Richards v. Chime Financial, Inc.

Background

Plaintiffs Ryan Richards, Ruba Ayoub, Brandy Terbay, and Tracy Cummings filed a proposed class action against Chime Financial, Inc., The Bancorp Inc., and Galileo Financial Technologies, LLC. They alleged that Chime experienced a system-wide service outage lasting approximately 72 hours beginning October 16, 2019. During the disruption, customers allegedly could not access their funds through card purchases and automated teller machine withdrawals; some later reported incorrect balances and unauthorized charges.

The complaint asserted claims for negligence, unjust enrichment, breach of contract, conversion, breach of fiduciary duty, and violations of consumer-protection statutes in Florida and Illinois. The parties reached a settlement after settlement conferences and informal exchanges of information. The court had previously granted preliminary approval.

Settlement Terms and Notice

The settlement class covered consumers who attempted to access or use their accounts but were unable to do so from October 16 through October 19, 2019, because of the service disruption. Before the settlement, Chime had paid or credited approximately $5,960,563 to active account holders, including $10 courtesy payments and credits for certain transaction fees.

The settlement created two additional compensation tiers. Class members without documentation could receive up to $25 for a verified claim under Tier 1. Class members with reasonable documentation could receive up to $750, but no more than their verified loss, under Tier 2. Earlier payments and credits were offset against these amounts. Defendants agreed to make at least $1.5 million available, with any amount needed to reach that minimum going to the East Bay Community Law Center if claims did not use the full amount. The agreement made up to $5.5 million available for verified Tier 1 and Tier 2 claims, but amounts above the $1.5 million minimum could revert to defendants.

The settlement administrator sent email notice to 527,505 potential class members. As of March 1, 2021, 495,006 notices had been delivered and 32,499 were undeliverable. The court found that the notice program provided the best practicable notice. One class member objected, focusing on the requested attorneys’ fees, and six requested exclusion from the settlement.

Final Approval

The court applied the federal rule governing class settlements, which requires a settlement to be fair, reasonable, and adequate after a hearing. It found that the settlement was reasonable in light of the complexity and litigation risks, including possible individual arbitration and challenges to whether the alleged losses were compensable. The court also considered the risks of maintaining a class involving more than 500,000 account holders, the information exchanged by the parties, counsel’s experience, and the class’s limited objections and exclusions.

The court noted that Epiq received 22,325 claim forms and verified 22,128. After offsets, 22,033 Tier 1 claims totaled $330,495, and 95 Tier 2 claims totaled $7,375.32. The court approved the class action settlement.

Attorneys’ Fees, Costs, and Incentive Awards

Class Counsel requested $750,000 in attorneys’ fees and costs and $500 incentive awards for each of the four named plaintiffs. The court concluded that the requested fee could not properly be based on the entire asserted constructive common fund because much of that fund consisted of payments made before settlement, the amount of additional class losses was uncertain, and $4 million of the $5.5 million made available for claims would revert to defendants. Only $337,870.32 was to be paid to class members on the verified claims, while $1,162,129.68 was to go to the East Bay Community Law Center under the settlement’s minimum-payment provision.

After reviewing the billing records, the court reduced the claimed lodestar—the reasonable hours multiplied by reasonable hourly rates—for inefficiencies, travel time, and time unrelated to the case. It calculated a revised lodestar of $338,719.56 and found the claimed costs of $8,146.75 reasonable. The court therefore awarded $346,857.31 in attorneys’ fees and costs.

The court denied the requested incentive awards in their entirety. It was concerned that $500 awards would substantially exceed the average class-member recovery of $11.94 and found that counsel had not provided enough detail about the named plaintiffs’ contributions or time spent on the litigation.

Disposition

The court granted the motion for final approval of the class action settlement. It granted in part and denied in part the motion for attorneys’ fees, costs, and incentive awards: it awarded $346,857.31 in attorneys’ fees and costs and denied incentive awards for the named plaintiffs. The parties and settlement administrator were directed to implement the settlement, and the parties were directed to file a short stipulated final judgment within 21 days.