Settlements in ‘rent-a-tribe’ class action lawsuits approved

After protracted payday lending litigation with uncertain outcomes and extended settlement negotiations, the settlements were found to be fair and adequate and the attorneys’ fees award of $2,871,000 was approved. However, an award of $5,000 to each plaintiff was refused; instead the named plaintiffs will each receive between $3,000 and $5,000, depending on their level of involvement.

Background

This matter arises out of what plaintiffs described as a “rent-a-tribe scheme” in which a payday lender affiliates with a Native American tribe to attempt to insulate itself from federal and state consumer financial protection laws. This matter is before the court on plaintiffs’ motion for final approval of class-action settlement.

Notice

The court finds that the notice provided to class members satisfies due process and that it was both reasonable and the best notice practicable under the circumstances.

Fairness

The procedural posture of the case points toward the fairness of the negotiations. The case was at an advanced stage when the parties entered settlement negotiations. Second, the extent of the discovery taken also points toward the fairness of the negotiations. In particular, 34 witnesses have been deposed and 145 subpoenas  were issued.

Third, the circumstances surrounding the negotiation point toward the procedural fairness of the negotiations. The parties had three formal mediation sessions over two months and an additional settlement conference. The mediation sessions were overseen by professional mediator Nancy A. Lesser, and the settlement conference was overseen by then magistrate judge David Novak.

Finally, class counsel and their firms have extensive backgrounds in complex and class action litigation and consumer protection litigation. And, in particular, members of class counsel have significant experience in litigating class action lawsuits against tribal lenders.

Adequacy

The first two adequacy factors, the strength of the plaintiffs’ case and the risks of going to trial, together suggest that the settlement is substantively adequate. The third factor, the anticipated duration and expense of additional litigation, similarly supports the conclusion that the settlement is adequate. Because of the risks plaintiffs would face if the case continued to trial, and the costs of litigation generally, the case would likely have continued at significant expense for both parties. But the risk of prolonging the litigation carried a special risk for class members with outstanding loans on which the interest would continue to accrue.

Class counsel has not provided any argument on the fourth adequacy factor, the solvency of the defendants and the likelihood of recovery on a litigated judgment, but the court has no reason to believe there is any such risk. The fifth and final factor also points to the substantive adequacy of the settlement. Of the approximately 491,018 class members, none objected.

Attorneys’ fees

To determine whether the attorneys’ fees requested by class counsel are reasonable, the court has considered the 12 Johnson factors and the seven Gunter factors. Balancing these factors–and emphasizing the duration and complexity of this case as well as the risk of nonpayment–the court finds that a fee award of $2,871,000 (i.e., 33% of the settlement fund), inclusive of costs, is reasonable.

By class counsel’s calculation, the lodestar figure is $4,238,589. Under the circumstances of this case, the court is satisfied that the lodestar  cross-check demonstrates that the requested fee award is commensurate with the time and effort expended by class counsel and is not an unwarranted windfall payment.

Service awards

Named plaintiffs request $5,000 each which will be paid from the overall settlement fund. Although a service award of $5,000 is not inherently unreasonable, here, the award requested is concerning on several fronts: (1) the amount of the requested service awards relative to the benefits for which most class members under the settlement are eligible, (2) the total amount of the service awards requested (i.e., $210,000) is quite high and (3) it is not clear that all 42 named plaintiffs were equally involved or faced equal risk in representing the class.

In view of the court’s concerns, an award of $5,000 will be given to any named plaintiff who was deposed and who was required to answer written discovery; an award of $4,000 will be given to any named plaintiff who was required to answer written discovery or who served on the creditor’s committee in the Eventide bankruptcy proceedings and an award of $3,000 will be given to any other named plaintiff.

Plaintiffs’ motion for final approval granted.

Galloway v. Williams, Case No. 3:19-cv-470, Dec. 18, 2020. EDVA at Richmond (Payne). VLW 020-3-643. 37 pp.