Armando Herrera v. Wells Fargo Bank, N.A.
8:18-cv-00332
| C.D. Cal. | Nov 16, 2021Background
- Plaintiffs sued Wells Fargo alleging it kept unearned Guaranteed Automobile Protection (GAP) fees when customers paid off auto finance agreements early and failed to refund the prorated amounts; claims included breach of contract, TILA, UCL, CLRA, money had and received, and declaratory relief.
- The proposed nationwide Settlement Class (with state Statutory Subclass distinctions) covered customers whose finance agreements with GAP addenda were assigned to Wells Fargo, terminated by early payoff during the class period, and who did not receive a GAP refund.
- Settlement relief: (1) Wells Fargo must implement an automatic Early-Payoff GAP refund process for all states (effective Jan 1, 2022 through Jan 1, 2026); (2) direct payment to Statutory Subclass members (including interest based on 1-year treasury rate); and (3) a $45,000,000 Supplemental Settlement Fund to pay Non-Statutory approved claims, $5 additional payments to Statutory Subclass members, attorneys’ fees/costs, and service awards. Wells Fargo separately pays notice/administration costs (~$5.5M).
- Notice: administrator JND mailed notices to ~2.7M Non-Statutory and ~120K Statutory potential class members, ran email and digital campaigns; as of Nov. 11, 2021 there were ~476,555 timely claims, 638 opt-outs, and 13 objections.
- Fee and awards requests: Class Counsel sought $23.1M in fees, $260,982.42 in expenses, and $7,500 each for 15 named plaintiffs.
- Court action: Judge Selna granted final approval of the settlement; awarded $23.1M attorneys’ fees and $260,982.42 costs; reduced and approved incentive/service awards totaling $46,375 (allocations by hours); and found the settlement fair, reasonable, and adequately administered under Rule 23(e).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the class settlement is fair, reasonable, and adequate under Fed. R. Civ. P. 23(e) | Settlement provides meaningful monetary and injunctive relief, was negotiated at arm's length after extensive litigation and mediation, and notice/claims process is effective | Settlement is adequate; Wells Fargo filed non-opposition to approval (no substantive opposition) | Court approved settlement: Rule 23(e)(2) factors satisfied (adequate representation, arm's-length negotiation, adequate relief, equitable treatment); class certified for settlement. |
| Whether and how to value the injunctive relief (Business Practice Change) for fee calculation | Include the future value of the Business Practice Change to current class members (estimated future refunds to class members) when calculating total settlement value for percentage-fee method | Wells Fargo did not oppose class counsel's requested fee but contended valuation should reflect what benefits actually accrue to class members | Court included future value to current class members in valuation; used a $107M+ total (including class-member share of future refunds) and found the fee percentage reasonable. |
| Whether $23.1M in attorneys' fees is reasonable (percentage vs. lodestar cross-check) | Fees are reasonable: ~21.5% of total valuation (including class-member future refunds), extensive hours (17,711.6), contingency risk, complex litigation justifies multiplier (2.13 lodestar) | Wells Fargo did not oppose fee request; objectors argued fee was too high as a percent of the $45M fund | Court found $23.1M reasonable: within Ninth Circuit benchmark/methodology (25% guideline), justified under percentage method and supported by lodestar cross-check (2.13 multiplier). |
| Whether $7,500 incentive awards for each named plaintiff are appropriate | Plaintiffs documented time/effort (depositions, document production) and requested $7,500 each to compensate for service and risk | Wells Fargo did not oppose; Court considered proportionality to class recovery and claimant time | Court reduced awards for most named plaintiffs to reflect $125/hour equivalent based on hours expended; maintained $7,500 only for Atkins (who logged 94 hours); total service awards approved = $46,375. |
Key Cases Cited
- Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003) (two-step test for settlement classes and standards for fairness of class settlements)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (standards for fee awards and scrutiny for possible collusion)
- In re Online DVD-Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015) (inclusion of notice/administration costs in settlement valuation; incentive award review)
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (25% benchmark for common-fund attorney fees)
- Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9th Cir. 2002) (factors supporting departure from benchmark and lodestar multipliers in common-fund cases)
- In re Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539 (9th Cir. 2019) (percentage vs. lodestar approaches in class-fee awards)
- Rodriguez v. West Publ'g Corp., 563 F.3d 948 (9th Cir. 2009) (notice must neutrally and plainly describe settlement terms to alert objectors)
- Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012) (notice need not estimate potential claim values or analyze statutes in detail)