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Esomonu v. Omnicare, Inc.

United States District Court, N.D. California

March 31, 2017

IJEOMA ESOMONU, Plaintiff,
v.
OMNICARE, INC., Defendant.

          ORDER DENYING PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT RE: DKT. NO. 39

          HAYWOOD S. GILLIAM, JR. UNITED STATES DISTRICT JUDGE

         Before the Court is the motion for preliminary approval of class action settlement filed by Plaintiff Ijeoma Esomonu. Dkt. No. 39 (“Mot.”). Plaintiff filed suit against Defendant Omnicare, Inc. for violating the Fair Credit Reporting Act, 15 U.S.C. §§ 1681, et seq. (“FCRA”), and related California statutes by failing to provide the proper disclosure form when Defendant obtained credit and background reports in connection with its hiring process. The parties have reached a settlement regarding Plaintiff's claims and now seek the required Court approval. For the reasons set forth below, the Court DENIES Plaintiff's motion for preliminary approval of class action settlement.

         I. BACKGROUND

         A. Factual Allegations

         On May 4, 2015, Plaintiff filed this action against Defendant, alleging that its hiring practices violated the FCRA. Dkt. No. 1. Plaintiff then amended the complaint on July 21, 2016, adding additional state law claims, including violations of California's Consumer Credit Reporting Agencies Act (“CCRAA”), Cal. Civ. Code §§ 1785.1, et seq., and California's Investigative Consumer Reporting Agencies Act (“ICRAA”), Cal. Civ. Code §§ 1786, et seq. Dkt. No. 41-1 (“FAC”).

         Plaintiff alleges that she was employed by Defendant in the State of California. FAC ¶ 5.

         According to Plaintiff, when she applied for employment with Defendant, she was required to fill out and sign a background check authorization form and a waiver of liability. Id. ¶¶ 29-33. She alleges that the disclosures required under the FCRA, however, were “embedded with extraneous information” in these forms rather than contained in a stand-alone document. FAC ¶ 34. Plaintiff further alleges that Defendant failed to inform her that she had a right to request a summary of her rights under the FCRA. Id. ¶¶ 41, 48. Plaintiff accordingly alleges that Defendant obtained credit and background reports on her - as well as on other prospective, current, and former employees - in violation of federal and state law. Id. ¶¶ 2, 41. Defendant answered the complaint on August 12, 2016, denying all claims and asserting several affirmative defenses. Dkt. No. 44.

         B. Settlement Agreement

         Following informal discovery and with the assistance of a private mediator, the parties entered into a settlement agreement. See Dkt. No. 45-1. Plaintiff then filed the pending, unopposed motion for preliminary approval of settlement on June 13, 2016.

         Pursuant to the terms of the current settlement agreement, Plaintiff “may apply to the Court” for an incentive award of up to $5, 000 for her role as named plaintiff in this lawsuit. Dkt. No. 45-1 (“SA”) ¶ 37. The settlement agreement refers to this as an “enhancement payment” for Plaintiff's “services to the Class and for the risks she undertook as a named Plaintiff.” Id. ¶¶ 17, 37. It further states that Plaintiff “will receive the sum of Ten Thousand Dollars and Zero Cents ($10, 000.00) for the general release she is giving Omnicare . . . .” Id. ¶ 38. The settlement agreement does not explicitly state that this general release payment is similarly subject to Court approval. Instead, the settlement agreement ambiguously states that Plaintiff will file a motion for an undefined “Class Representative Service Payment” with the Court. Id. ¶ 43. And Plaintiff's proposed class notice only states that “Class Counsel will seek an enhancement payment for the Class Representative, Plaintiff Ijeoma Esomonu, in the amount of $5, 000.” See Dkt. No. 39-3 at 6. It omits the $10, 000 general release payment entirely. Id.

         The Court raised several concerns about the settlement agreement during the two hearings on the motion. On August 18, 2016, the Court asked for authority to support the $10, 000 payment to Plaintiff for a general release in addition to the $5, 000 incentive payment. See Dkt. No. 52 at 8-9 (hearing transcript). On October 20, 2016, the parties then filed supplemental briefing to address, inter alia, this general release payment. See Dkt. Nos. 55 at 3-4. The supplemental briefing was insufficient and the Court again raised concerns about this payment at the subsequent hearing held on November 3, 2016. Yet the parties did not address this issue in their subsequent briefs. See Dkt. Nos. 59, 61.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or defenses of a certified class may be settled . . . only with the court's approval.” The Rule is intended to “protect the unnamed members of the class from unjust or unfair settlements affecting their rights.” In re Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). Accordingly, before a district court approves a class action settlement, it must conclude that the settlement is “fundamentally fair, adequate and reasonable.” In re Heritage Bond Litig., 546 F.3d 667, 674-75 (9th Cir. 2008).

         Where the parties reach a class action settlement prior to class certification, district courts apply “a higher standard of fairness and a more probing inquiry than may normally be required under Rule 23(e).” Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012) (quotation omitted). In those situations, 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.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011). Courts, however, lack the authority to ...


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