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Beaver v. Tarsadia Hotels

United States District Court, S.D. California

May 24, 2017




         The Parties and Playground Destination Properties, Inc. have entered into a Class Settlement Agreement and Release, dated April 24, 2017 (“Settlement”)[1] which, if approved, would resolve this putative class action. Plaintiffs have filed a Motion for Preliminary Approval of the Settlement. Upon review and consideration of the motion papers, including the Settlement, Notice Program, and Distribution Plan, the Court finds that there is sufficient basis for: (1) granting preliminary approval of the proposed Settlement; (2) preliminarily certifying the proposed Class for settlement purposes only; (3) preliminarily appointing Plaintiffs as Class Representatives and their counsel as Class Counsel; (4) approving the Parties' proposed Notice Program and directing that Notice be disseminated to the Class; (5) appointing the Garden City Group, LLC (“GCG”) as the Settlement Administrator to conduct the duties set forth for that position in the Settlement; and (6) setting a hearing (the “Fairness Hearing”), on September 15, 2017 at which the Court will consider, among other things: (a) whether the proposed Settlement, including the proposed Distribution Plan, should be Finally Approved as fair, reasonable, and adequate to the Class; (b) whether final judgment should be entered dismissing with prejudice this Action; (c) Class Counsel's application for attorneys' fees, costs, and expenses; and (d) Class Representatives' application for service awards;

         The Court now GRANTS the Motion for Preliminary Approval and makes the following findings and orders:

         Certification of Settlement Class

         1. The Ninth Circuit adheres to a “strong judicial policy that favors settlements, particularly where complex class action litigation is concerned.” Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). “The initial decision to approve or reject the settlement under Fed.R.Civ.P. 23(e) is committed to the sound discretion of the trial judge.” Id. at 1291.

         2. Rule 23(a) of the Federal Rules of Civil Procedure establishes four prerequisites for class certification: (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. Fed.R.Civ.P. 23(a). The Court finds that all of these requirements of Rule 23(a) are met here for settlement purposes only. Joinder of the more than 360 members of the Class in a single proceeding would be impractical. Because all Class members' claims stem from the same factual circumstances-the failure to provide rescission rights when Class members purchased condominium-hotel units-and raise the same legal claim, common issues exist among Class members and predominate over questions affecting only individual Class members. Plaintiffs' claims are typical of those of the Class in that they possess the same interest and suffered the same injury as putative Class members. Plaintiffs and their counsel will fairly and adequately protect the interests of the Class; Plaintiffs have no interests antagonistic to those of the Class, and have retained counsel experienced and competent to prosecute this matter on behalf of the Class. Finally, for settlement purposes only, a class settlement is superior to other available methods for a fair resolution of the controversy because the class mechanism will reduce litigation costs and promote greater efficiency.

         3. Because some of these factors-including the Class Members' reactions and governmental participation-cannot be fully assessed until the Court conducts a final fairness hearing, “a full fairness analysis is unnecessary at this stage.” Alberto v. GMRI, Inc., 252 F.R.D. 652, 665 (E.D. Cal. 2008) (internal citation and quotation marks omitted). Rather, “[t]he Court's task at the preliminary approval stage is to determine whether the settlement falls ‘within the range of possible approval.'” Hart v. Colvin, No. 15-CV-00623-JST, 2016 WL 6611002, at *4 (N.D. Cal. Nov. 9, 2016) (quoting In re Tableware Antitrust Litig., 484 F.Supp.2d 1078, 1080 (N.D. Cal. 2007)). In examining “overall fairness, ” the Court must review the proposed settlement “as a whole, rather than the individual component parts.” Id. (quoting Hanlon, 150 F.3d at 1026). A court lacks “the ability to delete, modify or substitute certain provisions. The settlement must stand or fall in its entirety.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998) (internal citations and quotation marks omitted).

         4. For the foregoing reasons, the Court preliminarily certifies the following settlement Class for purposes of the proposed Settlement only:

All individuals and businesses who agreed to purchase condominium-hotel units at the Hard Rock Hotel & Condominiums in San Diego, California at any time between May 2006 and December 2007 and ultimately closed escrow on units in the project, with the exception of (a) the Tarsadia Defendants and their officers, affiliates, directors, employees and the immediate family members of its officers, directors and employees (the Tarsadia Defendants have determined this exception excludes only Units 602, 639 and 1150), (b) those named plaintiffs in the action entitled Bell et al. v. Tarsadia Hotels et al. (San Diego Superior Court Case No. 37-2010-00096618) who signed the Settlement Agreement And Mutual Release in that case, (c) the named plaintiffs in the action entitled Salameh et al. v. Tarsadia Hotels et al. (Case No. 09-CV-2739), and (d) Persons who file timely Opt-Outs. The Settlement Class shall be construed to include purchasers “Subject to the 2008 Close Defense” and “Subject to the Assignment Defense, ” as those phrases are used in Exhibit A to the Class Member Stipulation (Dkt. No. 70), provided that they otherwise fall within the definition of the Settlement Class. Without in anyway limiting the foregoing, a list of known Settlement Class members is attached hereto as Exhibit A (the “Class Member List”).

         5. The Settlement provides for the creation of a common settlement fund in the amount of $51, 150, 000 (“Settlement Fund”). Settlement ¶ 8.1. Of the $51, 150, 000, the Tarsadia Defendants will contribute $10, 000, 000, and GT will contribute the remaining $41, 150, 000. Id. There will be no reversion of any funds to the Tarsadia Defendants, GT, GT's insurers, or any other contributing party. Id. at ¶ 8.7.

         6. The Net Settlement Fund, which consists of the money remaining after attorneys' fees and costs, Settlement Administration Costs, and service awards are deducted, will be distributed to Class members pursuant to the “Distribution Plan.” See Schrag Decl. Ex. 1 at Ex. E. The basic methodology is to first calculate the pro rata share of the Net Settlement Fund for each unit owned by one or more members of the Class, and then, if there is more than one owner, determine how that amount should be allocated among the owners. Generally, the pro rata shares are determined based on the original purchase price and either the current value of the unit if still owned, or what the Class member(s) received when the unit was sold or lost in foreclosure.

         7. The Court preliminarily appoints Plaintiffs Dean Beaver, Laurie Beaver, Steven Adelman, Abraham Aghachi, Dinesh Gauba, Kevin Kenna, and Veronica Kenna as Class Representatives.

         8. The Court preliminarily appoints the following five firms to serve as Class Counsel: Reiser Law, P.C.; Gibbs Law Group LLP; The Meade Firm p.c.; Talisman Law PC; and the Fostvedt Legal Group LLC.

         Preliminary Approval

         9. Rule 23(e) requires the Court to determine whether a proposed settlement is “fundamentally fair, adequate, and reasonable.” Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003) (internal quotations omitted). In making this determination, a court may consider: (1) the strength of the plaintiff's case; (2) “the risk, expense, complexity, and likely duration of further litigation;” (3) “the risk of maintaining class action status throughout the trial;” (4) “the amount offered in settlement;” (5) “the extent of discovery completed and the stage of the proceedings;” (6) “the experience and views of counsel;” (7) “the presence of a governmental participant;” and (8) “the reaction of the class members to the proposed settlement.” Id. (internal quotations omitted). Moreover, the settlement may not be the product of collusion among the negotiating parties. In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir.2000); see also Barani v. Wells Fargo Bank, N.A., 2014 WL 1389329, at *4 (S.D. Cal. Apr. 9, 2014).

         In considering whether to preliminarily approve a class settlement, the Court should consider whether the deal is both procedurally and substantively fair. In re Tableware Antitrust Litig., 484 F.Supp.2d at 1080 (“preliminary approval of a settlement has both a procedural and a substantive component”). Specifically, the Court should confirm that “(1) the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, (2) has no obvious deficiencies, (3) does not improperly grant preferential treatment to class representatives or segments of the class, and (4) falls with[in] the range of possible approval.” Dilts v. Penske Logistics, LLC, No. 08cv318-CAB(BLM), 2014 WL 12515159, *2 (S.D. Cal. July 11, 2014) (citations omitted).

         A. The Settlement Is the Product of Serious, Informed, Non-Collusive Negotiations

         10. A settlement agreement is presumed to be fair if it is reached in arm's length negotiations after relevant discovery has taken place. Cohorst v. BRE Prop., Inc., 2011 WL 7061923, *12 (S.D. Cal. Nov. 14, 2011) (stating that voluntary mediation before a retired judge in which the parties reached an agreement-in-principle are factors “highly indicative of fairness”) (citations omitted).

         11. In this case, the proposed Settlement is the product of over five and one half years of litigation, two failed court-assisted settlement conferences, a failed mediation in 2013, the recent second mediation and follow-up negotiations. Both mediations were before Judge West, a highly respected retired judge at JAMS who formerly presided in the complex department in Los Angeles County Superior Court. See Schrag Decl. at ¶ 26. The Parties reached a settlement after completion of fact and expert discovery, the Ninth Circuit's affirmance of this Court's granting partial summary judgment in Plaintiffs' favor on their UCL claim, full briefing and argument on the motion for class certification, and when the only remaining major task in the case was a remedies bench trial. Id. ¶¶ 23-25. Thus, the posture of the litigation and the process of negotiating the Settlement indicate that the deal is informed and non-collusive. Further, the Settlement's terms demonstrate procedural fairness and lack of collusion. Aspects of a settlement that may potentially lend themselves to self-interested action are attorneys' fees and incentive awards for class representatives. Barani v. Wells Fargo Bank, N.A., 2014 WL 1389329, *8 (S.D. Cal. Apr. 9, 2014). Here, however, both of these terms are fair to the Class.

         B. The Settlement Treats All Class Members Fairly

         12. Next, the Court should consider whether the proposed Settlement improperly grants preferential treatment to the Class Representatives or any segment of the Class. In re Tableware Antitrust Litig., 484 F.Supp.2d at 1079. Here, the proposed Settlement affords all Class members the same relief: a pro rata share of the Settlement Fund, based on the price they paid for their units and either the current value if they still own, the sales price if they sold, or the amount of their loan discharged in foreclosure. See Schrag Decl. at ΒΆ 27. Class members will receive different amounts under the Settlement, but those differences are only to take into account the purchase price of each ...

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