United States District Court, N.D. California
ORDER DENYING PRELIMINARY APPROVAL OF CLASS ACTION
SETTLEMENT RE: DKT. NO. 39
HAYWOOD S. GILLIAM, JR. UNITED STATES DISTRICT JUDGE
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.
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
alleges that she was employed by Defendant in the State of
California. FAC ¶ 5.
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.
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.
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.
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.
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).
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