United States District Court, N.D. California
DOMENICA LEWIS; JERROLD LEWIS; DOMENICA LEWIS as guardian ad-litem for their minor children S. L. and E. L., on behalf of themselves and all others similarly situated; and PROJECT SENTINEL, a California non-profit corporation, on behalf of itself and the general public, Plaintiff,
v.
SILVERTREE MOHAVE HOMEOWNERS’ ASSOCIATION, INC., CAROL LEE ADAMS a/k/a LEE ADAMS, MARILYN BLACK, ANAND BHASKARAN, and TAMELA DURANT, individually and as members of the Board of Directors of Silvertree Mohave Homeowner’s Association, Inc.; and DONALD W. MURPHY individually and d/b/a MANAGEMENT SOLUTIONS, Defendant.
NOTICE REGARDING FACTORS TO BE EVALUATED FOR ANY
PROPOSED CLASS SETTLEMENT
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE
For the
guidance of counsel, please review the Procedural
Guidance for Class Action Settlements, which is
available on the website for the United States District Court
for the Northern District of California at
www.cand.uscourts.gov/ClassActionSettlementGuidance.
In
addition, counsel should review the following substantive and
timing factors that the undersigned judge will consider in
determining whether to grant preliminary and/or final
approval to a proposed class settlement. Many of these
factors have already been set forth in In re
Bluetooth Headset Products Liability Litigation, 654
F.3d 935, 946-47 (9th Cir. 2011), but the following
discussion further illustrates the undersigned judge’s
consideration of such factors:
1.
Adequacy of Representation.
Anyone
seeking to represent a class, including a settlement class,
must affirmatively meet the Rule 23 standards, including
adequacy. It will not be enough for a defendant to stipulate
to adequacy of the class representation (because a defendant
cannot speak for absent class members). An affirmative
showing of adequacy must be made in a sworn record. Any
possible shortcomings in a plaintiff’s resume, such as
a conflict of interest, a criminal conviction, a prior
history of litigiousness, and/or a prior history with
counsel, must be disclosed. Adequacy of counsel is not a
substitute for adequacy of the representative.
To
elaborate, when a settlement proposal is made prior to formal
class certification, there is a risk that class claims have
been discounted, at least in part, by the risk that class
certification might be denied. Absent class members, of
course, should be subject to normal discounts for risks of
litigation on the merits but they should not be subject to a
further discount for a risk of denial of class certification,
such as, for example, a denial based on problems with a
proposed class representative, including a conflict of
interest or a prior criminal conviction. This is a main
reason the Court prefers to litigate and vet a class
certification motion before any settlement
discussions take place. That way, the class certification is
a done deal and cannot compromise class claims. Only the
risks of litigation on the merits can do so.
2.
Due Diligence.
Please
remember that when one undertakes to act as a fiduciary on
behalf of others (here, the absent class members), one must
perform adequate due diligence before acting. This requires
the representative and his or her counsel to investigate the
strengths and weaknesses of the case, including the best-case
dollar amount of claim relief. A quick deal up front may not
be fair to absent class members.
3.
Cost-Benefit for Absent Class Members.
In the
proposed settlement, what will absent class members give up
versus what will they receive in exchange, i.e., a
cost-benefit analysis? If the recovery will be a full
recovery, then much less will be required to justify the
settlement than for a partial recovery, in which case the
discount will have to be justified. The greater the discount,
the greater must be the justification. This will require an
analysis of the specific proof, such as a synopsis of any
conflicting evidence on key fact points. It will also require
a final class-wide damage study or a very good substitute, in
sworn form. If little discovery has been done to see how
strong the claim is, it will be hard to justify a substantial
discount on the mere generalized theory of “risks of
litigation.” A coupon settlement will rarely be
approved. Where there are various subgroups within the class,
counsel must justify the plan of allocation of the settlement
fund.
4.
The Release.
The
release should be limited only to the claims certified for
class treatment. Language releasing claims that “could
have been brought” is too vague and overbroad. The
specific statutory or common law claims to be released should
be spelled out. Class counsel must justify the release as to
each claim released, the probability of winning, and its
estimated value if fully successful.
Does
the settlement contemplate that claims of absent class
members will be released even for those whose class notice is
returned as undeliverable? Usually, the Court will
not extinguish claims of individuals known to have
received no notice or who received no benefit (and/or for
whom there is no way to send them a settlement check). Put
differently, usually the release must extend only to those
who receive money for the release.
5.
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