Case: Ayala v. Valley First Credit Union

This is a case about a financial institution denying applicants’ membership and financial services based on their alienage and immigration status.

On June 1, 2022, a woman who had been denied membership and financial services at a bank filed a class action complaint in U.S. District Court for the Eastern District for California. The lawsuit was filed against Valley First Credit Union which is a member-owned credit union serving California’s Central Valley. The plaintiff sought class certification, declaratory and injunctive relief, statutory and compensatory damages, and attorney’s fees under the Civil Rights Act of 1866, 42 U.S.C. § 1981 and California’s Unruh Civil Rights Act, California Civil Code § 51. The plaintiff asked the court to declare the defendant’s policies and practices unlawful and violations of § 1981 and § 51 of the respective statutes, and preliminary and permanent injunctions against it engaging in such practices. The plaintiff was represented by the Mexican American Legal Defense and Education Fund. The case was assigned to Magistrate Judge Helena Barch-Kuchta. 

The allegations arose after the plaintiff, who is a recipient of Deferred Action for Childhood Arrivals (DACA), sought a personal loan from the defendant. The plaintiff worked as a virtual teller for the defendant’s corporate headquarters. She applied for the loan on the defendant’s website and was subsequently approved. The defendant allegedly instructed the plaintiff that in order to receive the loan she needed to join the credit union, open a savings account, pay a membership fee, and upload a copy of her social security card. When the plaintiff attempted to comply with the instructions, she was unable to become a member and was informed by the defendant that it was unable to establish membership with a “work-only” social security number; thus, it would be unable to provide her the loan. Shortly after, the plaintiff received a notice from the defendant of the “adverse action taken” and listed the principal reason for her denial as being ineligible for membership at the credit union. The plaintiff sought to represent a class composed of all persons who attempted to apply for membership or a financial product from the defendant and was denied due to their alienage or immigration status.

On September 26, 2023, the plaintiff filed an unopposed motion for preliminary approval of class action settlement. After reviewing the proposed settlement the court denied approval without prejudice for several reasons. First, the proposed agreement described negotiations as “arms-length” as required by precedent, but the court found that there is no explanation on how the negotiations were conducted in that manner. Second, the “clear sailing” provision here, which provides the monetary limit of attorney’s fees payable from outside the settlement fund that the defendant would not contest, does not adequately describe the amount or type of discovery that was conducted. Third, the proposal failed to identify the cy pres recipients. A cy pres recipient is the beneficiary of any unused settlement funds and is typically a charitable organization. Fourth, the notice provided to affected claimants did not sufficiently inform class members of what claims they were releasing. Fifth, there was insufficient information to justify the incentive award for the class representative. Finally, the court concluded that the notice form provided to class members did not contain sufficient information concerning attorney’s fees, costs, incentive award, or other related information.

On November 8, 2023, after the parties cured the defects noted in the court’s previous denial, the court granted preliminary approval of their settlement. 

On March 11, 2024, the court granted final approval for the settlement and dismissed the case with prejudice. The settlement agreement included the following provisions:

• Recognition of 48 individuals who live in California and had applied for membership at the defendant credit union but were denied membership based on their lack of U.S. citizenship
• Release of their claims related to this denial
• Creation of a settlement fund amounting to $120,000
• Each individual receives $2,500
• Attorney’s fees paid separate from the settlement fund in the amount of $30,000
• Settlement administrator fees of $10,000
• Incentive payment of $5,000 for the class representative
• Defendant agreed to cease the practices challenged

This case is now closed.