Juarez v. Social Finance, Inc.

Background

Ruben Juarez, Calin Constantin Segarceanu, Emiliano Galicia, and Josue Jimenez alleged that Social Finance, Inc., doing business as SoFi, and SoFi Lending Corp. engaged in lending discrimination. They alleged that SoFi denied their loan applications because they were not U.S. citizens or lawful permanent residents. The plaintiffs had either Deferred Action for Childhood Arrivals status or temporary green cards as conditional permanent residents. They brought claims based on alienage and immigration status under federal and California law.

The parties reached a settlement after an all-day mediation session. The proposed settlement created a National Class and a California Class. In general, the classes covered certain people with valid DACA or conditional permanent resident status who applied or tried to apply for a SoFi credit product during specified periods, were denied according to SoFi’s records, and either used SoFi’s designated telephone number or had opted out of SoFi’s arbitration provision. The classes were designed to exclude applicants subject to SoFi’s arbitration agreement. Ruben Juarez was not a member of either settlement class under the proposed definitions.

Settlement terms

SoFi agreed to provide a $155,000 non-reversionary settlement fund and an additional $25,000 for administration costs. California Class Members who submitted a verified claim could receive $3,000 per denied application. National Class Members could receive up to $1,000 per denied application. SoFi also agreed to extend loans to current and valid DACA and conditional permanent resident recipients on the same terms and conditions as U.S. citizen applicants.

The settlement released claims related to alleged denials of loan applications based on alienage, lack of U.S. citizenship, or immigration status, including potential claims under 42 U.S.C. § 1981, California’s Unruh Civil Rights Act, the Equal Credit Opportunity Act, and the Fair Credit Reporting Act. The named plaintiffs could seek incentive awards of up to $5,000 each, while Juarez could seek up to $6,000. Class counsel could seek up to $300,000 in attorney fees and costs. The court had raised a concern that the original opt-out process required immigration-status documentation, and the parties agreed that such documentation would not be required.

Provisional class certification

For settlement purposes, the court found that the proposed classes met Federal Rule of Civil Procedure 23’s requirements. The court estimated that there were 690 class members, making individual joinder impracticable. It found common questions about whether SoFi’s lending policies violated federal and California civil-rights laws, and found the plaintiffs’ claims sufficiently similar to the class members’ claims. It also found no actual conflicts of interest between the plaintiffs, counsel, and other class members.

The court found that common issues predominated and that a class action was the superior method for resolving the dispute. It appointed Segarceanu, Galicia, and Jimenez as class representatives. It appointed Outten & Golden LLP and Lawyers for Civil Rights as class counsel. Juarez was not appointed as a class representative because he was not a member of either settling class as defined in the agreement.

Preliminary settlement approval

The court applied the requirement that a class settlement be fundamentally fair, adequate, and reasonable. Because the settlement was reached before class certification, the court applied heightened scrutiny for collusion and conflicts of interest.

The agreement included a “clear sailing” provision under which SoFi would not oppose a fee request of up to $300,000. The court recognized that such a provision can signal possible collusion and that the requested fees appeared significantly greater than the amount expected to be distributed to class members if the full amount were awarded. The court nevertheless concluded that the provision did not weigh against preliminary approval, while emphasizing that it would closely review any fee request at final approval.

The proposed cy pres recipient—the University of California Immigrant Legal Services Center—was found to have a sufficient connection to the class because it provides legal services to immigrant students and their families, including DACA recipients and conditional permanent residents. The court also found that the possible incentive awards did not prevent preliminary approval, although it specifically noted concern about whether Juarez, who was not a settlement-class member, should receive an incentive award.

The court found that the settlement fell within the range of possible approval. It considered the possible payments, SoFi’s agreement to use the same lending terms for current and valid DACA and conditional permanent resident recipients as for U.S. citizens, and the litigation risks identified by the parties. Those risks included class-certification issues, the possibility of losing at trial, SoFi’s position that its policies were lawful and justified by lending risks, individualized reasons applicants might not have qualified, and arbitration issues.

Notice plan and order

The court found no obvious deficiencies in the settlement and preliminarily found it fair, reasonable, and adequate. It granted the motion for preliminary approval; this order did not constitute final approval of the settlement.

A settlement administrator was directed to send notice by first-class mail to approximately 2,300 potential class members identified through SoFi’s records. Email and text notice would also be used when contact information was available, and reminder notices would be sent. The notice would explain how to submit a claim, opt out, or object. The settlement website and toll-free contact center would operate in English and Spanish.

The court directed the parties to meet and confer and submit, within seven days, a schedule for notice, fee and incentive-payment motions, the opt-out and objection deadline, the final-approval motion, and the final fairness hearing. The parties were also directed to implement the notice plan with the changes identified by the court. Judge Haywood S. Gilliam, Jr. signed the order.