For Immediate Release: June 11, 1998
For More Information Contact: TLPJ, 202-797-8600
A proposed nationwide class action settlement of consumer fraud claims against Marine Midland Mortgage Corporation was finally approved yesterday -- after the settlement was improved to address objections raised by Trial Lawyers for Public Justice (TLPJ). The original settlement was challenged by TLPJ for requiring unnecessary secrecy and providing class members with potentially worthless coupons. The amended settlement eliminates the secrecy and requires Marine Midland to make a minimum payment of at least one-third of the value of the damages allegedly suffered by the class.
"We are pleased that the settlement was improved to address our concerns," said TLPJ Foundation President Fred Baron of Baron & Budd in Dallas. "In our view, class action settlements must provide for public disclosure and ensure that the defendant is appropriately held accountable."
The class action lawsuit, Robinson v. Marine Midland Mortgage Corporation, charges that the company cheated its customers by maintaining excessive "cushions" in their escrow accounts. Marine Midland changed its practices and provided refunds to its customers after class counsel first filed suit in 1991, but did not compensate class members for the interest they lost on the excessive amounts held in escrow. In March 1998, a proposed settlement was reached, to which TLPJ objected.
TLPJ's first objection was that the proposed settlement contained an extraordinary one-way gag order, barring the attorneys for all class members and class counsel -- but not Marine Midland or its attorneys -- from "refer[ring] to, reveal[ing], or characteriz[ing] the settlement agreement or any of its terms." The parties agreed to strike that provision.
TLPJ also objected that the settlement provided class members with potentially worthless coupons, redeemable for either $175 or $250 only if class members refinanced or obtained a new mortgage from Marine Midland, and did not require the company to make any minimum payment if an insufficient number of coupons was redeemed. The parties agreed that there would be a minimum payment of at least $70,000 -- one-third of the value of the damages allegedly suffered by the class.
Another TLPJ objection was that the settlement did not prohibit Marine Midland from manipulating its practices to charge class members more than other customers, effectively rendering the coupons worthless. The parties agreed to alter the settlement to include such a provision and to ensure that the coupons could be combined with any other discounts offered by Marine Midland.
TLPJ further objected that the settlement had no mechanism for determining -- and allowing the public to discover -- exactly how many coupons were eventually redeemed. This information could be especially useful to litigants in other cases, judges, and policy makers, currently debating the propriety of coupons in class action settlements. The parties agreed to file and provide TLPJ with a report of the coupon redemption rates.
Finally, TLPJ objected that class counsel had not justified their attorneys' fee, which exceeded the value of the coupons likely to be redeemed. Class counsel clarified, however, that their fee request was based primarily on their claim that their actions prompted Marine Midland to change its practices and provide refunds to all of the class members. The parties then agreed that class counsel would file a detailed declaration with the court, setting forth the evidence to support this assertion and stating the relative value claimed for each element of the relief provide to the class members in the case.
At a hearing yesterday in federal court in Chicago, U.S. District Court Judge James B. Zagel granted final approval of the amended settlement. TLPJ challenged the original settlement in the case as part of its Class Action Abuse Prevention Project. TLPJ sought no fee for its work in this case.
"Our success in this case demonstrates the value of the Class Action Abuse Prevention Project," said TLPJ Staff Attorney F. Paul Bland, Jr., the primary author of TLPJ's objections. "We still believe strongly that automatic credits, instead of coupons, should be provided to class members whenever possible, but a variety of facts unique to this case convinced us not to stand or fall on that point here."
Robinson is the second case of this type to which TLPJ objected. In February of this year, TLPJ objected to very similar proposed settlement terms in Cusack v. Bank United of Texas, by the same class counsel, before the same judge. The one-way gag order was stricken, but Judge Zagel otherwise approved the settlement over TLPJ's objections. An appeal is pending. In a stunning development, however, class counsel have asked Judge Zagel to require the objecting class members to post a $1million bond or forfeit their right to appeal. TLPJ is contesting that motion.
In addition to Bland, TLPJ's legal team in these cases includes Joseph A. Power, Jr. of Chicago's Power, Rogers & Smith, and TLPJ's Arthur Bryant and Adele Kimmel.