United States District Court, N.D. California
MERCEDES GUERRERO, individually and for other persons similarly situated, Plaintiff,
WELLS FARGO BANK, N.A., Defendant.
ORDER RE FINAL APPROVAL OF CLASS SETTLEMENT, ATTORNEY'S FEES AND EXPENSES, AND SERVICE AWARD
WILLIAM ALSUP, District Judge.
In this class action involving force-placed flood insurance on home mortgages, class representative and class counsel move for (1) final approval of the proposed class settlement; (2) $143, 750 for attorney's fees and expenses; (3) reimbursement for the settlement administrator's expenses, capped at $28, 604; (4) a $7, 500 service award for class representative; and (5) designation of Habitat for Humanity as the cy pres recipient of any residual net settlement funds. Moreover, class representative's former counsel seek to respond and submit evidence. To the extent stated below, the requests are GRANTED IN PART AND DENIED IN PART.
The background of this action is set forth in prior orders ( see, e.g., Dkt. No. 212). In brief, this action began in June 2012. An amended complaint was permitted to add plaintiff Mercedes Guerrero, a California resident, as a putative class representative (Dkt. No. 82). The other named plaintiffs in this action - Danny and Beverly Lane - already stipulated to dismiss their claims, and Wells Fargo Bank, N.A. is the only remaining defendant.
Guerrero obtained a mortgage loan based on a Federal Housing Administration form mortgage. Wells Fargo then serviced that mortgage beginning in 2010. Because Guerrero's home was located in a flood-hazard area, she was required to maintain adequate flood insurance; otherwise, Wells Fargo was authorized to (and did) force-place flood insurance on her property. In doing so, Wells Fargo allegedly entered into exclusive purchasing agreements with two insurers - American Security Insurance Company and QBE Insurance Corporation - so that ASIC and QBE would pay "kickbacks" in unearned commissions to a Wells Fargo affiliate. Wells Fargo also reportedly maximized these kickbacks via a "backdating" practice, i.e., by force-placing flood insurance polices with retroactive effective dates. Guerrero thus sought to represent a California class based on Wells Fargo's alleged commissions and backdating, claiming breach of contract, unjust enrichment or restitution, conversion, and violation of California's Unfair Competition Law.
On June 21, 2013, a California class was conditionally certified with Guerrero as class representative. On August 16, 2013, that class was certified under Federal Rule of Civil Procedure 23, upon appointment of Hagens Berman Shobol Shapiro LLP as new class counsel and counsel for Guerrero in her individual capacity. The parties later agreed to a proposed class settlement, and an order filed on April 7, 2014, granted preliminary approval thereof (Dkt. No. 212).
Notice of settlement was then sent to class members, pursuant to the requirements of the settlement and the April 7 order. Among other items, the class notice provided adequate information about the proposed settlement relief, including the total settlement amount and injunction against Wells Fargo and its associates. The class notice also detailed the requested service award for Guerrero, the attorney's fees and expenses for class counsel, and the deadlines and rights that class members had to object to the settlement or exclude themselves from the class.
A motion is now made for (1) final approval of the proposed class settlement; (2) $143, 750 for attorney's fees and expenses; (3) reimbursement for the settlement administrator's expenses, capped at $28, 604; (4) a $7, 500 service award for Guerrero; and (5) designation of Habitat for Humanity as the cy pres recipient of any residual net settlement funds. In addition, Guerrero's former counsel - from before class certification - seek an opportunity to file a response and submit evidence in connection with the present request for attorney's fees and costs. Having considered the relevant briefing and oral argument from the fairness hearing, this order rules as follows.
1. FINAL APPROVAL OF PROPOSED CLASS SETTLEMENT AND CY PRES DESIGNATION.
In short, this order approves of the proposed class settlement. As part of that settlement, Wells Fargo will pay a total amount of $625, 000 to the class, which represents a 180% recovery of the best-case damages scenario ( i.e., $365, 179.08), as calculated by Guerrero's damages expert (Dkt. No. 199-3 at 2). Even if this order were to consider only the net amount of the settlement - i.e., $445, 146, after taking into account the requested attorney's fees and costs, the administrative expenses, and even the service award - Wells Fargo's settlement payment still comprises a 121.8% recovery of the best-case damages scenario. The amount of the settlement payment therefore militates in favor of final approval here.
But there is more. For three years from the date of final approval, the settlement would enjoin Wells Fargo and any of its affiliates from receiving (Loeser Exh. A at ¶ 15):
[C]ommissions in connection with the placement of lender[-]placed flood insurance on any residential California real estate that serves as collateral for an FHA Loan unless the receipt of such commissions is specifically authorized by statute, regulation or ...