Chang v. Wells Fargo Bank, N.A.

Background

Plaintiffs brought a putative class action alleging that Wells Fargo was the only bank used by an alleged Ponzi scheme involving Equitybuild, Inc., Equitybuild Finance, LLC, and Jerome and Shaun Cohen. Plaintiffs asserted claims for aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and negligence. The court previously denied Wells Fargo’s motion to dismiss the first two claims and granted the motion as to negligence with permission to amend.

After substantial discovery, an unsuccessful mediation, and further settlement discussions, the parties agreed to settle the case. The court had preliminarily approved the settlement in December 2022 and later held a final fairness hearing. The final approval and fee motions were unopposed.

Settlement Terms and Notice

The settlement creates a $3.75 million fund paid by Wells Fargo. The class consists of all persons and entities who invested in the Equitybuild Scheme and were damaged by it. Class members may receive payments based on the losses they claimed and, when necessary, documented. Any remaining balance that cannot feasibly be distributed will be donated to the Victim Connect Resource Center rather than returned to Wells Fargo.

The claims administrator mailed 826 notice packets, with 25 reported undeliverable, and operated a settlement website and telephone hotline. The administrator received 588 claims. No class member filed an objection or request to be excluded from the settlement. The court found that the notice plan provided the best practicable notice under the circumstances.

Final Settlement Approval

Under Federal Rule of Civil Procedure 23, a class settlement requires court approval after a hearing and must be fair, reasonable, and adequate. The court considered the strength and risks of Plaintiffs’ claims, the settlement amount, the discovery completed, the stage of the case, and the class members’ reaction. It noted risks involving proof that Wells Fargo knew about the alleged fraud, proof that Wells Fargo caused the losses, class certification, and further motions and trial.

The court found that the settlement was within the range of reasonable approval, that Plaintiffs’ counsel had enough information to evaluate the case, and that the settlement’s terms and class reaction supported approval. The court therefore GRANTED Plaintiffs’ motion for final approval of the class action settlement.

Attorneys’ Fees and Costs

The court also considered Plaintiffs’ request for $937,500 in attorneys’ fees and $128,723.32 in litigation costs. The fee request equals 25 percent of the settlement fund, the benchmark used for common-fund class actions. A common fund is money recovered for a class from which reasonable fees and expenses may be paid.

The court found the fee request reasonable based on the recovery obtained, the risks and complexity of the litigation, counsel’s work, and the hours and rates documented in the billing records. Counsel reported a lodestar of $1,733,734, calculated by multiplying reasonable hours by reasonable hourly rates. Because the requested fee was less than that amount, the court found this comparison further supported the request. The court GRANTED the request for attorneys’ fees and costs and awarded a total of $1,066,223.32.

Service Awards

The court approved $10,000 service awards for each named plaintiff: Annie Chang, Ann Liu, Oliver Chang, Melanie Gonzales, and Gary Gonzales. The court found that the representatives collectively spent more than 860 hours on case-related work, including reviewing documents, communicating with counsel, participating in mediation, preparing for depositions, and responding to discovery.

The court also found that the awards were not too large compared with class members’ expected recoveries and would not undermine the representatives’ ability to represent the class. It GRANTED the requested service awards, totaling $50,000.

Disposition and Further Requirements

The court GRANTED the motion for final approval of the class action settlement and GRANTED the motion for attorneys’ fees and incentive awards. It directed the parties and settlement administrator to implement the agreement, required the parties to file a short stipulated final judgment within 21 days, and required a post-distribution accounting after settlement payments were completed or checks became stale. The accounting must include distribution, notice, objections, opt-outs, recoveries, uncashed checks, fees, costs, administrative expenses, and any cy pres distributions. Cy pres distribution means distributing unclaimed settlement funds to an approved organization when further payments to class members are not feasible.