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Ozzy Okudan, Individually and On Behalf of v. Volkswagen Credit

August 1, 2011

OZZY OKUDAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
v.
VOLKSWAGEN CREDIT, INC., A BUSINESS ENTITY FORM UNKNOWN, AND DOES 1-30, INCLUSIVE, DEFENDANT.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

ORDER GRANTING MOTION ACTION SETTLEMENT FOR PRELIMINARY APPROVAL OF CLASS

On May 26, 2011, Plaintiff Ozzy Okudan filed a motion requesting: (1) preliminary approval of the proposed settlement; (2) certification of the proposed settlement class for settlement purposes only; (3) approval of the form and manner of giving notice of the proposed settlement to the Settlement Class; (4) appointment of class representative and class counsel; and (5) a date for the final fairness approval hearing. (Doc. No. 36.) On July 25, 2011, Defendant Volkswagen Credit, Inc. filed its notice of non-opposition to Plaintiff's motion. (Doc. No. 38.) The Court held a hearing on the matter on August 1, 2011. Carol Brewer and Michael Lindsey appeared on behalf of Plaintiff. Brian Frontino and Jeffrey Bell appeared on behalf of Defendant. The Court set the final fairness hearing for November 14, 2011, at 10:30 a.m. After considering the parties' motions and argument, the Court GRANTS the motion for preliminary approval of class action settlement.

Background

Plaintiff commenced this action in San Diego Superior Court, Okudan v. Volkswagen Credit, Inc., Case No. 31-2009-00096976-CU-BT-BTL, on August 26, 2009. On behalf of himself and a proposed class, Plaintiff claimed that Volkswagen Credit, Inc. ("VCI") had engaged in unlawful, unfair and fraudulent business practices in violation of California's Unfair Competition Law, Business & Profession Code §§ 17200 et seq. ("UCL"), predicated on alleged violations of California's Rees-Levering Automobile Sale Finance Act, Civil Code §§ 2981 et seq. ("Rees-Levering"). Plaintiff alleged that the form of post-repossession notice ("NOI") that VCI sent to members of the proposed class did not comply with Rees-Levering's requirements because, inter alia, it did not list all the conditions precedent to reinstatement of a vehicle contract after repossession. Because Rees-Levering, Civil Code § 2983.2(a), specifies that a creditor may obtain a deficiency against a defaulting consumer "only if" the NOI meets all of Rees-Levering's requirements, Plaintiff sought to cancel all deficiency balances that VCI asserted against him and the proposed class. He also sought restitution based on the amount each class member paid on deficiency balances during the class period, as well as injunctive relief, attorney's fees and costs.

On October 15, 2009, VCI removed the case to this Court pursuant to the Class Action Fairness Act. On April 14, 2011, the parties executed a Settlement Agreement, a copy which is attached to Plaintiff's motion. (Doc. No. 36-1 at 20, Ex. A.) The proposed settlement includes the following Settlement Class Members:

All California consumer residents to whom VCI sent NOIs during the period beginning August 24, 2005 to April 13, 2010, whose vehicles were repossessed or voluntarily surrendered to VCI or its agents in California, and against whom VCI has asserted a deficiency balance. The Class excludes all employees of VCI and its affiliates, and all persons whose conditional sale contract obligations have been discharged in bankruptcy.

Under the proposed settlement VCI will provide a non-revertible fund to the Settlement Administrator in an amount sufficient to refund 70% of Settlement Class Members' post-repossession payments to VCI. As of February 22, 2011, VCI had collected $1,124,876.85 in customer post-repossession payments, so Plaintiff estimates that the fund will be a minimum of about $800,000. (See Brewer Dec., ¶ 8.) The Settlement Administrator will send checks to Refund Eligible Class Members without the necessity of claims or claim forms. Any of the Class Members' checks that remain uncashed at the conclusion of the administration process will be distributed to appropriate non-profits pursuant to the cy pres doctrine.

Additionally, VCI agrees to waive its claim to any deficiency balances from Settlement Class members. As of August 20, 2010, VCI said the outstanding deficiency balances for persons to whom it sent NOIs between August 24, 2005 and April 13, 2010 was more than $40 million. (Brewer Dec., ¶ 4.) VCI agreed to provide the following relief: (a) it agrees that they do not owe any deficiency balances; (b) it will affirmatively change its internal account records to reflect no balance owed; (c) it will take all actions necessary to cease efforts to collect deficiency balances; (d) it will submit requests to Trans Union, Equifax and Experian to delete VCI's tradeline from Settlement Class Members' accounts; (e) in response to any inquiries about Settlement Class Members' account balances, it will say the balance is zero; (f) it will return all deficiency balance payments Settlement Class Members made, up through the deadline for Settlement Class members to opt out.

Finally, VCI will pay, separate and apart from the amount to fund payments to Settlement Class Members, the cost of Class Notice and administration. It will also pay Class Counsel's attorney's fees and expenses, not to exceed $325,000; and a service award to Plaintiff, not to exceed $2,500. In exchange for these awards, each Settlement Class member will release VCI from all claims arising out of or in connection with the claims that Plaintiff made in his Complaint or which reasonably could have been asserted by the Settlement Class in this Action.

Discussion

I. Rule 23 and Class Action Settlement

The decision to approve or reject a settlement is committed to the sound discretion of the trial court. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). Deciding whether to approve a proposed class action settlement is generally a two-step process. At the preliminary approval stage, the court "should make a preliminary determination that the proposed class satisfies the criteria set out in Rule 23(a) and at least one of the subsections of Rule 23(b)." Fed. Judicial Ctr., Manual for Complex Litigation, ยง 21.633 (4th ed.2004). The court then approves the ...


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