UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW … · 2021. 5. 11. · In re LIBOR-Based Financial Instruments Antitrust Litig., 327 F.R.D. 483 (S.D.N.Y. 2018) ... deceptive

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------------------------------------x VANESSA WILLIAMS and KORY TURNER, individually and on behalf of all persons similarly situated, Plaintiffs, vs. EQUITABLE ACCEPTANCE CORPORATION, SLF CENTER, LLC, INTEGRA STUDENT SOLUTIONS, LLC, and JEFFREY D. HENN, Defendants. ----------------------------------------------------------------x

No. 18-CV-07537 (NRB)

PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF PROVISIONAL CERTIFICATION OF A SETTLEMENT CLASS AND

PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

Case 1:18-cv-07537-NRB Document 174 Filed 03/15/21 Page 1 of 48

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TABLE OF CONTENTS Page

I. PRELIMINARY STATEMENT .........................................................................................1

II. BACKGROUND .................................................................................................................2

A. Allegations in the Complaint ...................................................................................2

B. This Litigation ..........................................................................................................3

C. Other Lawsuits and Investigations Against EAC ....................................................4

D. Settlement Negotiations ...........................................................................................5

E. Summary of the Settlement Terms ..........................................................................6

F. Proposed Allocation Plan for Monetary Awards to Class Members .......................8

G. Proposed Notice to Class Members, and Settlement Administration ......................9

H. Counsel’s Zealous Work on Behalf of the Class .....................................................9

III. SETTLEMENT APPROVAL PROCESS AND STANDARD OF REVIEW ..................10

A. The Settlement Is Fair, Reasonable, and Adequate ...............................................13

1. Rule 23(e)(2)(A): Named Plaintiffs and Class Counsel Have Adequately Represented the Class .............................................................13

2. Rule 23(e)(2)(B): The Settlement Proposal Was Negotiated at Arm’s Length .............................................................................................14

3. Rule 23(e)(2)(C): The Relief Provided for the Class Is Adequate .............15

(a) Rule 23(e)(2)(C)(i): Costs, Risks, and Delay of Trial and Appeal ............................................................................................15

(b) Rule 23(e)(2)(C)(ii): Effectiveness of Proposed Method of Claims Processing ..........................................................................21

(c) Rule 23(e)(2)(C)(iii): Attorneys’ Fees ...........................................21

(d) Rule 23(e)(2)(C)(iv): Agreements Made in Connection with Proposal..........................................................................................24

4. Rule 23(e)(2)(D): The Proposal Treats Class Members Equitably Relative to Each Other ...............................................................................24

5. Additional Grinnell Factors .......................................................................26

B. Rule 23(e)(1): Proposed Notice to the Class ..........................................................27

1. Notice to the Class .....................................................................................27

2. Telephonic Fairness Hearing .....................................................................30

C. Provisional Class Certification Should Be Granted for Settlement Purposes ........30

1. The Proposed Class Meets the Requirements of Rule 23(a) ......................31


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(a) The Proposed Class Is Sufficiently Numerous ..............................31

(b) There Are Common Questions of Law and Fact ...........................31

(c) Named Plaintiffs’ Claims Are Typical of Those of the Class Members ...............................................................................33

(d) The Named Plaintiffs Are Adequate Representatives ...................34

D. The Proposed Classes Meet the Requirements of Rule 23(b) ................................34

1. The Court Should Certify a Class Seeking Injunctive Relief Under Rule 23(b)(2) ..............................................................................................34

2. The Court Should Certify a Class Seeking Damages Under Rule 23(b)(3) ......................................................................................................35

(a) Common Questions Predominate ..................................................35

(b) A Class Action Is the Superior Method of Adjudication ...............37

(c) The Proposed Class Is Ascertainable .............................................38

E. NYLAG and Quinn Emanuel Satisfy the Rule 23(g) Prerequisites for Appointment as Class Counsel ..............................................................................39

IV. CONCLUSION ..................................................................................................................40


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TABLE OF AUTHORITIES

Page Cases

Amchem Prod., Inc. v. Windsor, 521 U.S. 591 (1997) ................................................................................................................. 38

In re AOL Time Warner, Inc., 2006 WL 903236 (S.D.N.Y. Apr. 6, 2006).............................................................................. 28

In re AT&T Mobility Wireless Data Servs. Sales Tax Litig., 789 F. Supp. 2d 935 (N.D. Ill. 2011) ....................................................................................... 28

In re Austrian and German Bank Holocaust Litig., 80 F. Supp. 2d 164 (S.D.N.Y. 2000) ...................................................................................... 20

Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52 (2d Cir. 2000)....................................................................................................... 34

Caridad v. Metro–N. Commuter R.R., 191 F.3d 283 (2d Cir. 1999)..................................................................................................... 33

Charron v. Pinnacle Grp. N.Y. LLC, 874 F. Supp. 2d 179 (S.D.N.Y. 2012)................................................................................ 16, 20

Charron v. Wiener, 731 F.3d 241 (2d Cir. 2013)............................................................................................... 16, 21

City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974)..................................................................................................... 11

Clark v. Ecolab, Inc., 2009 WL 6615729 (S.D.N.Y. Nov. 27, 2009) ......................................................................... 11

In re Colgate-Palmolive Co. ERISA Litig., 6 F. Supp. 3d 344 (S.D.N.Y. 2014) .......................................................................................... 23

Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473 (2d Cir. 1995)....................................................................................................... 31

In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385 (S.D.N.Y. 2003)................................................................................ 17, 20

D’Amato v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2011)................................................................................................. 11, 14

Damassia v. Duane Reade, Inc., 250 F.R.D. 152 (S.D.N.Y. 2008) ............................................................................................. 34

In re Domestic Airline Travel Antitrust Litig., 322 F. Supp. 3d 64 (D.D.C. 2018) ........................................................................................... 29

Dorrance v. ARS Nat. Servs., Inc., 2015 WL 2213514 (M.D. Pa. May 11, 2015) .......................................................................... 20


iv

Francisco Corte v. Fig & Olive Founders LLC, 2015 WL 12591677 (S.D.N.Y. June 24, 2015) ....................................................................... 31

Frank v. Eastman Kodak Co., 228 F.R.D. 174 (W.D.N.Y. 2005) ............................................................................................ 19

Garland v. Cohen & Krassner, 2011 WL 6010211 (E.D.N.Y. Nov. 29, 2011) ................................................................... 17, 26

In re General Motors LLC Ignition Switch Litig., 2020 WL 7481238 (S.D.N.Y. Dec. 18, 2020) ......................................................................... 30

In re Glob. Crossing Secs. & ERISA Litig., 225 F.R.D. 436 (S.D.N.Y. 2004) ............................................................................................. 27

Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000)........................................................................................... 11, 22, 23

Grice v. Pepsi Beverages Co., 363 F. Supp. 3d 401 (S.D.N.Y. 2019)...................................................................................... 23

Gross v. Washington Mut. Bank, F.A., 2006 WL 318814 (E.D.N.Y. Feb. 9, 2006).............................................................................. 26

In re GSE Bonds Antitrust Litig., 414 F. Supp. 3d 686 (S.D.N.Y. 2019)................................................................................ 12, 15

Guippone v. BH S&B Holdings LLC, 2016 WL 5811888 (S.D.N.Y. Sept. 23, 2016) ......................................................................... 25

Hadel v. Gaucho, LLC, 2016 WL 1060324 (S.D.N.Y. Mar. 14, 2016) ................................................................... 11, 12

Hall v. AT&T Mobility LLC, 2010 WL 4053547 (D.N.J. Oct. 13, 2010)............................................................................... 29

Harper v. Law Office of Harris & Zide LLP, 2017 WL 995215 (N.D. Cal. Mar. 15, 2017) ........................................................................... 20

In re Initial Public Offering Secs. Litig., 243 F.R.D. 79 (S.D.N.Y. 2007) ............................................................................................... 13

Johnson v. Brennan, 2011 WL 4357376 (S.D.NY. Sept. 16, 2011) .......................................................................... 27

In re LIBOR-Based Financial Instruments Antitrust Litig., 327 F.R.D. 483 (S.D.N.Y. 2018) ............................................................................................. 11

Marcoux v. Szwed, 2017 WL 679150 (D. Me. Feb. 21, 2017) ............................................................................... 20

Marisol A. v. Giuliani, 126 F.3d 372 (2d Cir. 1997)..................................................................................................... 33

Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423 (2d Cir. 2007)..................................................................................................... 26


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Mazzei v. Money Store, 829 F.3d 260 (2d Cir. 2016)..................................................................................................... 33

McBean v. City of New York, 233 F.R.D. 377 (S.D.N.Y. 2006) ............................................................................................. 23

Meredith Corp. v. SESAC, LLC, 87 F. Supp. 3d 650 (S.D.N.Y. 2015) ........................................................................................ 22

Millea v. Metro-North Railroad Co., 658 F.3d 154 (2d Cir. 2011)..................................................................................................... 23

Moore v. PaineWebber, Inc., 306 F.3d 1247 (2d Cir. 2002)................................................................................................... 16

Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) ................................................................................................................. 28

In re Namenda Direct Purchaser Antitrust Litig., 462 F. Supp. 3d 307 (S.D.N.Y. 2020)...................................................................................... 12

In re Nasdaq Market-Makers Antitrust Litig., 176 F.R.D. 99 (S.D.N.Y. 1997) ............................................................................................... 12

Newman v. Stein, 464 F.2d 689 (2d Cir. 1972)..................................................................................................... 19

Noll v. eBay, Inc., 309 F.R.D. 593 (N.D. Cal. 2015) ............................................................................................. 29

O’Connor v. AR Res., Inc., 2012 WL 12743 (D. Conn. Jan. 4, 2012) ................................................................................. 26

In re Online DVD-Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015) ................................................................................................... 29

Ortega v. Uber Tech., Inc., 2018 WL 4190799 (E.D.N.Y. May 4, 2018............................................................................. 29

In re PaineWebber Ltd. P’ships Litig., 171 F.R.D. 104 (S.D.N.Y. 1997) ............................................................................................. 16

In re Petrobras Sec., 862 F.3d 250 (2d Cir. 2017)..................................................................................................... 38

Proud v. Shakhnes, 569 U.S. 918 (2013) ................................................................................................................. 39

In re Prudential Sec., Inc., 1995 WL 798907 (S.D.N.Y. Nov. 20, 1995) ........................................................................... 17

Ramiro Aviles v. S & P Glob., Inc, 380 F. Supp. 3d 221 (S.D.N.Y. 2019)...................................................................................... 37

In re Restasis (Cyclosporine Ophthalmic Emulsion) Antitrust Litig., 2020 WL 6193857 (E.D.N.Y. Oct. 7, 2020) ............................................................................ 30


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Robidoux v. Celani, 987 F.2d 931 (2d Cir. 1993)..................................................................................................... 33

Sand v. Greenberg, 2011 WL 1338196 (S.D.N.Y. Mar. 22, 2011) ......................................................................... 24

Seekamp v. It’s Huge, Inc., 2012 WL 860364 (N.D.N.Y. 2012) ......................................................................................... 37

Shakhnes ex rel. Shakhnes v. Eggleston, 740 F. Supp. 2d 602 (S.D.N.Y. 2010)...................................................................................... 39

Shakhnes v. Berlin, 689 F.3d 244 (2d Cir. 2012)..................................................................................................... 39

Shapiro v. JPMorgan Chase & Co., 2014 WL 1224666 (S.D.N.Y. Mar. 24, 2014) ......................................................................... 23

In re Signet Jewelers Ltd. Sec. Litig., 2018 U.S. Dist. LEXIS 199808 (S.D.N.Y. Nov. 26, 2018) ..................................................... 30

Sims v. Bank of Am. Corp., 2008 WL 479988 (E.D.N.Y. Feb. 19, 2008)............................................................................ 39

Sykes v. Mel S. Harris & Assocs. LLC, 285 F.R.D..279 (S.D.N.Y. 2012) ....................................................................................... 36, 38

Sykes v. Mel S. Harris & Assocs. LLC, 780 F.3d 70 (2d Cir. 2015)........................................................................................... 31, 34, 36

Sykes v. Mel Harris & Assocs. LLC, 2016 WL 3030156 (S.D.N.Y. May 24, 2016) ......................................................................... 17

In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108 (2d Cir. 2013)......................................................................................... 36, 37, 38

Vasto v. Credico (USA) LLC, 2016 WL 2658172 (S.D.N.Y. May 5, 2016) ........................................................................... 28

Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) ........................................................................................................... 32, 35

Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005)................................................................................................. 11, 28

Weil v. Long Island Sav. Bank, 188 F. Supp. 2d 258 (E.D.N.Y. 2002) ..................................................................................... 17

Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982)....................................................................................................... 30

Yuzary v. HSBC Bank USA, N.A., 2013 WL 1832181 (S.D.N.Y. Apr. 30, 2013).......................................................................... 12


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Statutory Authorities 15 U.S.C. § 1637 ............................................................................................................................. 3 15 U.S.C. § 1638 ............................................................................................................................. 3 15 U.S.C. § 1640 ............................................................................................................... 20, 24, 35 18 U.S.C. § 1962 ................................................................................................................. 3, 17, 20 N.Y. Gen. Bus. Law § 349 .................................................................................................. 3, 24, 35

Rules and Regulations Fed. R. Civ. P. 23 ................................................................................................................... passim


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I. PRELIMINARY STATEMENT

Named Plaintiffs Vanessa Williams and Kory Turner, individually and on behalf

approximately 80,000 putative class members (the “Class Members,” together, the “Class”),

brought this suit to stop Defendants’ scheme to defraud student loan borrowers by extending

deceptive loans to finance scam debt relief services. After two-and-a-half years of zealous

litigation and extensive arm’s-length negotiations, Plaintiffs entered into a class-wide Settlement

Agreement with Defendants Equitable Acceptance Corporation (“EAC”) and Jeffrey Henn

(“Henn,” and with EAC, “Defendants”) that resolves all claims against Defendants. Plaintiffs

now seek provisional certification of the settlement class and preliminary approval of the

settlement. Defendants consent to the grant of this motion.1

The proposed settlement should be approved because it provides to the Class substantial

monetary relief and critical non-monetary relief. Specifically, under the Settlement Agreement:

Defendants will pay $1 million into a settlement fund; EAC ceased all collections from all Class

Members as of February 12, 2021, relief valued at $1.1 million; EAC will not sell any Class

Member accounts that it holds, with the effect that no other entity will be able to collect on those

accounts; EAC will delete all credit reporting by EAC on Class Members’ accounts; EAC will

transfer to the Class all claims it holds against the Dealers; and EAC will cooperate with Class

Counsel to assist Borrowers whose contracts have been assigned to Dealers. The settlement is

particularly valuable to the Class not only because proceeding to trial would require significant

time, resources, and litigation risk, but also because Defendants’ current and projected lack of

financial resources makes it likely that even successful litigation to judgment could ultimately

result in little or no monetary relief for the Class.

1 Defendants deny the allegations against them and do not admit fault.


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Because the proposed class meets all of Rule 23’s requirements and the proposed

settlement satisfies all of the criteria for preliminary approval, Plaintiffs respectfully request that

the Court:

1. grant preliminary approval of the proposed Settlement Agreement and Allocation Plan;

2. provisionally certify a Class for settlement purposes under Fed. R. Civ. P. 23(b)(2) and (b)(3), as defined below, and appoint New York Legal Assistance Group (“NYLAG”) and Quinn Emanuel, Urquhart & Sullivan, LLP (“Quinn Emanuel”) (together, “Class Counsel”) as Class Counsel, and Vanessa Williams and Kory Turner as the class representatives; and

3. approve the proposed notice plan and direct the provision of notice to the Class.

A Proposed Order is attached for the Court’s consideration as Exhibit 5 to the Declaration of

Danielle Tarantolo.

II. BACKGROUND

A. Allegations in the Complaint2

Plaintiffs Vanessa Williams and Kory Turner brought this action on behalf of themselves

and a class of approximately 80,000 federal student loan borrowers (“Borrowers” or “Class

Members”) harmed by Defendants’ scheme to sell and finance sham student loan debt relief

services (“Services”). Plaintiffs alleged that EAC and Henn masterminded the Scheme by

contracting with third-party companies (“Dealers”) that sold the purported Services to Borrowers

at wildly inflated prices, funded by usurious financing from EAC. Second Amended Complaint

(“SAC”), ECF No. 119, ¶¶ 281-397.

Specifically, in furtherance of the Scheme, the Dealers—whose successful operation

required misleading Borrowers as to the value of the Services and nature of EAC’s financing—

2 A more detailed description of the allegations of the Complaint is set forth in the Court’s order denying EAC’s

motion to dismiss Plaintiffs’ RICO claims, ECF No. 73.


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made false promises of “loan forgiveness,” id. ¶¶ 77-87, misled Borrowers about their Servicers

and the status of their federal student loan repayment, id. ¶¶ 100, 105-108, 148, never disclosed

that the Borrowers could sign up for the same services in minutes on their own or with free help

from their federal loan Servicer, id. ¶¶ 97-100, 128-144, and concealed from Borrowers the

nature of the financing offered to pay for these Services, id. ¶¶ 133-144. If Defendants had fully

disclosed and accurately described the purported Services and financing terms, the Borrowers

never would have accepted them. Id. ¶¶ 92, 410-510.

Once the Dealers induced Borrowers to purchase the Services for $1,300, based on these

and other misrepresentations, the Dealers referred Borrowers to EAC for financing of the cost of

the Services. EAC extended a new loan (“Credit Plan”) to each Borrower in the form of a maxed-

out “line of credit” for the full price of the Services, with an annual interest rate of up to 21%,

saddling Borrowers with additional, unnecessary debt on deceptive terms. Id. ¶¶ 5, 173-181.

EAC collected millions of dollars from Borrowers pursuant to the Credit Plans; EAC also

assigned some Borrowers’ contracts to Dealers, who have attempted to collect additional sums

from Borrowers. Id. ¶¶ 218, 240, 254.

Defendants’ actions caused significant harm to Borrowers, including money paid to the

Dealers and EAC on the Credit Plans, negative credit reporting, and, in many cases, increased or

defaulted federal student loan balances and significant emotional distress. Id. ¶¶ 251-264.

B. This Litigation

On August 17, 2018, Ms. Williams and Mr. Turner filed this lawsuit, bringing claims on

behalf of themselves and the proposed class under, inter alia, the Racketeer Influenced and

Corrupt Organizations Act (RICO) (18 U.S.C. §§ 1962(c), 1962(d)), the Truth in Lending Act

(TILA) (15 U.S.C. §§ 1637(a), 1637(b), 1638(a)), New York General Business Law § 349,

common law fraudulent inducement, and usury on behalf of New York Borrowers. SAC


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¶¶ 523-611.3

EAC moved to dismiss Plaintiffs’ RICO claims on November 19, 2018, ECF No. 23, and,

after Plaintiffs filed an Amended Complaint, ECF No. 30, moved again on March 11, 2019, ECF

No. 37. After oral argument, the Court denied EAC’s motion to dismiss Plaintiffs’ RICO claims

on March 11, 2020. ECF No. 73.

Plaintiffs filed their Second Amended Complaint on June 10, 2020, alleging RICO and

aiding and abetting fraudulent inducement claims against Henn, and fraudulent conveyance

claims against both EAC and Henn and his wife. ECF No. 95 (under seal, publicly filed at ECF

No. 119). Simultaneously, Plaintiffs moved for a preliminary injunction to stop EAC and the

Henns from transferring additional funds out of reach of the Class. ECF No. 109. EAC then filed

a motion to dismiss Plaintiffs’ fraudulent conveyance claim, ECF No. 122, and the Henns filed a

motion to dismiss all claims against them. ECF No. 143. On January 14, 2021, this Court denied

Jeffrey Henn’s motion to dismiss the RICO and aiding and abetting fraudulent inducement

claims against him, but denied Plaintiffs’ motion for a preliminary injunction and granted EAC

and the Henns’ motions to dismiss the fraudulent conveyance claims against them. ECF No. 164.

C. Other Lawsuits and Investigations Against EAC

During the pendency of this litigation, numerous law enforcement agencies (including the

Federal Trade Commission and state agencies of Colorado, Massachusetts, Minnesota, New

Hampshire, New York, and Virginia) filed actions against and entered into settlement

agreements with Defendant EAC based on allegations substantially similar to those asserted by

3 The Complaint also named as defendants the two Dealers who sold the Services to the Named Plaintiffs, SLF

Center, LLC and Integra Student Solutions, LLC. These defendants failed to appear in this action and thereby defaulted. See Clerk’s Cert. of Default as to Defendant SLF Center, LLC, ECF No. 45. This settlement does not resolve claims against these Defendants.


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Plaintiffs.4 Declaration of Danielle Tarantolo (“Tarantolo Decl.”) ¶ 57; see also ECF No. 57-1 at

6-7, 24-29 (comparing Plaintiffs’ allegations with law enforcement allegations).

While these patchwork consent judgments provided some relief to Class Members and

prevented EAC from offering any new Credit Plans, they were unable to provide comprehensive

relief to the Class. Specifically, the consent judgments did not prevent EAC from collecting

payments on existing Credit Plans for a majority of the Class Members. Moreover, in each

instance, although regulators assessed substantial fines against EAC, they ultimately reduced the

judgment EAC was required to pay based on EAC’s inability to pay.5 Specifically, the Federal

Trade Commission and New York and Minnesota Attorney General’s Offices assessed nearly

thirty million dollars of penalties against EAC, but suspended all but $1 million (FTC and

Minnesota) and $225,000 (New York) based on EAC’s demonstrated lack of financial resources.

Similarly, Pennsylvania and Virginia assessed $930,000 and $5.5 million in penalties, and

suspended all but $30,000 and $50,000, respectively. Tarantolo Decl. ¶ 58.

D. Settlement Negotiations

After the December 9, 2019 oral argument on EAC’s motion to dismiss the RICO claims,

the Parties began settlement negotiations. Id. ¶ 14. Upon the Parties’ representations that

negotiations were proceeding, the Court deferred decision on EAC’s Motion to Dismiss for

4 Stipulation as to Entry of Order for Permanent Injunction, Monetary Relief and Final Judgment as to Defendant Equitable Acceptance Corporation, Federal Trade Commission et al. v. Manhattan Beach Venture, LLC, et al, No. 19 Civ. 7849 (C.D. Cal.), ECF No. 4 (Sept. 11, 2019); Stipulation as to Entry of Order for Permanent Injunction, Monetary Relief and Final Judgment as to Equitable Acceptance Corporation, Federal Trade Commission v. Student Advocates Team, LLC, et al., No. 19 Civ. 1728 (C.D. Cal.), ECF No. 5 (Sept. 11, 2019); Stipulated Final Judgment and Order as to Equitable Assurance Corporation, New York v. Debt Resolve Inc. et al., No. 18 Civ. 9812 (AJN) (S.D.N.Y.), ECF No. 112 (Aug. 12, 2019); Final Judgment by Consent, Massachusetts v. Equitable Acceptance Corporation, No. 19-84CV025198 (Sup. Ct. Aug. 7, 2019); Assurance of Voluntary Compliance, Pennsylvania v. Equitable Acceptance Corporation (Allegheny County Court of Common Pleas Aug. 4, 2020); Consent Order, In re Equitable Acceptance Corporation, No. 17-239 (N.H. Baking Dep’t Mar. 3, 2020); Stipulated Final Agency Order, In re Equitable Acceptance Corporation, Colorado Uniform Credit Code Admin. (Feb. 11, 2021).

5 See ECF No. 114 (Pls. Mem. Of Law In Support of Mot. for Preliminary Injunction), at 14-15.


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multiple months. ECF No. 64. On March 3, 2020, the Parties attended an in-person settlement

conference before Magistrate Judge Hon. Sarah Netburn, which Plaintiff Vanessa Williams

attended; however, the Parties were unable to reach a settlement. Tarantolo Decl. ¶ 15.

Following additional discovery and motion practice, in November 2020 the Parties

entered settlement negotiations for a second time. Id. ¶ 16. The Parties engaged in rigorous,

contested settlement discussions throughout the subsequent three months as to both monetary

and non-monetary settlement terms. Id. ¶ 17. The Parties’ negotiations largely focused on EAC’s

financial condition and Defendants’ ability to satisfy a judgment. Id. ¶ 18. Plaintiffs reviewed

financial information and documents provided by EAC to assess EAC’s financial resources and

ultimately concluded, as EAC has represented, that the company had minimal resources with

which to settle or satisfy a litigated judgment. Id. ¶ 19. Henn also represented to Plaintiffs that he

would be unable to satisfy a judgment of the scale of damages at issue in this action. Id. ¶ 20. In

early February 2021, the Parties reached a settlement in principle and the Court approved the

Parties’ joint settlement plan on February 9, 2021. ECF No. 168. The Parties executed the

Settlement Agreement on February 17, 2021. Tarantolo Decl. ¶ 23; id. Ex. 1 (the “Settlement

Agreement”).

E. Summary of the Settlement Terms

If approved, the Settlement Agreement would resolve all claims against Defendants

asserted by the proposed settlement Class, which comprises all individuals who obtained a Credit

Plan from EAC to finance student loan assistance services. There are 79,656 Class Members. Id.

¶ 25. Each Class Member electronically signed a Credit Plan, materially identical documents

titled “Equitable Acceptance Revolving Credit Plan,” through which EAC extended credit to

each Class Member on the same terms, with the only differences being the Class Members’

identifying information, the interest rate, and certain immaterial terms. Id. ¶¶ 10-11.


7

To settle this action, Defendants have agreed to pay one million dollars ($1,000,000) into

a settlement fund (the “Settlement Fund”). At least 75% of the Settlement Fund ($750,000) will

be used to pay distributions to the Class Members in accordance with the Allocation Plan; the

remaining 25% of the Settlement Fund (no more than $250,000) will be used to pay

administration expenses (capped at $81,500), service awards of $3,000 to each of the Named

Plaintiffs, and reasonable attorneys’ fees and costs to be sought in connection with final approval

of approximately $162,500. Settlement Agreement ¶ II.A.1-6. To the extent funds remain in the

Settlement Fund after distribution, the Class Administrator and Class Counsel will together

determine whether to make any further distributions consistent with the Allocation Plan or issue

a cy pres award; under no circumstances will any of the money in the Settlement Fund revert to

Defendants. Id. ¶ II.A.7.

EAC has already ceased collecting on all outstanding Credit Plans or accepting any other

payments towards the Credit Plans effective February 12, 2021, and cessation of collections

becomes permanent upon final approval. Id. ¶¶ II.B.1-6. Cessation of collections provides

substantial relief to the Class, valued at approximately $1.1 million in foregone collections.

Tarantolo Decl. ¶ 22. Indeed, EAC’s immediate cessation (even in advance of a fully executed

stipulation of settlement, and well in advance of preliminary approval) was a material term of the

settlement on which Plaintiffs insisted. Id. ¶ 21. EAC has further agreed not to sell, assign, or

transfer any outstanding Credit Plans to the Dealers or to any other party, and will not otherwise

take any action that would permit any party to claim a right to collect on any Credit Plan.

Settlement Agreement ¶¶ II.C.1-4. If EAC does receive any payments after February 12, 2021, it

must return the payment to the Class Member within ten days. Id. ¶ II.B.2. If EAC does not

return the payment, it must deposit an additional sum equal to twice the amount collected into


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the Settlement Fund. Id. ¶ II.A.1.b. Plaintiffs’ agreement to the Settlement Agreement was based

on the accuracy of EAC’s representation that approximately $1.1 million remained outstanding

on Borrower Credit Plans as of the date collections ceased, and other material financial

representations regarding Defendants’ inability to satisfy a larger settlement or judgment.

Tarantolo Decl. ¶¶ 19-21; Settlement Agreement ¶ II.A.8.

EAC will request that all credit reporting bureaus delete all Credit Plan trade lines

reported by EAC from the credit reports of all Class Members. Settlement Agreement ¶ II.D.1.

EAC will transfer to the Class all outstanding claims that EAC holds against the Dealers,

and will take other steps to cooperate in Class Counsel’s efforts to assist Borrowers whose

contracts have been assigned to Dealers (including identifying such Borrowers, Dealers, and the

collection status to the extent known). Id. ¶ II.E.1-6.

Plaintiffs and Class Members will release all claims against Defendants, and Defendants

will release all claims against Class Members. Id. ¶ V.

F. Proposed Allocation Plan for Monetary Awards to Class Members

All Class Members who paid EAC more than $250 will be eligible for compensation (the

“Compensation Class”). A total of 60,232 Class Members (75.6% of the Class) paid more than

$250 to EAC; their payments comprise over 98.7% of all money collected by EAC from Class

Members. Tarantolo Decl. ¶ 25. Settlement Funds will be distributed to these Class Members on

a proportional basis, based on the amount of money that each Class Member paid EAC so that, in

effect, each Class Member will receive the same percentage refund of the funds they paid EAC.

Additionally, the twenty borrowers represented by Class Counsel whose stories were

included in the First and Second Amended Complaints (the “Rule 26 Borrowers,” as these

Borrowers were also listed in Plaintiffs’ Initial Disclosures) are in the Compensation Class.

These Class Members will receive a full refund of all amounts paid to EAC, up to $1,000 or, if


9

they paid less than $250 to EAC, an award of $250. Id. ¶ 38.

G. Proposed Notice to Class Members, and Settlement Administration

After a competitive bidding process, Class Counsel retained a Class Administrator,

Atticus Administration, LLC, which will distribute notice of the settlement to the Class, process

any Class Member objections and requests to opt-out, process claims, distribute settlement funds,

respond to Class Member inquiries about the settlement, and manage other aspects of

administering the settlement. The Class Administrator has agreed to charge a fee of no more than

$81,500. Tarantolo Decl.¶ 48.

The Notices (one for Compensation Class Members, one for Class Members not eligible

for compensation), attached as Tarantolo Declaration Exhibits 3 and 4, will be provided to all

Class Members by email. For Compensation Class Members, the email Notice will contain a link

to an electronic Claim Form. No later than forty-five days before the deadline to submit Claims

Forms, each Compensation Class member who has not opened the initial email will be sent a

second reminder email containing the Notice. A text message reminder will thereafter be sent to

some or all Compensation Class Members who did not open either reminder email. Finally, no

later than twenty-one days before the deadline, a post card notice providing a summary of the

settlement terms and directing Class Members to the settlement website will be sent by postal

mail to each Class Member for whom the email notice was returned as undeliverable, as well as

to any Compensation Class Member who did not open either of the notice emails. Id.¶ 49.

H. Counsel’s Zealous Work on Behalf of the Class

The New York Legal Assistance Group is a nonprofit legal services provider dedicated to

helping New Yorkers experiencing poverty or in crisis combat financial and other injustice, and

Quinn Emanuel is an experienced law firm working on this action pro bono. Tarantolo Decl.

¶ 61; Oblak Decl. ¶¶ 3, 5.


10

Class Counsel has zealously investigated and prosecuted Defendants’ scheme, expending

thousands of hours, starting months before the Complaint was filed, through the submission of

this motion. Tarantolo Decl. ¶ 63. Class Counsel collected documents from and thoroughly

interviewed Named Plaintiffs Kory Turner and Vanessa Williams and investigated their claims,

including by consulting with national experts in student loan and consumer law. Id. ¶¶ 64-66.

Class Counsel has spoken or emailed with over 350 additional Class Members, and interviewed

many Borrowers about their experience with EAC, reviewing their documents and providing

legal advice regarding this Action and the Borrowers’ student loans. Id. ¶¶ 67-68.

Class Counsel has aggressively litigated this action, including by filing three successively

exceedingly detailed Complaints totaling hundreds of pages, ECF Nos. 1, 30, 119, seeking to file

three motions to compel, ECF Nos. 54, 45, 158, filing a preliminary injunction motion, ECF No.

110, and opposing three motions to dismiss, ECF Nos. 47, 132, 154. Class Counsel also pursued

substantive discovery from EAC, securing re-production of EAC’s productions to investigating

federal and state law enforcement agencies early in the litigation, ECF No. 59, and reviewing

over 36,000 documents while negotiating additional substantive discovery from EAC. Tarantolo

Decl. ¶ 70; see also ECF No. 158. Class Counsel negotiated this Settlement Agreement through

dozens of phone conversations and emails, over the course of months, and also consulted with an

accounting expert to review documentation of EAC’s financial resources. Tarantolo Decl.

¶ 15, 69.

Notably, Plaintiffs filed their well-pleaded Complaint publicly before law enforcement

agencies filed and settled similar actions. Plaintiffs’ and Class Counsel’s zealous efforts to

litigate this action have thus served the public interest as well as Class Members. Id. ¶ 71.

III. SETTLEMENT APPROVAL PROCESS AND STANDARD OF REVIEW

There is a “strong judicial policy in favor of settlements, particularly in the class action


11

context.” Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005) (internal

quotation marks and citation omitted). Speedy settlement “allows class members to recover

without unnecessary delay and allows the judicial system to focus resources elsewhere.” Hadel v.

Gaucho, LLC, 2016 WL 1060324, at *2 (S.D.N.Y. Mar. 14, 2016).

Federal Rule of Civil Procedure 23(e) requires a court to approve class action settlements

before they can become binding. A court may approve such a settlement if it finds, in its

discretion, that it is “fair, adequate, and reasonable, and not a product of collusion.” Wal-Mart,

396 F.3d at 116; see also Fed. R. Civ. P. 23(e)(2). “The District Court determines a settlement’s

fairness by examining the negotiating process leading up to the settlement as well as the

settlement’s substantive terms.” D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2011). The

Court should “give proper deference to the private consensual decision of the parties . . . [and]

should keep in mind the unique ability of class and defense counsel to assess the potential risks

and rewards of litigation.” Clark v. Ecolab, Inc., 2009 WL 6615729, at *3 (S.D.N.Y. Nov. 27,

2009).

In evaluating the substantive fairness, adequacy, and reasonableness of a class action

settlement, courts in the Second Circuit have historically considered nine “Grinnell” factors:

(1) the complexity, expense and likely duration of the litigation . . . ; (2) the reaction of the class to the settlement . . . ; (3) the stage of the proceedings and the amount of discovery completed . . . ; (4) the risks of establishing liability . . . ; (5) the risks of establishing damages . . . ; (6) the risks of maintaining the class action through the trial . . . ; (7) the ability of the defendants to withstand a greater judgment . . . ; (8) the range of reasonableness of the settlement fund in light of the best possible recovery . . . ; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation . . . .

See City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974) (internal citations

omitted) (“Grinnell”), abrogated on other grounds by Goldberger v. Integrated Res., Inc., 209

F.3d 43 (2d Cir. 2000); see also In re LIBOR-Based Fin. Instruments Antitrust Litig., 327 F.R.D.


12

483, 493 (S.D.N.Y. 2018) (discussing use of the Grinnell factors in the Second Circuit).

On December 1, 2018, amendments to Federal Rule of Civil Procedure 23 took effect

that, among other changes, added specific factors to Rule 23(e)(2) that a Court must review in

determining whether a proposed class-wide settlement is fair, reasonable, and adequate. Under

the newly-amended Rule 23(e)(2), a Court must consider whether: (A) the class representatives

and class counsel have adequately represented the class; (B) the proposal was negotiated at arm’s

length; (C) the relief provided for the class is adequate, and (D) the proposal treats class

members equitably relative to each other. Fed. R. Civ. P. 23(e)(2). Following the amendment,

“[t]he factors set forth in Rule 23(e)(2) have been applied in tandem with the Second Circuit’s

Grinnell factors and focus the court and the lawyers on the core concerns of procedure and

substance that should guide the decision to whether to approve the proposal.” In re Namenda

Direct Purchaser Antitrust Litig., 462 F. Supp. 3d 307, 311 (S.D.N.Y. 2020) (citation omitted);

see also In re GSE Bonds Antitrust Litig., 414 F. Supp. 3d 686, 692 (S.D.N.Y. 2019) (citing the

Advisory Committee Notes to the 2018 Amendment).

Class action settlement approval involves two steps. First, the Court must evaluate the

proposed settlement on a preliminary basis, often termed “preliminary approval.” Upon “the

parties’ showing that the court will likely be able to (i) approve [the Settlement] under Rule

23(e)(2) and (ii) certify the class for purposes of judgment on the proposal,” the Court must

direct notice to the Class. Fed. R. Civ. P. 23(e)(1)(B); see also Yuzary v. HSBC Bank USA, N.A.,

2013 WL 1832181, at *2-4 (S.D.N.Y. Apr. 30, 2013); In re Nasdaq Market-Makers Antitrust

Litig., 176 F.R.D. 99, 102 (S.D.N.Y. 1997). The standards for preliminary approval are less

exacting than at the final stage, and preliminary approval is often granted without a hearing. See

Hadel, 2016 WL 1060324, at *1-2.


13

Second, upon granting preliminary approval, the Court orders that notice of the proposed

settlement be given to the class members, holds an evidentiary hearing to determine the fairness

and adequacy of the settlement on a final basis, and upon finding that the settlement is fair and

adequate, grants the settlement final approval. See In re Initial Public Offering Secs. Litig., 243

F.R.D. 79, 87 (S.D.N.Y. 2007).

A. The Settlement Is Fair, Reasonable, and Adequate

1. Rule 23(e)(2)(A): Named Plaintiffs and Class Counsel Have Adequately Represented the Class

Rule 23(e)(2)(A) directs the Court to consider whether “the class representatives and

class counsel have adequately represented the class.” This is a “procedural” inquiry, and the “the

focus . . . is on the actual performance of counsel acting on behalf of the class.” Advisory

Committee Note, Rule 23(e)(2)(A-B). Here, the Named Plaintiffs and Class Counsel have more

than adequately represented the Class throughout the litigation, weighing in favor of settlement.

Class Counsel performed thousands of hours of work on this litigation, including:

interviewing, collecting documents from, and/or providing information to Named Plaintiffs and

over 350 additional Class Members; consulting with national experts in student loan and

consumer law and an accounting expert; filing three exceedingly detailed Complaints totaling

hundreds of pages; filing three applications for motions to compel, a preliminary injunction

motion, and oppositions to three motions to dismiss; reviewing more than 36,000 documents

produced by EAC; zealously seeking additional document production; working with Named

Plaintiffs to produce discovery to EAC; and negotiating this Settlement Agreement over the

course of months. Tarantolo Decl. ¶¶ 63-72.

The Named Plaintiffs have adequately represented the Class through full and open

cooperation with Class Counsel, including by attending meetings and interviews with counsel,


14

providing multiple rounds of records for production, and reviewing and approving the substance

of the Settlement. Id. ¶¶ 42-44. Additionally, Ms. Williams attended the lengthy in-person

settlement conference held with Judge Netburn (while Mr. Turner made himself available by

telephone during this conference, due to his work obligations). Id. ¶ 46. Named Plaintiffs

contributed substantial time and effort meeting with Class Counsel and providing documents and

information to assist in both litigation and settlement negotiations. Id. ¶ 45. They undertook these

efforts despite having limited means and little familiarity with proceedings of this nature. Id.

¶ 47. Named Plaintiffs and Class Counsel have thereby adequately represented the Class.

2. Rule 23(e)(2)(B): The Settlement Proposal Was Negotiated at Arm’s Length

Rule 23(e)(2)(B) requires that “the proposal was negotiated at arm’s length.” Fed. R. Civ.

P. 23(e)(2)(B). The procedural fairness of a settlement is based on the negotiating process that

led to it. D’Amato, 236 F.3d at 85. To find a settlement process fair, the court must “ensure that

the settlement resulted from arm’s-length negotiations and that plaintiff[’s] counsel . . . possessed

the experience and ability . . . necessary to effective representation of the class’s interests.” Id.

(internal quotation marks omitted).

The settlement discussions in this matter, which began in late 2019, were highly

contested. Despite the Parties’ attendance at an in-person settlement conference before Judge

Netburn, they were unable to reach a settlement. Tarantolo Decl. ¶ 15. The Parties re-started

settlement negotiations for a second time in November 2020, engaging in rigorous, contested

discussions throughout the subsequent three months as to both the monetary and non-monetary

settlement terms. Id. ¶¶ 16-24. Notably, Plaintiffs continued to demand discovery throughout this

negotiation process, indicating their willingness to proceed with the litigation if the Parties were

unable to reach a settlement that Class Counsel viewed as fair and reasonable. Id. ¶ 70. Class


15

Counsel reviewed many rounds of financial documentation and information provided by EAC in

order to probe the veracity of EAC’s representations about its financial condition. Id. ¶¶ 18-20.

The seriousness of the disagreements between the Parties is evidenced by the months of

settlement negotiations that the Parties undertook before ultimately agreeing to the Settlement.

Id. ¶¶ 14-23. Rule 23(e)(2)(B) is therefore satisfied.

3. Rule 23(e)(2)(C): The Relief Provided for the Class Is Adequate

(a) Rule 23(e)(2)(C)(i): Costs, Risks, and Delay of Trial and Appeal

Rule 23(e)(2)(C)(i), which asks the Court to consider the “costs, risks, and delay of trial

and appeal” overlaps with a number of Grinnell factors, which help guide the Court’s application

of the Rule. See In re GSE Bonds, 414 F. Supp. 3d at 693. Specifically, the Court’s inquiry here

should be guided by the following Grinnell factors: the complexity, expense, and likely duration

of the litigation (Factor 1); the risks of establishing liability (Factor 4); the risks of establishing

damages (Factor 5); the risks of maintaining the class action through the trial (Factor 6); the

ability of the defendants to withstand a greater judgment (Factor 7); the range of reasonableness

of the settlement fund in light of the best possible recovery (Factor 8); and the range of

reasonableness of the settlement fund as compared to a possible recovery in light of all the

attendant risks of litigation (Factor 9). Id. As explained below, proceeding to trial in this action

would involve tremendous time and resources, and significant litigation risk. Tarantolo Decl.

¶¶ 73-78. Moreover, Defendants’ severe lack of financial resources creates a risk that even

successful litigation to judgment would ultimately be fruitless for Plaintiffs, as there is a

significant chance that even as prevailing parties Plaintiffs could obtain little or no money for the

Class. Id. ¶ 77.

Complexity, expense and likely duration of the litigation (Factor 1): With regard to the


16

first Grinnell factor, this case is complex, involving TILA, RICO, and related fraud claims as

well as dozens of Dealers and tens of thousands of Class Members.6 Continuing litigation would

be time-consuming and expensive for all Parties, involving numerous depositions; a likelihood

that EAC would be required to reconstruct substantial portions of its prior productions to agency

investigators due to unresolved doubts as to the reproductions’ sufficiency, as well as conduct

other further document searches and productions, see ECF No. 158; and new discovery into

Jeffrey Henn’s role in the conduct at issue. Tarantolo Decl. ¶ 75. Moreover, delay would have

substantial negative ramifications for the Class, as Defendants would continue to collect money

from Class Members on Credit Plans during the pendency of litigation—valued at up to $1.1

million—and, as described below, would almost certainly be less likely in the future to have

sufficient funds with which to satisfy a judgment. Id. ¶ 77. This factor weighs in favor of the

proposed settlement.

Risks of establishing liability and damages (Factors 4 and 5): Class Counsel believes that

the Class has a strong case and would prevail on liability and damages at trial. Id. ¶ 73. However,

“[l]itigation inherently involves risks,” and the main purpose of settlement “is to avoid a trial on

the merits because of the uncertainty of the outcome” and the costs of delay. See In re

PaineWebber Ltd. P’ships Litig., 171 F.R.D. 104, 126 (S.D.N.Y. 1997) (internal quotation marks

omitted). There would be risk in establishing Defendants’ class-wide liability, particularly as to

Plaintiffs’ fraud claims that are based on Dealers’ oral misrepresentations, which carry a high

burden of proof. Tarantolo Decl. ¶ 73; see Moore v. PaineWebber, Inc., 306 F.3d 1247, 1252-56

6 See, e.g., Charron v. Pinnacle Grp. N.Y. LLC, 874 F.Supp.2d 179, 195 (S.D.N.Y. 2012), aff’d sub nom.

Charron v. Wiener, 731 F.3d 241 (2d Cir. 2013) (granting final approval of settlement class action where “[t]he path from this stage of the litigation to a final judgment on the issue of Defendants’ liability for violation of the RICO statutes . . . would be long, complicated, and expensive . . . [n]otwithstanding the strength of the evidence Plaintiffs elicited during the pre-suit investigation and discovery”).


17

(2d Cir. 2002). Courts have recognized that RICO claims are typically complex and can be

difficult to establish. See, e.g., In re Prudential Sec., Inc., 1995 WL 798907, at *13 (S.D.N.Y.

Nov. 20, 1995) (granting final approval of settlement class action in action that was “extremely

complex, involving RICO allegations which, in and of themselves, involve complex issues such

as, inter alia, whether a pattern exists, whether the underlying predicate acts have been proved,

and whether a RICO injury can be established”).

As to damages, Plaintiffs face litigation uncertainty as to the amount of actual and

statutory damages that would be permitted under TILA in light of governing case law and

Defendants’ limited net worth. Tarantolo Decl. ¶ 73; In re Currency Conversion Fee Antitrust

Litig., 265 F. Supp. 2d 385, 428 (S.D.N.Y. 2003) (burden for TILA damages). Although there is

a chance that Plaintiffs could recover a larger amount if they litigated this matter to its

conclusion—for example, a successful RICO claim can yield treble damages, 18 U.S.C.

§ 1962(c)—Plaintiffs would also risk recovering nothing at all. Tarantolo Decl. ¶ 73; see also

Weil v. Long Island Sav. Bank, 188 F. Supp. 2d 258, 264 (E.D.N.Y. 2002) (finding treble

damages in a RICO claim “speculative” “in light of the difficulty in proving a RICO claim”).

“Settlement is favored” where, as here, it “results in substantial and tangible present recovery,

without the attendant risk and delay of trial.” Sykes v. Mel Harris & Assocs. LLC (“Sykes III”),

2016 WL 3030156, at *12 (S.D.N.Y. May 24, 2016) (internal quotation marks omitted).

Risks of maintaining the class action through the trial (Factor 6): The sixth Grinnell

factor “weighs in favor of settlement” where “it is likely that defendants would oppose class

certification” if the case were to be litigated. Garland v. Cohen & Krassner, 2011 WL 6010211,

at *8 (E.D.N.Y. Nov. 29, 2011). While Plaintiffs believe that their arguments in favor of class

certification are strong, and that a Class would ultimately be certified, Defendants would


18

vigorously oppose certification, likely on the basis that the Class Members were sold the

Services by various employees of dozens of different Dealers. Tarantolo Decl. ¶ 74. This factor

thus weighs in favor of settlement.

Ability of the defendants to withstand a greater judgment (Factor 7): Defendants’

inability to withstand greater judgment strongly weighs in favor of approval of settlement here.

The settlement negotiations in this matter largely focused on the financial condition of EAC and

its ability to withstand an eventual judgment. Tarantolo Decl. ¶¶ 18-19. EAC represented that it

had very limited assets, and that its income was projected to decline sharply in the coming

months. Id. To substantiate these claims, Class Counsel sought and obtained detailed financial

information to Class Counsel to review, including its audited financial statements and tax

returns. Id. Upon reviewing, Class Counsel is satisfied that EAC has very limited financial

resources and would be unlikely to withstand a judgment of the magnitude sought in this case—

indeed, that by the time this case were litigated to Judgment, EAC might not be able to satisfy

any portion of a judgment at all. Id. ¶¶ 19, 77. Moreover, EAC has represented that it is winding

down its business. Indeed, since EAC was prohibited by the law enforcement settlements from

issuing new Credit Plans, its income is severely curtailed, such that even the limited resources

available for the Class now may not remain after the time it would take to litigate this action to

judgment. Id. ¶ 77.

Henn, against whom Plaintiffs’ claims are at a substantially earlier stage of development

given that they were added only in late 2020, has likewise represented that he would be unable to

satisfy a judgment of the magnitude Plaintiffs seek. Id. ¶ 20. Plaintiffs’ agreement to the

Settlement Agreement is expressly conditioned on the truthfulness of these financial disclosures.

Settlement Agreement ¶ II.A.8.


19

The reasonableness of Plaintiffs’ determination that Defendants may not be able to satisfy

a judgment larger than the value of the settlement is bolstered by the law enforcement agency

settlements. Both the Federal Trade Commission and the New York Attorney General settled

their claims with EAC in the Fall of 2019 — a time when EAC had significantly more assets

than it does now — and suspended over 90% of the financial penalties assessed due to EAC’s

inability to pay.7 The FTC obtained $1 million in financial penalties from EAC between the two

cases it filed against the Company, the same settlement that Plaintiffs have secured here. Each of

those settlements were conditioned on the veracity of EAC’s representations regarding its

finances, and none of the suspended judgments have been reinstated since that time, suggesting

that the law enforcement agencies have not become aware of significant additional assets held by

EAC. Tarantolo Decl. ¶ 60. No law enforcement agency secured a higher payment than Plaintiffs

have obtained through settlement; indeed, Virginia’s settlement, which was secured within days

of Plaintiffs’ settlement of this action, obtained only $50,000 in monetary relief. Id. ¶ 58.

Range of reasonableness of the Settlement Fund in light of the best possible recovery and

attendant risks of litigation (Factors 8 and 9): In analyzing the reasonableness of the Settlement

Fund, the Court must assess “the uncertainties of law and fact in any particular case and the

concomitant risks and costs necessarily inherent in taking any litigation to completion.’” Frank

v. Eastman Kodak Co., 228 F.R.D. 174, 186 (W.D.N.Y. 2005) (quoting Newman v. Stein, 464

F.2d 689, 693 (2d Cir. 1972)). In other words, “[t]he adequacy of the amount offered should be

judged in light of the strengths and weaknesses of the plaintiff[s’] case.” In re Austrian and

7 Federal Trade Commission et al. v. Manhattan Beach Venture, LLC, et al, No. 19 Civ. 7849 (C.D. Cal.),

ECF No. 4, at 11 (suspending all but $136,200 of $3.8 million judgment); Federal Trade Commission v. Student Advocates Team, LLC, et al., No. 19 Civ. 1728 (C.D. Cal.), ECF No. 5, at 11 (suspending all but $863,800 of $24 million judgment); New York v. Debt Resolve Inc. et al., No. 18 Civ. 9812 (AJN) (S.D.N.Y.), Dkt. 112, at 13 (suspending all but $225,000 of $1.66 million judgment).


20

German Bank Holocaust Litig., 80 F. Supp. 2d 164, 178 (S.D.N.Y. 2000) (citation omitted). The

proposed settlement, which provides $1 million to the Class Settlement Fund, cessation of

outstanding collections valued at $1.1 million, and additional benefits, provides the Class

valuable injunctive and monetary relief. Tarantolo Decl. ¶¶ 12, 25-35.

While Plaintiffs bring a very strong TILA claim, the Settlement Fund’s $1 million in

damages very likely exceeds the amount of damages that the Class could obtain were it to prevail

on that claim. TILA caps statutory damages at the lesser of $1 million or 1% of the Defendants’

net worth, 16 U.S.C. § 1640(a)(2)(B), and it is difficult to obtain actual damages under TILA on

a class-wide basis. See In re Currency Conversion Fee Antitrust Litig., 265 F.Supp.2d at 428.

This weighs in favor of settlement. See, e.g., Dorrance v. ARS Nat. Servs., Inc., 2015 WL

2213514, at *6 (M.D. Pa. May 11, 2015) (classwide damages of “a vast majority of the statutory

damages available,” as determined by 1% of defendant’s net worth, “weigh[ed] in favor of

settlement”); Marcoux v. Szwed, 2017 WL 679150, at *2 (D. Me. Feb. 21, 2017) (same); Harper

v. Law Office of Harris & Zide LLP, 2017 WL 995215, at *4 (N.D. Cal. Mar. 15, 2017) (same).

Plaintiffs believe that if this case were litigated through trial, the Class would be entitled

to actual and treble damages as available under RICO, as well as actual damages under their

common law fraud and New York’s consumer protection statute claims, and recognize that the

Settlement Fund is not a high percentage of the Class’s hypothetical best possible recovery,

particularly when taking into account the possibility of treble damages on the RICO claims.

18 U.S.C. § 1962(d); see Tarantolo Decl. ¶ 73. The settlement nonetheless reflects a reasonable

recovery for the Class given the significant risks of litigation and Defendants’ limited net

worth, as set forth above. Id.; see also Charron v. Pinnacle Grp. N.Y. LLC, 874 F. Supp. 2d 179,

201 (S.D.N.Y. 2012) (recognizing benefit in settlement where alternative was that “liability


21

claims under RICO and the NYCPA went to trial and the Class Members were then forced to

prove their individual damages claims”) aff’d sub nom. Charron v. Wiener, 731 F.3d 241

(2d Cir. 2013).

(b) Rule 23(e)(2)(C)(ii): Effectiveness of Proposed Method of Claims Processing

Rule 23(e)(2)(C)(ii) directs the Court to consider “the effectiveness of any proposed

method of distributing relief to the class, including the method of processing class-member

claims.” Fed. R. Civ. P. 23(e)(2)(C)(ii). The proposed method of processing claims will be

effective. Upon receiving the Notice, Class Members eligible for compensation will be able to

submit Claim Forms online via the Settlement website,8 and will be asked to verify their identity

by providing easily accessible information such as the phone number associated with their EAC

account or the last four digits of their social security number. Tarantolo Decl. ¶ 54. This

verification process will ensure that payments are made only to eligible Class Members, and will

provide a simple way for the class administrator to process payment of claims. Class Members

will be able to elect to receive payment via electronic means (including PayPal, Vemno, Zelle,

physical or electronic debit card, and bank transfer), which is both less expensive to administer

and more convenient for class members, or to be mailed a paper check. Id. ¶ 55.

(c) Rule 23(e)(2)(C)(iii): Attorneys’ Fees

As of the date the Parties signed the Settlement Agreement, Class Counsel had already

expended in excess of 2,468 hours, resulting in a preliminary lodestar of more than $1,628,000,

and expect to spend considerable additional hours bringing this matter to its conclusion.

Tarantolo Decl. ¶ 63; Oblak Decl. ¶ 6. Yet, Class Counsel seeks to recover only a limited amount

8 Class Counsel can provide a screenshot of the Claim Form website to the Court upon request. Class Members who are unable to submit Claim Forms online will be able to submit a paper Claim Form by contacting the Settlement Administrator.


22

of attorneys’ fees and costs, such that at least 75% ($750,000) of the Settlement Fund will be

paid directly to Class Members. Up to the remaining 25% ($250,000) of the Settlement Fund will

cover service awards, administration expenses, and attorneys’ fees and costs. Specifically,

administration expense are capped at $81,500; Named Plaintiffs will seek service awards of

$6,000, and Class Counsel accordingly estimates that it will seek an attorneys’ fees award in

connection with final approval of $162,500.9 Tarantolo Decl. ¶ 64. Quinn Emanuel has agreed to

litigate this case pro bono and will recover only its out-of-pocket expenses; all attorneys’ fees in

the settlement will go to NYLAG, a non-profit legal services organization serving New Yorkers

experiencing poverty. Tarantolo Decl. ¶ 61; Oblak Decl. ¶ 5. Plaintiffs presently seek

preliminary approval of this fee amount and will move for an award of the fees under Rules

23(h) and 54(d)(2) in connection with an eventual request for final approval of the Settlement.

The fee amount is eminently reasonable. When assessing proposed attorneys’ fees, courts

consider the following six factors: (1) the time and labor expended by counsel; (2) the magnitude

and complexities of the litigation; (3) the risk of the litigation; (4) the quality of the

representation; (5) the requested fee in relation to the settlement; and (6) public policy

considerations. Goldberger v. Integrated Res., Inc., 209 F.3d 43, 50 (2d Cir. 2000); Meredith

Corp. v. SESAC, LLC, 87 F. Supp. 3d 650 (S.D.N.Y. 2015).

Here, counsel expended a tremendous amount of time and labor zealously pursuing this

action; as stated above, Class Counsel’s hours totaled more than 2,468 hours. This litigation has

been substantial and complex, affecting 79,656 Class Members across all states who purchased

Services from numerous Dealers, involving multiple, technical claims under statutes such as

9 In the event that Administration Expenses fall below the $81,500 maximum, Class Counsel reserves the right to seek additional fees and costs equal to the reduction in Administration Expenses. But in no event will Class Counsel seek an award of fees and costs such that less than 75% of the total Settlement Fund is distributed to Class Members. Tarantolo Decl. ¶ 64.


23

RICO and TILA. Moreover, when Class Counsel developed these claims, no information from

regulatory investigations was public, which entailed substantial efforts and some risk. Tarantolo

Decl. ¶ 71. Both NYLAG and Quinn Emanuel have significant experience with complex and

class litigation and are highly qualified. Id. ¶ 62; Oblak Decl. ¶¶ 3-4.

The size of the fee award is modest in relation to the relief for the Class, approximately

16% of the Settlement Fund, which is well within the boundaries of fees awarded in this

district. 10 This fee is particularly appropriate under the “sliding scale” approach, in which

plaintiffs’ counsel are awarded a smaller proportion of the Settlement Fund as the size of the

fund increases. In re Colgate-Palmolive Co. ERISA Litig., 36 F. Supp. 3d at 348. Moreover, the

stipulated fee amount is far lower than the result of Class Counsel’s preliminary lodestar

calculation. Goldberger, 209 F.3d at 50 (holding that lodestar method may be used to calculate

reasonable fees for a class action settlement); Millea v. Metro-North Railroad Co., 658 F.3d 154,

166 (2d Cir. 2011) (lodestar method calculates attorneys’ fees by multiplying number of hours

reasonably expended by reasonable hourly rates). At the time the Settlement Agreement was

signed, Class Counsel had already expended well over 2,468 hours litigating the case. Tarantolo

Decl. ¶ 63; Oblak Decl. ¶ 6. Applying reasonable prevailing rates, Class Counsel had already

performed services valued at more than ten (10) times the requested fee amount, and since that

time, Class Counsel have expended many additional uncompensated hours (with many more to

follow in the future). Tarantolo Decl. ¶ 63; Oblak Decl. ¶ 6.

In addition, public policy considerations strongly support the requested fees here.

10 See Shapiro v. JPMorgan Chase & Co., 2014 WL 1224666, at *19 (S.D.N.Y. Mar. 24, 2014) (“[A]

reasonable percentage-of-the-fund range [is] between 10% and 30%.”); McBean v. City of New York, 233 F.R.D. 377, 393 (S.D.N.Y. 2006) (awarding attorneys’ fees amounting to 18% of the settlement fund); In re Colgate-Palmolive Co. ERISA Litig., 36 F. Supp. 3d 344, 349-350 (S.D.N.Y. 2014) (median fees percentage between 21.9% to 30% of the settlement fund); see also Grice v. Pepsi Beverages Co., 363 F. Supp. 3d 401 (S.D.N.Y. 2019); Goldberger, 209 F.3d at 47, 50 (describing “percentage of recovery” method as alternative to lodestar method).


24

NYLAG is a non-profit legal services organization that provides representation to New Yorkers

like Ms. Williams and Mr. Turner who would not otherwise have the means to obtain private

counsel to assist them. Id. ¶ 61. A fee award to NYLAG would support ongoing work on behalf

of New Yorkers in need. Id. Moreover, multiple statutory provisions under which Plaintiffs

brought this action provide for fee-shifting, precisely to encourage qualified counsel like

NYLAG and Quinn Emanuel to commit resources to prosecuting private claims to enforce the

law. See 18 U.S.C. § 1964 (c) (RICO); 15 U.S.C. § 1640(a) (TILA); NY GBL § 349(h).

Here, where experienced Class Counsel spent over two years vigorously investigating

and prosecuting a Scheme designed to defraud vulnerable student loan Borrowers into

purchasing worthless “services” at usurious rates — and where the fee award is approximately

16% of the total Settlement Fund, and less than 10% of Class Counsel’s preliminary lodestar —

the Goldberger factors weigh in the proposed attorneys’ fees favor.

(d) Rule 23(e)(2)(C)(iv): Agreements Made in Connection with Proposal

Rule 23(e)(2)(C)(iv) directs the Court to consider “any agreement made in connection

with the [settlement] proposal.” Other than the Settlement Agreement itself, there are no

agreements that have been made in connection with the Proposed Settlement. Tarantolo Decl.

¶ 24.

4. Rule 23(e)(2)(D): The Proposal Treats Class Members Equitably Relative to Each Other

The proposed Allocation Plan, attached as Tarantolo Declaration Exhibit 2, is fair and

treats Class Members equitably relative to each other. “The method of allocation need not be

perfect [to warrant preliminary approval]; it must only be rationally related to the relative

strengths and weaknesses of the . . . claims asserted.” Sand v. Greenberg, 2011 WL 1338196, at

*5 (S.D.N.Y. Mar. 22, 2011) (internal quotation marks and citation omitted).


25

The proposed Allocation Plan excludes from compensation Class Members who paid less

than $250 to EAC, who comprise approximately one-quarter of the Class (11% of Class

Members paid EAC less than $250, and 13% of Class Members never paid any money to EAC at

all). Tarantolo Decl. ¶ 25. These individuals paid in the aggregate less than 1.5% of the total

funds collected by EAC, and they would likely receive only a very small distribution from the

settlement.11 Id. ¶ 36.

The remaining 60,232 Class Members (75.6% of the Class) are eligible for Compensation

and will be treated equitably, in relation to the size of their payment to EAC. Id. ¶ 36. Each

Compensation Class Member who submits a Claim Form will receive a monetary payment that is

proportional to the amount of money he or she paid to EAC, effectively giving each

Compensation Class Member the same percentage refund of their payments to EAC. Id. ¶ 37.

Class Counsel chose this plan because it is straightforwardly fair, in that it puts money back into

the hands of injured Class Members in an amount related to their harm, and it minimizes

administrative costs. Id. ¶ 39.

Additionally, the Allocation Plan provides for awards of $250 to $1,000 to the Rule 26

Borrowers, in recognition of their work contributing to the Action, as well as a Service Award of

$3,000 each to Ms. Williams and Mr. Turner, the Named Plaintiffs. Id. ¶¶ 38, 41; Settlement

Agreement ¶ II.A.5. The Named Plaintiffs and Rule 26 Borrowers “play[ed] a crucial role in

bringing justice to those who would otherwise be hidden from judicial scrutiny.” Guippone v. BH

S&B Holdings LLC, 2016 WL 5811888, at *8 (S.D.N.Y. Sept. 23, 2016). The service awards,

which are “consistent with the range of awards made in” similar cases in this Circuit, is

11 Class Counsel calculated that, at a 10% claims rate, these Class Members would be entitled to a payment

of no more than approximately $25; at a 30% claims rate, the maximum payment would be only approximately $8. Tarantolo Decl. ¶ 39.


26

reasonable in light of Mr. Turner and Ms. Williams’s time and effort.12 This amount is also

comparable to the amount Ms. Williams and Mr. Turner would have received in actual or

compensatory damages and statutory damages had they brought their own suits. Tarantolo

Decl. ¶ 42.

Under the proposed Settlement, if money remains in the Settlement Fund after a first

distribution and further distributions to Class Members is not economically reasonable, a cy pres

distribution may be made to a not-for-profit organization that benefits individuals adversely

affected by federal student loan debt, “for the aggregate, indirect, prospective benefit of the

class.” Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 436 (2d Cir. 2007) (quotations

omitted); see Settlement Agreement ¶ II.A.7.

5. Additional Grinnell Factors

The second Grinnell factor asks the Court to consider the reactions of the class to the

settlement. Both Named Plaintiffs approve of the settlement. Tarantolo Decl. ¶ 34. Thus, at this

stage, the second Grinnell factor weighs in favor of approving the settlement. The Court should

re-examine this factor after notice has been issued to the rest of the Class Members, in

connection with final approval.

The third Grinnell factor, which focuses on the stage of the proceedings and the amount

of discovery completed, also favors preliminary approval of the Settlement. In general,

settlement is appropriate as long as “the plaintiffs have obtained a sufficient understanding of the

case to gauge the strengths and weaknesses of their claims and the adequacy of the settlement.”

In re AOL Time Warner, Inc., 2006 WL 903236, at *10 (S.D.N.Y. Apr. 6, 2006) (approving

12 O’Connor v. AR Res., Inc., 2012 WL 12743, at *9 (D. Conn. Jan. 4, 2012) ($2,000 service award); see

also Garland, 2011 WL 6010211, at *14 ($3,000 service award); Gross v. Wash. Mut. Bank, F.A., 2006 WL 318814, at *6 (E.D.N.Y. Feb. 9, 2006) ($5,000 service award).


27

settlement prior to depositions); see, e.g., Johnson v. Brennan, 2011 WL 4357376, at *9-10

(S.D.NY. Sept. 16, 2011) (granting final approval of a class settlement where the parties engaged

in informal discovery, class counsel conducted interviews and reviewed information provided by

the defendants, the parties met with a mediator and exchanged mediation statements, and counsel

performed “detailed damages calculations” based on defendant’s data, but no depositions were

taken). Here, in the two and half years that this case has been pending, the Parties have

exchanged significant discovery, and Class Counsel has reviewed over 36,000 documents from

EAC, as well as critical informal discovery regarding EAC’s financial condition and ability to

withstand a sizeable judgment. Supra at 10. This factor also weighs in favor of settlement.

B. Rule 23(e)(1): Proposed Notice to the Class

1. Notice to the Class

The Federal Rules of Civil Procedure require notice to be provided when a Rule 23(b)(3)

class is certified and when a class action settles. See Fed. R. Civ. P. 23(c)(2)(B), 23(e)(1)(B).

“Where, as here, the parties seek simultaneously to certify a settlement class and to settle a class

action, the elements of Rule 23(c) notice (for class certification) are combined with the elements

of Rule 23(e) notice (for settlement or dismissal).” In re Glob. Crossing Secs. & ERISA Litig.,

225 F.R.D. 436, 448 (S.D.N.Y. 2004). Notice to class members must be made “in a reasonable

manner” that is “the best notice that is practicable under the circumstances.” Fed. R. Civ. P.

23(c)(2)(B), 23(e)(1)(B).

The Parties have retained an experienced claims administrator, Atticus Administration,

LLC, which will distribute notice of the settlement to the Class, process any Class Member

objections and requests to opt-out, process claims, distribute settlement funds, respond to Class

Member inquiries about the settlement, and manage other aspects of administering the

settlement. Tarantolo Decl. ¶ 48. The Notice Plan involves up to four rounds of notice: First, an


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email to all Class Members; second, a reminder email to all Compensation Class Members who

have not submitted a Claim Form; third, a text message reminder to some or all Compensation

Class Members; and, finally, a postcard notice13 to all Class Members for whom the notice email

was undeliverable, as well to all Compensation Class Members who did not open the notice

emails. Id. ¶ 49.

Plaintiffs’ proposal to distribute notice primarily by email should be approved, as “[t]he

standard for the adequacy of a settlement notice in a class action under either the Due Process

Clause or the Federal Rules is measured by reasonableness.” Wal-Mart, 396 F.3d at 113; see also

Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314-15 (1950) (holding class notice

must be “reasonably calculated, under all the circumstances, to apprise interested parties of the

pendency of the action and afford them an opportunity to present their objections”). Class

certification notice may therefore be made by “United States mail, electronic means, or other

appropriate means.” Fed. R. Civ. P. 23(c)(2)(B) (emphasis added); see also Fed. R. Civ. P.

23(e)(1)(B) (Court “direct[s] notice in a reasonable manner to all class members[.]”).

Distribution of notice of proposed class action settlements by email satisfies Rule 23 and

the Due Process Clause’s notice requirements, particularly where, as here, the notice plan relies

on physical mail as a backup where electronic mail is undeliverable.14 In Ortega v. Uber Tech.,

Inc., the Court approved a notice plan where the “settlement class would receive notice of the

settlement solely by email; if an email transmitting the settlement notice is returned as

13 The post card notice will contain a summary of the Settlement terms, and will direct Class Members to the settlement website for more information.

14 The notice plan also proposes sending Class Members reminders via text message. Tarantolo Decl. ¶ 49. Courts have approved plans where notice is disseminated by text message, where the defendant has class members’ phone numbers. See In re AT&T Mobility Wireless Data Servs. Sales Tax Litig., 789 F. Supp. 2d 935, 968 (N.D. Ill. 2011) (approving notice plan that included sending text messages to Class Members); Vasto v. Credico (USA) LLC, 2016 WL 2658172, at *16 (S.D.N.Y. May 5, 2016) (granting plaintiffs’ “request for permission to distribute notice [of conditional collective action certification under FLSA] via email and text message”).


29

undeliverable, the settlement administrator would send a copy of the notice to that class member

by physical mail,” because the class members communicated with the defendant corporation

over email, demonstrating that the class members were “familiar and comfortable with email and

the Internet.” 2018 WL 4190799, at *10-11 (E.D.N.Y. May 4, 2018) (internal citations omitted);

see also In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 941 (9th Cir. 2015) (approving

settlement notice by email, then notice by regular mail for email notices that “bounced back”).

Every Class Member enrolled in the EAC Credit Plan electronically through email and received

EAC’s statements and monthly bills by email, demonstrating that all Class Members are

“familiar and comfortable with email and the Internet.” Tarantolo Decl. ¶ 50. Moreover, the

notice plan proposes to send physical notice not only to Class Members whose emails return as

“undeliverable,” but also to all Class Members who do not open the email notice. Id. ¶ 49. Courts

are especially inclined to approve email notice plans in cases involving companies that already

possess class members’ email addresses, recognizing the financial efficiencies of email notice as

compared to notice sent by U.S. mail.15 Effecting notice primarily through email is far more cost-

effective in this case than mailed notice; because notice costs will be paid out of the Settlement

Fund, sending notice via electronic means benefits Class Members by preserving more funds for

allocation to the Class. Id. ¶ 50. Further, EAC has provided email addresses for over 99.95% of

Class Members, and these email addresses are far more likely to be accurate than mailing

addresses in EAC’s records, since EAC did not regularly communicate with Class Members via

15 See In re Domestic Airline Travel Antitrust Litig., 322 F. Supp. 3d 64, 71 (D.D.C. 2018) (determining

that settlement notice by email and publication notice was adequate under Rule 23 because direct mail would be disproportionately expensive, and defendant already had customer emails in possession); see also Noll v. eBay, Inc., 309 F.R.D. 593, 601 (N.D. Cal. 2015) (approving a plan to disseminate notice to class members using email addresses possessed by eBay, and by direct mail notice if the emails were undeliverable); Hall v. AT&T Mobility LLC, 2010 WL 4053547, at *4-6 (D.N.J. Oct. 13, 2010) (approving plan to disseminate notice in class members’ electronic monthly billing statements, which were sent via email).


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postal mail. Id.

The content of the proposed Individual Notices is also appropriate. They are written in

language that is as plain and simple as possible. Id. ¶ 51, Exs. 3 (Compensation Notice), 4

(Injunctive Notice). They also contain all of the requirements listed in Rule 23(c)(2)(B),

including a “general description” that “fairly apprise[s] the prospective members of the class of

the class action’s pendency, the relevant terms of the proposed settlement, their options in

connection with th[e] case.” Weinberger v. Kendrick, 698 F.2d 61, 70-71 (2d Cir. 1982) (internal

quotation marks omitted). Further, the notices provide Class Members with information not only

about this settlement, but also about how to contact free government assistance for their federal

student loans — critical information, as every Class Member paid for scam student loan debt

relief services that are available from the federal government for free. Tarantolo Decl. ¶ 51. And

the Notice will direct Class Members to the settlement website, which will have additional

information.

2. Telephonic Fairness Hearing

Class Counsel proposes that the Fairness Hearing in this matter be held telephonically

due to the ongoing COVID-19 public health emergency. Many courts, including in this district,

have ordered telephonic fairness hearings due to the pandemic.16 If the Court orders a telephonic

fairness hearing, Class Counsel will cooperate with the Court to ensure that all Class Members

are properly notified of the procedures for joining the telephonic hearing. Tarantolo Decl. ¶ 56.

C. Provisional Class Certification Should Be Granted for Settlement Purposes

Plaintiffs seek provisional approval of a settlement class pursuant to Fed. R. Civ. P. 16 See, e.g., In re Restasis (Cyclosporine Ophthalmic Emulsion) Antitrust Litig., 2020 WL 6193857, at *1 n.2 (E.D.N.Y. Oct. 7, 2020); In re General Motors LLC Ignition Switch Litig., 2020 WL 7481238 (S.D.N.Y. Dec. 18, 2020); In re Signet Jewelers Ltd. Sec. Litig., 2018 U.S. Dist. LEXIS 199808 (S.D.N.Y. Nov. 26, 2018); Hernandez v. Between the Bread 55th Inc., No. 17 Civ. 9541 (LJL) (S.D.N.Y.), ECF No. 170 (Sept. 10, 2020); Beach v. JPMorgan Chase Bank, 17 Civ. 563 (JMF) (S.D.N.Y), ECF No. 229 (Sept. 18, 2020).


31

23(b)(2) and (b)(3) consisting of all individuals who obtained a Credit Plan from EAC to finance

student loan assistance services. Defendants have agreed to the certification of this Class for the

purposes of settlement. Settlement Agreement ¶ I.A.

Provisional class certification for the settlement of a putative class action has the key

practical advantages of “avoiding the costs of litigating class status while facilitating a global

settlement.” Francisco Corte v. Fig & Olive Founders LLC, 2015 WL 12591677, at *2

(S.D.N.Y. June 24, 2015). Under Federal Rule of Civil Procedure 23(a), “a class may be certified

only if four prerequisites have been met: numerosity, commonality, typicality, and adequacy of

representation.” Sykes v. Mel S. Harris & Assocs. LLC (“Sykes II”), 780 F.3d 70, 80 (2d Cir.

2015). In addition to satisfying the prerequisites of Rule 23(a), at least one of the three

subdivisions of Rule 23(b) must be satisfied in order to qualify for class certification. Fed. R.

Civ. P. 23(b). Here, Plaintiff seeks class certification under both Rule 23(b)(2) for injunctive

relief, and Rule 23(b)(3) for damages. For the following reasons, class certification is

appropriate here.

1. The Proposed Class Meets the Requirements of Rule 23(a)

(a) The Proposed Class Is Sufficiently Numerous

Federal Rule of Civil Procedure 23(a)(1) requires that a class be “so numerous that

joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). Numerosity is generally

presumed for classes larger than forty members. Consol. Rail Corp. v. Town of Hyde Park, 47

F.3d 473, 483 (2d Cir. 1995). Plaintiffs’ proposed Class easily meets the numerosity requirement,

because the proposed Class contains 79, 656 individuals. Tarantolo Decl.¶ 3.

(b) There Are Common Questions of Law and Fact

Rule 23(a)(2) requires there to be “questions of law or fact common to the class.” Fed. R.

Civ. P. 23(a)(2). Rule 23(a)’s commonality requirement is met if the class members’ claims


32

depend on a “common contention . . . of such a nature that it is capable of classwide resolution—

which means that determination of its truth or falsity will resolve an issue that is central to the

validity of each one of the claims in one stroke.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338,

350 (2011).

The claims of the putative Class stem from Defendants’ unitary course of conduct in

operating a scheme to fraudulently induce Borrowers, by common oral misrepresentations and a

standardized set of contracts with material omissions, into purchasing valueless yet costly

Services financed by EAC at usurious rates. See supra at 3. Questions of law and fact common to

the Class include, among others, whether: EAC is a creditor under TILA; the Credit Plans

constitute spurious open-end credit; Defendants’ conduct is consumer-oriented; the Dealers’

sales practices constitute deceptive acts or practices; Defendants form an association-in-fact

enterprise under RICO; Defendants committed a pattern of racketeering activity; the Dealers

falsely represented that Borrowers would obtain loan “forgiveness”; the Dealers falsely

represented that their Services would benefit Borrowers; the Dealers failed to disclose that the

financing was in the form of a new loan from EAC; EAC drafted standard form Credit Plans; the

Credit Plans failed to disclose the amount financed, finance charge, total of payments, due date

and schedule of payments, billing notice rights, and Grace Period; and Defendants used the

interstate mails and wires.

There are plainly common questions of law and fact under TILA, as the Credit Plans—

which omitted disclosures required under TILA, and other material information—were

materially identical for all members of the proposed Class, except for the Borrower’s information,

the name of the Dealer, and the description and price of the specific Services purchased.

Tarantolo Decl. ¶ 11. The common material omissions in the standard Credit Plan, along with the


33

Dealers’ common oral misrepresentations, underlie Plaintiffs’ RICO and state law claims as

well.17 Moreover, each member of the Class was harmed in a similar manner by Defendants’

fraudulent actions, in that Defendants’ unitary scheme of inducing Borrowers into purchasing

worthless services through common misrepresentations and common material omissions

defrauded Class Members of the cost of the Services and interest, lowered their credit scores, and

put them at risk of default on their federal student loans, among other similar financial,

emotional, and psychological harms. Supra at 3. Commonality is often found where each class

member’s injuries “derive from a unitary course of conduct by a single system.” Marisol A. v.

Giuliani, 126 F.3d 372, 377 (2d Cir. 1997). Here, the Class Members all suffer similar injuries as

a result of Defendants’ unitary Scheme; therefore, this Court may find commonality for the

purposes of approving the Parties’ Settlement Agreement.

(c) Named Plaintiffs’ Claims Are Typical of Those of the Class Members

Rule 23(a)(3) requires that the claims of the class representative be typical of the claims

of the class. The typicality requirement is met where, as here, “the disputed issue[s] of law or

fact occupy essentially the same degree of centrality to the named plaintiff’s claim as to that of

other members of the proposed class.” Mazzei v. Money Store, 829 F.3d 260, 272 (2d Cir. 2016)

(quoting Caridad v. Metro–N. Commuter R.R., 191 F.3d 283, 293 (2d Cir. 1999)). “[M]inor

variations in the fact patterns underlying individual claims” do not prevent a finding of typicality.

Robidoux v. Celani, 987 F.2d 931, 937 (2d Cir. 1993).

Ms. Williams’s and Mr. Turner’s claims are typical of the claims asserted by the Class, in

that they assert that Defendants’ scheme violated their individual rights under TILA, RICO, and

17 The Court has recognized that Plaintiffs’ fraud and RICO claims “clearly arise of the same nucleus of

operative fact.” ECF 164, Order of Jan. 14, 2021, at n.11.


34

state law. The other Class Members assert precisely the same claims based on their materially

identical Credit Plans and Defendants’ unitary course of conduct towards all Class Members.

SAC ¶¶ 411-434, 458-478, 511-522. The Credit Plans they signed were materially identical to

those signed by members of the Class. Tarantolo Decl. ¶ 11. In addition, the financial, emotional,

and psychological harm they experienced is typical of that experienced by the Class Members.

SAC ¶¶ 251-264.

(d) The Named Plaintiffs Are Adequate Representatives

The final requirement of Rule 23(a) is that the representative parties must fairly and

adequately represent the interests of the class. Fed. R. Civ. P. 23(a)(4). “[A]dequacy is satisfied

unless ‘plaintiff’s interests are antagonistic to the interest of other members of the class.’” Sykes

II, 780 F.3d at 90 (quoting Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d

Cir. 2000)). Neither Mr. Turner nor Ms. Williams have interests antagonistic to the interest of

other Class Members. To the contrary, they have been subject to the same unlawful conduct as

the other Class Members. Supra at 2-3. Because “the same strategies that will vindicate [the

Named Plaintiffs’] claims will vindicate those of the class,” they are adequate class

representatives. See Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 158 (S.D.N.Y. 2008).

D. The Proposed Classes Meet the Requirements of Rule 23(b)

In addition to satisfying the prerequisites of Rule 23(a), at least one of the three

subdivisions of Rule 23(b) must be satisfied in order to qualify for class certification. Fed. R. Civ.

P. 23(b). Here, Plaintiff seeks class certification under both Rules 23(b)(2), for injunctive relief,

and 23(b)(3), for damages.

1. The Court Should Certify a Class Seeking Injunctive Relief Under Rule 23(b)(2)

Rule 23(b)(2) supplies a basis for certification where, as here, the Defendants “ha[ve]


35

acted or refused to act on grounds that apply generally to the class, so that final injunctive relief

or corresponding declaratory relief is appropriate [for] the class as a whole.” Fed. R. Civ. P.

23(b)(2). Defendants have acted on grounds that apply generally to the Class by designing and

operating a Scheme to fraudulently induce Borrowers by oral misrepresentation and material

omissions into purchasing valueless yet costly Dealer Services financed by EAC at usurious

rates. Supra at 3. The same declaratory and injunctive relief — that EAC stops collection on the

Credit Plans, that EAC is prohibited from selling or otherwise transferring the Credit Plan, that

EAC take steps to remedy harm to Class Members’ credit, and that EAC cooperates with efforts

to recover against the Dealers — would provide relief for close to every members of the Class.

Tarantolo Decl. ¶¶ 29-33. Certification under Rule 23(b)(2) is therefore appropriate because the

declaratory or injunctive relief Plaintiffs seek would “benefit[] all [the Class Members] members

at once.” Dukes, 564 U.S. at 362.

2. The Court Should Certify a Class Seeking Damages Under Rule 23(b)(3)

Plaintiffs and the proposed Class seek provisional certification of a Class under Rule

23(b)(3) because they are entitled to actual, statutory, and punitive damages under RICO (18

U.S.C. § 1964(c)), TILA (16 U.S.C. § 1640(a)(2)(B)), N.Y. G.B.L. § 349(h), and common law

fraud. Rule 23(b)(3) certification is appropriate here, because common issues of fact and law

predominate over individual issues, the class action is superior to other methods of adjudication,

and the proposed class is ascertainable. See Fed. R. Civ. P. 23(b)(3).

(a) Common Questions Predominate

Certification under Rule 23(b)(3) requires that questions of law or fact common to the

class predominate over individual questions. “The predominance requirement is satisfied if

resolution of some of the legal or factual questions that qualify each class member’s case as a


36

genuine controversy can be achieved through generalized proof, and if these particular issues are

more substantial than the issues subject only to individualized proof.” In re U.S. Foodservice Inc.

Pricing Litig., 729 F.3d 108, 118 (2d Cir. 2013) (citation omitted). The rule does not require that

individual questions be absent; to the contrary, “[t]he text of Rule 23(b)(3) itself contemplates

that such individual questions will be present.” Sykes II, 780 F.3d at 81.

Common questions of law and fact predominate in this action because the claims of

Plaintiffs and the Class arise from Defendants’ uniform conduct and would require generalized

proof. Class certification is plainly appropriate as to Plaintiffs’ TILA claims, as all putative class

members received financing from EAC through Credit Plans materially identical to the ones

issues to Ms. Williams and Mr. Turner, each of which lacks the same disclosures. “[C]ases

regarding the legality of standardized documents . . . often result in the predomination of

common questions of law or fact and are, therefore, generally appropriate for resolution by class

action.” Sykes v. Mel Harris and Assocs. LLC, 285 F.R.D. 279, 293 (S.D.N.Y. 2012) (“Sykes I”)

(quotation omitted). Here, where all putative class members received standard form documents

that all violated the same statute in the same manner, class certification is straightforwardly

appropriate.

As to Plaintiffs’ RICO and related fraud claims, common questions of law and fact

predominate because Plaintiffs allege that Defendants designed and operated a Scheme that

could only function if Dealers made materially similar oral misrepresentations and oral and

written omissions to all Class Members. Tarantolo Decl. ¶ 9. Some specifics of Dealers’ oral

misrepresentations may have varied among Borrowers, but the misrepresentations all fell into

common, uniform categories, which include: false promises of “student loan forgiveness,” SAC

¶¶ 77-90; false representations that the Dealers’ worthless services were valuable, id. ¶¶ 91-110;


37

failure to disclose the harms that the Dealers’ services could cause Borrowers, id. ¶¶ 111-119;

misrepresentations that the Dealers were affiliated with the U.S. Department of Education, id.

¶¶ 120-127); and misrepresentation of Borrowers’ payment obligations to their federal student

loan servicers and under the Credit Plan, id. ¶¶ 128-144.

Indeed, Plaintiffs are not required to identify a “closed universe of actionable

misrepresentations” to support class fraud claims. Ramiro Aviles v. S & P Glob., Inc, 380

F. Supp. 3d 221, 292 (S.D.N.Y. 2019). Rather, courts will find that class issues predominate

where the “nature of the alleged misrepresentations at issue” permit “legitimate inferences” to be

drawn as to class members’ reliance on them. In re U.S. Foodservice Inc. Pricing, 729 F.3d at

120 (emphasis added). This Court may draw the inference that the design and operation of

Defendants’ Scheme required common misrepresentations as well as common material

omissions in the Credit Plans because Plaintiffs have alleged that no rational Borrower would

have purchased Dealers’ valueless services with EAC’s predatory financing had they understood

their true nature. Tarantolo Decl. ¶ 9; see Seekamp v. It’s Huge, Inc., 2012 WL 860364, at *10

(N.D.N.Y. 2012) (certifying a class whose members relied on the common “implicit

representation” of a product’s “legality and beneficialness in decided whether to purchase it”).

Because resolution of the legal and factual inquiries that underlie Plaintiffs’ RICO and related

fraud claims can be achieved by “generalized proof,” common issues predominate over

individual issues and class certification is appropriate. In re U.S. Foodservice Inc. Pricing Litig.,

729 F.3d at 118.

(b) A Class Action Is the Superior Method of Adjudication

Rule 23(b)(3) also requires that “a class action is superior to other available methods for

fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). Adjudicating claims

stemming from materially identical Credit Plans in a single action avoids an unwieldy number of


38

repetitive individual lawsuits. See Sykes I, 285 F.R.D. at 294. Courts also find that damages class

actions under Rule 23(b)(3) “can be superior precisely because they facilitate the redress of

claims where the costs of bringing individual actions outweigh the expected recovery,” as

“substituting a single class action for numerous trials in a matter involving substantial common

legal issues and factual issues susceptible to generalized proof achieve(s) significant economies

of “time, effort and expense, and promote uniformity of decision.” In re U.S. Foodservice Inc.

Pricing Litig., 729 F.3d at 130 (internal citations omitted). The substantial common legal and

factual issues in Plaintiffs’ case are subject to generalized proof, and overwhelm the

comparatively small factual distinctions as to the damages owed to each Class Member, make

proceeding on a class basis far more economical for Class Members and the Court. Lastly, as

many Class Members may lack the means or incentive to pursue their claims on their own,

Tarantolo Decl. ¶ 26, certifying a Rule 23(b)(3) class action here would help to vindicate “the

rights of groups of people who individually would be without effective strength to bring their

opponents into court at all.” See Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 617 (1997).

(c) The Proposed Class Is Ascertainable

Rule 23(b)(3) “contains an implicit threshold requirement that the members of a proposed

class be readily identifiable, often characterized as an ‘ascertainability’ requirement.” In re

Petrobras Sec., 862 F.3d 250, 264 (2d Cir. 2017) (internal quotation omitted). The membership

of Plaintiffs’ proposed Class is not only ascertainable, in that it is defined “using objective

criteria that establish a membership with definite boundaries,” id., but it has already been

ascertained—the identities of the 79,656 individuals who are in the Class are contained in

Defendants’ records and will be provided to the Class Administrator to effectuate accurate and

timely notice and claims administration. Tarantolo Decl. ¶ 25.


39

E. NYLAG and Quinn Emanuel Satisfy the Rule 23(g) Prerequisites for Appointment as Class Counsel

Rule 23(g)(1)(A) sets forth the factors a court must consider in appointing class counsel:

“(i) the work counsel has done in identifying or investigating potential claims in the action;

(ii) counsel’s experience in handling class actions, other complex litigation, and the types of

claims asserted in the action; (iii) counsel’s knowledge of the applicable law; and (iv) the

resources counsel will commit to representing the class.” Fed. R. Civ. P. 23(g)(1).

NYLAG is a nonprofit organization that provides high quality, free civil legal services to

low-income New Yorkers in a number of fields, including consumer protection. NYLAG is

highly experienced in class actions and other large and complex matters involving complicated

legal and factual issues. NYLAG has successfully litigated dozens of class actions to benefit

poor New Yorkers, and has been appointed class counsel in many cases.18 Tarantolo Decl. ¶ 62.

Quinn Emanuel is a large law firm with over 800 attorneys that focuses on complex

commercial litigation. Oblak Decl. ¶ 2. Quinn Emanuel has extensive experience in handling

large class actions and complex disputes on a nation-wide scale and has been appointed as class

counsel in dozens of cases. Id. ¶ 4.

18 See, e.g., Mayfield v. Asta Funding, No. 14-CV-2591 (LAP)(JLC) (S.D.N.Y.), ECF No. 130 (Apr. 10,

2018) (appointing NYLAG Class Counsel for settlement class comprising over 60,000 low-income New York City consumers in FDCPA action); Salazar v. DeVos, No. 14-CV-1230 (RWS) (S.D.N.Y.), ECF No. 72 (Aug. 8, 2017) (appointing NYLAG Class Counsel for settlement class comprising over 60,000 low-income student loan borrowers); Philemon v. Aries Capital Partners, Inc., No. 18-CV-1927 (CLP) (E.D.N.Y.), ECF No. 52 (July 1, 2019) (preliminarily appointing NYLAG Class Counsel for settlement class of low-income New York City consumers in FDCPA action); Flores v. Technical Career Institutes, Inc., Adv. Pro. No. 18-01554 (MKV) (Bankr. S.D.N.Y.), ECF No. 25 (Sept. 6, 2019) (appointing NYLAG Class Counsel for settlement class of low-income New York City consumers in fraud action); Shakhnes ex rel. Shakhnes v. Eggleston, 740 F. Supp. 2d 602, 628 (S.D.N.Y. 2010), vacated in part on other grounds sub nom. Shakhnes v. Berlin, 689 F.3d 244 (2d Cir. 2012), cert. denied sub nom. Proud v. Shakhnes, 569 U.S. 918 (2013); Sims v. Bank of Am. Corp., No. 06-CV-5991 (CPS)(JMA), 2008 WL 479988, at *8 (E.D.N.Y. Feb. 19, 2008) (certifying class and appointing NYLAG class counsel).


40

IV. CONCLUSION

For the foregoing reasons, Plaintiffs respectfully request that the Court grant the Parties’

settlement preliminary approval, provisionally certify a class in this matter for settlement

purposes, provisionally appoint NYLAG and Quinn Emanuel as class counsel, and direct notice

to the Class Members and enter the proposed Preliminary Approval Order, attached to the

Tarantolo Declaration as Exhibit 5.

Dated: March 15, 2021 New York, New York

/s/ Jonathan Oblak . Jonathan Oblak Anna Deknatel Sophia Qasir QUINN EMANUEL URQUHART & SULLIVAN, LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 (212) 849-7000 [email protected]

/s/ Danielle Tarantolo . Danielle Tarantolo Jessica Ranucci NEW YORK LEGAL ASSISTANCE GROUP 7 Hanover Square New York, NY 10004 (212) 613-5000 [email protected]

Counsel for Plaintiffs


Documents

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW … · 2021. 5. 11. · In re LIBOR-Based Financial Instruments Antitrust Litig., 327 F.R.D. 483 (S.D.N.Y. 2018) ... deceptive