Quintanilla Vasquez v. Libre by Nexus, Inc.

Background

The plaintiffs moved to hold Libre by Nexus, Inc. (LBN) in civil contempt and impose civil contempt sanctions. The court had approved the parties’ settlement agreement on February 8, 2021, and incorporated its terms into a final approval order. The agreement required LBN to provide settlement-class members with monetary and non-monetary benefits totaling $3,200,000 in value, including a $750,000 cash settlement fund, $40,000 in incentive awards for four named plaintiffs, $800,000 in attorneys’ fees and costs, $80,000 in settlement-administration costs, and a $1,530,000 debt-relief fund.

The agreement also required LBN to provide discounts to eligible current program participants, limit certain program payments to the face amount of the bond, and provide other benefits. Earlier court orders required LBN to provide records and declarations showing that it had complied with these obligations. The court retained jurisdiction to enforce and interpret the settlement agreement and final approval order.

LBN did not file a formal opposition. Instead, Evan Ajin submitted an unsworn letter stating that the pandemic and changes in immigration policy had reduced LBN’s clients and revenue. The letter did not include evidence of LBN’s financial condition or evidence of the steps LBN had taken to comply with the court’s orders.

Civil contempt standard

The court explained that civil contempt occurs when a party disobeys a specific and definite court order by failing to take all reasonable steps within its power to comply. The moving party must prove the violation by clear and convincing evidence; the burden then shifts to the alleged contemnor to explain why compliance was impossible. Civil contempt sanctions may coerce compliance or compensate for actual losses. The court generally must impose the minimum sanction necessary to secure compliance but retains discretion to establish appropriate sanctions.

Cash settlement, incentive awards, and attorneys’ fees and costs

The court found that LBN violated the July 30, 2021 and January 12, 2022 orders by failing to provide financial statements prepared by an external accountant and certified under penalty of perjury by LBN’s counsel. The court also found that LBN violated the final approval order and settlement agreement by failing to make any payments toward the $1,590,000 owed for the cash settlement fund, incentive awards, and attorneys’ fees and costs.

As a civil contempt sanction, the court drew the requested adverse inference—that is, it assumed that the missing financial statements would have shown revenue levels requiring LBN to make the maximum weekly payment of $100,000. Under that inference, the $1,590,000 should have been paid by the week of March 28, 2022. The court ordered LBN to pay the full $1,590,000 within ten business days after the order was filed. For each day of continued noncompliance, LBN must pay a $1,000 fine to the settlement administrator for the benefit and eventual distribution of specified settlement subclasses.

Settlement-administration costs

The court found that LBN violated the July 30, 2021 order by failing to pay the full $80,000 required for settlement administration. LBN had paid only $8,000, leaving $72,000 unpaid. The court ordered LBN to pay the remaining $72,000 within ten business days, with interest calculated from August 14, 2021, to the present. LBN also must pay a $1,000-per-day fine for continued noncompliance. The court stated that these sanctions were intended to coerce compliance and compensate the settlement administrator for losses.

Previously ordered attorneys’ fees and costs

The court found that LBN violated several prior orders by failing to pay $34,142.60 in attorneys’ fees and costs awarded for plaintiffs’ 2021 motion to enforce the settlement agreement. LBN did not identify evidence that it had complied or taken all reasonable steps to comply. The court ordered LBN to pay $34,142.60, with interest calculated from July 30, 2021, to the present, within ten business days. Payment must be made into a trust held by the settlement administrator and may not be distributed to Class Counsel until required cash distributions are first made to specified settlement subclasses. LBN also must pay a $1,000-per-day fine for continued noncompliance.

Discounts

The court found that LBN violated several orders by failing to provide sufficient documentation showing that it had implemented the Timely and In Full Payment Discount and the Consecutive Payment Discount as required by the settlement agreement. The court ordered Class Counsel to identify fifty eligible current program participants. Within five business days after receiving those names, LBN must provide billing records and other documents showing whether and when it implemented the discounts for those people. LBN’s principals must authenticate the records and attest under penalty of perjury to their truth and accuracy.

If Class Counsel believes in good faith after reviewing the records that LBN failed to apply the discounts as required, Class Counsel may file a supplemental motion for civil contempt sanctions. Until LBN demonstrates compliance, it may not refer to a third-party collection agency alleged debts owed by eligible participants. The order provides for a $1,000-per-day fine for violating that prohibition. The court declined at that time to require an across-the-board 20 percent discount or impose other requested sanctions concerning the discounts.

Total Payment Cap

The court found that LBN violated the January 12, 2022 order by failing to provide individual analysis and documentation explaining instances in which a class member’s total monthly payments exceeded the bond amount. The court ordered Class Counsel to identify fifty eligible current program participants. LBN must then provide, within five business days, records showing whether and when it applied the Total Payment Cap to those participants, together with a declaration from LBN’s principals authenticating the records and attesting to their accuracy.

Class Counsel may file a supplemental contempt-sanctions motion if it believes in good faith that LBN failed to apply the cap as required. Until LBN demonstrates compliance, it may not refer to a third-party collection agency alleged debts owed by participants eligible for the cap. LBN is subject to a $1,000-per-day fine for violating that prohibition.

Debt Relief Fund

The court found that LBN violated the January 12, 2022 order by failing to provide sufficient records showing that it had implemented the $1,530,000 Debt Relief Fund. The court ordered Class Counsel to identify fifty eligible current program participants. Within five business days after receiving the names, LBN must provide billing records and other documents showing whether and when it applied the debt-relief credits to those participants. LBN’s principals must authenticate the records and attest under penalty of perjury to their truth and accuracy.

Class Counsel may file a supplemental contempt-sanctions motion if it believes in good faith that LBN failed to apply the credits as required. Until LBN demonstrates compliance, it may not refer to a third-party collection agency alleged debts owed by participants eligible for the Debt Relief Fund. LBN is subject to a $1,000-per-day fine for violating that prohibition.

Fees for the current motion and disposition

The court found that Class Counsel was entitled to $53,021.60 for work on the present contempt motion. The amount represented 69.4 hours at $764 per hour, which the court found reasonable. LBN did not challenge the requested hours or rate. The court ordered LBN to pay the $53,021.60 within ten business days into a trust held by the settlement administrator. The amount may not be distributed to Class Counsel until required cash distributions are first made to specified settlement subclasses.

The court concluded that it grants in part and denies in part the plaintiffs’ motion for an order holding LBN in civil contempt and imposing civil contempt sanctions. The conclusion states that the court would issue a separate order delineating the sanctions, although the opinion itself specifies the monetary payments, documentation requirements, collection-referral prohibitions, and daily fines described above.