case 1:14-cv-00807-glr document 142-1 filed 11/21/17 page ... · case 1:14-cv-00807-glr document...

UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND

CHARMAINE FRECKLETON and THOMAS J. JUST, on behalf of themselves and all others similarly situated,

Plaintiffs,

v.

TARGET CORPORATION,

Defendant.

Case No. 14-cv-00807-GLR CLASS ACTION

PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF FINAL APPROVAL OF CLASS ACTION SETTLEMENT

GORDON, WOLF & CARNEY, CHTD Martin E. Wolf (Bar No. 09425)

102 W. Pennsylvania Avenue, Suite 402 Towson, MD 21204

(410) 825-2300

FRANCIS & MAILMAN, P.C. James A. Francis (pro hac vice) John Soumilas (pro hac vice)

David A. Searles (pro hac vice) 100 S. Broad Street, Suite 1902

Philadelphia, PA 19110 (215) 735-8600

LANGER GROGAN & DIVER, P.C.

Irv Ackelsberg (pro hac vice) 1717 Arch Street, Suite 4130

Philadelphia, PA 19103 (215) 320-5660

BAILLON THOME JOZWIAK & WANTA

Shawn Wanta (pro hac vice) 100 South 5th Street, Suite 1200

Minneapolis, MN 55402 (612) 252-3570

Attorneys for Plaintiffs and the Classes

Case 1:14-cv-00807-GLR Document 142-1 Filed 11/21/17 of 26

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES ......................................................................................................... iii

I. INTRODUCTION ................................................................................................................ 1

II. HISTORY OF THE LITIGATION ...................................................................................... 3

A. The Freckleton Litigation ........................................................................................ 3

B. The Just Litigation ................................................................................................... 4

C. Mediation ................................................................................................................. 5

III. SETTLEMENT .................................................................................................................... 5

IV. THE APPLICABLE LEGAL STANDARDS TO BE UTILIZED IN CONSIDERING THE APPROVAL OF CLASS ACTION SETTLEMENTS ................... 9

V. THE SETTLEMENT IS FAIR AND ADEQUATE .......................................................... 12

A. The Jiffy Lube “Fairness” Factors All Support Approval of This Settlement ........ 13

1. The First and Second Jiffy Lube Fairness Factors, the Posture of the Case and the Amount of Discovery Completed, Support Settlement Approval ..................................................................................................... 13

2. The Third Jiffy Lube Fairness Factor, the Circumstances Surrounding Settlement Negotiations, Weighs in Favor of Settlement Approval ................................................................................... 13

3. The Fourth Jiffy Lube Fairness Factor, the Experience of Counsel, Weighs in Favor of Settlement Approval ................................................... 14

B. The “Adequacy” Factors Likewise Support Approval of This Settlement ............ 14

1. The First and Second Adequacy Factors, the Strength of Plaintiffs’ Case on the Merits, and Any Difficulties Plaintiffs Are Likely to Encounter at Trial, Weigh in Favor of Settlement Approval ..................... 14

2. The Third Adequacy Factor, the Anticipated Duration and Expense of Additional Litigation, Weighs in Favor of Settlement Approval .......... 16

3. The Fourth Adequacy Factor, the Solvency of Defendants and Likelihood of Recovery of a Litigated Judgment, Weighs in Favor of Settlement Approval .............................................................................. 17

4. The Fifth Adequacy Factor, the Degree of Opposition to the Settlement, Weighs in Favor of Settlement Approval ............................... 18


ii

VI. CONCLUSION .................................................................................................................. 19


iii

TABLE OF AUTHORITIES

Page(s)

CASES

In re Bendectin Products Liability Litigation, 749 F.2d 300 (6th Cir. 1984) .................................................................................................... 16

Berry v. Schulman, 807 F.3d 600 (4th Cir. 2015) .................................................................................................. 6, 7

Blandina v. Midland Funding, LLC, 2016 WL 3101270 (E.D. Pa. June 1, 2016) ............................................................................. 17

City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) ..................................................................................................... 12

In re Corrugated Container Antitrust Litigation, 659 F.2d 1322 (5th Cir. 1981) .................................................................................................. 11

Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977) .................................................................................................. 11

Dalton v. Capital Assoc. Indus., Inc., 257 F.3d 409 (4th Cir. 2001) .................................................................................................... 15

Dennis v. Trans Union, LLC, 2014 WL 5325231 (E.D. Pa. Oct. 20, 2014) ............................................................................ 15

Flinn v. FMC Corp., 528 F.2d 1169 (4th Cir. 1975) ...................................................................................... 10, 11, 12

Freckleton v. Target Corp., 81 F. Supp. 3d 473 (D. Md. 2015) ............................................................................................. 3

In re General Motors Pick-Up Trust Fuel Tank Products Liab. Litig., 55 F.3d 768 (3d Cir. 1995) ....................................................................................................... 12

In re Jiffy Lube Securities Litigation, 927 F.2d 155 (4th Cir. 1991) ...................................................................... 10, 13, 14, 16, 17, 18

Just v. Target Corp., 187 F. Supp. 3d 1064 (D. Minn. 2016) .................................................................................. 4, 6

Lake v. First Nationwide Bank, 900 F. Supp. 726 (E.D. Pa. 1995) ............................................................................................ 11


iv

Protective Committee for Indep. Stockholders of TMT Trailer Ferry v. Anderson, 390 U.S. 414 (1968) ................................................................................................................. 17

In re Prudential Insurance Company of America Sales Litigation, 148 F.3d 283 (3d Cir. 1998) ..................................................................................................... 19

Rolland v. Cellucci, 191 F.R.D. 3 (D. Mass. 2000) .................................................................................................. 11

Safeco Insurance Co. of America v. Burr, 551 U.S. 47 (2007) ................................................................................................................... 15

Shlensky v. Dorsey, 574 F.2d 131 (3d Cir. 1978) ..................................................................................................... 11

Stoetzner v. U.S. Steel Corp., 897 F.2d 115 (3d Cir. 1990) ..................................................................................................... 19

Troncelliti v. Minolta Corporation, 666 F. Supp. 750 (D. Md. 1987) .............................................................................................. 10

In re Washington Public Power Supply System Securities Litigation, 720 F. Supp. 1379 (D. Ariz. 1989) ........................................................................................... 11

Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982) ....................................................................................................... 11

West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710 (S.D.N.Y. 1970) ..................................................................................... 15, 16

STATUTES

Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. .............................................................. passim

15 U.S.C. § 1681b(b)(2) ........................................................................................... 4, 5, 6, 7, 18

15 U.S.C. § 1681b(b)(2)(A)(i) ................................................................................................... 4

15 U.S.C. § 1681b(b)(3) ..................................................................................................... 3, 5, 6

15 U.S.C. § 1681n(a)(1)(A) ................................................................................................. 7, 18

15 U.S.C. § 1681o(a)(1) ............................................................................................................. 7

FEDERAL RULES

Fed. R. Civ. P. 20(a)(1) .................................................................................................................... 5

Fed. R. Civ. P. 23 ......................................................................................................................... 7, 9


v

Fed. R. Civ. P. 23(b)(2) ........................................................................................................ 1, 2, 7, 9

Fed. R. Civ. P. 23(b)(3) ................................................................................................ 1, 2, 6, 7, 8, 9

Fed. R. Civ. P. 23(e)(1) .................................................................................................................... 9

Fed. R. Civ. P. 23(e)(2) .................................................................................................................. 10

OTHER AUTHORITIES

http://www.resolutionsllc.com/principals.htm ................................................................................. 5


1

I. INTRODUCTION

Plaintiffs Charmaine Freckleton and Thomas J. Just, on behalf of themselves and two

Classes of persons similarly situated, through undersigned Class Counsel, submit this

Memorandum in support of their Motion for Final Approval of Class Action Settlement in this

class action case brought under the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. (“FCRA”).

As set forth in the Settlement Agreement filed May 26, 2017 (ECF 118-1) (the “Settlement

Agreement” or “Agreement”),1 and in the Notices to the Classes, the proposed settlement is

between the Settlement Classes and Defendant Target Corporation (“Target”). The Classes are

made up of employment applicants and current and former employees of Defendant who, Plaintiffs

allege, were not provided with the stand-alone disclosure and authorization for obtaining

background reports for employment purposes, and some of whom were allegedly subject to

adverse action as a result of such a report.

The two Settlement Classes are specifically defined as follows:

Rule 23(b)(2) Settlement Class

All internal and external applicants for employment, promotion, or transfer on whom Target Corporation obtained a consumer report for employment purposes beginning November 13, 2010 through November 13, 2016, who executed the Consent & Disclosure Form attached as Exhibit D to the Settlement Agreement or a form substantially similar, and who are not Excluded Individuals.

See Settlement Agreement at ¶ 28. Defendant notified the Settlement Administrator of 1,356,743

individuals in this Settlement Class.

Rule 23(b)(3) Class

All internal and external applicants for employment, promotion, or transfer on whom Target Corporation obtained a consumer report for employment

1 Unless otherwise defined herein, all capitalized terms herein have the same meaning as in the Settlement Agreement.


2

purposes beginning March 17, 2012 through June 13, 2016, who were not employed, promoted, or transferred by Target because of the consumer report, and who are not Excluded Individuals.

Agreement, ¶ 37. Defendant notified the Settlement Administrator of 49,935 individuals in this

Settlement Class. All members of the Rule 23(b)(3) Settlement Class are also members of the

Rule 23(b)(2) Settlement Class.

The settlement benefits former, current, and future employees of Target. It provides for

both non-monetary and financial relief and represents an excellent result for the Classes under all

the circumstances of the case. The Settlement Agreement is on file with the Court (ECF 118-1),

and the terms of that Agreement are detailed more fully in Part III, infra.

The Settlement Administrator sent email and postcard notice to the Settlement Class

Members during the period of August 10, 2017 through August 25, 2017. The Settlement

Administrator also established a website containing relevant documents relating to the settlement,

and a telephone assistance program, both of which received thousands of contacts from Class

Members. See Declaration of RSM US LLP in Connection with Notice Dissemination, ¶¶ 3-28

(“RSM Dec.”) (ECF 141). These notice efforts had a success rate of over 98%. RSM Dec., ¶¶ 13,

28.

The Class has demonstrated its universal support for the proposed settlement – only ten

Settlement Class Members out of approximately 1.35 million have objected to the settlement (three

later indicated they wished to withdraw their objections), and only two have sent correspondence

to the Court. See Declaration of David A. Searles in Support of Motion for Final Approval of

Class Action Settlement (“Searles Dec.”). Only four have opted out from the settlement. RSM

Dec. ¶ 29. Accordingly, and because the settlement is fair, adequate, and reasonable, Plaintiffs

respectfully request that the Court grant final settlement approval.


3

II. HISTORY OF THE LITIGATION

A. The Freckleton Litigation

Plaintiff Charmaine Freckleton commenced this action on March 17, 2014.2 As originally

pled, the only claim against Defendant Target Corporation was the claim alleging a violation of 15

U.S.C. § 1681b(b)(3). That section prohibits an employer, such as Target, from using a “consumer

report” to make an “adverse” decision relating to prospective employment without, beforehand,

providing the person who is the subject of the report a copy of the report and a summary of rights

under the FCRA. Plaintiff Freckleton alleged that, because of that violation, job applicants are

denied the opportunity to view the reports sold about them, and to dispute any inaccuracies in the

reports before the adverse action is taken.

On April 30, 2014, Defendant filed a motion to dismiss for failure to state a claim (ECF 28).

Target contended that the background report it commissioned on Ms. Freckleton was not a

“consumer report” subject to the requirements of the FCRA, and also that it had not acted willfully

in violation of the FCRA. Id. Plaintiff Freckleton filed an Amended Complaint on June 20, 2014

(ECF 45), which Target moved to strike (ECF 54). This Court, through the Honorable William D.

Quarles, Jr., denied Defendant’s motion to strike on January 12, 2015, also ruling that Target’s

action in obtaining a background report for employment purposes was in fact governed by the

FCRA. Freckleton v. Target Corp., 81 F. Supp. 3d 473 (D. Md. 2015).

Thereafter, the Parties proceeded with discovery. Defendant produced over 4,000 pages

of documents on September 21, 2015. Following a review of the documents, Plaintiff Freckleton

2 Plaintiff Freckleton originally included in the action an individual damage claim against First Advantage LNS (formerly LexisNexis) Screening Solutions, Inc., seeking damages arising from the purported inaccuracy of the background report provided to Target. That individual claim was settled, and First Advantage was dismissed as a party on June 1, 2016. (ECF 107).


4

sought leave to amend a second time to add a claim under section 1681b(b)(2) of the FCRA. That

section prohibits employers from obtaining background reports on consumers with the use of a

consent and disclosure form that does not “consist solely of the disclosure that a consumer report

may be obtained for employment purposes.”3 15 U.S.C. § 1681b(b)(2)(A)(i).

Leave to amend was granted by this Court on October 26, 2015 (ECF 91), and the Second

Amended Complaint (“SAC”) was filed on that date (ECF 92). Defendant moved to dismiss the

new count in the SAC under section 1681b(b)(2) on November 16, 2015 (ECF 97), and

Ms. Freckleton opposed (ECF 98). The motion was placed in abeyance on April 13, 2016, to allow

the parties to pursue settlement. See Marginal Order (ECF 106). This Court has since dismissed

the motion without prejudice. See Order, June 30, 2016 (ECF 109).

B. The Just Litigation

Plaintiff Thomas J. Just commenced his action in the District of Minnesota on

November 13, 2015. Just v. Target Corp., Case No. 15-cv-04117-DWF-TNL. Plaintiff Just

asserted a violation of 15 U.S.C. § 1681b(b)(2) only. Defendant moved to dismiss the complaint

on December 11, 2015. The court granted the motion to dismiss with prejudice and entered

judgment in favor of Defendant on May 12, 2016. Just v. Target Corp., 187 F. Supp. 3d 1064 (D.

Minn. 2016).

Plaintiff Just filed a notice of appeal with the Eighth Circuit Court of Appeals on June 17,

2016. The appellate court then stayed the appeal as the Parties pursued settlement.

3 Plaintiff contended that Target’s Consent & Disclosure Form included various self-serving and extraneous statements which distract job applicants from the stand-alone disclosure “that a consumer report may be obtained for employment purposes” (the singular purpose of section 1681b(b)(2)), and extracted unrelated agreements and authorizations from the consumer that have nothing to do with the procurement of a consumer report. The alleged violations of section 1681b(b)(2) were highlighted on the Consent & Disclosure Form signed by Ms. Freckleton, and attached to Plaintiff’s opposition to Target’s motion to dismiss that count. (ECF 98-2).


5

C. Mediation

After the motions to dismiss the claims under section 1681b(b)(2) had been fully briefed

in both cases (but prior to either court ruling), and after depositions had been conducted on the

section 1681b(b)(2) and section 1681b(b)(3) claims in the Freckleton case, the Parties in both cases

agreed to attempt to settle the cases through private mediation. A two-day mediation occurred on

June 21 and 22, 2016, before Professor Eric D. Green.4 The Parties were unsuccessful in their

settlement efforts, but agreed to return for another day with Professor Green, on October 5, 2016.

At that session, the economic terms of a settlement agreement were reached, but with significant

additional terms remaining to be resolved.

Thereafter, there was substantial further negotiation that included an agreement to add

Plaintiff Just as an additional named plaintiff in this action and to resolve both matters in a single

agreement. The Parties spent months preparing the settlement agreement, drafting the collateral

documents, exchanging numerous drafts, and conducting a series of telephone negotiations

concerning the details of the terms and conditions of the agreement. They eventually finalized

their agreement as of May 25, 2017, resulting in the settlement document filed on May 26, 2017

as Appendix I to Plaintiffs’ Motion for Preliminary Approval (ECF 118).

In furtherance of the Settlement Agreement, the parties stipulated and agreed to join

Plaintiff Just to this case under Rule 20(a)(1) as an additional Class Representative for purposes

of Count I only (approved, ECF 115). Plaintiff Just’s appeal in the Eighth Circuit remains stayed.

III. SETTLEMENT

The Settlement Agreement achieves a superior result for the Classes, and will result in

4 Prof. Green is a nationally prominent ADR provider, specializing in complex commercial disputes; currently a principal with Resolutions, LLC, he is a co-founder of what became JAMS. See http://www.resolutionsllc.com/principals.htm.


6

substantial payments to Rule 23(b)(3) Settlement Class Members if it is approved. The Settlement

Agreement contains equitable recovery for members of both Classes and monetary recovery for

members of the Rule 23(b)(3) Settlement Class.

First, the Settlement Agreement acknowledges that Defendant has implemented changes

to its business practices because of the lawsuits, including the use of revised disclosure forms.5

Agreement, ¶¶ 119-122. More specifically, while Defendant disagrees that its disclosure violated

section 1681b(b)(2), it has agreed to remove from its various disclosures the language that

Plaintiffs characterized as extraneous, specifically the language highlighted in Exhibit D of the

Settlement Agreement. In addition, while Defendant maintains that a preliminary score on a

background report of “not cleared to proceed” is not an adverse action, it has nonetheless revised

the notices sent pursuant to section 1681b(b)(3), taken steps to ensure that no final negative

employment action is taken earlier than eight days after sending such notices, and severely

restricted access to the preliminary score of “not cleared to proceed” or any equivalent score until

eight days has passed. These changes will benefit both Settlement Classes, as well as other future

applicants, with regard to any future applications for employment with Target. See, e.g., Just, 187

F. Supp. 3d at 1065 (explaining that Plaintiff Just applied to Target multiple times).

Second, in addition to the business practice changes described above, the Agreement

requires Defendant to pay $8,500,000 into a Settlement Fund. Agreement, ¶ 7. These funds will

be used to pay for: (1) an automatic payment of approximately $70.00 each to every member of

the Rule 23(b)(3) Settlement Class; (2) the sum of $1,785,000 to make additional payments of up

5 See Berry v. Schulman, 807 F.3d 600, 610 (4th Cir. 2015) (noting that the FCRA does not provide expressly for a private right of action for injunctive relief, but that a settling defendant is free to agree to a settlement term that could not be imposed without its consent).


7

to $1,500 each to members of the Rule 23(b)(3) Settlement Class who submit Valid Claims for

actual damages;6 (3) service awards to Class Representatives Freckleton and Just in the amount of

$3,900 each, as approved by the Court; (4) Class Counsel’s reasonable attorneys’ fees and

expenses, not in excess of one-third of the Settlement Fund, as approved by the Court; and,

(5) costs of notice and settlement administration, including any taxes that may come due.

Agreement, ¶¶ 87, 90, 95, 99, 105-107, 108. Excess funds remaining in the Settlement Fund, if

any, shall be distributed to up to three different cy pres recipients, as approved by the Court.

Agreement, ¶ 109.

In exchange for the relief described in the Agreement, each Rule 23(b)(3) Settlement Class

Member who does not validly opt out from the Rule 23(b)(3) Settlement Class shall release the

Released Parties from any and all claims under FCRA and any FCRA State or Local Equivalents

arising through the date of Final Approval, including, but not limited to any claims for statutory,

actual, punitive, and other forms of damages, attorneys’ fees, and costs. Agreement, ¶¶ 40, 124-

125.

The Rule 23(b)(2) Settlement Class Members who are not also members of the

Rule 23(b)(3) Settlement Class do not release any individual claims they may have. See Berry v.

Schulman, 807 F.3d at 612-13 (approving FCRA settlement preserving actual damages claims for

Rule 23(b)(2) class members). They waive the procedural mechanisms for class certification or

collective or mass action under Fed. R. Civ. P. 23 and any and all state equivalents for prosecution

of any claim under 15 U.S.C. § 1681b(b)(2) or any FCRA state or local equivalents arising through

the date of Final Approval. Agreement, ¶¶ 32, 123.

6 See 15 U.S.C. §§ 1681n(a)(1)(A), 1681o(a)(1) (providing for unlimited actual damages for both negligent and willful violations of the FCRA).


8

The Class Representatives will release any and all claims against the Released Parties.

Agreement, ¶ 127.

The settlement provides for a streamlined process for the Classes to obtain the relief to

which they are entitled. All Class Members will automatically receive the non-cash remedies

listed above, and checks will be mailed to the Rule 23(b)(3) Settlement Class Members without

any further action on their part. In addition, each Rule 23(b)(3) Settlement Class Member can

submit a Claim Form for an additional payment from the Rule 23(b)(3) Claims Made Pool, in the

amount of the lesser of $1,500 or a pro rata share of the Pool. Agreement, ¶ 117.

No portion of the Settlement Fund will revert to Target, even if some Class Members fail

to cash checks – the entire Settlement Fund will be used for the benefit of the Class.

It is inevitable, however, that some amount may remain in the Settlement Fund after

distribution – if, for example, Class Members do not cash their checks. Recognizing this

possibility, the Settlement Agreement provides that any residual amount remaining in the

Settlement Fund should be used to create a cy pres award to be paid to Equal Justice Works, the

Maryland Volunteer Lawyers Service, and the Volunteer Lawyers Network, Ltd. of Minnesota.

Agreement, ¶ 109.

Thus, the settlement set forth in the Settlement Agreement, especially because it includes

equitable, monetary, and cy pres remedies for the Classes, is believed by Class Counsel to be fair,

adequate, and reasonable. As a result, Class Counsel respectfully submit that the settlement is

favorable for the Classes.

Settlement Class Members have been notified of the terms of this settlement with great

success. The firm of RSM US LLP was hired as Settlement Administrator. Id. ¶ 43. The parties


9

agreed upon a form and manner of notice which this Court approved, and which was provided to

Class Members as ordered by this Court to inform Class Members about the Agreement and their

rights. Specifically, RSM emailed and mailed 1,356,743 notices of the proposed settlement to

Rule 23(b)(2) Settlement Class Members, obtained updated addresses for Class Members whose

notices were returned, and then re-mailed notices to the updated addresses. This notice mailing

had a 98.52% success rate. See RSM Dec., ¶ 13.

RSM also emailed and mailed notice to 49,935 members of the Rule 23(b)(3) Settlement

Class. After accounting for undeliverables and re-mailings, this notice mailing had a 98.23%

success rate. Id., ¶ 28. Only four Settlement Class Members have opted out of the Rule 23(b)(3)

Settlement Class. RSM Dec., ¶ 29.

The Notices (Exhibits A, C, D and E to RSM Dec.) advised Class Members of the terms

and procedures set forth in the Agreement, the benefits to be provided under the Settlement

Agreement to the Classes, the release to be given as part of the settlement, and the amount of

attorney’s fees and costs to be requested by Class Counsel.

The settlement provides an excellent result for the Class, and is the product of serious,

informed, adversarial and non-collusive negotiations. For the many reasons set forth in this

Memorandum, Plaintiffs respectfully request final approval of the settlement.

IV. THE APPLICABLE LEGAL STANDARDS TO BE UTILIZED IN CONSIDERING THE APPROVAL OF CLASS ACTION SETTLEMENTS

Federal Rule of Civil Procedure 23 requires both that Class Members be notified of a class

action settlement, and that any class action settlement must be fair, adequate and reasonable. Both

requirements are met in this case.

Regarding notice, Rule 23 states that “[t]he court must direct notice in a reasonable manner

to all class members who would be bound by” a proposed settlement. FED. R. CIV. P. 23(e)(1).


10

This Court directed notice to the Classes in the Preliminary Approval Order, and approved the

forms of notice to be sent. As set forth above, and in the RSM Dec., RSM effected notice to the

Class with a success rate over 98%. Under any standard, this notice program was highly successful

and meets the requirement that notice be directed in a “reasonable manner.”

Second, the court may approve a settlement that would bind class members “only after a

hearing and on finding that it is fair, reasonable, and adequate.” FED. R. CIV. P. 23(e)(2). The

Court has scheduled a hearing for December 8, 2017 to consider whether the terms of the proposed

settlement, as described above, are fair, reasonable and adequate.

A court should approve a settlement which is “fair, adequate, and reasonable” to the

members of the class. In re Jiffy Lube Securities Litigation, 927 F.2d 155 (4th Cir. 1991) (“Jiffy

Lube”); Troncelliti v. Minolta Corporation, 666 F. Supp. 750 (D. Md. 1987). In Jiffy Lube, the

Fourth Circuit identified the factors relevant in determining the fairness and adequacy of

settlement. The four factors for determining the “fairness” of a settlement are:

(1) the posture of the case at the time settlement was proposed, (2) the extent of discovery that had been conducted, (3) the circumstances surrounding the negotiations, and (4) the experience of counsel.

927 F.2d at 159.

In turn, the five Jiffy Lube factors for determining the “adequacy” of a settlement are:

(1) the relative strength of the plaintiffs’ case on the merits, (2) the existence of any difficulties of proof or strong defenses the plaintiffs are likely to encounter if the case goes to trial, (3) the anticipated duration and expense of additional litigation, (4) the solvency of the defendants and the likelihood of recovery on a litigated judgment, and (5) the degree of opposition to the settlement.

As discussed in Part V below, the application of the Jiffy Lube factors to the proposed settlement

in this case demonstrates that it is fair, adequate, and reasonable.

While approval of a proposed class action settlement by a court is discretionary, Flinn v.


11

FMC Corp., 528 F.2d 1169 (4th Cir. 1975), there is a “strong initial presumption that the

compromise is fair and reasonable.” Rolland v. Cellucci, 191 F.R.D. 3, 6 (D. Mass. 2000). The

law favors settlement and “[i]t is indeed the preferred means of dispute resolution, particularly in

complex class action litigation.” In re Washington Public Power Supply System Securities

Litigation, 720 F. Supp. 1379, 1387 (D. Ariz. 1989), aff’d, 955 F.2d 1268 (9th Cir. 1992). Courts

therefore approve class settlements which are reasonable compared to the likely results of

litigation, Shlensky v. Dorsey, 574 F.2d 131, 147 (3d Cir. 1978), and which result from good faith,

arms-length negotiations. Weinberger v. Kendrick, 698 F.2d 61, 74 (2d Cir. 1982).

Settlements by their very nature involve the balancing of many uncertainties. In the final

analysis, that is why litigation is settled. The “essence of a settlement is compromise. A just result

is often no more than an arbitrary point between competing notions of reasonableness.” In re

Corrugated Container Antitrust Litigation, 659 F.2d 1322, 1325 (5th Cir. 1981).

Here, counsel for Plaintiffs and Target have had many years of combined experience in

class action litigation. As a result, their judgment that the settlement is “fair, reasonable and

adequate” is entitled to great weight. As stated by the court in Cotton v. Hinton, 559 F.2d 1326,

1330 (5th Cir. 1977):

In performing this balancing task, the trial court is entitled to rely upon the judgment of experienced counsel for the parties . . . [citation omitted]. Indeed, the trial judge, absent fraud, collusion, or the like, should be hesitant to substitute its own judgment for that of counsel.

See also Lake v. First Nationwide Bank, 900 F. Supp. 726, 732 (E.D. Pa. 1995) (“Significant

weight should be attributed to the belief of experienced counsel that settlement is in the best interest

of the class”).

Recognizing that a settlement represents an exercise of informed judgment by the

negotiating parties, courts have uniformly held that the function of the judge reviewing the


12

settlement is not to resolve issues that the parties intentionally have left unresolved, nor to turn the

settlement hearing into a trial or a rehearsal of the trial, nor to make dispositive conclusions on

unsettled legal issues. Flinn v. FMC Corp., 528 F.2d 1169, 1172-73 (4th Cir. 1975).

[i]t is not necessary in order to determine whether an agreement of settlement and compromise shall be approved that the Court try the case which is before it for settlement. . . . Such procedure would emasculate the very purpose for which settlements are made. The court is only called upon to consider and weigh the nature of the claim, the possible defenses, the situation of the parties, and the exercise of business judgment in determining whether the proposed settlement is reasonable.

City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir. 1974) (quoting Young v. Katz, 447

F.2d 431, 433 (5th Cir. 1971)) (abrogated on other grounds, Goldberger v. Integrated Res., Inc.,

209 F.3d 43 (2d Cir. 2000)).

This case involves complicated issues and a trial could well be lengthy and costly to all

parties. An appeal by either party would be likely. Such an appeal could result in a second trial

and would result in a very long delay in any remedies to the Class, including any payments to

Class Members. Indeed, by the time the case would be finally resolved, even if resolved in favor

of the Class, many customers will have moved without a forwarding address or died, and would,

therefore, derive little or no benefit from the monetary and equitable relief which has been

obtained. Avoidance of this unnecessary expenditure of time and resources clearly benefits all

parties. See In re General Motors Pick-Up Trust Fuel Tank Products Liab. Litig., 55 F.3d 768,

812 (3d Cir. 1995) (concluding that lengthy discovery and ardent opposition from the defendant

with “a plethora of pretrial motions” were facts favoring settlement, which offers immediate

benefits and avoids delay and expense).

V. THE SETTLEMENT IS FAIR AND ADEQUATE

Especially given the significant relief provided in the Settlement Agreement, and the

dangers inherent in proceeding with litigation, this settlement is amply justified as “fair and


13

adequate” under the criteria set forth in Jiffy Lube.

A. The Jiffy Lube “Fairness” Factors All Support Approval of This Settlement

1. The First and Second Jiffy Lube Fairness Factors, the Posture of the Case and the Amount of Discovery Completed, Support Settlement Approval

The posture of this case and the information obtained by Class Counsel in the course of

investigation and litigation support the approval of the settlement negotiated between the parties.

This case is now over three years old, and the parties have conducted extensive research regarding

the applicable law relating to the claims, defenses and class certification issues. The parties have

engaged in hotly contested litigation including two fully briefed motions to dismiss resulting in a

published opinion. This litigation has also included substantial written discovery, depositions,

negotiations, three days of face-to-face mediation before a private mediator, Professor Eric Green,

and multiple telephone conferences thereafter between counsel.

The Settlement Agreement avoids further time-consuming litigation, however, and allows

the Class to receive substantial cash and non-cash benefits without undue difficulty or delay. The

Class is far better served by the certainty and timeliness of recovery under the Agreement than by

the significant risks and delay associated with continued litigation against Defendant.

Accordingly, the first two Jiffy Lube fairness factors favor approval of the settlement.

2. The Third Jiffy Lube Fairness Factor, the Circumstances Surrounding Settlement Negotiations, Weighs in Favor of Settlement Approval

The third Jiffy Lube “fairness” factor, the circumstances surrounding the negotiations, also

weighs heavily in favor of approval of this settlement. This settlement is the result of months of

negotiations. These negotiations were overseen with the extensive involvement and assistance of

Professor Green, whose tireless efforts in mediation were essential to the resolution of this case.

The settlement also involved arms-length negotiations between the parties both before and after


14

face-to-face mediation. Given the stage of proceedings in this case, the contested litigation in this

matter, the substantial settlement payments, and the equitable relief provided for the benefit of

Class Members, it is clear that the Agreement is not a result of collusion, but rather a result of

intensive mediation and arms-length negotiations. Accordingly, the circumstances surrounding

the settlement negotiations in this case support settlement approval.

3. The Fourth Jiffy Lube Fairness Factor, the Experience of Counsel, Weighs in Favor of Settlement Approval

The fourth Jiffy Lube “fairness” factor, the experience of counsel, similarly supports

approval of this settlement. Class Counsel are recognized nationally as leading and skillful

practitioners in the field of complex class actions. See Declaration of James A. Francis in Support

of Plaintiffs’ Motions for Final Approval of Class Action Settlement and for Award of Attorney’s

Fees and Expenses, filed herewith. The fact that reputable counsel competently and successfully

represented Plaintiffs and the Classes undoubtedly played a role in bringing Target to the

settlement table and resolving this case, and indicates that the settlement is fair and adequate.

B. The “Adequacy” Factors Likewise Support Approval of This Settlement

1. The First and Second Adequacy Factors, the Strength of Plaintiffs’ Case on the Merits, and Any Difficulties Plaintiffs Are Likely to Encounter at Trial, Weigh in Favor of Settlement Approval

The first and second Jiffy Lube “adequacy” factors, the strength of the case on the merits,

and any difficulties likely to be encountered at trial, weigh in favor of settlement approval.

Plaintiffs believe that, at trial, they would prevail on their FCRA claims against Target and,

through evidence, be able to prove that Target’s conduct willfully violated the FCRA as alleged in

the Second Amended Complaint.

Nevertheless, despite the strength of the case, many significant hurdles would have to be

overcome before Plaintiffs and the Classes could establish their entitlement to relief. The District


15

of Minnesota has already dismissed Plaintiff Just’s disclosure claims on the merits. Target also

would undoubtedly contest Plaintiffs’ claims, including the claim (essential to recover statutory

damages under the FCRA) that Target’s alleged non-compliance with the FCRA was willful.7 The

Agreement in this case avoids these issues, provides the Classes with the opportunity to benefit

from significant equitable relief and recover substantial damages, and accomplishes an excellent

result without the need for a full trial8 of the issues. Additionally, if the case were to continue,

Plaintiffs and the Classes would still need to prove at trial that Target’s affirmative defenses to

Plaintiffs’ claims have no merit.

To state it simply, despite Plaintiffs’ confidence in their case, they recognize that there is

no certainty in litigation and that success in this case depends almost entirely on the Court’s

interpretation of the controlling statutory language and the jury’s determination of fact on the issue

of willfulness. “It is known from past experience that no matter how confident one may be of the

outcome of litigation, such confidence is often misplaced.” West Virginia v. Chas. Pfizer & Co.,

314 F. Supp. 710 (S.D.N.Y. 1970), aff’d, 440 F.2d 1079 (2d Cir.) (“Pfizer”). In Pfizer, a notable

7 In Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 69 (2007), the Supreme Court considered the standard for whether a defendant “willfully” violates the FCRA, including whether willfulness also includes “recklessness.” Id. at 52. While it held that the former encompassed the latter, the Court also concluded that this willfulness standard is not met “unless the action is not only a violation [of the FCRA] under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.” Id. at 69. To overcome this hurdle, it is the plaintiff’s burden to prove that a defendant’s attempts to comply with the FCRA were “objectively unreasonable.” Id. 8 See Dennis v. Trans Union, LLC, No. 14-2865, 2014 WL 5325231 (E.D. Pa. Oct. 20, 2014). The Dennis court reviewed the state of the law on alleging willfulness under the FCRA and observed that “[u]ltimately, whether an act was done with knowing or reckless disregard for another’s rights remains a fact-intensive question’” citing Whitfield v. Radian Guar., Inc., 501 F.3d 262, 271 (3d Cir. 2007), vacated as moot, 553 U.S. 1091 (2008). See also, Dalton v. Capital Assoc. Indus., Inc., 257 F.3d 409, 418 (4th Cir. 2001) (summary judgment is “seldom appropriate” on whether a party possessed a particular state of mind).


16

consumer class action, Judge Wyatt offered the following example:

In Upson v. Otis, 155 F.2d 606, 612 (2d Cir. 1946), approval of a settlement was reversed, the Court saying (at 612): “on the facts presented to the district judge, the liability of the individual defendants was indubitable and the amount of recovery beyond doubt greater than that offered in the settlement. Accordingly, it was an abuse of discretion to approve the settlement.” The action was then tried and plaintiffs obtained a judgment, twice considered by the Court of Appeals (168 F.2d 649, 169 F.2d 148 (1948)). We are told, however, that “the ultimate recovery . . . turned out to be substantially less than the amount of the rejected compromise.”

Id. at 743-44. Events time and again have demonstrated the enormous risks of litigation. For example, a

class action against the manufacturer of the drug Bendectin was originally settled. The Court of

Appeals for the Sixth Circuit reversed approval of that settlement. In re Bendectin Products

Liability Litigation, 749 F.2d 300 (6th Cir. 1984). Thereupon, as reported in The Wall Street

Journal (March 13, 1985), the plaintiffs tried the case and, by jury verdict, lost the millions of

dollars for which they had originally bargained.

Plaintiffs believe they and the Classes have a strong case against Target. As evident from

the above discussion, however, it is by no means certain that Plaintiffs and the Class would have

obtained a result better than that achieved through the Agreement. In any event, such a result

would have been achieved only after years of litigation and appeals. See Part III, above. At the

present time, however, Plaintiffs have secured a substantial settlement with Target, which provides

a significant cash recovery and includes non-cash relief which could not have been obtained even

through a litigated judgment in favor of the Class. Accordingly, the first and second adequacy

factors favor approval of this settlement.

2. The Third Adequacy Factor, the Anticipated Duration and Expense of Additional Litigation, Weighs in Favor of Settlement Approval

The third Jiffy Lube “adequacy” factor, the anticipated duration and expense of additional


17

litigation, also supports the proposed settlement. Although the trial of this case certainly would be

manageable and would be superior to other means of adjudicating the controversy, the issue here

is the extent to which the anticipated complexity and costs of proceeding to trial favor settlement.

Had this matter proceeded to trial, Target would have attempted to present evidence to

demonstrate that it did not willfully violate its statutory obligations to Plaintiffs and the Class, as

Plaintiffs allege. The expense of taking this case through trial would have been considerable. It

would have required, among other things, a substantial amount of additional formal discovery,

including depositions and likely third-party discovery, and extensive motions practice. Trial

preparation would require great effort, both by the parties and the Court, and expense. Those

expenses would likely have reduced any recovery obtained by the Class. As such, there is no

certainty that Plaintiffs would have achieved the maximum statutory damages recoverable had

they prevailed on the merits. Blandina v. Midland Funding, LLC, No. 13-1179, 2016 WL

3101270, *5 (E.D. Pa. June 1, 2016).

Avoiding the delay and risk of protracted litigation is a primary reason for counsel to

recommend and the court to approve a settlement. Protective Committee for Indep. Stockholders

of TMT Trailer Ferry v. Anderson, 390 U.S. 414, 424 (1968) (judge must consider “the complexity,

expense, and likely duration” of the litigation). Here that delay and risk would be substantial.

Accordingly, the anticipated complexity, costs, and time necessary to try this case – in comparison

with the substantial cost and time savings achieved through the settlement proposed here – favors

settlement approval.

3. The Fourth Adequacy Factor, the Solvency of Defendants and Likelihood of Recovery of a Litigated Judgment, Weighs in Favor of Settlement Approval

The fourth Jiffy Lube “adequacy” factor, the “solvency of the defendants and the likelihood

of recovery on a litigated judgment,” supports settlement approval. Even though Plaintiffs are


18

confident of prevailing at trial, such a litigated judgment would not be available to the Classes

until this case was fully litigated and all appeals exhausted. The availability of substantial cash

and non-cash benefits now, as opposed to some point in the far-off future, is a major benefit of this

settlement. Additionally, some of the benefits obtained through this settlement, such as Target’s

acknowledgment that it has implemented changes to its business practices to utilize new disclosure

forms in an effort to comply with section 1681b(b)(2) of the FCRA, could not have been recovered

through a litigated judgment in this case.

For purposes of this settlement, the inquiry is not whether Target could withstand a greater

judgment; rather, assuming a favorable trial outcome, it is whether Target would be subjected to a

judgment substantially more favorable to Class Members. The relief provided under the proposed

settlement provides substantial monetary and equitable relief to Class Members. While the

FCRA’s statutory damages provision9 could result in greater relief than what is provided in the

settlement, Target takes a different view – and the Settlement Agreement represents a negotiated

compromise between the Parties’ positions, which is the essence of any reasonable settlement. The

settlement avoids any risk of not recovering a litigated judgment at all, which is extremely valuable

to the Class, and instead provides Class Members with substantial cash and non-cash benefits

immediately. Accordingly, the likelihood of recovery of a litigated judgment weighs in favor of

settlement approval in this case.

4. The Fifth Adequacy Factor, the Degree of Opposition to the Settlement, Weighs in Favor of Settlement Approval

The fifth Jiffy Lube “adequacy” factor, the “degree of opposition to the settlement,” also

counsels in favor of approving the settlement. The Classes have reacted in an overwhelmingly

9 Under the FCRA, a plaintiff who successfully proves willful conduct in a class action may obtain between $100 and $1,000 in statutory damages for each member of a class. 15 U.S.C. § 1681n(a)(1)(A).


19

favorable manner to the settlement in this case. In a class action with over 1,356,000 Class

Members, where the notice to those Class Members had more than a 98% success rate, there are

only ten objections10 to the settlement (approximately .000007%), two letters to the Court and only

four opt-outs. The reason for this support for, and desire to be included in, the settlement is clear

and apparent – a settlement that provides substantial equitable relief and cash recovery is a superior

result for the Classes.

Where, as here, there is virtually unanimous support of a proposed settlement by the

beneficiaries (i.e., the Classes), it is persuasive evidence that the proposal is fair and reasonable.

See Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 118-119 (3d Cir. 1990) (“only” 29 objections in

281-member class “strongly favors settlement”); In re Prudential Insurance Company of America

Sales Litigation, 148 F.3d 283, 318 (3d Cir. 1998) (affirming conclusion that class reaction was

favorable where 19,000 policyholders out of 8 million opted out and 300 objected).

VI. CONCLUSION

For the reasons set forth in this Memorandum, Plaintiffs Freckleton and Just, on behalf of

themselves and the Settlement Classes, request that the Court grant final approval of the proposed

Settlement Agreement as fair, reasonable, and adequate. Plaintiffs are submitting with this

Memorandum a proposed form of Order, reviewed and approved by Target, which

comprehensively resolves this motion for final settlement approval. By separate motions,

Plaintiffs also seek approval of the proposed cy pres awards, the service awards to the Class

Representatives, and an award of attorneys’ fees and expenses.

10 The objections are addressed in the accompanying Searles Dec. Class Counsel contacted or attempted to contact each member who had filed an objection or a letter inquiring about the settlement. Several members did not respond to voice messages or written correspondence. Three objectors, after speaking with Class Counsel and understanding the settlement, stated they would withdraw their objections. Id.


20

DATED: November 21, 2017 Respectfully submitted,

Martin E. Wolf (Bar No. 09425) GORDON, WOLF & CARNEY, CHTD. 102 W. Pennsylvania Avenue, Suite 402 Towson, MD 21204 (410) 825-2300 s/ James A. Francis James A. Francis (pro hac vice) John Soumilas (pro hac vice) David A. Searles (pro hac vice) FRANCIS & MAILMAN, P.C. 100 S. Broad Street, Suite 1902 Philadelphia, PA 19110 (215) 735-8600 Irv Ackelsberg (pro hac vice) LANGER GROGAN & DIVER, P.C. 1717 Arch Street, Suite 4130 Philadelphia, PA 19103 (215) 320-5660 Shawn Wanta (pro hac vice) BAILLON THOME JOZWIAK & WANTA 100 South 5th Street, Suite 1200 Minneapolis, MN 55402 [email protected]

Attorneys for Plaintiffs and the Classes


case 1:14-cv-00807-glr document 142-1 filed 11/21/17 page ... · case 1:14-cv-00807-glr document...

Documents