Perks v. Activehours, Inc.

Background

Mary Perks and Stanley Alexander brought this class action individually and for other similarly situated people against ActiveHours, Inc., doing business as Earnin. The proposed settlement class consisted of consumers who incurred at least one overdraft fee or insufficient-funds event fee that a bank attributed to an Earnin withdrawal between September 3, 2015, and May 28, 2020. The court had previously certified the settlement class and granted preliminary approval.

Settlement terms and notice

The settlement required Earnin to provide a total $3,000,000 settlement fund. That fund would cover payments to class members, settlement-administration costs, court-approved attorneys’ fees and expenses, and service awards to the named plaintiffs. For certain class members whose accounts had been temporarily suspended because they had not repaid cash outs, Earnin would allow them to use Earnin Express, subject to onboarding requirements, and would automatically forgive up to an aggregate $9.5 million in previously unpaid cash outs after completion of the onboarding process.

Current Earnin customers would receive payment through a credit to their linked checking accounts without submitting a claim form. Former customers would receive an email with instructions for retrieving payment through electronic payment services or an automated clearing house transfer. The court found that notice was adequate: approximately 95% of the settlement class received notice, and notice was also provided to the relevant federal, state, and territorial attorneys general. No class member objected to or opted out of the settlement.

Class certification and settlement approval

The court reaffirmed certification under Federal Rule of Civil Procedure 23(a) and Rule 23(b)(3). It found that the class was sufficiently numerous, that common questions existed, that the named plaintiffs’ claims were typical of the class, and that the named plaintiffs and their counsel adequately represented the class. The court also found that common questions predominated and that a class action was superior to other methods of resolving the claims.

The court applied the factors governing whether a class settlement is fair, reasonable, and adequate. It found that the representatives and counsel adequately represented the class, the settlement was negotiated at arm’s length through mediation and follow-up communications supervised by United States Magistrate Judge Laurel Beeler, the relief and distribution process were adequate, and the class members were treated equitably through pro rata payments based on the number of overdraft fees incurred. The court also considered the risks and costs of continued litigation, including a pending motion to dismiss and possible later disputes over class certification, summary judgment, trial, and appeal. The settlement did not constitute an admission by Earnin regarding the merits of the claims.

Fees, expenses, and service awards

The court approved $900,000 in attorneys’ fees for class counsel. It found that amount reasonable because it represented 30% of the $3 million settlement fund, less than 8% of the potential monetary relief when possible cash-out forgiveness was included, and a multiplier of less than two over counsel’s $477,245 lodestar. A lodestar is an estimate based on reasonable hours worked multiplied by a reasonable hourly rate.

The court also approved reimbursement of $3,225.59 in litigation expenses and payment of the settlement administrator’s actual notice and administration costs, not exceeding $70,000. It approved a $2,500 service award for each of the two named plaintiffs.

Disposition

The court granted the plaintiffs’ unopposed motion for final approval. It reaffirmed the settlement-class certification and appointments of the class representatives and class counsel, found that notice complied with the applicable rule and due process, found the settlement fair, reasonable, and adequate, directed implementation of the settlement and distribution of the net settlement fund, and approved the specified payments. The action was dismissed with prejudice, with the parties otherwise bearing their own fees and costs except as provided in the order and prior orders.