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Soderstrom v. MSP Crossroads Apartments LLC

United States District Court, D. Minnesota

February 2, 2018

Linda Lee Soderstrom, Maria Johnson, Craig Goodwin, Jurline Bryant, and Julio Stalin de Tourniel, on behalf of themselves and others similarly situated, and HOME Line, a Minnesota nonprofit corporation, Plaintiffs,
v.
MSP Crossroads Apartments LLC, a Minnesota corporation, and Soderberg Apartment Specialists SAS, a Minnesota corporation, Defendants.

         MEMORANDUM OPINION AND ORDER GRANTING FINAL APPROVAL OF CLASS SETTLEMENT, APPROVAL OF NOTICE PLAN, OVERRULING OF OBJECTION, APPROVAL OF PLAN OF ALLOCATION AND AUTHORIZATION OF DISTRIBUTION, APPROVAL OF INCENTIVE AWARDS, FEES AND EXPENSES, AND FOR FINAL CLASS CERTIFICATION AND ENTRY OF FINAL JUDGMENT

          ANN D. MONTGOMERY U.S. DISTRICT JUDGE

         INTRODUCTION

         On January 23, 2018, the undersigned United States District Judge heard oral argument on Plaintiffs Linda Lee Soderstrom, Maria Johnson, Craig Goodwin, Jurline Bryant, and Julio Stalin de Tourniel (collectively, the “Class Plaintiffs”), and Plaintiff HOME Line's (together with Class Plaintiffs, “Plaintiffs”) Motion for Order and Judgment Granting Final Approval of Class Action Settlement and Certifying Settlement Class (the “Motion”) [Docket No. 192]. Kristen G. Marttila, Esq., Kate M. Baxter-Kauf, Esq., and Charles N. Nauen, Esq., Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, and Timothy L. Thompson, Esq., Housing Justice Center, St. Paul, MN, appeared on behalf of Plaintiffs. Margaret R. Ryan, Esq., and Bradley J. Lindeman, Esq., Meagher & Greer, PLLP, Minneapolis, MN, appeared on behalf of Defendants MSP Crossroads Apartments LLC (“MSP”) and Soderberg Apartment Specialists (“SAS”) (collectively, “Defendants”).

         Objections [Docket Nos. 182, 186] to the Motion have been filed by Claire J. Lee (“Lee”). Lee did not appear at the hearing.[1]

         For the reasons set forth below, Lee's Objections are overruled and the Motion is granted.

         BACKGROUND[2]

         On February 1, 2016, Plaintiffs commenced this action alleging that Defendants violated the Fair Housing Act's (“FHA”) prohibitions against disparate treatment and disparate impact discrimination under 42 U.S.C. § 3604, and also violated Minn. Stat. § 504B.315. See generally Compl. [Docket No. 1]. Plaintiffs moved for a preliminary injunction and Defendants moved to dismiss Plaintiffs' claims. See Pls.' Mot. Expedited Prelim. Inj. [Docket No. 15]; Defs.' Joint Mot. Dismiss [Docket No. 10]. The Court denied Plaintiffs' motion for a preliminary injunction, denied Defendants' motion to dismiss Plaintiff's claims under the FHA, and granted Defendants' motion to dismiss Plaintiffs' claim under Minn. Stat. § 504B.315. See Mem. Op. Order, Apr. 15, 2016 [Docket No. 39]; Mem. Op. Order, July 5, 2016 [Docket No. 41].

         From July 2016 to March 2017, the parties engaged in extensive discovery, including the production of documents and responses for at least twelve Plaintiffs, depositions of three named plaintiffs, third-party discovery, and the production of more than 2, 300 pages of documents from Defendants. First Marttila Decl. [Docket No. 178] ¶ 3.

         In April 2017, the parties participated in multiple mediation sessions with United States Magistrate Judge Katherine M. Menendez. Id. ¶ 4. Although no settlement was reached during these sessions, the parties continued to negotiate potential settlement terms and participated in periodic status conferences with Judge Menendez from April through August 2017. Id.

         In June 2017, Judge Menendez entered an order severing the individual claims of Lee, then a named plaintiff, from the putative class action claims raised by the Class Plaintiffs. See Order, June 14, 2017 [Docket No. 159]. Lee's individual claims were severed due to “the very different approaches to the litigation taken by Interim Class Counsel and Ms. Lee, ” which made it difficult to achieve progress in the litigation. Id. at 3. A separate civil case was opened for Lee's individual claims. See Lee v. MSP Crossroads Apartments LLC, et al., No. 17-2045 (D. Minn.). Lee's individual case remains pending.

         In September 2017, the parties arrived at a finalized Settlement Agreement. See First Marttila Decl. Ex. 1 (“Settlement Agreement”). The Settlement Agreement provides that for three years after the effective date of the Settlement Agreement, Defendants will amend their screening criteria for applications for tenancy at the apartment complex formerly known as Crossroads at Penn and now known as Concierge Apartments (the “Property”) and will amend all public marketing materials, application materials, screening criteria disclosures, and any other public documents, including websites, to be consistent with the amended screening criteria. Additionally, if MSP, or an entity in which it or at least one member or director of MSP beneficially owns, holds, or controls a membership interest, or an entity that is an affiliate of MSP, acquires a property located within the seven-county metropolitan area during the next three years, and if that property is managed by SAS, Defendants will apply the amended screening criteria at the newly acquired property for two years and will amend all materials during that period. Further, SAS will recommend to the owners of each of the properties for which it is retained as the property management company that those owners similarly amend their screening criteria for tenancy applications. Defendants will also provide training on the Fair Housing Act to all leasing agents employed at the Property.

         Additionally, Defendants will pay $650, 000 to resolve all claims in the lawsuit. The payment will be distributed as follows: (1) $200, 000 to an Equitable Relief Fund for the purpose of assisting in the acquisition and preservation of naturally affordable rental properties in the Twin Cities Metro Area at risk of conversion to higher rents and the threat of displacement of low and moderate income residents; (2) $300, 000 in payments to the Settlement Class, which consists of two subclasses, the Displacement Class and the Application Class, as defined in the Settlement Agreement; (3) $40, 000 to Plaintiff HOME Line; (4) $76, 000 to pay attorneys' fees; (5) $14, 000 to pay incentive awards; and (6) $20, 000 to pay notice and administration costs.

         Under the Settlement Agreement, Defendants will be released from any and all claims that were or could have been raised arising out of the subject matter of the litigation. The Settlement Agreement explicitly recognizes that the severed individual claims asserted by Lee in her separate action are not affected by the Settlement Agreement. See Settlement Agreement ¶¶ C, G, I(B)(3), I(B)(24), V.

         The Court preliminarily approved the Settlement Agreement on October 19, 2017. See Order [Docket No. 184] (“Preliminary Approval Order”).

         After preliminary approval of the settlement, the parties carried out the Court-approved notice program, which included: (1) mailing a long-form notice and claim form packet to Class Members located through reasonable efforts and records from Defendants; (2) establishing a public website to provide information regarding the litigation, settlement, and claims process; and (3) establishing a toll-free telephone hotline regarding the settlement and claims process. Keough Suppl. Decl. [Docket No. 205] ¶¶ 3-5. Claims administrator JND Legal Administration, LLC (“JND” or “Claims Administrator”) mailed notice and claim forms to 501 addresses for potential Displacement Class Members and received 230 claim forms from the Displacement Class. Id. ¶¶ 7, 9. JND mailed notice and claim forms to 1, 648 addresses for Application Class Members and received 131 claim forms from the Application Class.[3] Id. ¶¶ 7, 9. Lee is the only Class Member who has objected to the settlement. Id. ¶ 6.

         Additionally, Defendants mailed notice of the settlement to state Attorneys General and the U.S. Attorney General, in accordance with the Class Action Fairness Act., 28 U.S.C. §§ 1715(b). Marttila Suppl. Decl. ¶ 3. None of the notified federal or state officials have objected to the settlement or otherwise commented.

         Plaintiffs now move for final approval of the settlement; approval of the notice plan as comporting with due process; approval of the proposed plan of allocation for the settlement proceeds; authorization to distribute the settlement proceeds; approval of Plaintiffs' request for incentive awards, attorneys' fees and expenses; conditional certification of the Settlement Class, and entry of judgment.

         DISCUSSION

         A. Approval of Class Action Settlement

         Under Federal Rule of Civil Procedure 23(e), a court may only approve a proposed class action settlement if the settlement is “fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2). To determine whether a class action settlement satisfies these standards, the court must consider: “(1) the merits of the plaintiff's case, weighed against the terms of the settlement; (2) the defendant's financial condition; (3) the complexity and expense of further litigation; and (4) the amount of opposition to the settlement.” In re Wireless Tel. Fed. Cost Recovery Fees Litig., 396 F.3d 922, 932 (8th Cir. 2005).

         The Eighth Circuit recognizes that “‘strong public policy favors [settlement] agreements, and courts should approach them with a presumption in their favor.'” Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1148 (8th Cir. 1999) (quoting Little Rock Sch. Dist. v. Pulaski Cty. Special Sch. Dist. No. 1, 921 F.2d 1371, 1388 (8th Cir. 1990)). Accordingly, courts in the Eighth Circuit have held that “there is a presumption of fairness when a settlement is negotiated at arm's length by well informed counsel.” In re Charter Commc'ns, Inc. Sec. Litig., No. 02-1186, 2005 WL 4045741, at *5 (E.D. Mo. June 30, 2005); see also In re Zurn Pex Plumbing Prods. Liab. Litig., No. 08-1958, 2012 WL 5055810, at *6 (D. Minn. Oct. 18, 2012) (“There is usually a presumption of fairness when a proposed class settlement, which was negotiated at arm's length by counsel for the class, is presented for approval.”) (quoting 4 Alba Conte & Herbert Newberg, Newberg on Class Actions § 11.41 at 90 (4th ed. 2002)).

         The settlement is presumptively valid. It is the product of substantial expertise and diligence of both plaintiff and defense attorneys. The settlement was negotiated by counsel with expertise in class action litigation generally as well as housing law specifically. Marttila Suppl. Decl. ¶ 6; Marttila Aff. Supp. Mot. Appoint Interim Class Counsel [Docket No. 71] Exs. 1-2. Prior to reaching settlement, the parties diligently litigated multiple motions and engaged in extensive discovery. The assistance of Judge Menendez as a neutral mediator to facilitate settlement negotiations further demonstrates that the settlement was negotiated fairly and honestly at arm's length.

         1. Merits of Case vs. Settlement Terms

         Even if the settlement was not presumptively valid, it satisfies the fairness criteria for Rule 23(e) established by the Eighth Circuit. The most important consideration is the strength of Plaintiffs' case on the merits versus the amount offered in the settlement. See Petrovic, 200 F.3d at 1150. In deciding on the merits, the Court need not “go beyond an amalgam of delicate balancing, gross approximation, and rough justice.” White v. Nat'l Football League, 822 F.Supp. 1389, 1417 (D. Minn. 1993) (internal quotations omitted).

         The merits of Plaintiffs' case were arguably[4] strong but raised considerable legal and factual challenges. Litigation under the Fair Housing Act is complex and poses difficult legal issues. Additionally, the putative class faced multiple risky litigation hurdles, including class certification, summary judgment, Daubert motions, a lengthy trial, and probable appeals. On the other side of the scale, the amount offered in the settlement includes a large lump sum payment and substantial equitable relief. Not only has the settlement been described by affordable-housing advocates as the largest of its kind in the nation, [5] it provides immediate and certain benefits to Class Members. Thus, this factor weighs in favor of approving the settlement.

         2. Defendants' Financial Condition

         There is no evidence questioning Defendants' financial condition. This factor weighs in favor of approval.

         3. Complexity and Expense of Further Litigation

         Generally, class actions “place an enormous burden of costs and expense upon [ ] parties.” Marshall v. Nat'l Football League, 787 F.3d 502, 512 (8th Cir. 2015) (quoting Schmidt v. Fuller Brush Co., 527 F.2d 532, 535 (8th Cir. 1975)). This case is no exception. The costs and delay of litigating this case through trial and probable appeal would have potentially exceeded any damages award. Accordingly, this factor also supports final approval of the settlement.

         4. Opposition to the Settlement

         Of the more than 2, 000 notices mailed to potential Class Members, only one individual objected. This strongly weighs in favor of approving the settlement.

         Based on the foregoing, the Court finds that the settlement is fair, reasonable, and adequate. The settlement is approved.

         B. Class Certification

         The Court next considers whether certification of the Settlement Class is appropriate. Rule 23(a) requires as a prerequisite for class certification that the following be shown: (1) the class is so numerous that joinder is impracticable; (2) questions of law or fact are common to the class; (3) the representative parties' claims or defenses are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the class interests. Fed.R.Civ.P. 23(a)(1-4).

         Once the Rule 23(a) prerequisites are met, the class action may be maintained if the court determines that a Rule 23(b) factor is met. Plaintiffs request certification under Rule 23(b)(2). This factor permits class certification if “the party opposing the class has [allegedly] acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed.R.Civ.P. 23(b)(2).

         1. Rule 23(a) Prerequisites

         The proposed class here meets all the prerequisite requirements of Rule 23(a). Courts in Minnesota have found that putative class sizes of forty will support a finding of numerosity, and much smaller classes have been certified by courts in the Eighth Circuit. See, e.g., Lockwood Motors, Inc. v. Gen. Motors, Corp., 162 F.R.D. 569, 574 (D. Minn. 1995) (approving of classes of as few as forty members); Ark. Educ. Ass'n v. Bd. of Educ. of Portland, Ark. Sch. Dist., 446 F.2d 763, 765-66 (8th Cir. 1971) (approving class of twenty members). Here, the proposed Settlement Class size is in the hundreds, as evidenced by the number of claims forms received from eligible Class Members. Given the numerosity of Class Members, joinder is impracticable. Moreover, no party or Class Member has challenged the numerosity prerequisite. Accordingly, this Court finds the class sufficiently numerous to satisfy Rule 23(a)(1).

         The second prerequisite, commonality, is also met. The threshold for commonality is low, requiring only that the legal question “linking the class members is substantially related to the resolution of the litigation.” DeBoer v. Mellon Mortg. Co., 64 F.3d 1171, 1174 (8th Cir. 1995). “When the claim arises out of the same legal or remedial theory, the presence of factual variations is normally not sufficient to preclude class action treatment.” Donaldson v. Pillsbury Co., 554 F.2d 825, 831 (8th Cir. 1977). Here, the Class Members' claims all derive from the same legal theories: disparate impact and disparate treatment discrimination under the FHA. Common questions of law and fact include whether Defendants' application criteria have a disparate impact on protected classes; whether Defendants intentionally discriminated in violation of the FHA; and, if discrimination is found, whether injunctive relief and punitive damages are warranted.

         The third prerequisite, typicality, exists when there are “other members of the class who have the same or similar grievances as the plaintiff.” Id. at 830; see also E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 (1977). “Typicality is satisfied when the claims of the named plaintiffs emanate from the same event or are based on the same legal theory as the claims of the class members.” Lockwood Motors, 162 F.R.D. at 575 (internal quotations omitted). Here, all named Plaintiffs are members of the Displacement Class because they were residents of Crossroads at Penn on September 30, 2015, do not reside at Concierge Apartments now, and belong to households that include at least one person qualifying as a member of a protected class under the FHA under one of the following categories: non-white; handicapped as defined by the FHA; national origin; and familial status (which, for purposes of this settlement, is limited to tenants who had or desired to have more than two individuals reside in a unit due to at least one individual under the age of 18 residing in the unit). First Marttila Decl. ΒΆ 15. Moreover, named Plaintiffs Linda Soderstrom, Maria Johnson, and Jurline Bryant are also members of the Application Class because they are members of a protected class as described above and also applied for tenancy at the property but were ...


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