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Motion for preliminary approval of class settlement
This is a consumer class action brought pursuant to the California Fair Debt Buying Practices Act, Civil Code section 1788.50 et seq. (the “CFDBPA”). Plaintiff David Chai brings this action against defendants Velocity Investments, LLC, and Velocity Portfolio Group, Inc. (collectively, “Defendants”).
The parties have reached a settlement, and Plaintiff’s unopposed motion for preliminary approval of the settlement is before the Court. As discussed below, the Court GRANTS the motion for preliminary approval and sets a final approval hearing for January 6, 2026 at 1:30 p.m. in Department 11.
I. Legal Standard
“In general, questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
The most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130.)
III.
Discussion
A. Provisions of the Settlement
This case has been settled on behalf of the following class, as certified in February 2022: All persons with addresses in California to whom Convergent Outsourcing, Inc., sent, or caused to be sent an initial written communication in the form of Exhibit “1” to the Complaint on behalf of Defendants, in an attempt to collect a charged-off consumer debt originally owed to Citibank, N.A., which was sold or resold to Defendants on or after January 1, 2014, which were not returned as undeliverable by the U.S. Post Office during the period December 7, 2019, through February 24, 2022.
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(Class Action Settlement Agreement (“Agreement”), ¶ 1.5.)
Defendants will pay a total class fund of $500,000. (Motion, pp. 5:9–6:6.)
Defendants will also pay to Plaintiff a total of $2,000 in statutory damages, pursuant to Civil Code sections 1788.62(a)(2) and 1788.62(b).
Defendants will pay an additional service award to Plaintiff of up to $5,000.
In a separate motion, Class counsel will seek an award of attorneys’ fees and costs in an amount not to exceed $300,000.
Notice of the pending certified Class Action has already been served to all Class Members. (Agreement, ¶ 5.1.)
The Agreement provides that CPT Group, Inc. (“CPT”) will serve as the neutral entity that will administer the settlement. (Id. at ¶¶ 1.2, 4.6.)
The Court appoints CPT as the settlement administrator.
The Agreement further provides that funds from uncashed settlement checks will be paid in equal shares to the following entities as cy pres recipients: (1) East Bay Community Law Center in Berkeley, California; (2) the Housing and Economic Rights Advocates in Oakland, California; and (3) Community Legal Services in East Palo Alto, California. (Id. at 4.6.)
The Court approves the cy pres designations.
In exchange for the settlement, the Class Members agree to release Defendants and related entities and persons from “all claims asserts, or which could have been asserted, in the Complaint ... which arise from or relate to letters mailed on behalf of Defendants in the form attached as Exhibit “1” to Plaintiff’s Complaint. (Agreement, ¶¶ 7.1 and 7.2.)
The release provisions are appropriately tailored to the factual allegations of the operative pleading. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 538.)
B. Fairness of the Settlement
Plaintiff contends the proposed settlement is fair and within the range of reasonableness. (Motion, pp. 10:24–16:6.)
Plaintiff explains that the Complaint seeks only statutory damages and that the parties filed a Stipulation on December 2, 2022 that each of the Defendants’ net worth exceeded $50 million, so that the maximum cap on the Class’s recovery of additional damages would be $500,000. (Id. at p. 11:14–11:23.)
The Agreement provides Plaintiff with a payment equivalent to the amount of maximum statutory damages ($2,000; $1,000 from each Defendant) and an additional incentive award.
The litigation since December 2020 has included Plaintiffs’ successful motion for class certification and successful appeal of the Court’s decision granting Defendants’ motion for judgment on the pleadings. (Id. at pp. 3:4 – 5:10.)
The settlement is the result of mediation with Hon. Robert D. McGuiness (Ret.) on December 9, 2025.
Class Counsel is experienced in consumer class actions and attests that the proposed settlement is an excellent result given the potential maximum possible recovery. (Declaration of Fred. W. Schwinn, ¶¶ 22–24.)
The Court has reviewed Plaintiff’s written submissions and is satisfied that the settlement is fair and may be approved.
C. Service Award, Fees and Costs
Plaintiff will seek a service award of $5,000.
Plaintiff shall submit a declaration in support of this request, describing his participation in this action, prior to the final approval hearing.
The Court will issue its determination regarding the approved amount of the service at the final approval hearing.
Class Counsel will seek attorney fees and costs of up to $300,000.
Prior to the final approval hearing, Class Counsel shall submit lodestar information (including hourly rates and hours worked) as well as evidence of actual litigation costs incurred and settlement administration costs.
D. Conditional Certification of Class
Plaintiff requests the class be conditionally certified for purposes of the settlement.
California Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ....”
Plaintiff states there are approximately 602 class members who can be identified from a review of Defendant’s records.
The Court finds that there are common questions regarding whether class members were subjected to unlawful conduct and that proposed class may be conditionally certified for settlement purposes.
E. Class Notice
California Rules of Court, rule 3.769, subdivision (f), provides, “If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court. The notice must contain an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing and state any objections to the proposed settlement.”
Here, the form of the notice is generally adequate subject to the modification set forth below.
It describes the lawsuit, explains the settlement, and states the settlement amounts, including attorney fees and payment to the named plaintiff.
The notice informs class members that they may appear at the final fairness hearing to make an oral objection without filing a written objection.
The following language regarding the final approval hearing shall be added to the notice: Class members may appear at the final approval hearing in person or remotely using the link for Department 11 (Afternoon Session), and should review the remote appearance instructions beforehand: https://santaclara.courts.ca.gov/online-services/remote-hearings
Class members who wish to appear remotely are encouraged to contact class counsel at least three days before the hearing, if possible, so that potential technology or audibility issues can be avoided or minimized.
On the condition that the parties make the above modification to the notice prior to its mailing, the notice is approved.
III.
Conclusion
The Court GRANTS the motion for preliminary approval and sets a final approval hearing for January 6, 2026 at 1:30 p.m. in Department 11.
Case Management Conference May 20, 2026 is VACATED.
Plaintiff shall prepare the order in accordance with California Rules of Court, rule 3.1312.
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