For Immediate Release: Tuesday, September 30, 1997
For More Information Contact: Theresa Henige, TLPJ, 202-797-8600
Objections
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Press Release
Trial Lawyers for Public Justice (TLPJ) announced today that the unprecedented secrecy provisions in a proposed national class action settlement of credit card fraud claims against First USA Bank have been eliminated in response to TLPJ's objections. The original settlement in Kalhammer v. First USA Bank, pending before U. S. District Court Judge Charles A. Legge in San Francisco, would have barred public disclosure of the total settlement amount and total attorneys' fees and prevented class counsel and class members -- but not First USA or its counsel -- from talking to the press about the deal. TLPJ challenged the proposed settlement on September 22 for providing the majority of class members with no relief and requiring unprecedented secrecy.
In addition to the secrecy provisions, the original settlement would have provided current cardholders with a "rebate certificate" worth less than five dollars and former cardholders with nothing, in exchange for a total release of claims against First USA. Under the new deal, the secrecy provisions have been eliminated and former cardholders will receive "rebate certificates" that may be redeemed for a check for less than five dollars. A hearing on the fairness of the new deal is scheduled for October 17, when TLPJ will continue to press its challenge to the adequacy of relief provided to the class.
"The elimination of the secrecy provisions is an important victory for the class and against class action abuse, but it only makes clearer that this settlement is insufficient" said TLPJ Staff Attorney Paul Bland, who authored TLPJ's objections on behalf of three class members. "Now we know that First USA overcharged at least 1.6 million credit cardholders nearly $15 million, but that most of these cardholders will receive no compensation. We also know that class counsel will seek at least $1.5 million in fees, which is likely to be more than First USA will pay to the entire class."
The class action, which was filed on December 19, 1995, alleges that 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 during the last few weeks of the period when the introductory rates were supposed to be in force. The amended settlement, which was filed on September 26, will provide both current and former cardholders with "rebate certificates" worth less than $5 (and, in some cases, less than $2). Rather than simply crediting this money to cardmembers' accounts, the settlement will require class members to fill out the certificates and mail them back to the bank.
TLPJ's objections argued that the settlement is unfair because it makes it too difficult for class members to recover their money and that the secrecy provisions violated the class members' and public's right to know about the settlement's terms. TLPJ's brief contended that, because very few class members will return the "rebate certificates" to First USA, the settlement will provide very little actual value to the class. The result, for First USA, is a complete release of liability.
"Even though the secrecy is gone, the rebate certificate process remains a huge problem under the new deal," said TLPJ Executive Director Arthur Bryant, who co-authored the objections with Bland. "First USA could easily agree to eliminate the rebate certificates by simply crediting current cardholders' accounts with their recoveries and sending former cardholders a check for their money. As it is, the settlement is unfairly designed to minimize any payout by the bank. Although we are pleased that the secrecy has been eliminated, the settlement should still be rejected as unfair."
In addition to Bryant and Bland, TLPJ's legal team in the case includes Leslie A. Brueckner of TLPJ and Robert Cartwright, Jr., of San Francisco's Cartwright & Alexander Law Firm.
