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Chen v. Chase Bank USA, N.A.

United States District Court, N.D. California

January 16, 2020

JEFFREY CHEN, Plaintiff,
v.
CHASE BANK USA, N.A., Defendant.

          ORDER RE: PLAINTIFF'S MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT RE: DKT. NOS. 43, 51

          JACQUELINE SCOTT CORLEY UNITED STATES MAGISTRATE JUDGE

         Plaintiff Jeffrey Chen brings a class action against Chase Bank USA, N.A. (now J.P. Morgan Chase) (“Chase”) alleging violations of the Equal Credit Opportunity Act (“ECOA”) under 15 U.S.C. § 1691 et seq. (Dkt. No. 43 at 6.)[1] Now before the Court is Plaintiff's unopposed motion for preliminary approval of the parties' Class Action Settlement Agreement.[2] Having considered the papers, having had the benefit of oral argument on December 12, 2019, and having considered the parties' supplemental submission, the Court GRANTS the motion for preliminary approval.

         BACKGROUND

         Plaintiff filed a class action against Chase in the Superior Court of State of California, County of Alameda on January 28, 2019 alleging violations of the ECOA under 12 C.F.R. § 1002.2, and seeking punitive damages under the ECOA, injunctive relief, and attorney's fees and costs. (Dkt. No. 1-1 (“Complaint”) at 1, 9, Prayer for Relief ¶¶ 1-3.) Chase removed the action to this Court because the action arises under ECOA, a federal law. (Dkt. No. 1 at ¶ 7.) Chase then moved to dismiss the complaint for lack of statutory standing and failure to state a claim. (Dkt. No. 8.) The Court denied the motion to dismiss, and two months later, the parties participated in a mediation with retired magistrate judge Wayne D. Brazil. (Dkt. No. 22; Dkt. No. 43-1 at ¶ 6.) While the parties did not settle, they made “substantial progress and continued to negotiate over the following weeks.” (Id. at ¶ 7.) On August 9, 2019, the parties reached a settlement in principle. (Id.) After two months of “extensive negotiations concerning the final terms of the Settlement, ” Plaintiff filed the instant unopposed motion for preliminary approval of the class action settlement on November 22, 2019. (Id. at ¶ 8.)

         I. Complaint Allegations

         Plaintiff applied for a credit card issued by Chase. (Complaint at ¶ 5.) On or about September 19, 2018, Chase sent Plaintiff a letter denying his credit application stating that Chase “can't approve your request at this time because: Previous unsatisfactory relationship with this bank.” (Id. at ¶¶ 18-19.) Plaintiff alleges that Chase's denial of his credit application constitutes an “adverse action” for which a “statement of specific reasons for the action taken” or a “disclosure of the applicant's right to a statement of specific reasons” is required within 30 days of receiving Plaintiff's credit application. (Id. at ¶¶ 16-17.) Plaintiff insists that the letter he received fails to meet the “specific reason” requirement under the ECOA and does not disclose the specific reasons for which Plaintiff's application was denied. (Id. at ¶¶ 19, 22.)

         II. Settlement Agreement

         A. Proposed Class

         The proposed settlement class consists of “all natural persons to whom Chase sent a letter giving either ‘previous unsatisfactory relationship with this bank' or ‘previous unsatisfactory relationship with us or one of our affiliates' as the only reason for taking adverse action in connection with a credit card account during the period beginning January 28, 2014 and ending on November 22, 2019.” (Dkt. No. 43-1, Ex. A (“Agreement”) § 1.29.) The class is comprised of approximately 18, 183 persons. The class excludes “officers and directors of Chase and its parents, subsidiaries, affiliates, and any entity in which Defendant has a controlling interest; and all judges assigned to hear any aspect of this litigation, as well as their immediate family members.” (Id.)

         B. Payment Terms

         Chase agrees to pay $244, 659 for: “(1) payments to the Settlement Class, (2) a Class Representative Incentive Award of up to $5, 000, and (3) Notice and Settlement Administration Costs.” (Id. §§ 2.3, 3.2, 3.3, 4.8.) The Settlement Class Consideration is “non-reversionary.” (Id. § 4.10(f).) The settlement administration costs are estimated at $50, 102. (Dkt. No. 43-1 at ¶ 10.) Assuming the $5, 000 class representative incentive award and the $50, 102 administration costs, the net settlement class consideration will be $189, 557, or, $10.42 per settlement class member if all settlement class members were to submit a valid claim form. (Dkt. No. 43 at 9.)

         In addition to the Settlement Class Consideration, “Plaintiff's counsel will move for attorneys' fees and costs of up to $185, 000, to be paid by Chase.” (Dkt. No. 43-1, Ex. A, Agreement § 3.4(a).) The Court will also enjoin Chase, for five years from the date of final approval, from using the phrases “‘previous unsatisfactory relationship with this bank' and ‘previous unsatisfactory relationship with us or one of our affiliates' in adverse action notices as the sole reason for denying credit card applications or otherwise taking an adverse action in connection with a Chase credit card account.” (Id. § 3.5)

         1. Individual Class Member Shares

         To receive a payment, settlement class members “must submit a valid Claim Form electronically through the Settlement Website or by mail to the Settlement Administrator” within 60 days after the Notice Date. (Agreement §§ 1.5, 4.3(a), 4.10(b).) The claim form will be made available on the Settlement Website and will be mailed upon request. (Id. § 4.3(a).) The claim form requires class members to provide:

(a) the Settlement Class Member's name and mailing address,
(b) a certification that, to the best of the Settlement Class Member's knowledge, Chase sent him or her a notice containing either “previous unsatisfactory relationship with this bank” or “previous unsatisfactory relationship with us or one of our affiliates” as the only reason why Chase took an adverse credit action against the Settlement Class Member.

(Id. § 1.6, Exh. E.) Claim Forms must be submitted online or postmarked no later than 60 days after the Notice Date (the “Claims Submission Deadline”). (Id. § 4.3(b).)

         The Settlement Class Consideration will be divided in equal shares among the claiming class members. Plaintiff estimates that only 7% of class members will submit a valid claim form which would yield a cash payment of approximately $149 per claiming class member. (Dkt. Nos. 43 at 13; 43-1 at ¶ 11.)

         Within 15 days of an order and finalized judgment from this Court, Chase will deposit the Settlement Class Consideration into an account which will be maintained as the “Court-approved Qualified Settlement Fund.” (Dkt. No. 43-1, Ex. A, Agreement §§ 3.2, 4.8.) Within 27 days of the final order and judgment, each class Mmmber eligible for payment will be mailed their payment drawn from the Settlement Class Consideration account. (Id. § 4.10(c).)

         2. Unclaimed Funds

         The class members' checks are valid for 180 days after issuance. (Id. § 4.10(d).) If any check is returned as undeliverable, the Settlement Administrator will make “reasonable efforts to locate the proper address for any intended recipient” and “will re-mail it once to the updated address.” (Id.) For checks left uncashed after the 180 days, a second distribution will be made to the settlement class members who cashed their initial checks, if “economically feasible.” (Id. § 4.10(e).) If second round distribution is not feasible, or if there are funds remaining in the Settlement Class Consideration account after the “stale check date for the second distribution, ” the remaining funds will then be distributed in a “mutually agreeable manner, subject to the approval of the Court.” (Id.)

         D. Release

         Plaintiff and class members who do not opt out agree to release Chase, together with the other “Released Parties, ” from the “Released Claims.” (Agreement § 3.6(a).) Namely, claims arising out of or related to:

(a) Chase's use of the language “previous unsatisfactory relationship with this bank” or “previous unsatisfactory relationship with us or one of our affiliates” in an adverse action notice sent pursuant to the ECOA in connection with a credit card account on or before November 22, 2019; or (b) the acts and omissions alleged in the Complaint occurring on or before November 22, 2019.

(Id. § 1.24.) In addition, Plaintiff and class members waive “any and all rights” under California Civil Code § 1542 which excludes from release those claims which are unknown at the time of the release. (Id. § 3.6(d).) The claims to be released are broader than the claims in the Complaint. (Dkt. No. 43 at 11.)

         E. Notice

         Within 10 days of preliminary approval, Chase will “provide the Settlement Class Member List to the Settlement Administrator and Settlement Class Counsel.” (Agreement § 4.2.) “Within 45 days of Preliminary Approval, the Settlement Administrator will provide the Settlement Class with notice of the proposed Settlement by:

(a) Establishing a Settlement Website, which shall contain the Notice and enable Settlement Class Members to submit a Claim Form electronically. The Settlement Website shall remain active until at least 45 days after the Post-Distribution Accounting;
(b) Emailing the Notice to all Settlement Class Members who have an email address on file with Chase; and,
(c) For all Settlement Class Members who do not have a current and valid email address on file with Chase (including as evidenced by any undeliverable messages or bounce-backs resulting from (b) immediately above), by sending the Notice and Claim Form to Settlement Class Members via U.S. Mail using the postal mailing address on file with Chase as updated by the Settlement Class Administrator using reasonable and customary procedures for address updating using public records.

(Id.) All email notices will be sent with a tracking pixel and, if the email notice has not opened as of the seventh day following the email notice, the class member will be sent a notice by mail. (Id. § 4.2.)

         F. Opt-Out and ...


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