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De La Torre v. Cashcall, Inc.

United States District Court, N.D. California

June 21, 2017

CASHCALL, INC., Defendant.


          MARIA-ELENAJAMES United States Magistrate Judge


         After nearly nine years of litigation, including a bench trial, the parties in this certified class action have reached a settlement as to one of their claims. See Settlement, Dkt. No. 362. Plaintiffs Eduardo De La Torre and Lori Kempley (together, ''Plaintiffs'') ask the Court to (1) preliminarily approve the Settlement, (2) approve the proposed notice and notice plan, (3) appoint a settlement administrator, and (4) schedule a final approval hearing. See Mot., Dkt. No. 361. The Court heard oral argument on this matter on June 1, 2017. Having considered the parties‘ positions, the record in this case, and the relevant legal authority, the Court GRANTS Plaintiffs‘ Motion for the reasons set forth below.


         A. Factual Allegations [1]

         In February 2006, De La Torre borrowed $2, 600 from Defendant CashCall, Inc. (''CashCall'') based on an annual percentage rate of interest (''APR'') of approximately 98%. Fourth Am. Compl. (''FAC'') ¶ 24, Dkt. No. 54. In May 2006, Kempley[2] borrowed $2, 525 from CashCall based on an APR of 99.07%. Id. ¶ 28. Neither De La Torre nor Kempley could afford their monthly CashCall loan payments, and their monthly expenses exceeded their income. Id. ¶¶ 25-26, 29-30.

         Plaintiffs allege CashCall made loans to De La Torre and Kempley that were beyond their financial abilities to repay in the time and manner set forth in the CashCall Promissory Note and Disclosure Statement. Id. ¶¶ 25, 29. They contend CashCall did not assess De La Torre‘s or Kempley‘s earning capacities, monthly expenses, or outstanding debts when it approved them for their loans. Id. ¶¶ 27, 31. Plaintiffs further allege CashCall conditioned the extension of credit on the consumer‘s repayment by means of preauthorized electronic fund transfers (''EFTs''). Id. ¶ 48.

         B. Procedural Background

         On July 1, 2008, Plaintiffs initiated this action on behalf of themselves and similarly situated individuals. See Compl., Dkt. No. 1. On February 25, 2010, they filed the operative FAC. See FAC. The FAC asserts a total of six claims. It asserts three claims for violations of (1) the Electronic Fund Transfer Act (''EFTA''), 15 U.S.C. § 1693; (2) the California Consumer Legal Remedies Act (''CLRA''), Cal. Civ. Code § 1750; and (3) the Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code § 1788. Id. ¶¶ 41-72. In addition, the FAC asserts three claims under California‘s Unfair Competition Law (''UCL''), Cal. Bus. & Prof. Code § 17200, predicated on the aforementioned violations. Id. ¶¶ 73-106. As is relevant here, Plaintiffs‘ EFTA claim is based on CashCall‘s alleged practice of conditioning the extension of credit on the consumer‘s repayment by means of preauthorized electronic fund transfers (''EFTs'') in violation of 15 U.S.C. § 1693k(1).[3] Id. ¶ 48. This violation is also the basis for one of Plaintiff‘s UCL claims. Id. ¶ 96.

         1. Class Certification, Summary Judgment, and Appeal

         On November 15, 2011, the Court certified two classes. Class Cert. Order, Dkt. No. 100. It certified a Conditioning Class, which was later limited to ''[a]ll individuals who, while residing in California, borrowed money from CashCall, Inc. for personal, family, or household use on or after March 13, 2006 through July 10, 2011 and were charged an [nonsufficient fund (‗NSF‘)] fee.'' Order Approving Class Notice Plan, Dkt. No. 130.[4] The Court also certified a Loan Unconscionability Class of ''[a]ll individuals who while residing in California borrowed from $2, 500 to $2, 600 at an interest rate of 90% or higher from CashCall for personal family or household use at any time from June 30, 2004 through July 10, 2011.'' Class Cert. Order at 38. The Court later appointed James Sturdevant, Arthur Levy, and Whitney Stark as class counsel. Dkt. No. 127 at 6-7; Dkt. No. 130.

         Thereafter, the parties filed cross-motions for summary judgment. Dkt. Nos. 159, 166, 175. On July 30, 2014, the Court denied CashCall‘s Motion for Summary Judgment on Plaintiffs‘ conditioning and unconscionability claims and granted Plaintiffs‘ Motion Summary Judgment on the EFTA violation. Order re: Mots. for Summ. J. (''MSJ Order''), Dkt. No. 220. CashCall filed a Motion for Reconsideration as to the Court‘s denial of summary judgment on the unconscionability claim. Dkt. No. 234. The Court granted the Motion for Reconsideration and granted CashCall‘s Motion for Summary Judgment as to the unconscionability claim. Dkt. No. 239. The Court entered judgment on this claim pursuant to Federal Rule of Civil Procedure 54(b) (Dkt. No. 247), and Plaintiffs appealed (Dkt. No. 248).[5]

         2. Bench Trial

         The Court held a bench trial on September 8 and 9, 2015 on the issue of whether Plaintiffs are entitled to statutory and/or actual damages under the EFTA and/or restitution under the UCL. See Sept. 8, 2015 Trial Tr., Dkt. No. 296; Sept. 9, 2015 Trial Tr., Dkt. No. 298. On March 16, 2016, the Court issued its Findings of Fact and Conclusions of Law. Findings of Fact & Conclusions of Law (''FFCL''), Dkt. No. 312. The Court (1) ordered CashCall to pay a statutory penalty of $500, 000 for its EFTA violation, but found Plaintiffs and the Class otherwise failed to show they were entitled to actual damages under the EFTA; and (2) found Plaintiffs had not established they were entitled to restitution, as they failed to prove Kempley had standing to pursue a representative action under the UCL‘s ''lost money or property'' requirement. See Id. The Court further ordered the parties to submit proposed judgments and a notice plan to inform the Class about the trial‘s outcome and to distribute the statutory award to the Class no later than May 2, 2016. Id. The Court also ordered the parties to file a supplemental status report to address some of its concerns about the proposed notice plan. May 12, 2016 Order, Dkt. No. 314.

         In the parties‘ Joint Response to the May 12, 2016 Order, among other things, CashCall stated it intended to file a motion under Rule 59 to amend the judgment or for a new trial. Jt. Resp. at 1, Dkt. No. 315. The basis for CashCall‘s anticipated motion was the United States Supreme Court‘s recent decision in Spokeo, Inc. v. Robbins, 136 S.Ct. 1540 (2016) as revised (May 24, 2016), which CashCall asserted ''compels the finding that . . . Kempl[e]y [also] lacks standing under the EFTA.''[6] Id. The Court stayed any pending deadlines to allow the parties to file cross-Rule 59 motions. Dkt. Nos. 319, 325.

         3. Post-Trial Motions

         CashCall moved to amend the FFCL and enter judgment in its favor pursuant to Rule 59(a)(2), on the ground that Spokeo made it clear that Kempley lacked standing to pursue damages under the EFTA on both her own behalf and on behalf of the Class. CashCall Rule 59 Mot. at 1, Dkt. No. 326. Plaintiffs opposed CashCall‘s Rule 59 Motion and affirmatively moved under Rule 59, or alternatively Rule 52, to submit additional evidence, amend the class definition, and amend the FFCL. Pls.‘ Rule 59 Mot., Dkt. No. 334. The Court denied CashCall‘s Motion and granted in part Plaintiffs‘ Motion. See Relief Order. The Court found ''Kempley‘s harm, albeit an intangible one, is sufficiently concrete to satisfy Article III‘s standing requirement. Through § 1693k(1) of the EFTA, Congress defined a specific right, which was based on the risk of real harm, and thereby elevated a violation of that right to legally cognizable, concrete injury.'' Id. at 13. Specifically,

[t]he EFTA guaranteed Kempley the right to choose her method of repayment when she sought credit from CashCall. When CashCall would not allow her to obtain credit without first agreeing to use EFT payments, it violated that right and caused her to confront the very harms Congress sought to avoid: the lack of choice in using EFT payments and the risks associated with those methods of payments.

Id. at 14 (citing Spokeo, 136 S.Ct. at 1549 (''[T]he violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact. In other words, a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified.'')).

         The Court also noted that ''[w]hile standing is an elemental aspect of a UCL claim, . . . this issue was never raised before the post-trial briefs, and the parties‘ Pretrial Statement limited the issues for trial in accordance with the Court‗s Pretrial Order.'' Id. (citing Case Management Order at 2, Dkt. No. 280); see Jt. Pretrial Conference Statement, Dkt. No. 281. The Court thus granted Plaintiffs a limited opportunity to put on evidence of such standing. Relief Order at 21-24.

         The Court also concluded it had erred in applying EFTA‘s one-year statute of limitations instead of the UCL‘s four-year statute of limitations to Plaintiffs‘ conditioning claims. Id. at 25-26 (citing Beaver v. Tarsadia Hotels, 816 F.3d 1170, 1178 (9th Cir. 2016), cert. denied, 137 S.Ct. 113 (2016)); see also Order re Class Definitions, Dkt. No. 127. The Court allowed the parties to request an evidentiary hearing to determine whether De La Torre and Kempley had standing to represent a class of borrowers for the four-year UCL statute of limitations period. Relief Order at 27. The parties requested an evidentiary hearing, which the Court scheduled for April 5, 2017. Dkt. No. 345.

         4. Settlement Negotiations

         In the meantime, the parties returned to settlement negotiations. Dkt. Nos. 347, 350. On March 10, 2017, they reached a settlement as to the Conditioning Claim. Dkt. No. 350. The Court accordingly vacated the evidentiary hearing and set a briefing schedule for Plaintiffs to file the instant motion. Dkt. No. 356.


         The key provisions of the Settlement are as follows.

         A. The Settlement Class

         The Settlement provides relief for the Conditioning Class, defined as ''all individuals who, while residing in California, borrowed money from CashCall for personal, family, or household use from March 13, 2006 through July 10, 2011 and were charged an NSF fee.'' Settlement ¶ 1.5.

         B. Remedies

         Under the terms of the Settlement, CashCall shall pay a maximum of $1.5 million (the ''Settlement Fund''). The Settlement allocates $830, 000 of the Settlement Fund to Class Members who paid NSF fees prior to the cancellation, if any, of their respective authorizations to collect loan payments via EFT. Settlement ¶ 3.1. Class Members will receive a pro rata share of the $830, 000 fund equal to the ratio of the total NSF fees he or she actually paid prior to the EFT cancellation, if any, as compared to the total NSF fees collected from all Class Members prior to EFT cancellations. Id.

         CashCall further agrees to release all Class Members from liability for all NSF fees CashCall charged prior to the cancellation, if any, of their respective authorizations to collect loan payments via EFT. Id. ¶ 3.3; see Id. ¶ 6.1(b). The release shall apply to all Class Members, whether or not they paid NSF fees. Id. ¶ 3.3. If a Class Member has an open loan account that includes unpaid charges for NSF fees, CashCall shall recalculate the loan account to eliminate such charges. Id.

         C. Distribution of Funds

         The Settlement Administrator shall mail Class Members payment in the form of a check. Id. ¶ 3.1. Class Members shall have sixty days from the date of mailing to cash their payments. Id. ¶ 4.13.

         CashCall will provide the Settlement Administrator with, among other things, Class Members‘ contact information, including their last known mailing and email addresses. Id. ¶ 4.3. The Settlement Administrator shall update Class Members‘ addresses through the National Change of Address Database. Id. ¶ 4.5. If a Class Member cannot be located-i.e., email and mail notices are returned undeliverable-the Settlement Administrator will not attempt to mail that Class Member a check, but shall retain any payment due to that Class Member. Id. ¶ 3.2.

         Within ninety days of the initial distribution, the Settlement Administrator shall report to the parties the total amount of funds, if any, related to (1) Class Members who could not be located, and (2) checks that were mailed but had not been cashed. Id.; id. ¶ 4.13. The Settlement requires the parties to meet and confer to discuss whether a second distribution is appropriate or whether the residual funds should be paid to a Court-approved cy pres recipient. Id. (both). The Court shall have final approval over whether to make a second distribution or to pay the residual amount to a cy pres recipient. Id. ¶ 3.2.

         D. Opt-Outs and Objections

         Class Members may opt out of the Settlement by mailing a written request to both CashCall‘s and Plaintiffs‘ counsel. Id. ¶ 4.7. The opt out request must include (1) the Class Member‘s name, signature, address, and telephone number; and (2) a statement that the Class Member requests to be excluded or to opt out of the Settlement. Id. If more than 100 Class Members-that is, approximately 0.1% of the Class-request exclusion, CashCall shall have the option to rescind and void the Settlement before the Court finally approves the Settlement. Id.

         Class Members may also object to the Settlement and/or request to be heard at the final approval hearing. Id. ¶¶ 4.8-4.9. The Settlement requires Class Members to mail their objections to the Class Action Clerk for the Northern District of California or by filing them with the Court. The objection must (1) state the Class Member‘s name, address, and telephone number; (2) include all documents or testimony supporting such objection; and (3) provide a detailed statement of any objection asserted, including the grounds therefor and reasons, if any, for requesting the opportunity to appear and be heard at the final approval hearing. Id. ¶ 4.9.

         E. Attorneys' Fees and Costs and Service Awards

         The Settlement Fund allocates a maximum of $650, 000 in Plaintiffs‘ attorneys‘ fees and costs. Id. ¶ 3.5. If the Court awards less than $650, 000 in attorneys‘ fees and costs, the amount by which $650, 000 exceeds the amount ...

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