Serrano v. Sterling Testing Sys. Inc, Civil Action No. 07-4563.

711 F.Supp.2d 402

Gary SERRANO, on behalf of himself and all others similarly situated, Plaintiffs,v.STERLING TESTING SYSTEMS, INC., Defendant.

Civil Action No. 07-4563.

United States District Court E.D. Pennsylvania.

May 7, 2010.

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James A. Francis, Joanne Y. Park, John Soumilas, Francis & Mailman, PC, David A. Searles, Donovan Searles, LLC, Philadelphia, PA, for Plaintiffs.

Andrew M. Schwartz, Dean H. Malik, Marshall Dennehey Warner Coleman & Goggin, Philadelphia, PA, for Defendant.

MEMORANDUM AND ORDER

PRATTER, District Judge.

In this putative class action, Gary Serrano, on behalf of himself and all others similarly situated, sued Sterling Testing Systems, Inc. (“Sterling”),¹ a national employment consumer credit reporting agency, pursuant to the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et. seq., for damages resulting from Sterling's alleged practice of disclosing the existence of outdated arrest records of potential employees to Sterling's clients. After various pretrial activities, the parties negotiated a potential resolution of the case. Mr. Serrano filed a Motion for Final Approval of Settlement, as well as a Motion for Attorneys' Fees and Unreimbursed Costs, and the Court held a fairness hearing on December 16, 2009. For the reasons that follow, the Court now grants both motions.

I. BACKGROUNDA. History of the Litigation

Mr. Serrano's Complaint, filed on October 30, 2007, alleges that Sterling willfully violated the FCRA through its practice of reporting outdated and adverse information concerning arrests to prospective employers of Plaintiffs, which information Sterling was required to exclude from the reports it sells to employers and prospective employers.² The case was filed as a class action only for statutory damages under the FCRA. On January 28, 2008, Sterling filed a motion to dismiss, in which it contested the essence of Plaintiffs' theory of liability. Full briefing ensued, and the Court heard oral argument. The Court denied Sterling's motion on May 30, 2008, and issued an opinion on a liability question of first impression. See Serrano v. Sterling Testing Systems, Inc., 557 F.Supp.2d 688 (E.D.Pa.2008). Sterling filed an Answer to the Complaint on June 17, 2008, and the parties proceeded with written discovery and depositions.

On January 27, 2009, the Court entered an Order to allow the parties to pursue resolution of the matter through private mediation. The parties proceeded to meet with an experienced private mediator for a full day session on March 12, 2009. The case did not settle that day, but the parties continued to negotiate between themselves. See Mot. for Final Approval at 4. Subsequently, the Court issued additional scheduling orders setting forth various case management deadlines, including one for class certification motions. The parties then met for a second time with the mediator on June 4, 2009. Id. At that time, with the assistance of the mediator, the rough parameters of a settlement were reached. Id. In the weeks that followed, the parties continued to negotiate the details and nuances required for documenting a classwide settlement, including the notice procedures, release issues and Sterling's agreement to change its practice. Id. The parties eventually reached a proposed settlement, and submitted their Settlement Agreement to the Court for preliminary approval.

B. The Settlement Agreement

The Settlement Agreement contemplates certification of the following Settlement Class:

All persons in the United States and its territories, beginning two years prior to the filing of this Complaint and continuing through the time of judgment of this action, who were the subject of a consumer report sold by Defendant in connection with their employment that contained language substantially similar to the Form Paragraph in the letter attached to the Complaint, with respect to the following cause of action: for statutory damages only for willful violation of section 1681c of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

See Settlement Agreement, App'x 1 to Mot. for Prelim. Approval, at 3.

According to the Settlement Agreement, Sterling has paid the amount of nine hundred seventy-five thousand dollars ($975,000.00) into an account to be administered by Sterling pending final approval of the settlement (“Settlement Fund”). Id. The parties have agreed that this sum shall be used to satisfy the awards to each claiming Class member (as defined in the Settlement Agreement), as well as Mr. Serrano's individual settlement award and Mr. Serrano's claim for reasonable attorney's fees and costs. Id. at 3-5.

The Settlement Agreement provides that the amount of each claiming Class member's pro rata share of the remaining balance of the Settlement Fund (following payment of the award to the Mr. Serrano and his reasonable fees and costs) will be determined through the following formula: claiming Class member's pro rata share = balance of Settlement Fund divided by total number of claiming Class members. Id. at 5. Each share shall be no more than one thousand dollars ($1,000.00).³ Id. No portion of the Settlement Fund shall revert to Sterling or its insurer. Id. at 6. The parties have agreed that any residue of the Settlement Fund remaining for any reason, including checks that are not negotiated or are returned and remain undeliverable after a date set by the Court, shall be used to create a cy pres fund. Id. This cy pres fund shall be donated, as designated by Class Counsel, to the Philadelphia Volunteers for the Indigent Program (“VIP”). Id. The Settlement Administrator shall forward the funds directly to VIP, one hundred ten (110) days after the checks are mailed to the Class members and will provide proof of such payment to Class Counsel. Id. In addition, Sterling will fund all administration expenses (class list, notice, mailing, administration, inquiries, issuance of checks, etc.). Id.

Further, Mr. Serrano will receive, in addition to his share as a claiming Class member, the sum of one thousand dollars ($1,000.00) in full settlement and satisfaction of his individual claims and as compensation for his services rendered to the Class. Id. at 4-6. The Settlement Agreement states that this award is subject to approval by the Court, to which Sterling will not object. Id.

Sterling has agreed to pay Mr. Serrano's reasonable attorney's fees and costs out of the Settlement Fund, subject to the Court's approval. Id. at 7. Further, the notices sent out to the Class set forth that Class Counsel will petition for an award of fees and costs in an amount not to exceed 35% of the Settlement Fund (made by way of a separate motion). Id. at 4-6.

According to the Settlement Agreement, Sterling has ceased the allegedly unlawful reporting practice challenged in the Complaint, and Plaintiffs have secured Sterling's agreement to forever refrain from engaging in the practice in the future. Id. at 7.

The parties specifically have agreed that because the Settlement Class is comprised of members asserting claims for statutory damages only, claims for actual damages are specifically excluded from release, and the Final Judgment and Order will so reflect. Id. at 8. Thus, Class members may still pursue actual damages, if they have any, without having to opt-out of the Settlement. However, as Plaintiffs' counsel confirmed at the fairness hearing, the Settlement Agreement extinguishes any claims that Class members may have for punitive damages under the FCRA. See 12/16/2009 Hr'g Tr. at 6-8.

C. Preliminary Approval, Notice and Responses

On August 26, 2009, the Court preliminarily certified the Settlement Class described in the Settlement Agreement, and scheduled a final fairness hearing for December 16, 2009. Pursuant to the Settlement Agreement and the Preliminary Approval Order, notices were sent out to Class members regarding the pendency of this action; the terms of the proposed settlement; the opportunity to opt out, object or participate; and the date of the fairness hearing. See Mot. for Final Approval at 2-3. These notices were sent out via first class mail on September 30, 2009, and also through an internet website established by Class Counsel on the same date. Id. The notices informed Class members of their rights to exclude themselves from the Class, how to object to the settlement and provided a claim form to be submitted to receive the funds available under the settlement. Id. The notices also expressly advised Class members that Mr. Serrano would be applying for an award of attorney's fees and expenses not to exceed 35% of the Settlement Fund. Id.

The deadline for requesting exclusion from the Settlement Class and for filing objections to the settlement was October 30, 2009 see id. at 3, and the fairness hearing was held on December 16, 2009. As of the date of the fairness hearing, no Settlement Class members had requested to be excluded from the Class or had objected to the settlement. See 12/16/2009 Hr'g Tr. at 13.

D. Attorney's Fees and Expenses

Class counsel have requested attorneys' fees and reimbursement of expenses in the total amount of $340,900.00. See Mot. For Fees, Expenses and Award to Representative Plaintiff at 4.

II. DISCUSSION

“A court presented with a joint request for approval of a class certification and settlement must separate its analysis of the class certification from its determination that the settlement is fair.” Boone v. City of Philadelphia, 668 F.Supp.2d 693, 705 (E.D.Pa.2009) (citing In re Insurance Brokerage Antitrust Litig., 579 F.3d 241, 257-58 (3d Cir.2009)). To certify a class under Federal Rule of Civil Procedure 23, a court must determine that the requirements of all four subsections of Rule 23(a) are satisfied, and the requirements of at least one subsection of Rule 23(b) are satisfied. See Baby Neal v. Casey, 43 F.3d 48, 55 (3d Cir.1994).

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