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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
________________________________________________
GAIL L. ROBINSON
and ALL OTHERS SIMILARLY SITUATED,
Case No. 95-C-5635
Plaintiff,
vs.
MARINE MIDLAND MORTGAGE
CORPORATION,
Defendant.
OBJECTIONS OF CLASS MEMBER MARGARET QUINN
TO SETTLEMENT AGREEMENT AND FEE PETITION
Joseph A. Power, Jr.,
Power, Rogers & Smith, P.C.
35 West Wacker Drive
Suite 3700
Chicago, IL 60601
F. Paul Bland, Jr.
Adele Kimmel
Arthur H. Bryant
Trial Lawyers for Public Justice, P.C.
1717 Massachusetts Ave., N.W.
Suite 800
Washington, D.C. 20036
Counsel for Margaret Quinn
Fed. Ct. No. 02244276
Date: May 20, 1998
Class member Margaret Quinn, by and through her counsel Trial Lawyers
for Public Justice ("TLPJ"), hereby objects to the proposed settlement
of this action and Class Counsel's fee petition in this action. These objections
shall also serve as Margaret Quinn's notice that she intends to participate
in this Court's fairness hearing through counsel.
FACTS
This class action was filed in 1995 on behalf of a nationwide class of
current and former mortgagors of Marine Midland Mortgage Corp. ("Marine
Midland"). In the course of servicing its customers' residential mortgages,
Marine Midland required homeowners to maintain excess "cushions"
in their escrow accounts. Complaint ¶ 1. This practice allegedly deprived
homeowners of substantial sums of money, in violation of the Real Estate
Settlement Procedures Act, various state laws, and the class members' contracts
with Marine Midland. Id. ¶¶ 1-3.
In March 1998, the parties filed the proposed Settlement Agreement ("Agreement"),
which gives different sets of relief to the current and former mortgagor
class members. The Agreement permits former mortgagor class members who
learn of the settlement to apply for a rebate of some undetermined figure
that will be less than $10. Agreement ¶ 9. Marine Midland need not
pay out more than $1 million in such rebates, but no minimum payment is
specified. Id.
The Agreement would give each current mortgagor class member a "discount
certificate" worth either $175 or $250 (depending on the date of the
class member's mortgage form) off the closing costs of any new or refinanced
mortgage with Marine Midland. Id. ¶¶ 11-12. The certificates are
only redeemable on Marine Midland loans; expire after five years; are nontransferable;
and may not be redeemed for cash. Id. ¶ 11. Any class member whose
loan was in foreclosure or bankruptcy is ineligible for the relief. Id.
¶ 12. Class members who do not qualify for a loan cannot use the certificates.
Settlement Notice ¶ b.4. In exchange for this relief, class members
would release every conceivable claim they might have against Marine Midland
(and its affiliates and successors) relating to Marine Midland's escrow
practices and, in addition, "all claims and causes of action that have
been or that could have been brought in this Litigation." Agreement
¶ 28. Class Counsel would receive up to $665,000 in attorneys' fees
and expenses. Id. ¶ 14.
Notice of the proposed settlement was given to current mortgagors via
direct mail and to former mortgagors via a one-time notice published in
the New York Times or U.S.A. Today. Agreement ¶ 17.
The Agreement also contains a "one-way gag order" that forbids
Class Counsel and counsel for any objecting class members – but not
Marine Midland – from saying anything to anyone except their clients
about the case. See Agreement ¶ 31. This provision forbids attorneys
for any class members from "refer[ring] to, reveal[ing], or characteriz[ing]
the Settlement Agreement or any of its terms . . . " Id.
Class Counsel have entered into at least eight other settlements with
mortgage banks that contain relief similar to the coupons provided to the
current mortgagors in this case, and have entered into a number of other
settlements with mortgage banks that establish claims processes similar
to the one established for former mortgagors in this case. One of the earlier
coupon settlements was reached well over two and one half years ago. See
Settlement Agreeement, Bay v. Citicorp. Mortgage, Nos. 90 C 5357, 91 C 7020,
and 93 C 3137 (N.D. Ill.) (providing a claims process for former mortgagors,
and seven-year, nontransferable coupons worth $125 and $50 off closing costs
of new or refinanced mortgages to current mortgagors) (Exhibit 1).
ARGUMENT
I. THE "ONE-WAY GAG ORDER" IS AN UNCONSTITUTIONAL PRIOR RESTRAINT
ON SPEECH.
Generally speaking, any order that prohibits the utterance or publication
of particular information or commentary imposes a "prior restraint"
on speech. See United States v. Salameh, 992 F.2d 445, 447 (2d Cir. 1993).
A prior restraint on constitutionally protected expression carries a heavy
presumption against its constitutional validity. See, e.g., New York Times
Co. v. United States, 403 U.S. 713, 714 (1971). Although the speech of a
litigant participating in judicial proceedings may be subjected to greater
limitations than could constitutionally be imposed on the press, the limitations
on litigant/attorney speech may be "no broader than necessary to protect
the integrity of the judicial system . . .." Salameh, 992 F.2d at 447.
Thus, gag orders on litigants in pending cases violate the First Amendment
unless they are narrowly tailored to prohibit only statements posing a "substantial
likelihood of material prejudice" to an ongoing adjudicative proceeding.
Gentile v. State Bar of Nevada, 501 U.S. 1030, 1074-75 (1991). See also
Chicago Council of Lawyers v. Bauer, 522 F.2d 242, 249 (1975) (district
court's rules that barred lawyers from making public comments about ongoing
civil and criminal cases deprived litigants of their free speech rights
under the First Amendment). Finally, this Court has also previously noted
that such a gag order is improper. See Hearing Transcript, Cusack v. Bank
United of Texas, No. 95 C 544, at 14 (N.D. Ill. March 4, 1998) (excerpts
of which are attached as Exhibit 2 hereto) ("I'm glad that the parties
agreed to get rid of the one-way gag order, because once objected to, I
would not approve it").
II. THE SETTLING PARTIES HAVE FAILED TO MEET THEIR BURDEN OF
ESTABLISHING THAT THE SETTLEMENT IS FAIR.
Class Counsel have made the following claims: (1) the coupons provided
to current mortgagors "will likely amount in the several millions of
dollars by the time the credits expire in year 2003," Memo in Support
of Preliminary Approval at 3-4; (2) "[t]he settlement also creates
a $1,000,000 cash fund for former mortgagors," id. at 16; and (3) "[d]uring
this litigation, plaintiff achieved the refund of overages" for the
class, id. at 14. Class Counsel have cited to no evidence for any of these
propositions. Marine Midland has not yet claimed, and also has produced
no evidence whatsoever to suggest, that this settlement produces any benefits
for the class. In fact, as these objections will establish, each of Class
Counsel's claims is extremely unlikely at best. Unless the Settling Parties
present actual evidence to support their claims, or rework this settlement
to guarantee that class members will receive meaningful benefits, this settlement
should be rejected.
The Settling Parties have the burden of establishing that this settlement
is fair. See Newberg & Conte, 1 Newberg on Class Actions § 11.42,
at 11-94 (3d ed. 1993) (citing, inter alia, In re General Motors Corp. Engine
Interchange Litig., 594 F.2d 1106 (7th Cir. 1979)). Class Counsel have cited
several older cases for the proposition that reviewing courts need not worry
much about the fairness of class action settlements. In fact, the most recent
pronouncement by the Supreme Court mandates that this Court closely scrutinize
the fairness of this settlement. 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.
In fact, the Settling Parties had set out to design a claims distribution
process that would discourage class members from participating in the settlement,
they 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. Accordingly, Marine Midland could simply
issue an automatic refund to all present mortgagors and send a check to
all former mortgagors. Instead, the Agreement provides coupons to current
mortgagors and virtually ensures that the vast majority of former mortgagors
will receive nothing.
A. THE SETTLING PARTIES HAVE NOT MET THEIR BURDEN OF DEMONSTRATING THAT
THE CLAIMS PROCESS IS FAIR TO CLASS MEMBERS WHO ARE FORMER MORTGAGORS.
Attached, as Exhibit 3 hereto, is an affidavit from Todd Hilsee, a nationally
recognized expert on class action notices and an expert on financial institution
marketing. Mr. Hilsee concludes that less than 1% of the former mortgagors
will recover any money under the claims process. Ex. 3 at ¶ 6. In particular,
Mr. Hilsee testifies that it is likely that less than 5% of all former mortgagors
nationwide even saw the publications that contained the notice to them,
id. at ¶ 8 (although a higher portion of New York residents may have
seen these publications). Of course, many former mortgagors who did see
these publications would never notice, much less read, the small box containing
the notice's fine print. Id. at ¶ 9(a). Even if a former mortgagor
actually read the notice, moreover, a review of relevant marketing and class
action data reveals that not more than 5%, and possibly less than 1%, of
these persons would make claims under this process. Id. at ¶¶
9-10 .
Accordingly, the process essentially ensures that Marine Midland will
end up paying next to no money to former mortgagor class members. The result,
for Marine Midland, is a complete release of its liability for paying only
a fraction of the claims against it. This Court should find that an Agreement
that effectively divides the class into two subclasses, and then creates
a process that will predictably ensure that at least 99% of the members
of the largest subclass receive no recovery at all, is unfair. This Court
should reject the settlement unless it is revised to require Marine Midland
to automatically send a check to former mortgagors owed money under the
applicable formula.
Alternatively, the settlement should be rejected unless the Settling
Parties either (1) demonstrate that a significant number of former mortgagors
will use the claims process, by producing all data from previous similar
settlements and/or other evidence establishing that fact; or (2) guarantee
some minimum payment to former mortgagors (with any amount not paid out
being spent for the indirect benefit of the class via cy pres principles)..
With respect to the first point, Class Counsel have a very good idea
of how many people will make claims because they have represented plaintiffs
in a number of similar deals. Accordingly, they should be required to disclose
the claims rates in the various other settlements. The Citicorp settlement
has been in place for more than two and one half years. The claims rates
in that and Class Counsel's other claims process cases are crucial evidence
for evaluating the value of the relief for former mortgagors provided in
the Agreement.
With respect to a minimum payment, authorities calling for such guarantees
in the closely analogous coupon context are set forth in Part II-B-1 below.
B. THE SETTLING PARTIES HAVE NOT MET THEIR BURDEN OF DEMONSTRATING THAT
THE COUPONS ARE FAIR TO CLASS MEMBERS WHO ARE CURRENT MORTGAGORS.
1. The Settling Parties Have Not Produced Any Evidence to Demonstrate
that a Significant Number of Class Members Will Actually Attempt to Redeem
Their Coupons.
While Class Counsel assert that the coupons will lead to plaintiffs enjoying
several millions of dollars in benefits, they offer no evidence to support
that claim. In fact, a large body of evidence suggests that the coupons
will be redeemed by very few class members.
The coupons established in the Agreement are a fairly common device in
class action settlements. Similar coupons have been used in other cases
over the last decade, and similar types of coupons are offered in a wide
variety of other commercial settings. A number of marketing experts, academics,
and diligent courts have taken a hard look at the percentage of consumers
who actually redeem such coupons and certificates. Such information bears
heavily upon the fairness of this settlement and the propriety of class
counsel's requested fee. Nationwide, relatively few consumers expend the
time and effort to redeem coupons. "[O]nly 2% of the nation's $180
billion of money-off coupons are redeemed annually." P & G's Sticky
Bid to End Coupons, Wall Street Journal at A-1 (April 17, 1997), attached
as Exhibit 4 hereto. Coupon redemptions in many class action cases have
been even lower. In Buchet v. ITT Consumer Fin. Corp., 845 F. Supp. 684
(D. Minn. 1994), amended, 858 F. Supp. 944, for example, the court noted
that the percentage of certificates actually redeemed in four class action
settlements was 0.074%; 0.002%; 0.110%; and 0.103%. It should go without
saying that if 99.998% of the current mortgagor class members were to receive
nothing from this deal, the settlement would not be reasonable. See also
Barry Meier, Fistfuls of Coupons: Millions for Class-Action Lawyers, Scrip
for Plaintiffs, New York Times, p. C1 at C-5 (May 26, 1995) (attached as
Exhibit 5 hereto) (only 1% of 300,000 Chrysler owners used coupon in Renault
Encore case); and Strong v. Bellsouth Telecommunications, Inc., 173 F.R.D.
167, 172 (W.D. La. 1997), affirmed, 137 F.3d 844 (5th Cir. 1998) (class
counsel characterized the agreement as producing a $64.5 million common
fund; "the value of the actual credit requests submitted was $1,718.594.40....").
A number of factors set forth in the attached affidavit of Mr. Hilsee,
and the attached affidavit of Elizabeth Renuart (Exhibit 6), an attorney
with the National Consumer Law Center who is an expert on the mortgage lending
industry, indicate that the redemption rates are likely to be particularly
low for the coupons in this case:
o Many consumers will perceive the coupons to be a solicitation, and
as much as 75% of such mail is thrown out. Hilsee at ¶ 12(d). Consumers
are particularly unlikely to respond to mailings from the mortgage industry.
Id. at ¶ 13.
o Redemption rates will be enormously affected by whether Marine Midland's
loans are competitive with those offered by the hundreds of other mortgage
lenders in the United States. Renuart at ¶ 9. The evidence here suggests
that the difference between Marine Midland's terms and those of other lenders
with better rates would be more than enough to offset the value of the coupons.
Hilsee at ¶ 14(b).
o If past data is a reliable guide, only 43% of class members are even
likely to refinance or obtain a new mortgage, Hilsee at ¶ 14(a), indicating
that at least 57% of the current mortgagor class members will receive no
value from the coupons. In fact, it appears likely that refinancing rates
will decline in the next few years, in light of the recent dynamics of the
market. Renuart at ¶ 10.
o Marketing evidence shows that half or more of all consumers who refinance
their loans do so with a different bank than the lender from their first
loan. Hilsee at ¶ 14(c).
In light of the foregoing, the Court should reject the Agreement unless
the settling parties either (a) come forward with evidence (if any exists)
to demonstrate that the certificates will be redeemed by a significant number
of class members – and will provide meaningful relief to the class;
or (b) guarantee some minimum payment to the class (or, via cy pres principles,
for the indirect benefit of the class members). With respect to the first
point, as noted above, Class Counsel have engaged in several similar coupon
deals, and they should be required to reveal the coupon redemption rates
in cases such as Citicorp.
Alternatively, the settling parties could rework the agreement to ensure
that it would contain meaningful relief for class members. The limited value
of the coupons here is underscored by the fact that the Settlement Agreement
includes no minimum guaranteed sum to go to the class. Thus, if only 0.01%
of the class were to redeem the Rebate Certificates, then Marine Midland
would simply keep the other 99.99% of the multi-million dollar "recovery"
claimed by Class Counsel. In a case where there is no strong evidence indicating
that a sizeable portion of class members will actually redeem the coupons,
this failure to include a guaranteed minimum payment justifies rejecting
the settlement. See Buchet, 845 F. Supp. at 696 ("[T]he Court can only
assume that ITT's refusal to establish a minimum cash contribution reflects
the economic value it places on the possibility that these certificates
will not be redeemed at the rates predicted by its expert.") (denying
approval to proposed settlement of class action). See also the National
Association of Consumer Advocates' Standards and Guidelines for Litigating
and Settling Consumer Class Actions, 176 F.R.D. 375, 384 (1997):
A settlement involving certificates should require a minimum level of
redemption by the class members within a reasonable period of time. In the
event actual redemption does not meet this minimum level, the defendant
should provide alternative relief in the form of a common fund. This requirement
protects against the use of a meaningless certificate settlement that has
little or no impact on a defendant, and little or no compensatory value
to the plaintiff class.
2. The Settling Parties Have Given Marine Midland the Ability
to Easily Strip the Certificates of Any Value to Those Class Members Who
Actually Attempt to Redeem Them.
Redemption rates aside, the certificates could have little or no value
even to class members who attempt to use them. Bluntly put, Marine Midland
is in the very unusual position of having complete control over whether
it will provide any value to class members through the discount certificates.
First, the Agreement imposes no obligation on Marine Midland to treat
class members like all other applicants for Marine Midland loans. Thus,
Marine Midland could easily inflate a number of the costs charged to class
members to offset the discount offered by the certificates. Renuart at ¶
11. Second, Marine Midland could use different underwriting criteria to
either deny class members with coupons refinancing altogether or to charge
class members with coupons higher points and fees. Id. ¶ 13. This problem
could easily be solved by the addition of "antidiscrimination"
language to the settlement. For example, the settlement agreement negotiated
by these same Class Counsel and approved by this Court in Gallardo v. PHH
US Mortgage Corp., No. 97 C 0844 (N.D. Ill.), addresses the first point
about potentially inflated fees. It states "PHH will not discriminate
against any Class member who seeks to redeem a coupon by intentionally increasing
its closing costs or fees to that Class member specifically in an effort
to offset the value of the coupon presented." See Gallardo Agreement,
attached hereto as Exhibit 8, at page 10, ¶ 9. The Settling Parties
here have chosen not to include nondiscrimination language related to inflated
fees or underwriting criteria in the Agreement, rendering this settlement
potentially worthless.
Thus, it is quite possible that the certificates provided by the Agreement
will have no value to the class. If true, then the sole beneficiary of this
deal will be Marine Midland, which will obtain a complete release from liability
in exchange for an Agreement that could yield additional customers for the
bank at no additional cost. Viewed this way, class members would be better
off with a settlement that provided an actual refund of the interest earned
on the inflated escrow accounts maintained by Marine Midland, rather than
a deal that entices them into a refinancing that costs more than the face
value of the certificate. Renuart at. ¶ 16.
This Court should not approve the settlement unless the Agreement is
amended to provide that class members' loans will not be subject to any
different terms, conditions, costs, and/or underwriting criteria than loans
sought by other Marine Midland customers.
C. CLASS COUNSEL HAVE PRODUCED NO EVIDENCE TO SUPPORT THEIR CLAIM THAT
THEY HAVE ALREADY OBTAINED REFUNDS FOR ANY CLASS MEMBERS.
As noted above, Class Counsel claim to have "achieved" the
result of Marine Midland refunding monies to class members. Memo in Support
of Preliminary Approval at 14. Class Counsel's assertion is unaccompanied
by any evidentiary support. Tellingly, Marine Midland has not made any such
representation in this case. In fact, Marine Midland has already advised
this Court "because of the change in federal regulations . . . MMMC
has changed its method of escrow calculations to the aggregate method, and
distributed refunds, for all MMMC's mortgage portfolio." Response to
Plaintiffs' Motion for Class Cert. at 6-7.
In the absence of any evidence on the matter, the sequence of events
suggests that the activities of the state and federal governments -- and
not Class Counsel's handling of this case -- led to changes by Marine Midland.
Years before this litigation began, several Attorneys General published
a comprehensive report on this problem; the Attorneys General of 17 states
brought a test case against GMAC Mortgage Company; and Congress conducted
hearings on this topic. See Overchanging on Mortgages: Escrow Account Limits:
Hearings Before the Senate Comm. On Governmental Affairs, 102nd Cong. 1st
Sess. At 10-11, 83-101 (1991). In 1993, well before this case was filed,
the U.S. government issued a proposed regulation that would require banks
to change their accounting practices to eliminate excess escrow charges.
See 58 Fed. Reg. 64066 (December 3, 1993). Those regulations were made final
before this case was brought in this Court. Class Counsel are apparently
suggesting that it is acceptable for this settlement to provide little or
no new relief beyond that required by the regulation, and for Class Counsel
to receive a fee greatly exceeding the "new" relief provided in
the settlement, because Class Counsel supposedly caused Marine Midland to
change its practices. If this is indeed the proposed factual predicate for
approving this deal and this fee, Class Counsel must produce substantial
admissible evidence to support this claim.
III. BY AGREEING TO A SETTLEMENT THAT CONTAINS AN UNCONSTITUTIONAL ONE-WAY
GAG ORDER AND WILL PROVIDE NO RECOVERY TO THE VAST MAJORITY OF THE CLASS,
AND BY SEEKING ATTORNEYS' FEES VERY LIKELY TO EXCEED THE CLASS'S RECOVERY,
THE CLASS REPRESENTATIVES AND CLASS COUNSEL DEMONSTRATED THEIR INADEQUATE
REPRESENTATION OF THE CLASS.
One of the essential requirements of the Federal Rules of Civil Procedure
and Constitutional due process in class actions is that the representative
parties -- and their counsel -- fairly and adequately represent the interests
of the class. See Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997);
Fed. R. Civ. P. 23(a)(4). That requirement has not been met here.
As noted above, the proposed settlement in this case contains an unconstitutional
one-way gag order and ensures that the vast majority of class members will
very likely receive no compensation. This Court should hold that when class
representatives and class counsel agree to such a settlement, those representatives
and counsel have not adequately represented the class. In addition, as shown
above and below, it is likely that the requested fee will greatly exceed
the actual benefit conferred upon the class. In several states (and this
is a nationwide class action, with class counsel claiming to represent plaintiffs
from across the nation), it is normally a violation of the professional
responsibility code for attorneys to charge a fee that exceeds their client's
recovery. E.g., Attorney Grievance Comm'n of Maryland v. Korotki, 569 A.2d
1224, 1233 (Md. 1990) ("Without passing upon whether there can ever
be circumstances justifying a contingent fee in excess of fifty percent,
it is generally a violation of the rule for the attorney's stake in the
result to exceed the client's stake.") This Court should find that
a practice that violates the ethical codes of a number of states cannot
constitute adequate representation under Rule 23 (a)(4). The excessive fee
request is per se proof of inadequate representation.
IV. THE PROPOSED SETTLEMENT AND CLASS COUNSEL'S ATTORNEY FEE REQUEST
SHOULD BE REJECTED BECAUSE THE FORMER PERMITS AND THE LATTER SEEKS MORE
MONEY FOR CLASS COUNSEL THAN THE CLASS IS LIKELY TO RECEIVE.
Class Counsel have asked this Court to award them $665,000. As set forth
above, the demonstrable reality is that only a tiny number of class members
are likely to receive anything from this settlement. As a result, it is
likely that the requested fee will greatly exceed the actual benefit conferred
upon the class. For example, if 1% of the 100,000 former mortgagors receive
$10 each, that group will receive a net benefit of $10,000. If 2% of the
90,000 current mortgagors redeemed their coupons for $250 each, that group
will receive a net benefit of $450,000. Accordingly, under these fairly
generous estimates (and the real numbers are likely to be much lower), the
$665,000 attorneys' fee requested here will greatly exceed the actual recovery
to the class.
The Agreement here allows, and Class Counsel request, a fee based upon
Class Counsel's prediction of the class's recovery. Unlike the contingent
claims applications and coupons to be given to the class, Class Counsel
propose to take their fee immediately in non-contingent, guaranteed cash.
This Court should reject this proposal because an attorneys' fee award should
properly be based upon the financial benefits actually provided to the class.
See, e.g., Voege v. Ackerman, 67 F.R.D. 432, 436-37 (S.D.N.Y. 1975) ("the
fee determination will be reserved until all claims of shareholders entitled
to participate in the settlement have been filed and determined.");
Petruzzi's v. Darling Delaware Co., 1997 U.S. Dist. LEXIS 15073, *1-3 (M.D.
Pa. Aug. 18, 1997) (noting that the requested fee was "nearly 12 times
the sum that the settling class actually received," to base class counsel's
fee on the defendants' potential liability "if all class members submitted
verifiable claims plus the value of the settling defendants' obligation
to pay counsel's fees," would base class counsel's fee upon "a
phantom common fund," and would lead to "a perverse result");
Goodrich v. E.F. Hutton Group, Inc., 681 A.2d 1039, 1049 (Del. 1996) (basing
attorneys' fee upon actual, not potential, benefit conferred); NACA Guidelines,
176 F.R.D. at 399 (in cases involving certificates and no minimum settlement
level, class counsel should not request a percentage fee "until such
time as the court can accurately assess the actual value of the settlement
(i.e. after the deadline for class member claims [or] after the certificates
expire).")
Class Counsel have not yet provided any information about their actual
time spent on the case. This Court should review counsel's lodestar as a
reality check upon the reasonableness of the requested fee award. This is
particularly necessary where, as here, the amount of the benefit actually
conferred is imprecise. See Charles v. Goodyear Tire and Rubber Co., 976
F. Supp. 321, 326 (D.N.J. 1997) ("any settlement based upon an award
of certificates may prove to be too speculative a value on which to base
a fee award").
V. THE COURT SHOULD REQUIRE THE PARTIES TO FILE A PUBLIC REPORT ON THE
NUMBER OF FORMER MORTGAGORS WHO FILE CLAIMS AND RECEIVE REIMBURSEMENT, AND
THE NUMBER OF CURRENT MORTGAGORS WHO REDEEM THEIR COUPONS.
The question of how many coupons are actually redeemed in class action
settlements – and thus whether those settlements actually confer meaningful
value on class members – is an issue of concern to courts, policymakers,
legal scholars, and the media. See, e.g., Buchet, 845 F. Supp. 684 (court
rejected a proposed coupon settlement after finding that the coupon redemption
rates in other, similar cases were so low that the settlement offered no
real value to the class); "Class Action Lawsuits: Examining Victim
Compensation and Attorney's Fees," Hearing of the U.S. Senate Judiciary
Committee's Subcommittee on Administrative Oversight and the Courts, October
30, 1997 (witnesses debated whether coupon settlements provide genuine benefits
to class members); and Meier, "Fistfuls of Coupons," supra, (Exhibit
5) (illustrative news article discussing whether coupons offer real value
to consumers).
Class counsel and defendants should submit to the court and all counsel
of record detailed information about redemption rates and coupon transfers
during the entire life of the coupon. By doing so, a public record will
be made of what works and what does not work in non-cash settlement cases.
NACA Guidelines, 176 F.R.D. at 384. Accordingly, this Court should reject
the settlement because it does not require the settling parties: (1) to
keep precise records of the number of class members who actually redeem
their discount certificates; and (2) to file publicly with the Court both
those records and a report summarizing their contents.
Respectfully submitted,_________________________
Joseph A. Power, Jr.
Power, Rogers & Smith, P.C.
35 West Wacker Drive
Suite 3700
Chicago, IL 60601
(312) 236-9381 Suite 800
Local Counsel
Fed. Ct. No. 02244276
F. Paul Bland, Jr.
Adele Kimmel
Arthur H. Bryant
Trial Lawyer for Public Justice, P.C.
1717 Massachusetts Ave., N.W.
Washington, D.C. 20036
(202) 797-8600
Date: May 20, 1998
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