motion for Preliminary Approval, the 

Court’s eventual Order granting Preliminary Approval, Class Counsel’s Motion for Attorneys’ 

Fees and Costs, and the Motion for Final Approval of the Class Action Settlement.

CONCLUSION

The Court preliminarily finds that the proposed Settlement Class meets the requisite 

certification standards and GRANTS conditional certification of the Class for settlement purposes. 

The proffered Settlement Agreement, as amended by the parties’ revised Settlement Agreement 

and Class Notice filed January 19, 2016 (Dkt. No. 49-1), meets the requisite requirements for fair, 

adequate, and reasonable settlement at this juncture of the settlement process. 

The Court finds further oral argument unnecessary, see N.D. Cal. Civ. L.R. 7-1(b), and

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VACATES the hearing previously set for January 21, 2016.

For the reasons stated above, the Court therefore GRANTS the motion for preliminary 

approval of the class action settlement as follows:

1. Notice shall be provided in accordance with the Notice Plan and this Order—that 

is, by February 18, 2016. 

2. Plaintiffs’ counsel shall file a motion for final approval and motion for approval of 

attorneys’ fees and costs by March 21, 2016.

3. Class Members shall submit their exclusion requests or objections by April 18, 

2016.

4. Counsel shall return before this Court for a final fairness hearing, at which the 

Court shall finally determine whether the settlement is fair, reasonable, and adequate, on April 28, 

2016 at 9:00 a.m. in Courtroom F, 450 Golden Gate Ave., San Francisco, California.

IT IS SO ORDERED.

Dated: January 20, 2016

JACQUELINE SCOTT CORLEY

United States Magistrate Judge

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