Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_13-cv-03105/USCOURTS-cand-3_13-cv-03105-2/pdf.json

Parties Involved:
Aerotek, Inc.
Defendant
Jose Rubio-Delgado
Plaintiff

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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,

 Plaintiff,

 v.

AEROTEK, INC.,

 Defendant.

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Case No. 13-cv-03105-SC

ORDER REQUESTING SUPPLEMENTAL 

BRIEFING RE: PROPOSED 

SETTLEMENT

I. INTRODUCTION

This case involves alleged violations of the Fair Credit 

Reporting Act ("FCRA"). See 15 U.S.C. § 1681, et seq. Plaintiff 

Jose Rubio-Delgado purports to represent a class of persons 

aggrieved by Defendant Aerotek, Inc. ("Aerotek"). Aerotek is a 

recruiting and staffing agency, and Mr. Rubio-Delgado alleges 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 reached a settlement 

agreement and now seek the Court's preliminary approval. See ECF 

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No. 52 ("Mot."). Plaintiffs have moved for preliminary approval of 

the settlement agreement, and the motion is unopposed.

II. 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 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

(1) appears to be the product of serious, informed, non- collusive 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).

III. DISCUSSION

The settlement agreement in this case calls for Aerotek to pay 

$5,000,000. ECF No. 50-2 ("Settlement Agreement") ¶ 27. If enough 

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class members submit claims, however, the agreement requires 

Aerotek to make an additional contribution to the settlement fund, 

enough to ensure that each class member receives $42.32, up to a 

maximum of $262,500. The agreement provides for Mr. RubioDelgado's lawyers to recover up to 25% of the settlement --

$1,250,000, assuming Aerotek is not required to make any additional 

contribution -- as attorney's fees. Id. ¶ 33. Additionally, 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. Id. ¶ 34.

The Court has serious concerns about the fairness and adequacy 

of the settlement. The settlement class includes "[a]ll 

individuals on whom Aerotek or its agents procured consumer reports 

for employment purposes in the period beginning two years prior to 

the filing of the Complaint and continuing through the date the 

Class list is prepared." Id. ¶ 2. Aerotek's records indicate that 

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

Agreement provides for the settlement fund to be distributed pro 

rata (after the deduction of attorney's fees, litigation expenses, 

settlement administration costs, and incentive awards) to all class 

members who properly submit claim forms. Id. ¶ 29. If all 588,000 

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

would be required to make the maximum possible contribution to the 

settlement fund, which would contain a total of $5,262,500. Once 

the proposed attorney's fees and incentive awards are deducted, 

$3,941,875 would remain in the fund. Thus each class member would 

receive about $6.70.

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

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violation of FCRA. See ECF No. 1 ("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 sought punitive damages, 

costs, and attorney's fees. Compl. ¶¶ 61-62. Therefore, even 

assuming the Court were to deny Plaintiffs' punitive damages claim 

in its entirety and refuse to award attorneys' fees and costs, the 

proposed settlement offers each class member 6.7% of the minimum

amount recoverable were plaintiffs to prevail at trial, and 0.67% 

of the maximum recovery.1

 That is plainly inadequate. See, e.g.,

Trombley v. Nat'l City Bank, 759 F. Supp. 2d 20, 25-26 (D.D.C. 

2011) (settlement in the range of 17%-24% of potential recovery at 

 

1 Plaintiffs acknowledge that "Defendant's violation is not the 

sort of violation which includes aggravating factors likely to 

justify an award over the minimum amount of $100." Mot. at 21. That is somewhat puzzling given the allegations in the complaint 

that "Aerotek has willfully and systematically violated [FCRA]" and 

"consistently undermined Congress's carefully struck balance, 

unlawfully placing its business interests above the rights of 

consumers." Compl. ¶¶ 7, 15. Additionally, Plaintiffs allege that 

"Aerotek's practices violate a fundamental protection afforded to 

employees under the FCRA, are contrary to the unambiguous language 

of the statutes, and are counter to longstanding judicial and 

regulatory guidance." Compl. ¶ 47. Finally, Plaintiffs sought 

punitive damages, which may only be awarded where violation of FCRA 

is willful. See Guimond v. Trans Union Credit Info. Co., 45 F.3d 

1329, 1332 (9th Cir. 1995). Rule 11 of the Federal Rules of Civil 

Procedure provides that Plaintiffs' attorney's signature on the 

complaint constitutes a representation that the complaint's legal 

contentions are "warranted by existing law or by a nonfrivolous 

argument for extending, modifying, or reversing existing 

law . . . ." Fed. R. Civ. P. 11(b)(2). That Rule additionally 

requires that factual contentions have evidentiary support. Fed. 

R. Civ. P. 11(b)(3). Thus Plaintiffs must have had some basis for 

believing their allegations against Aerotek and that those 

allegations supported an award of punitive damages. Thus it seems 

that Plaintiffs may either have been disingenuous in authoring 

their complaint or are being disingenuous now in abandoning their 

argument about the reprehensibility of Aerotek's behavior. Either 

way, the contrast of the language of the complaint with the 

language in Plaintiffs' motion for preliminary approval creates an 

additional concern that the Settlement Agreement was the product of 

collusive negotiations.

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trial was within the range of possible approval).

However, the parties anticipate that each class member's share 

of the settlement fund will be about $40. See Mot. at 20; 

Settlement Agreement Ex. C at 4. That helps to ameliorate the 

Court's concern about the adequacy of each class member's share, 

but it raises a new issue: for each class member to receive $40, 

only 98,546 class members -- about 17% -- could submit claims. 

That only such a small portion of the class would receive any 

compensation at all is equally concerning to the Court.

The fact that the parties apparently expect such a small 

number of class members to submit claims prompts an important 

question: why can't the Settlement Agreement simply provide for 

Aerotek to mail a check to each class member, without requiring 

class members to submit claim forms? 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, 759 F. 

Supp. 2d at 27 (granting preliminary approval to proposed 

settlement in part because requirement that class members submit 

claim forms was not unduly burdensome in light of parties' argument 

that shares of damages could not be calculated without additional 

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

issue. 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). It 

would be very easy to envision a settlement agreement providing for 

Aerotek to mail each class member a check for his share of the 

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settlement fund. Remaining money left over from checks not cashed 

within a certain amount time could simply be redistributed to class 

members who did cash their checks, along the lines of the process 

already outlined in the Settlement Agreement. See Settlement 

Agreement ¶¶ 36-39.

IV. CONCLUSION

For the reasons described above, the Court is concerned that 

the proposed Settlement Agreement may be obviously deficient, fail 

to fall within the range of possible approval, or be the result of 

collusive negotiations. At the same time, the Court is cognizant 

of the well-established policy concerns in favor of settlement. 

The Court finds that additional briefing may resolve these concerns 

and permit preliminary approval of the Settlement Agreement. 

Accordingly, Plaintiffs shall file a supplemental brief of no more 

than fifteen (15) pages within twenty-one (21) days of the 

signature date of this Order. That brief should address the 

Court's concerns with the fairness and adequacy of the Settlement 

Agreement. Aerotek may file a supplemental brief as well, of no 

more than fifteen (15) pages, within fourteen (14) days of the 

deadline for Plaintiffs' submission.

IT IS SO ORDERED.

Dated: April 1, 2015

UNITED STATES DISTRICT JUDGE

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