Norton v. LVNV Funding, LLC

Background

Sonya Norton filed a putative class action against LVNV Funding, LLC and the Law Office of Harris & Zide, alleging violations of the federal Fair Debt Collection Practices Act, the California Rosenthal Act, and California’s Unfair Competition Law. Norton alleged that the defendants took judicial action to enforce a judgment against her without first filing an assignment of judgment as required by California Code of Civil Procedure section 673.

The court had previously certified a class covering California residents against whom LVNV, represented by H&Z, took judicial action after August 17, 2014 to collect a California consumer-debt judgment originally entered in favor of Arrow Financial Services, LLC, when LVNV had not filed a conforming assignment or otherwise become the assignee of record. The court also certified a subclass with a more limited period corresponding to the one-year limitations period for the federal and California debt-collection claims.

The parties participated in discovery and two mediation sessions and reached a settlement in principle. Norton first sought preliminary approval, withdrew that motion after the court raised concerns, and filed a revised motion after renegotiating parts of the agreement.

Settlement Terms

The agreement estimated 481 Class Members and 276 Subclass Members. A Class Member who submits a valid claim will receive the total amount collected from that person through judicial action to enforce the judgment, including collected costs, plus 7% interest calculated from the collection date. Subclass Members who submit valid claims will also receive a pro rata share of $50,000.

For judgments on open accounts, the defendants will delete court costs and interest on those costs, and will not try to collect those amounts or sell the right to collect them. For closed accounts, the defendants will make no further efforts to collect the judgment balances, and LVNV will not sell or transfer those judgments. The defendants will pay notice and administration costs and the funds needed to pay valid claims.

Class Members must submit a claim form to receive monetary benefits. The form asks whether the debt involved was a consumer debt and provides “Yes,” “No,” and “I don’t know” choices; the form states that a “Yes” answer is required to recover under the agreement. Class Members may also request exclusion or object. The agreement provides that uncashed checks will be distributed to the Katharine & George Alexander Community Law Center in San Jose, California. The agreement separately contemplates a possible incentive award for Norton of up to $7,000 and a fee-and-cost request by class counsel of up to $241,426.58, but neither amount was finally determined in this order.

Court’s Analysis

For preliminary approval, the court considered whether the proposed class settlement fell within the range of possible approval and whether it appeared fair, reasonable, and adequate under Federal Rule of Civil Procedure 23. The court considered the strength and risks of Norton’s claims, the settlement amount, the stage of the case, counsel’s experience, the absence of government participation, the proposed notice and claims process, attorney fees, equitable treatment, and the Northern District of California’s settlement guidelines.

The court found that the settlement offered full reimbursement of amounts collected, with interest, plus substantial additional statutory relief and the elimination of specified court costs. It also found that the parties had enough information from discovery to make an informed settlement decision and that the proposed notice was understandable and reasonably calculated to inform class members of their rights. Although the claims-made structure could leave unclaimed reimbursement funds with the defendants and the fee and incentive-award provisions warranted review, the court found that these concerns did not prevent preliminary approval.

Ruling and Next Steps

Judge Donna M. Ryu granted the motion for preliminary approval. The court preliminarily approved the agreement as fair, adequate, and reasonable; approved the proposed claim forms and notices; appointed CPT Group, Inc. as claim administrator; and approved procedures for exclusions and objections.

The court stayed Norton’s claims and temporarily barred Norton and non-excluded Class Members from pursuing the released claims while final approval remained pending. The court ordered defendants to provide the class list within 15 days and the administrator to mail notice within 60 days. Class Members would have 75 days after the notice mailing to submit claims, objections, or exclusion requests. The final-approval hearing was set for January 13, 2022. The order stated that if the agreement were not finally approved or became void or terminated, the preliminary-approval order and related orders would become null and void, without prejudice to the parties’ rights.