Hyland v. Navient CorporationHyland v. Navient Corporation
Before:
SACK, LOHIER, and NARDINI, Circuit Judges.
The Clerk of Court is directed to amend the caption to conform to the caption above.
In this class action, the United States District Court for the Southern District of New York (Cote, J.) certified a settlement class under
CAITLIN J. HALLIGAN (Faith E. Gay, Yelena Konanova, David A. Coon, Max Siegel, on the brief), Selendy & Gay PLLC, New York, NY; Mark Richard, Phillips, Richard & Rind, P.A., Miami, FL, for Plaintiffs-Appellees Kathryn Hyland, Melissa Garcia, Jessica Saint-Paul, Rebecca Spitler-Lawson, Michelle Means, Elizabeth Kaplan, Jennifer Guth, Megan Nocerino, Elizabeth Taylor, and Anthony Church, each individually and on behalf of all others similarly situated.
Ashley M. Simonsen, Covington & Burling LLP, Los Angeles, CA; Andrew A. Ruffino, Covington & Burling LLP, New York, NY, for Defendants-Appellees Navient Corporation, Navient Solutions, LLC.
ANNA ST. JOHN, Hamilton Lincoln Law Institute, Center for Class Action Fairness, Washington, DC, for Objector-Appellant William Yeatman.
ERIC ALAN ISAACSON, Law Office of Eric Alan Isaacson, La Jolla, CA, for Objector-Appellant Richard Estle Carson, III.
This appeal concerns a settlement that a class of public servants negotiated with the loan servicing companies Navient Corporation and Navient Solutions, LLC (together, “Navient“). As part of the settlement, Navient agreed to deliver better and more accurate information to borrowers and to contribute a cy pres award of $2.25 million to establish a nonprofit organization that provides counseling to borrowers at all stages of the repayment process. In exchange, the class agreed to release their claims for non-monetary relief, though they retain the right to sue Navient individually for money damages.
The United States District Court for the Southern District of New York (Cote, J.) certified a class for settlement purposes under
BACKGROUND
In 2007 the federal government created the Public Service Loan Forgiveness program (“PSLF“) to help address the problem
Navient aims to help borrowers “understand the complex array of federal loan repayment options so they can make informed choices about the plans that are aligned with their financial circumstances and goals.” App‘x 35. In October 2018, however, a group of public servants who had contacted Navient for help repaying their loans (collectively, “Plaintiffs“) filed a putative class action lawsuit in the Southern District of New York, alleging that Navient had not “liv[ed] up to its obligation to help vulnerable borrowers get on the best possible repayment plan and qualify for PSLF.” App‘x 36. They claimed that Navient had “[d]eceived borrowers by [erroneously] informing them PSLF was not available to them,” “[m]isled borrowers by stating they were ‘on track’ for PSLF when in fact their repayment plan did not qualify for PSLF,” and “[a]dvised borrowers not to submit paperwork that would verify their employment and other qualifying factors for PSLF.” App‘x 37. As a result, according to the Plaintiffs’ amended complaint, borrowers were “denied loan forgiveness at alarming rates, with horrifying effects on the borrowers and their families and communities.” App‘x 37.
Plaintiffs brought a number of tort and contract claims, as well as claims under state statutes protecting against unfair and deceptive trade practices. Navient‘s business practices, they asserted, were largely to blame for their injuries. Plaintiffs alleged that Navient structured employee compensation “to incentivize short calls by rewarding employees for rushing borrowers off the phone, thereby preventing borrowers from receiving full and accurate information about their best repayment options.” App‘x 39. They also alleged that Navient‘s employees, looking for quick and easy solutions to present on the phone, pushed cash-strapped borrowers to enter loan forbearance, despite the availability of more flexible repayment plans and the fact that forbearance pauses PSLF-qualifying payments and can increase the total amount a borrower ultimately owes. In addition to various sub-classes based on geography, Plaintiffs proposed a nationwide class of public servants who have or had loans serviced by Navient and who contacted the company regarding their eligibility for PSLF, as well as a nationwide injunctive class of borrowers who have loans actively serviced by Navient, previously contacted Navient about PSLF eligibility, and intended to contact Navient in the future regarding PSLF eligibility.
Navient moved to dismiss the amended complaint under
Spurred in part by Judge Cote‘s comments, the parties reached a settlement in April 2020 in which they agreed to seek certification of a mandatory nationwide settlement class pursuant to
In June 2020 the District Court preliminarily approved the settlement agreement and the cy pres recipient. The District Court also conditionally certified a
[a]ll individuals who, at any point from October 1, 2007 to the Effective Date (i) have or had Federal Family Education Loans (“FFEL“) or Direct Loans serviced by Navient; (ii) are or were employed full-time by a qualifying public service employer or employers for purposes of PSLF; and (iii) spoke to a Navient customer service representative about subjects relating to eligibility for PSLF.
App‘x 292. The District Court found that “Defendants [were] alleged to have acted or refused to act on grounds that appl[ied] generally to the Settlement Class,” and that certification was therefore proper under
Less than a month later, this Court decided Berni v. Barilla S.p.A., 964 F.3d 141 (2d Cir. 2020), which held that a class of past purchasers of a product (in that case, Barilla pasta) could not be certified under
A number of class members at the hearing -- including the appellants here, William Yeatman and Richard E. Carson, III (together, “Appellants“) -- objected to the
The District Court also granted $15,000 incentive awards to the named plaintiffs based on “evidence that they have suffered attack[s] personally because they have served in their role here . . . and tried to achieve a benefit on behalf of absent class members.” App‘x 651-52. The District Court acknowledged that incentive awards could encourage class representatives to agree among themselves to a settlement that was not in the best interests of the class, but it found that such collusion was unlikely in this case. App‘x 649-50. Finally, the court denied a request for $500,000 in attorney‘s fees after learning that the money would be used to reimburse a labor union, the American Federation of Teachers (“AFT“), that had been paying Plaintiffs’ counsel‘s bills on a monthly basis. See App‘x 653-54.
On October 9, 2020, consistent with the fairness hearing and its preliminary approval of the settlement, the District Court entered a final order certifying the settlement class, approving the settlement agreement as “in the best interest of the Settlement Class as a whole,” approving the $15,000 service awards, denying class counsel‘s application for attorney‘s fees, and dismissing the case. Navient Corp., 2020 WL 6554826, at *1-3.
This appeal followed.
DISCUSSION
I.
Appellants challenge the District Court‘s decision to certify a
II.
Before considering whether the District Court properly certified the class under
“Whether a plaintiff has constitutional standing is a question of law that we review de novo.” Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C. (”Cent. States“), 504 F.3d 229, 241 (2d Cir. 2007). Standing is satisfied so long as at least one named plaintiff can demonstrate the requisite injury. Dep‘t of Commerce v. New York, 139 S. Ct. 2551, 2565 (2019) (“For a legal dispute to qualify as a genuine case or controversy, at least one plaintiff must have
Here, the amended complaint plausibly alleged that the named plaintiffs were likely to suffer future harm because they continued to rely on Navient for information about repaying their student loans. See, e.g., App‘x 53, 61, 63. At least six of the named plaintiffs continue to have a relationship with Navient. See App‘x 574. That is enough to confer standing on the entire class. See Amador v. Andrews, 655 F.3d 89, 99 (2d Cir. 2011) (“In a class action, once standing is established for a named plaintiff, standing is established for the entire class.” (quotation marks omitted)).
III.
Having satisfied ourselves that the class has standing, we turn to whether the District Court abused its discretion in certifying the settlement class. “According to the
Appellants first argue that certification was improper because not all members of the class stand to benefit from the proposed injunctive relief. As part of the settlement, however, Navient has agreed to implement a number of business-practice enhancements, including requiring call center representatives to listen for keywords indicating PSLF eligibility; updating forms sent to borrowers to include more information about PSLF; and improving website and chat communications to better reach borrowers who might be eligible for loan forgiveness. See App‘x 304. Navient‘s reforms will benefit class members whose loans continue to be serviced by Navient. But the reforms will also benefit the remaining class members who, for example, are no longer with Navient or who no longer have student loans, by providing them accurate information about PSLF and helping them determine whether they have viable individual claims for damages. See App‘x 635 (Plaintiffs’ counsel explaining that the proposed reforms “help borrowers advance their individual claims [] because they are now able to receive accurate information from Navient” regarding their loan histories); see also Oral Arg. at 17:28-18:22 (same). Specifically, improvements to Navient‘s communications system will make it easier for class members to access their loan-repayment record, learn how PSLF is supposed to work, and assess whether they would have been eligible for loan forgiveness had Navient initially provided them with accurate information. See Oral Arg. at 18:46-19:23. Access to payment records will be particularly useful to class members who may need to explain their credit history to secure mortgages or other loans. See Oral Arg. at 20:21-21:15; see also App‘x 379 (declaration of a named plaintiff explaining how his “inflated loan balance posed a substantial barrier while [he] was attempting to purchase a home, as [he] was disqualified from a number of mortgage options in light of [his] outstanding debt alone“). The evidence of these benefits, which plausibly accrue to even those class members who have paid off their loans in full or no longer have Navient-serviced loans, supports the District Court‘s finding that the settlement was in the best interest of the class.2
First, Yeatman argues that the class should have been certified under
Second, Appellants challenge the certification on the ground that the release obtained by the certified class eliminates the right of individual class members to pursue claims for monetary damages “on an aggregate basis.” Yeatman Br. 28. Fundamentally, they argue that the settlement violates the due process rights of absent class members by denying them the opportunity to opt out of the class and sue for money damages in addition to injunctive relief. But as the District Court explained, “individual class members [in fact] retain their right to bring individual lawsuits,” and the settlement does not prevent absent class members from pursuing monetary claims.3 See App‘x 648; see also Navient Corp., 2020 WL 6554826, at *3 (“[A]ll other Settlement Class Members do not release or discharge, but instead expressly preserve, their right to file individual lawsuits for monetary relief on a non-class basis and excluding Aggregate Actions.“). We therefore conclude that the District Court did not abuse its discretion when it certified the settlement class under
IV.
Appellants’ challenge to the District Court‘s approval of the settlement itself fares no better.
A. Fairness of the Settlement
First, Appellants ask us to reject the settlement as unfair under
(1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
Id. at 463 (citations omitted). On appeal, “[t]he trial judge‘s views” of these factors are entitled to “great weight.” Joel A. v. Giuliani, 218 F.3d 132, 139 (2d Cir. 2000) (quoting Grinnell, 495 F.2d at 454).
The District Court carefully analyzed each of the nine factors. See App‘x 645-48. In particular, in considering the final three factors, the court reasonably concluded that although Navient could have “withst[ood] a greater judgment,” the settlement was “absolutely within the range of reasonable settlements,” especially “because there [was] a grave risk that there would have been no recovery at all” had the case proceeded. App‘x 647-48. We find no abuse of discretion in the District Court‘s application of the Grinnell factors to the facts before it.
B. Cy Pres Award
Appellants separately object to the cy pres award in this case. As an initial matter, they say that a cy pres award is never appropriate in a class action settlement because it provides no direct benefit to class members. See Yeatman Br. 33 (“[C]y pres awards typically fail to redress class members’ alleged injuries for which they are waiving their rights.“); id. at 37 (“Cy pres . . . provides no redress to . . . class members.“); see generally Yeatman Br. 31-44; Carson Br. 37-44. We disagree. As our sister circuits have recognized, class members can “benefit -- albeit indirectly -- from a defendant‘s payment of funds to an appropriate third party.” In re Google Inc. Street View Elec. Commc‘ns Litig., 21 F.4th 1102, 1116 (9th Cir. 2021); see id. (where a cy pres award has a “direct and substantial nexus” to the interests of the class and “account[s] for the nature of the plaintiffs’ lawsuit,” as the award in question does here, it “necessarily prioritizes class members’ interests,
Appellants also argue that a cy pres award is not appropriate if it is feasible to distribute the funds that support the award directly to the class instead. This argument, however, misconstrues the settlement fund as a damages award that was redistributed to Public Service Promise through the cy pres doctrine. But the settlement fund never belonged to class members as damages (indeed, the class members expressly reserved their individual right to later sue Navient for money damages), and there is no evidence to suggest that Navient would have otherwise agreed to distribute the funds to the class. See App‘x 646 (the District Court rejecting objections over “the lack of an award of damages,” in part because “there is no sound argument to suggest[] that there could be a class action that would result in a monetary award to individual class members“).
C. First Amendment Challenge
Finally, Appellants maintain that the cy pres award to Public Service Promise unlawfully compels speech in violation of the First Amendment. “We review a First Amendment challenge to the district court‘s approval of a settlement,” including a cy pres award, “de novo.” In re Google Street View, 21 F.4th at 1110.
We reject Appellants’ constitutional challenge to the settlement. The settlement agreement does not involve state action that implicates the First Amendment. Instead, the “[D]istrict [C]ourt‘s review of the settlement agreement in this case essentially determined whether it was ‘fair, reasonable, and adequate’ and was merely an exercise in compliance with
D. Involvement of the Labor Union
Appellants object to the relationship between Plaintiffs’ counsel and AFT, the labor
In advancing this claim, however, Appellants have not pointed to any evidence that conflicts with Judge Cote‘s finding that “the motive behind AFT acting as it has and the commitment it has shown in this litigation . . . is nothing but admirable.” App‘x 655; see also id. at 654 (“[B]ecause of AFT‘s work and its decision and its generosity, the class has achieved a significant benefit, and that significant benefit will have or may have a profound impact on all public service employees.“). Nor, on review of the record, do we see evidence that class counsel abandoned the litigation or otherwise acted in bad faith in pursuing this case. To the contrary, counsel agreed to settle only after the District Court indicated that
V.
Finally, Appellants challenge the District Court‘s decision to approve service awards for the named plaintiffs, arguing that such awards are prohibited under a pair of nineteenth-century Supreme Court cases, Trustees v. Greenough, 105 U.S. 527 (1882), and Central R.R. & Banking Co. v. Pettus, 113 U.S. 116 (1885). We are not persuaded.
Greenough involved a suit brought by a bondholder of the Florida Railroad Company, Francis Vose, against the trustees of the Internal Improvement Fund of Florida, which “consisted of ten or eleven million acres of lands belonging to the State,” the proceeds of which were “pledged for the payment of the interest accruing on the bonds.” 105 U.S. at 528. On behalf of himself and other bondholders, Vose alleged that the trustees were “wasting and destroying the fund by selling [the land] at nominal prices.” Id. at 528-29. The litigation was successful: The trustees were ultimately removed from their positions, and the court appointed agents to sell the land, which resulted in “a large number of sales” and “a considerable amount of money” for the bondholders. Id. at 529.
Vose, who had financed most of the litigation personally, petitioned to have his expenses reimbursed by the fund. The Supreme Court held that Vose could receive “reasonable costs, counsel fees, charges, and expenses incurred in the fair prosecution
Although Greenough was decided decades before the adoption of
Turning to the awards themselves, we note that the District Court offered compelling reasons for compensating the class representatives, including that they “opened their lives to scrutiny“; “laid bare their financial circumstances, their career choices, and their personal histories“; suffered personal attacks; and were “subjected to vitriol.” App‘x 651-52. These determinations, which were supported by the record, see App‘x 402, 434, 443-44, 456-57 (declarations of named plaintiffs), did not lie outside the bounds of the District Court‘s discretion.6
CONCLUSION
We have considered Appellants’ remaining arguments and conclude that they are without sufficient merit to warrant reversal. For the foregoing reasons, we AFFIRM the judgment of the District Court.