Date: 07-18-2023

Case Style:

Alicia Charlie v. Rehoboth McKinley Christian Health Care

Case Number: 1:21-cv-00652

Judge: teven C. Yarbrough

Court: United States District Court for the District of New Mexico (Bernalillo County)

Plaintiff's Attorney: Kristina Martinez, David Leitz, Gary Klinger, Gary Mason

Defendant's Attorney: Elizabeth Perkins, Jon P. Kardassakis, Vanessa Garcia, Gregory L. Biehler

Description: Albuquerque, New Mexico personal injury lawyers represented Plaintiffs who sued Defendant on a negligence theory claiming to have been injured and/or damages as a direct result of the disclosure of personal information caused by a data breach.

Plaintiffs filed this action in state court on June 4, 2021. Class Action Complaint, Doc. 2 (“Compl.”) at 3. Defendant removed it to federal court on July 15, citing the Class Action Fairness Act. Doc. 1 at 3. The case concerns a cybersecurity incident through which an unauthorized actor was able to access patient information and data between January 21 and February 5, 2021. Defendant learned of the breach on February 16 and began notifying affected individuals on May 19. The complaint brings causes of action for (1) negligence; (2) intrusion upon seclusion/invasion of privacy; (3) negligence per se; (4) breach of implied contract; (5) breach of fiduciary duty; (6) unjust enrichment; (7) violation of the New Mexico Unfair Practices Act; and (8) violation of the Arizona Consumer Fraud Act.

Defendant filed a motion to dismiss all counts of the complaint on August 17, 2021. The Court granted the motion in part and denied it in part, dismissing a portion of the complaint but allowing an amendment. Plaintiffs did not file an amended complaint. The parties proceeded to engage in discovery and simultaneous settlement negotiations. After months of negotiations, the parties reached a settlement agreement to provide relief for a defined class in the form of: (1) reimbursement for lost time (up to four (4) hours at $15 per hour) and ordinary out-of-pocket expenses up to $500; (2) reimbursement for extraordinary losses up to $3,500; (3) two years' free credit monitoring services; and (4) equitable relief in the form of security improvements to Defendant's systems. Id. at 14. The settlement agreement also provided for Service Awards to the named Plaintiffs in the amount of $2,500.00 per Plaintiff, and combined attorneys' fees, costs, and expenses in an amount not to exceed $300,000.00, subject to the approval of the Court. Id. at 19-20.

On October 25, 2022, Plaintiffs filed their Unopposed Motion for Preliminary Approval of Class Action Settlement. Doc. 39. The motion argued that the Court should certify the class for settlement purposes under Federal Rule of Civil Procedure 23. Id. at 21-26. The motion argued that the settlement was fair, reasonable, and adequate under Rule 23(e)(2). Id. at 26-34. The Court set a hearing on the motion. Doc. 41. In the notice of hearing, on the topic of attorneys' fees, the Court explained:

The parties' settlement agreement stipulates that Plaintiffs' counsel may seek up to $300,000 in attorney's fees, which Plaintiffs represent constitutes 10% of the total benefit to the class. Doc. 39 at 29. At the hearing, the Court will discuss whether this calculation will need to be modified according to the actual rate of claims made after the claims deadline is closed. Fager v. CenturyLink Commc'ns, LLC, 854 F.3d 1167, 1177 (10th Cir. 2016) (“We see merit in an approach that ties attorney recovery to the amount actually paid to the class.”). The Court will hear from the parties as to whether “the fee arrangement outlined in the settlement should be characterized as a constructive common fund or as a fee-shifting contract” and whether the Court should assess the reasonableness of the fee agreement through the percentage method, lodestar method, or hybrid method in which one method is cross-checked with the other. See In re Home Depot Inc., 931 F.3d 1065, 1071 (11th Cir. 2019). The Court advises the parties that it is inclined to adopt a hybrid approach where it assesses the reasonableness of the attorney fees agreement using a percentage-of-fund approach that uses the amount actually paid to the class rather than a percentage of the theoretical maximum that could be paid to the class. The Court would then cross-check that amount with a lodestar calculation.

The Court will also inquire as to whether the attorney's fees provision of the settlement agreement is a “clear sailing” agreement that requires heightened scrutiny from a district court. Cf. In re Samsung Top-Load Washing Mach. Mktg., Sales Pracs. & Prod. Liab. Litig., 997 F.3d 1077, 1080 (10th Cir. 2021).


After the hearing, the Court preliminarily certified the class and directed class notice to issue. Doc. 45. Class notice reached 191,009 settlement class members, or 93.3% of the class. Doc. 48 at 2. Eleven class members sought to be excluded from the settlement, and none objected. Id. As of May 23, 2023-the day before the final approval hearing-the settlement administrator, Kroll Settlement Administration LLC, filed a declaration explaining:

The claim form deadline was May 9, 2023. As of May 23, 2023, Kroll has received 334 timely paper claim forms received through the mail and 4,891 claim forms filed electronically through the Settlement Website, for a total of 5,225 timely claim forms. Kroll has also received five (5) late claim forms through the mail.

Of the 5,225 timely claim forms received, 1,306 are determined to be valid. The remaining 3,919 claims were deemed invalid for one or more reasons, including but not limited to incomplete claim forms, failing to supply proper documentation, were not in the class list, and/or did not select attestation regarding time spent. The following is a summary of the 1,306 timely claim forms and the types of benefits claimed therein:

Lost-Time Reimbursement: 1,028 claimants filed for lost-time reimbursement, for a total value of $45,765. As of May 23, 2023, Kroll has validated 1,007 of the claims for an aggregate value of $44,730.

Documented Ordinary Out-of-Pocket Expenses: Seventy-six (76) claimants filed for expense reimbursement for a total value to $23,407.92. As of May 23, 2023, Kroll has validated four (4) of the expense reimbursement claims for a total value of $325.81.

Documented Out-of-Pocket Extraordinary Expenses: Twenty-six (26) claimants filed for expense reimbursement for a total of $60,323.08. As of May 23, 2023, Kroll has validated one (1) of the expense reimbursement claims for a total value of $263.49.

Credit Monitoring Services: 741 claimants filed for credit monitoring services, all of which have been determined to be valid by Kroll.


At the final approval hearing, the Court expressed concern that, given the large number of invalidated claims forms, legitimate claims were being invalided for minor deficiencies. Class counsel represented that this was not the issue. In fact, Kroll is reprocessing invalid claims with minor issues (e.g., leaving off an email from the claim form) and providing the class member the opportunity to cure the deficiency. Doc. 51 at 1 (clerk's minutes). Rather than being a result of minor deficiencies, most invalid claims are due to foreign hackers, who do not meet the class definition, filing claims. Id. More specifically, there are 218 claims by legitimate class members with deficiencies in the forms. This compares to 3700 claims that are suspected of being fraudulent; Kroll is still working through the issue. Id. At the hearing, the Court indicated it would grant final settlement approval and consider the issue of attorneys' fees separately. Id. at 2. On May 25, 2023, the Court granted the motion to approve the settlement and entered judgment as to all claims, save the request for attorneys' fees.

Outcome: Motion to approve settlement and award attorney fees approved.

Plaintiff's Experts:

Defendant's Experts:

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