Diaz v. FCI Lender Services, Inc.

Background

Altagracia Diaz filed the action against FCI Lender Services, Inc., a mortgage servicer specializing in defaulted mortgages. Diaz alleged that FCI sent borrowers documents stating or implying that late fees continued to accrue after their mortgages had been accelerated. She alleged that this violated New York law and that FCI’s statements were false representations under the Fair Debt Collection Practices Act, specifically 15 U.S.C. § 1692e. The court had previously denied FCI’s motion to dismiss.

The parties negotiated a settlement for a proposed class. The court had preliminarily approved the settlement and held a final fairness hearing on November 7, 2019. Notices were mailed successfully to 109 of 119 class members; 10 notices were returned as undeliverable, and one recipient opted out. The parties initially contemplated distributing a $65,000 settlement fund by mortgage account, but the notices stated that each class member would receive an estimated $764.70. To avoid sending new notices, the parties modified the agreement so that each class member would receive $764.70.

Class Certification

For settlement purposes, the court certified a class under Rule 23(a) and Rule 23(b)(3) of the Federal Rules of Civil Procedure. The class covered individuals whose loans were more than 90 days behind when FCI began servicing them, whose property address was recorded in FCI’s records, whose mortgages had been accelerated, and who received from FCI—between November 9, 2016, and November 29, 2017—a document referring to late charges accrued since acceleration.

The court found that the class satisfied numerosity because it had more than 100 members. It also found commonality and typicality because the class members’ claims centered on whether FCI falsely stated that post-acceleration late fees could accrue, and Diaz’s claim arose from the same alleged conduct. The court found adequate representation because Diaz’s interests aligned with the class and her counsel had experience litigating similar cases.

For Rule 23(b)(3), the court found that common issues predominated over individualized issues, including differences in the language of class members’ mortgages. It also found that a class action was superior because individual lawsuits would be impractical given the minimal potential recovery.

Notice and Settlement Approval

The court found that the class received appropriate notice of the settlement terms, objection procedures, and opt-out procedures. The parties also notified relevant federal and state authorities. The court evaluated whether the settlement was procedurally and substantively fair, reasonable, and adequate under Rule 23(e)(2).

The court found procedural fairness because experienced counsel negotiated the settlement, although discovery had been limited and informal. The court concluded that the amount of relief was sufficient to overcome concerns arising from the limited discovery.

The court also found substantive fairness. It considered the settlement’s likely avoidance of expensive discovery, the class’s response, the modest amount of discovery, the risks of proving liability and damages, the risk that FCI would oppose certification of a litigation class, and the range of possible recovery. The court noted that FCI could assert a defense for an unintentional, good-faith error despite reasonable procedures, which could eliminate recovery. It also found that actual damages would be difficult to prove and that statutory damages might not exceed the $764.70 payment per class member. The parties supplied no information concerning FCI’s ability to withstand a larger judgment.

The court concluded that the factors supported approval and determined that the settlement was fair, reasonable, and adequate.

Fees, Expenses, and Incentive Award

Class counsel sought $35,000 in attorney’s fees and costs, and Diaz sought a $5,000 incentive award. The court found the attorney’s fee request reasonable. It stated that a 30-percent percentage-of-the-fund fee was within the typical range and that counsel’s claimed lodestar—110 hours producing a $40,000 figure—would result in a multiplier of less than one. The court also found the $5,000 incentive award appropriate in light of Diaz’s efforts for the class and her refusal to settle her individual claim during the litigation.

Disposition

Judge Alison J. Nathan granted Plaintiff’s motion for final approval of the class action settlement. She also granted Plaintiff’s motion for service payments to class representatives, attorney’s fees, and reimbursement of expenses. The court stated that it would separately enter a final approval order serving as the final judgment and order of dismissal.