F. Paul Bland, Jr. (pro hac vice motion pending)

Leslie A. Brueckner (same)

Arthur H. Bryant (same)

TRIAL LAWYERS FOR PUBLIC JUSTICE

1717 Massachusetts Ave., N.W.

Washington, D.C. 20036

Telephone: (202) 797-8600

Robert Cartwright, Jr., Esq.

(Calif. Bar No. 104284)

Cartwright & Alexander Law Firm

222 Front Street, Fifth Floor

San Francisco, CA 94111

Telephone: (415) 443-0444

Attorneys for Jane Tucker, et al.,

Objectors

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

BARBARA J.S. KALHAMMER, on behalf )

herself and all others similarly)

situated, )

)

Plaintiffs,)

)

v.) No. C 96-45632010-CAL)

)

FIRST USA BANK, a Delaware banking) OBJECTIONS TO SETTLEMENT

corporation; and RICHARD W. VAGUE,) AGREEMENT BY TUCKER

an individual,) OBJECTORS

Defendant.)

)

)

 ) Hearing Date: Oct. 17, 1997

) Time:9:30 a.m.

) Judge:Hon. Charles A. Legge

)

___________________________________)

COME NOW, Objecting class members Jane E. Tucker, L. J. Davies, and James F. Nobel, III (the "Tucker Objectors"), and file these objections to the proposed class Settlement Agreement and Release (the "Settlement Agreement") between plaintiff Barbara Kalhammmer and defendants First USA Bank ("First USA") and Richard Vague. These Objections shall also serve as the Tucker Objector's notice that they intend to participate in this Court's fairness hearing through their counsel.

INTRODUCTION AND SUMMARY OF ARGUMENT

The Settlement Agreement is a particularly egregious illustration of the kind of class action settlement where the attorneys and the defendants benefit, but the class members receive almost nothing. The Settlement Agreement provides an extremely broad release of liability for First USA, will likely produce a handsome fee for class counsel, and will provide remarkably little relief to class members. The Settlement Agreement is also surrounded with a veil of secrecy which is extraordinary for a class action, ensuring that class members and members of the public are deprived of critical information bearing on the fairness of the deal. This Court should reject the settlement, and unravel the secrecy.

To begin with, the Settlement Agreement provides no relief to a significant segment of the class. Although the class includes both current and former holders of First USA credit cards, the sole form of relief provided by the Settlement Agreement is a "Rebate Certificate" that can only be used by current cardholders. In return, First USA obtains a total release of liability for its misconduct with respect to all class members. This fact alone renders the Settlement Agreement unfair and unapprovable on its face.

As to those class members who are still cardholders, the Settlement Agreement is crafted to minimize any payout by First USA. In essence, the Settlement provides Rebate Certificates to cardholders worth less than $5 to most class members (and less than $2 for others). Instead of simply crediting this value to current cardholders' accounts, the Settlement Agreement requires class members to take the affirmative step of returning the certificates to First USA. Because the certificates will be included in class members' credit cards statements, most class members will probably mistake them for a solicitation and ignore them. Even those class members who do read the certificates, moreover, are highly unlikely to go to the trouble of returning them to First USA to receive a few dollars credit. Thus, even those class members who are theoretically entitled to some relief from this settlement will actually receive nothing. The result, for First USA, is a complete release of liability in exchange for minimal cash payout.

Making matters worse, the Settlement Agreement is designed to minimize opposition to its terms by concealing a host of information that bears directly on its substantive fairness. First, the Settlement Agreement prohibits any public disclosure of its "total value," thereby permitting First USA to conceal the extent of its liability from class members and the general public. Second, the Settlement Agreement prohibits any public disclosure of the total amount of attorneys' fees, thereby permitting class counsel to conceal the discrepancy between his fee and the minuscule relief provided to the class. Third, all the discovery in the case is under seal, thereby limiting access to information regarding the extent of class members' damages and First USA's conduct. Finally, and perhaps most astonishing, the Settlement Agreement seeks to bar both class counsel and all class members -- but not First USA -- from speaking out publicly about any aspect of this case. Not only do these provisions violate the public's right of access to the judicial process, but they appear designed to stifle opposition from the class itself -- a result that runs flatly contrary to the fairness inquiry imposed by Rule 23.

All these problems are exacerbated by the class notice, which also appears designed to dampen the ability of class members to detect the true nature of the deal. First, many class members undoubtedly did not receive any notice at all. The only notice provided was via direct mail to class members' last known addresses. Because the Settlement Agreement does not make any provision for notice by publication, any class members who have moved most likely are unaware of this settlement. Second, the notice itself was presented in such a way as to lead many class members to pay little attention to it, and to take it for a mere solicitation. Third, the notice is sketchy on important points, failing to provide crucial details relating to aggregate attorneys' fees and similar matters. Taken together, the inadequacies in the notice make it even more likely that class members are deprived of important information relating to the Settlement Agreement.

For all these reasons, this settlement cannot be approved as fair, adequate, or reasonable. Not only is the class provided with remarkably little relief, but the settling parties have gone to great lengths to limit opposition to the deal by agreeing to secrecy provisions that are virtually unheard of in the class action context. The Court should reject this attempt to use the class action device in this manner.

STATEMENT OF FACTS

This action arises out of a pattern of credit card fraud committed by First USA. In essence, First USA solicited credit card customers by promising special low introductory interest rates for a set period of time, but then phased in its normal higher rates prior to the expiration of the introductory period. First Amended Complaint at ¶ 1. Accordingly, persons with balances on their accounts during that period were charged higher interest rates than had been agreed to by First USA.

The plaintiff brought this action on December 19, 1995, pleading a nationwide class and bringing causes of action under the federal Truth in Lending Act, the California Business & Professions Code, and for common law breach of contract, negligent misrepresentation, and fraud and deceit. Complaint at ¶¶ 30-61.

The parties briefly litigated the matter. Defendants brought an unsuccessful motion to dismiss, and the plaintiff brought an unsuccessful motion for a preliminary injunction. The parties also apparently conducted some limited discovery. The Settlement Agreement recites at ¶ 5 that:

Plaintiffs propounded a variety of interrogatories and requests for production and as a result of the negotiations between the parties, Defendant answered several interrogatories and produced approximately 2700 pages of documents in August and September, pursuant to the Stipulated Protective Order filed herein on August 26, 1996.

This discovery apparently showed that the average overcharge to class members is $9.12 per person. Plaintiffs' Application for Preliminary Approval at 2.

On May 30, 1997, the parties submitted the Settlement Agreement to the Court, and moved for preliminary approval of the settlement. The plaintiff also sought to amend the Complaint, expanding the allegations and adding a count under Delaware law. See Settlement Agreement at ¶ 2 ("[a]s part of this Agreement, plaintiff will file a First Amended Complaint asserting all possible issues and including all possible class representatives known to Plaintiff and Plaintiffs' Counsel....") The Settlement Agreement's release also provides that the class members waive any claims they may have against First USA based upon facts which they do not even currently have. Settlement Agreement at ¶ 27.

This Court granted the motion for preliminary approval and allowed plaintiff to file the amended complaint.

The Settlement Agreement divides the plaintiffs into two subclasses -- persons who received a disputed cardmember agreement and persons who merely received a disputed solicitation. See Settlement Agreement at ¶ 13. Neither subclass is to receive any cash under the agreement. Id. ¶ 16(a). Instead, persons in the first category would receive a "Rebate Certificate" in the amount of $5.50, less attorneys' fees (not to exceed 30%), some undefined amount of costs, and a proportionate share of the undefined incentive payment to the named plaintiffs. Id. ¶ 16(a). Persons in the second category would receive a certificate in the amount of $2.25, less the same items. Id. In order to redeem the certificates, class members would be obligated to send them back to First USA, which would then apply the rebate against any outstanding charges owed by the class members. Thus, the Settlement's benefits are limited to class members with outstanding balances on their existing First USA accounts -- former cardholders receive no relief at all.

The Settlement Agreement also includes several secrecy provisions that limit disclosure of the total settlement value, attorneys' fees, discovery materials, and any negative publicity about First USA. First, it provides at ¶ 36:

The total value of this Agreement will not be mentioned in any public document except as set forth in this paragraph [see the next sentence] or as required by law. Plaintiffs' Counsel's fee application may contain the total value of the Agreement, but said application must be filed under seal with the Court, subject to review by the Settlement Class Members at their request.

Under this provision, class members are not provided any information about total settlement value or total attorneys' fees in advance of the objection/opt-out deadline. Although they can theoretically obtain this information from making a special request to review the fee petition, that will not be filed until after the deadline for filing objections has passed. The public at large will never have access to this information about the settlement.

The Settlement Agreement also notes that the discovery in the case has been sealed by a stipulated secrecy order. Settlement Agreement at ¶ 5. According to the settling parties, all of the discovery produced by First USA is subject to that order, and may not be publicly disclosed, even though First USA has never made any showing of good cause for secrecy as required by Fed. R. Civ. P. 26(c).

Finally, the Settlement Agreement attempts to prevent any public disclosures about this deal by class counsel and members of the class. Specifically, it provides at ¶ 33 that:

The Settling Plaintiffs, the Settlement Class and Plaintiffs' Counsel shall not provide any press releases or any statements to the press, of any kind or nature whatsoever, whether on the record or otherwise. Defendants may comment to the press regarding this action, whether written or oral, on the record or otherwise.

Under this provision, only First USA is allowed to talk to the press about this case.

A notice was sent out to all class members at their last known address. For class members who are currently First USA credit cardholders, the notice was sent as an insert to a billing statement. The notice was sent on First USA's letterhead, and in the first paragraph (describing the nature of the litigation), the following words are put in boldface: "introductory interest rates. . . ." The Settlement Agreement makes no provision for notice by publication, though the settling parties do not have current addresses for a number of class members. The notice gives no telephone number that class members can call for further information, though it does give the name and address of counsel. Though this is a nationwide class action, the notice suggests that class members who wish to review the settlement agreement may do so "at the Office" of the clerk of this Court in San Francisco.

ARGUMENT

I.THIS COURT SHOULD CLOSELY SCRUTINIZE THE PROPOSED SETTLEMENT.

Unlike settlements in normal individual cases, class action settlements must be approved by the court. Fed. R. Civ. P. 23(e). The Court of Appeals for the Ninth Circuit has stated that "The primary purpose of Rule 23(e) is to protect class members . . . . whose rights may not have been given due regard by the negotiating parties." Ficalora v. Lockheed Calif. Co., 751 F.2d 995, 996 (9^th Cir. 1985) The Court's "responsibility [is] to act as guardian of the absent parties . . . . " Norman v. McKee, 431 F.2d 769, 774 (9^th Cir. 1970), cert. denied, 401 U.S. 912 (1971). "The burden of proving the fairness of the proposed settlement is on the proponents." In re Matzo Food Products Litig., 156 F.R.D. 600, 605 (D.N.J. 1994).

The Ninth Circuit has stressed that class action settlements require careful scrutiny because of the profound differences between them and ordinary settlements:

[T]he settlement of a class action is fundamentally different from the settlement of traditional litigation . . . . [C]lass members, unlike individual litigants in traditional lawsuits, are bound by the settlement even though they do not individually consent to its terms. Instead, consent is given by class representatives, who derive authority to represent members not by obtaining their consent, but by obtaining a court order designating them the representatives.

* * *

[I]n order to protect the rights of absent class members, the court must assume a far more active role than it typically plays in traditional litigation.

Epstein v. MCA, Inc., 50 F.3d 644, 666-67 (9^th Cir. 1995), rev'd on other grounds sub nom. Matsushita Elec. Indus. Co. v Epstein, 116 S. Ct. 873 (1996). Similarly, in Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997), the Supreme Court held that the rights of absent class members must be "the dominant concern" of the court, especially in the settlement context. The Supreme Court held that courts should provide "undiluted, even heightened attention in the settlement context" to certain Rule 23 requirements in order "to protect absentees . . . ." Id.

II.THE PROPOSED SETTLEMENT SHOULD NOT BE APPROVED BECAUSE IT WILL PROVIDE NO COMPENSATION TO THE VAST MAJORITY OF CLASS MEMBERS, WHILE GIVING AN EXTRAORDINARILY BROAD RELEASE TO THE DEFENDANTS.

On its face, the Settlement Agreement is an extremely poor deal for class members. In exchange for a very broad release of liability, the agreement provides no relief whatsoever to class members who are former cardholders, and it creates a mechanism for reimbursing class members who are still cardholders that will result in very few receiving any compensation.

A.THE PROPOSED SETTLEMENT, ON ITS FACE, PROVIDES NO COMPENSATION AT ALL TO AN ENTIRE CATEGORY OF CLASS MEMBERS -- FORMER CARDHOLDERS.

The Settlement Agreement states on its face that "No cash payments of any kind will be owing or made to the Settlement Class Members." Settlement Agreement at ¶ 16(a). Instead, the only relief provided to class members by the Settlement Agreement is a Rebate Certificate that can be used to reduce the class member's existing balance. The Settlement Agreement further acknowledges that these certificates have no other value to class members:

The Settlement Class Members and Defendant recognize, acknowledge, and agree that the coupons represent a mere expectancy and, accordingly, have no intrinsic value whatsoever.

Settlement Agreement at ¶ 16(b).

The Rebate Certificates are thus of no value to persons -- like objector Laura Davies -- who no longer have First USA credit cards. The Tucker Objectors do not know the precise number of persons who fall in this category, but it is very likely to constitute a substantial number of class members. This blatant discrimination against former cardholders renders the whole settlement fatally defective. See Norman, 431 F.2d at 774 (court disapproved settlement where "no consideration existed for part of the settlement.") Cf. Manual for Complex Litigation § 30.42 at 264-65 (3d ed. 1995) (one factor that may be taken into account in determining the settlement's fairness is whether "particularly segments of the class are treated significantly differently from others. . . . ")

    B.THE REBATE CERTIFICATE PROCESS ESTABLISHED BY THE PROPOSED SETTLEMENT VIRTUALLY ASSURES THAT THE OVERWHELMING MAJORITY OF THE REMAINING CLASS MEMBERS WILL RECEIVE NOTHING AT ALL.

If First USA had set out to design a claims distribution process that would discourage class members from participating in the settlement, it could hardly have done better than the process set forth in the Settlement Agreement. It is clear that the settling parties have the names and identifying information for all class members. See Settlement Agreement at ¶ 5 ("plaintiffs requested and Defendant produced the information necessary to identify all cardmembers who, during the Class Period, received a Disputed Cardmember Agreement.") Accordingly, it would be easy for the defendant to automatically credit the accounts of the class members with the amount of the overcharge. Alternatively, the defendant could simply send a check to every single class member.

Unfortunately, the Settlement Agreement does not take either of these two simple steps. Instead, it requires class members to go through the unnecessary process of sending the Rebate Certificates back to the defendant. To further ensure that the Rebate Certificates are of sharply limited value, the Settlement Agreement provides at ¶ 16(b) that they must be used within 60 days, and that they are not transferable.

Studies of claims processes show that very few class members will take the time and effort to go through such a process, and that is particularly likely to be true for sums as small as these. See G. Hillebrand & D. Torrence, Claims Procedures in Large Consumer Class Actions and Equitable Distribution of Benefits, 28 Santa Clara L. Rev. 747, 752 (1988) (noting that between 3 and 20 percent of class members typically file claims). The leading class action treatise examines empirical data reflecting class member response rates in class action settlements where proofs of claim were required. See 3 Newberg, Appendix 8-4, attached as Exhibit 2 hereto. Of the 33 cases listed on the two tables in Newberg, in only two cases did more than half of the class file claim forms. See Karan v. Nabisco, Inc. and Wetzel v. Liberty Mutual Ins. Co., at 8-193. By contrast, in 20 of the 33 cases, less than 20% of the class filed claims.

The class' response is particularly likely to be low in this case, because the Rebate Certificates will be sent to them as inserts in credit card statements. One of the nation's leading experts on class action notices, Todd Hilsee, has identified empirical data showing that very few persons -- as few as 7 out of 1,000, and never more than 5% -- ever respond to items inserted in their credit card statements. Hilsee Affidavit, attached as Exhibit 3 hereto, at ¶ 4.

Accordingly, the process essentially ensures that First USA will end up paying out very little money to class members -- and that the vast majority of class members with current First USA accounts will receive nothing at all from this settlement. The result, for First USA, is a complete release of its liability while paying out only a fraction of the claims against it. Under these circumstances, the rebate certificate process is improper, and renders the settlement unfair.

C.THE RELEASE IS UNCONSCIONABLY BROAD

Finally, the scope of the release is unreasonably broad. First, to ensure that the release is as broad as possible, the parties are settling broader claims than they litigated, without any apparent improvement in the deal for the consumer. Settlement Agreement at ¶ 2. The Complaint was amended, for example, to add a Sixth Count for claims based upon Delaware's Consumer Fraud and Retail Installment Account statutes.

In addition, the Settlement Agreement releases claims that class members might have based upon facts not yet even known or suspected. Settlement Agreement at ¶ 27. It explicitly waives class members' rights under a California statute designed to preserve such claims from being extinguished by general releases, blatantly circumventing and sidestepping the protections built in by California law. There is no indication what sort of claims might be barred by this unusual and over-reaching provision.

III.THE PROPOSED SETTLEMENT'S SECRECY PROVISIONS NOTICE VIOLATE THE CLASS MEMBERS' RIGHTS, AS WELL AS THE PUBLIC'S RIGHT TO KNOW, AND MAKE IT IMPOSSIBLE TO LEARN OF OTHER POSSIBLE DEFECTS IN THE SETTLEMENT.

While the information revealed by the settling parties makes clear -- as we have just shown -- that the settlement gives far too little to class members and far too much to defendants, the most disturbing and unprecedented feature of the proposed settlement is the extent to which it keeps key information secret. Unlike any class action settlement in reported legal history, the proposed settlement in this case places under seal the total amount of the settlement, all discovery taken in the case, and the class counsel's petition for attorneys' fees and costs. And, while the class members, the public, and the national press plainly have an interest in knowing more about this case, the settlement establishes an extraordinary (and unconstitutional) one-way gag order that prevents class counsel and all class members (but not the defendants) from talking to the press about this case. These unprecedented secrecy provisions violate the class members' rights under Rule 26(c), the common law, the Constitution, and the public's right to know. And, in so doing, they make it impossible for the class members -- and the public -- to determine what else may be wrong with this settlement.

A.THE PUBLIC HAS THE RIGHT UNDER RULE 26(c), THE COMMON LAW, AND THE FIRST AMENDMENT TO KNOW -- AND SPEAK FREELY -- ABOUT THE SETTLEMENT.

Under the common law, the public has a right of access to records in civil proceedings. The Ninth Circuit has held that this common law right gives rise to "a strong presumption in favor of access." Hagestad v. Tragesser, 49 F.3d 1430, 1434 (9th Cir. 1995). See also Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1066 (3d Cir. 1984). This right is particularly strong for materials filed in connection with motions or pleadings. Republic of the Philippines v. Westinghouse Electric Corp., 949 F.2d 653, 660-61 (3d Cir. 1991). The First Amendment, independent of the common law, also "embraces a right of access to [civil] trials." Publicker Indus., 733 F.2d at 1070.

Rule 26(c), similarly, requires a particularized factual demonstration of good cause before discovery materials may be sealed. This requirement means that, "[a]s a general proposition, pretrial discovery must take place in the public unless compelling reasons exist for denying the public access to the proceedings." American Telephone and Telegraph Co. v. Grady, 594 F.2d 594, 596 (7th Cir. 1978), cert. denied, 440 U.S. 971 (1979).

The public's right to know, protected by the common law, the First Amendment and Rule 26(c), is particularly strong where, as here, there is an intense public interest in a matter. Here, the public is greatly interested in the propriety of the solicitation practices of the credit card industry. See Wall Street Journal articles attached as Exhibit 4 hereto. In addition, there is an enormous public interest and concern about abusive and collusive class action settlements, with intense scrutiny coming from the public, the media, the Congress, and the members of the Federal Rules Advisory Committee. There can be little doubt that the issues involved in this case and this settlement are of enormous interest to the public.

B.THE SECRECY PROVISIONS OF THIS SETTLEMENT VIOLATE THE CLASS MEMBERS' RIGHTS AND THE PUBLIC'S RIGHT TO KNOW.

1.The Settlement Agreement Improperly Seeks to Keep Secret the Amount of the Settlement, Class Counsel's Petition for Fees and Costs, and all Discovery on the Merits.

The Settlement Agreement provides at ¶ 36 that the total settlement amount is secret. This is an unprecedented and highly unusual provision, and is completely improper in the class action context. The disposition of the rights of many class members (whether numbered in the hundreds of thousands or millions is not yet known) cannot take place in a vacuum of secrecy.

The Settlement Agreement also indicates at ¶ 5 that all discovery remain sealed, so that the public may never have any information as to the truth of the allegations of the complaint. There has been no particularized showing of facts justifying this secrecy, however. The Settlement Agreement further provides that class counsel's fee petition may be filed under seal, without identifying any "compelling reason" justifying this extraordinary secrecy.

As a number of authorities have recognized, class members have a strong interest in knowing the aggregate amount of attorneys' fees requested by class counsel, so that the class can evaluate whether that fee request played a role in the settlement terms reached.

By providing that the overall size of the settlement itself is confidential, the Settlement Agreement makes it impossible for class members to do the math to determine the aggregate amount of the attorneys' fees to be requested (e.g., 30% multiplied by the total amount of the settlement).

It is true that these figures should appear in the fee petition at some point, so that class members -- but not the general public -- may review them. But counsel for plaintiffs have informed undersigned counsel that they do not even intend to file a fee petition until after the deadline for class member objections. Taken together, these actions insure that there is no means for class members to determine on a timely basis what the aggregate fees will be, or to determine what the costs or incentive payments will be.

This unusual course of secrecy prevents class members from fairly evaluating the settlement agreement, and thus renders the settlement agreement unfair, for two reasons. First, since the amount that the class members will actually receive depends upon various deductions (of fees, costs and the plaintiffs' incentive awards), the notice's failure to specify the amount of costs or the incentive award prevents class members from determining what they will individually receive if they agree to the settlement. Second, the settling parties' refusal to provide this information in a timely manner hamstrings objectors in their evaluation of the proposed settlement. The absolute magnitude of the attorneys' fees for class counsel is a factor in evaluating the fairness of a settlement. It may well prove to be the case that the amount of attorneys' fees requested will exceed the actual recovery to be received by the class, for example. Suppose that the claimed aggregate amount of the settlement is $8 million, as reported in the Wall Street Journal, see Exhibit 4 hereto. Further suppose that class counsel will request a fee of $2.4 million (30% of $8 million). Further suppose that there are two million class members. Further assume that the percentage of class members likely to (a) read the Rebate Certificate lumped into the credit card statement; and (b) jump through the hoops of the Rebate Certificate process, is 5% (an unrealistic and extremely generous assumption in this case), or 400,000 class members. Even assuming that all 400,000 of these persons are in the Contract subclass (meaning that they would receive about $4.00, or $5.50 less 30%, rounding up generously), then the net amount that class members would receive would be about $1.6 million -- far less than the hypothesized attorneys' fees.

Under those circumstances, class members would have been far more likely to object if they had been provided with more data about counsel's fee request. As the court stated in Bronco II:

Further, although class members were notified that class counsel would be submitting a request for fees, they were not notified of the exact amount requested. . . . Although class counsel and Ford stress the fact that only 109 out of approximately 690,000 class members notified of the settlement submitted objections, perhaps more class members would have spoken out had they known of the arrangement between Ford and class counsel regarding attorneys' fees.

1995 U.S. Dist LEXIS at *28-29.

It is improper for settling parties to deny class members information about aggregate attorneys' fees, because this information is likely to be of great interest to many class members. As the court stated in In re General Motors Corp. Engine Interchange Litig., 594 F.2d 1106, 1130 (7th Cir.), cert. denied, 444 U.S. 870 (1979) (emphasis added):

[T]he record does not provide any reliable estimate of the aggregate amount of attorneys' fees and expenses that GM will eventually pay. We think the proposed settlement's estimate of attorneys' fees and expenses is so vague that subclass members could not determine the possible influence of attorneys' fees on the settlement in considering whether to object to it.

The Ninth Circuit has also recognized the class members might be well advised to pay careful attention to the magnitude of attorneys' fees, in light of the risks that class counsel may compromise the class' interests to obtain a fee. See Ficalora v. Lockheed Calif. Co., 751 F.2d 995, 996 (9^th Cir. 1985) ("The attorney also can be forced into a situation in which his or her own fee can be enlarged or reduced by concessions made by the class or by members of the class in order to achieve settlement.")

2.The One-Way Gag Order is Completely Improper.

The Settlement Agreement imposes at ¶ 44 an astonishing, one-way gag order on plaintiffs' counsel and settlement class members that appears designed to prohibit any adverse publicity about First USA. This gag order will further reduce the number of class members who will participate in the settlement. Mr. Hilsee's expert affidavit notes that this gag order is "highly unusual," and serves to limit the information available to class members. Exhibit 3, at ¶ 13. With every party aware of the settlement (except for defendants) barred from speaking about the matter, those class members who do not receive a notice cannot learn about the case, and those class members who do receive the sketchy notice will not have it explained or reinforced. If the defendant made an incorrect statement to the media, neither class counsel nor any class member could provide truthful information to correct the statement. By attempting to invoke this Court's authority in support of a gag order on many thousand persons, the settling parties have sharply infringed upon the First Amendment rights of the class members. See New York Times Co. v. United States, 403 U.S. 713, 714 (1971) (heavy presumption against the constitutional validity of "[a]ny system of prior restraints of expression.")

The effect of this provision is much like the effect of the Settlement Agreement generally: it pleases the defendant, but it harms the class members. Silence about this settlement will benefit First USA (by preventing fewer class members from claiming their recovery); will not affect class counsel (who apparently expect to get paid the same amount without regard to the number of class members who participate); and will harm the class members.

IV.THE INADEQUATE NOTICE VIOLATES THE CLASS MEMBERS' RIGHTS TO RECEIVE INFORMATION ABOUT THE SETTLEMENTS TERMS BEFORE DECIDING WHETHER TO OPT OUT OR OBJECT.

A.THE CLASS MEMBERS HAVE THE RIGHT UNDER RULE 23 AND THE DUE PROCESS CLAUSE TO RECEIVE ADEQUATE NOTICE OF THE SETTLEMENT'S TERMS BEFORE DECIDING WHETHER TO OPT OUT OR OBJECT.

Notice and opportunity to be heard are essential elements of due process in class action proceedings. Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 313 (1950). Under Mullane, the notice to class members must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Id. at 314. These due process interests of class members were not adequately protected by the notice provided here, which was inadequate in several important respects.

B.THE NOTICE IS LIKELY TO HAVE DEFLECTED, NOT RAISED, MOST CLASS MEMBERS' ATTENTION.

The Notice was included in class members' card statements, ensuring that most class members would never read it. See Hilsee Affidavit at ¶ 5, 6. It was presented in such a way as to look like a solicitation from the bank rather than a notice about litigation. Id. at 7. It gives no phone number to call, and appears to suggest that class members must travel to San Francisco to review the Settlement Agreement. Taken together, as Mr. Hilsee opines, the "notice plan as currently outlined is not sufficient to adequately notify class members. . . ." Id. at 15.

C.MANY CLASS MEMBERS WILL RECEIVE NO NOTICE UNDER THE SETTLEMENT.

Class members for whom the settling parties do not have a current address received virtually no notice at all. The Settlement Agreement recites that defendant has records of the name and addresses of class members and apparently mailed individual notices to those addresses. Settlement Agreement at

¶ 16(f). For some percentage of those class members, however, those addresses are not correct.

The only constitutionally adequate means for providing notice to these class members is by publication. A number of authorities have made clear that, for those individuals who cannot be notified by first-class mail, an extensive publication notice campaign is required. In In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 311 (N.D. Ga. 1992), notice was sent individually to 10 million persons on a list of possible class members and others known to the plaintiffs' counsel, and the notice was published twice in 67 newspapers in 65 cities across the United States. See also 7B Charles A. Wright, Arthur Miller, and Mary K. Kane, Federal Practice and Procedure § 1786 at 206-07 (discussing requirement of publication campaign to reach class members who could not be reached individually).

Unfortunately, the Settlement Agreement does not provide for any publication. Settlement Agreement at ¶16(f). As Mr. Hilsee notes in his expert affidavit, this failure is unusual and questionable. Exhibit 4 hereto, at ¶ 11. This ensures that class members who no longer live at the addresses listed in defendant's computer will receive no notice whatsoever. By undertaking an approach guaranteed not to provide notice to an entire category of class members, the Settlement Agreement is per se unreasonable. See Officers for Justice v. Civil Service Comm'n, 688 F.2d 615, 624 (9^th Cir. 1982) ("the class must be notified of a proposed settlement in a manner that does not systemically leave any group without notice . . . ."), cert. denied, 459 U.S. 1217 (1983).

The Settlement Agreement sloughs off this problem by flatly asserting, at ¶ 16(f), that "The parties agree that this method of providing notice is sufficient and satisfies the requirements of due process." The Settlement Agreement also could have proclaimed that the Sun rises in the West, however, and that would not have made it so.

D.THE CLASS MEMBERS HAVE NOT BEEN PROVIDED WITH ADEQUATE NOTICE ABOUT THE FORM OF THE REBATE CERTIFICATE.

The settling parties have also effectively prevented class members from evaluating the form of the Rebate Certificates. This is essential, as such matters as the form of the certificate and the nature of the information required to fill out the certificates will play an enormous role in determining how many class members participate in the settlement.

The Notice provides no information whatsoever to class members about the form of the Rebate Certificate. What is more, there is no other way for class members to learn about these certificates in a timely manner. Class counsel have stated that the setting parties have not agreed upon a form for the Rebate Certificate and that they will not do so until after the deadline for class members to object. This timing, conveniently for the settling parties, prevents class members from learning about this important matter until it is too late to do anything.

V.THE CLASS REPRESENTATIVES AND THEIR COUNSEL DID NOT ADEQUATELY REPRESENT THE INTERESTS OF PERSONS WHO DO NOT STILL HAVE FIRST USA CARDS.

A.UNDER THE FEDERAL RULES AND THE CONSTITUTION, THE SETTLEMENT AGREEMENT CANNOT BE APPROVED UNLESS THE CLASS REPRESENTATIVES AND CLASS COUNSEL ADEQUATELY REPRESENTED ALL CATEGORIES OF CLASS MEMBERS.

One of the essential requirements of due process in class actions is the requirement that the representative parties -- and their counsel -- must fairly and adequately represent the interests of the class. This requirement was recently reaffirmed by the Court in Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997). Rule 23(a)(4) provides that a class action may be maintained only if "the representative parties will fully and adequately protect the interests of the class."

B.BY CRAFTING AND AGREEING TO A SETTLEMENT AGREEMENT AND SCHEME OF NOTICE THAT COMPLETELY IGNORE THE INTERESTS OF AN ENTIRE CATEGORY OF CLASS MEMBERS, CLASS COUNSEL HAVE FAILED TO ADEQUATELY REPRESENT THOSE PERSONS WHO DO NOT STILL HAVE FIRST USA CARDS.

The Settlement Agreement class in this case creates a clear conflict between two groups of class members: persons who still have a First USA credit card, and persons who do not. The Settlement Agreement makes at least some sort of relief (the Rebate Certificates) available to the first group and no relief whatsoever available to the second group. While at least some notice was mailed to the address of the members of the first group, the notice program provided in the Settlement Agreement, coupled with the Settlement Agreement's various secrecy and gag order provisions, ensures that many members of the second group will never learn of the settlement.

This is precisely the sort of intra-class conflict that rendered the settlement defective in the Amchem case. In Amchem, the same set of counsel attempted to represent two distinct groups of persons, persons who had already been exposed to and harmed by asbestos, and persons who might be exposed to or harmed by asbestos in the future. The Supreme Court rejected the class action settlement, holding that the class could not be certified because, due to the conflict between these two groups, the adequacy of representation requirement was not met.

In short, the class representatives and class counsel made concessions that guaranteed that former cardholders would release their claims, receive nothing, and probably not learn either of these facts. It seems likely that class counsel was motivated to make these concessions to achieve a settlement that protected their own interests, rather than those of all of the class members. Cf. In re Bronco II (one of the dangers inherent in class action settlements is that class counsel "may try to 'sell out' the class in exchange for substantial attorneys' fees").

VI.CONCLUSION

On its face, this settlement provides no compensation to an entire category of class members. In fact, the settlement will provide no recovery to 95% or more of the class members. Not by coincidence, this settlement is also enshrouded in greater secrecy than any other class action settlement that Trial Lawyers for Public Justice or its experts have ever seen. This court should reject the secrecy and reject the settlement as well.

Respectfully submitted,

__________________

Robert Cartwright, Jr.F. Paul Bland, Jr.

(Calif. Bar No. 14284)Leslie A. Brueckner

Cartwright & AlexanderArthur H. Bryant

Law FirmTRIAL LAWYERS FOR PUBLIC JUSTICE, P.C.

222 Front Street,1717 Massachusetts Ave., N.W.

5th Floor Suite 800

San Francisco, CA 94111Washington, DC 20036

Counsel for the Tucker Objectors

Dated: September 22, 1997

CERTIFICATE OF SERVICE

I, , hereby certify that, on this 22nd day of September, 1997, a true and correct copy of the foregoing was served by first class mail on counsel for the settling parties as follows:

Robert S. Green, Esq.

Girard & Green, LLP

160 Sansome Street, Suite 300

San Francisco, CA 94104

(Class counsel)

Douglas L. Hendricks, Esq.

Morrison & Foerster, LLP

425 Market Street

San Francisco, CA 994105

(Counsel to First USA Bank)

I declare under the penalty of perjury that the foregoing is true and correct. Executed on September 22, 1997.