Case 3:20-cv-00717-MHL Document 49 Filed 02/26/21 Page 1 of 29 PageID# 4791 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA Richmond Division DARLENE GIBBS, on behalf of themselves and all others similarly situated, Plaintiffs, v. Case No: 3:20-cv-00717-MHL KENNETH REES, Defendants. INDIA BANKS, et. al., on behalf of themselves and all others similarly situated, Plaintiffs, v. Case No: 3:20-cv-00716-MHL KENNETH REES, Defendant. KIMETRA BRICE, et al., on behalf of themselves and all others similarly situated, Plaintiffs, v. Case No: 3:20-cv-00732-MHL KENNETH REES, Defendants. Case 3:20-cv-00717-MHL Document 49 Filed 02/26/21 Page 2 of 29 PageID# 4792 MEMORANDUM IN SUPPORT OF PLAINTIFFS’ MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT This Settlement, which resolves the claims in three different lawsuits against Kenneth Rees for his role in the Think Finance lending enterprise, creates a settlement fund of approximately $7,000,000 to provide automatic cash payments to class members. The fund consists of a cash payment of $3,302,000, plus 924,495 NYSE-traded stock shares of Elevate Credit, Inc. (“Elevate”), which are conservatively valued at $4.00 per share1, for a total of no less than $3,697,980 for the Settlement’s stock component. The Court preliminarily approved the Settlement on December 9, 2020. The class notice process has been completed, with a 99.5% delivery rate to the 1,037,091 Class Members. See Declaration of RSM at ¶ 11 (Exhibit “1”). The response has been overwhelmingly positive, with one objection2 and only ten exclusion requests3. Ex. 1, RSM Decl. at ¶¶ 17-16. Therefore, pursuant to Fed. R. Civ. P. 23, the Parties request that the Court confirm its certification of the proposed Class, approve the proposed Class Settlement, award attorneys’ fees, costs, and the Class Representative Service Awards, and dismiss the claims with prejudice. 1 On February 25, 2021, the Elevate stock price closed at $4.11 per share. At the time of updating this filing, the stock price was $4.08 per share. However, Class Counsel does not want to overstate the value of the settlement to the Court, so is providing what Class Counsel considers a conservative estimate of the stock price for the Court’s consideration. 2 The lone objection to the Settlement is January 14, 2021 letter, sent by Darrell Washington, Jr., states that he “is objecting to the decision of the non-monetary funding out of the lawsuit[.]”. (ECF 41). 3 As referenced in the RSM Declaration, there were two additional exclusions requests from individuals who did not appear to be Class Members. These exclusion requests were also defective because neither individual checked the box to exclude themselves from the settlement. RSM and Class Counsel tried to reach contact both individuals about their request, but were unable to reach them. 2 Case 3:20-cv-00717-MHL Document 49 Filed 02/26/21 Page 3 of 29 PageID# 4793 BACKGROUND OF THE CLAIMS TO BE SETTLED & PLAINTIFFS’ INVESTIGATION These three consolidated cases are part of a series of putative class actions filed across the country alleging violations of various state and federal laws stemming from usurious loans made by Think Finance in the name of Great Plains Lending, LLC (“Great Plains”), Plain Green, LLC (“Plain Green”), and MobiLoans, LLC (“MobiLoans”). Rees, the settling Defendant, was, for a time, the Chief Executive Officer, Chairman of the Board, and a shareholder of Think Finance. These three cases have been litigated on multiple fronts, including in the District Courts of Virginia, Florida, and California prior to their transfer to the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) after Think Finance filed for bankruptcy in October 2017. As the Court is aware, many of the other lending enterprise participants, including Think Finance, Great Plains, Plain Green, MobiLoans, Victory Park, and others, have already settled, and there is another pending settlement negotiated by the same Class Counsel. Gibbs v. Plain Green, LLC, Case No. 3:17-cv-495 (E.D. Va.), Dec. 13, 2019 Order at Dkt. 141 (granting final approval of the class settlement); Gibbs v. TCV V, L.P., 3:17-cv-495 (E.D. Va.) Litigation is ongoing against other enterprise participants against some of the enterprise’s investors and shareholders. Gibbs v. Stinson, Case No. 3:18-cv-00676-MHL (E.D. Va.); Gibbs v. Elevate Credit, Inc., 3:20-cv-632 (E.D. Va.). Prior to the transfer to the Bankruptcy Court, Plaintiffs engaged in substantial motion practice with Rees, including opposing motions to dismiss and transfer and filing a motion for class certification. See, e.g., Dkt Nos. 22-28, 32, 62-65, 98-99. Plaintiffs also received discovery responses from Ken Rees and engaged in tHe meet-and-confer process. Once the cases were transferred to the Bankruptcy Court, there was little progress against Rees as the parties were focused on the litigation of a bellwether case with the Think Finance Debtors. This settlement was 3 Case 3:20-cv-00717-MHL Document 49 Filed 02/26/21 Page 4 of 29 PageID# 4794 ultimately acHieved with the assistance of the sitting Chief United States Bankruptcy Judge for the Southern District of Texas, the Hon. David R. Jones, after an all-day mediation. Class Counsel, the Attorney General for the Commonwealth of Pennsylvania, other lawyers with cases involving Rees, the Think Finance Litigation Trustee and his counsel, Gary Leibowitz, and lawyer Matt Bryne (representing several individual class members), all attended the mediation. Rees denied liability. But the largest obstacle to settlement was Rees’s ability to pay. Plaintiffs negotiated the production of Rees’s attested financial statements and identified his assets (cash, real property and shares of stock), and remaining insurance. The negotiation question became how much of those assets would be paid in settlement and to whom.4 Through persistent advocacy, Class Counsel was able to obtain most of them. The Parties reached a settlement in principle on February 18, 2020. The Settlement was papered and preliminarily approved on December 9, 2020. Given the sharply contested issues in this case, the risks, the cost of further litigation, and the substantial benefits that the Class Members will receive under the agreement, the Settlement is fair, reasonable, and adequate. CLASS ACTION SETTLEMENT A. Settlement Class. The Parties agreed to resolve the claims of the following Class: All persons within the United States to whom Great Plaints has lent money; all persons within the United States to whom Plain Green had lent money prior to June 1, 2016; and all persons within the United States who received a cash advance from 4 The Commonwealth of Pennsylvania had litigated against Rees more than any other constituency, had survived Summary judgment, and—but for the pandemic—would have already tried its case. Commonwealth of Pennsylvania v. Think Finance, Inc., No. 14-7139-JCJ (E.D. Pa.) (“the Pennsylvania Litigation”). While the present Class included Pennsylvania, Class Counsel’s negotiation strategy had to recognize that not all of the Class was there. Pennsylvania had incurred significant attorney’s fees and costs that had to be addressed independent of any class settlement. Accordingly, Class Counsel negotiated to allow the remaining balance of insurance coverage, itself still disputed, and several million dollars, to be reserved for the reimbursement of the expenses incurred in the Pennsylvania Litigation. 4 Case 3:20-cv-00717-MHL Document 49 Filed 02/26/21 Page 5 of 29 PageID# 4795 MobiLoans prior to May 6, 2017. The Settlement Class contains 1,037,091 individual consumers. This definition deliberately tracked the Class in the previous and collateral settlements. B. The Consideration Provided To The Settlement Class Under The Settlement Agreement. The proposed Settlement provides significant and meaningful relief to consumers nationwide. Defendant Rees will pay $3,302,000.00 for distribution to the Class Members. In addition, the Rees Defendants will also transfer all of their 924,495 NYSE-traded stock shares of Elevate. The shares will be held and liquidated for the benefit of the consumer Class by the Think Finance Litigation Trust (“TFLT”), created in settlement of the In Re: Think Finance bankruptcy litigation. As outlined in the Settlement Agreement, the payments will be allocated to the class members using the same tiered formula applied in distributing funds pursuant to the Initial Settlements, as follows: • Tier 1: All payments made by consumers in Arizona, Arkansas, Colorado, Connecticut, Idaho, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Ohio, South Dakota, Vermont, Virginia, and Wisconsin so long as he or she repaid the principal amount of his or her loan. • Tier 2: Payments made above the legal limits for consumers in Alabama, Alaska, California, Delaware, Florida, Georgia, Hawaii, Iowa, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Nebraska, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Washington, West Virginia, Washington D.C., and Wyoming. • Tier 3: No payment if the consumer lived in Utah or Nevada when the loan was taken out.5 5 The Settlement uses tiers to address differences between certain state’s laws. For example, Virginia law allows recovery of any amount paid by a consumer on a usurious loan, including principal. See Va. Code. § 6.2-1541(A). By contrast, other states, such as California, merely allow recovery of the usurious interest paid above the cap. See Cal. Civ. Code § 1916-3. 5 Case 3:20-cv-00717-MHL Document 49 Filed 02/26/21 Page 6 of 29 PageID# 4796 Rees has also agreed to provide reasonable cooperation with pending actions in Virginia, California, and the bankruptcy court, including the cases prosecuted by the TFLT, as outlined in the Settlement Agreement.