Russell v. United States Of America

Filing 82

ORDER ON MOTION TO INTERVENE AND RELATED MOTIONS by Judge Alsup denying 62 Motion to Intervene; denying 63 Motion for Preliminary Injunction; denying 64 Motion to Certify Class; denying 65 Motion to Shorten Time (whalc1, COURT STAFF) (Filed on 4/23/2010)

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1 2 3 4 5 6 7 8 9 10 TAYLOR RUSSELL, on behalf of himself and all others similarly situated, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. / INTRODUCTION After a successful class action against the United States involving military credit cards, the same counsel commenced a second proposed class action against the United States also involving military credit cards but concerning a different practice. This order addresses counsel's search for a suitable plaintiff in the second action. The second proposed class action is the instant action, Russell v. United States of America. The instant action, like counsel's first class action, Briggs v. United States of America (also pending before the undersigned judge), involves credit cards issued by the Army and Air Force Exchange Service ("AAFES") to military personnel.1 The details of the two claims asserted in the instant action were set forth in a previous order filed on March 30, 2010 (Dkt. No. 61). In brief, the AAFES credit cards targeted in both actions offered two types of repayment plans for credit card purchases: (1) the Uniform Clothing Deferred Payment Plan ("UCDPP"), which applied to purchases of military uniforms, and (2) the Deferred Payment Plan ("DPP"), which 1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA No. C 09-03239 WHA United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER ON MOTION TO INTERVENE AND RELATED MOTIONS The case number for the related Briggs action is CV 07-5760 WHA. 1 2 3 4 5 6 7 8 9 10 applied to purchases of other goods. Both claims asserted in the instant action involved allegedly excessive interest charges imposed by the AAFES on debt incurred under these two payment plans. By contrast, the claims in the related Briggs action involved tax refunds and other government benefits illegally withheld by the government to satisfy AAFES credit card debt. This omnibus order resolves four separate motions filed by counsel in these two related actions: (1) a motion to enlarge time, filed in Briggs (the first lawsuit); (2) a motion to intervene, filed in the instant lawsuit; (3) a motion for a preliminary injunction, filed in the instant lawsuit; and (4) a motion for class certification, filed in the instant lawsuit. As stated, these motions all relate to counsel's search for a suitable plaintiff in the instant action. For the reasons explained below, all four motions are DENIED. STATEMENT The procedural history behind both this action and the Briggs action provides instructive context to the instant motions. Of particular interest is the fact that the two interest-overcharge claims asserted in the instant action were originally asserted in the related Briggs action. In Briggs, however, the credit-card interest claims were dismissed as moot approximately four months into the litigation, after the AAFES voluntarily "removed the disputed interest charges" prior to class certification (Dkt. No. 34 at 1213 in CV 07-5760 WHA). Over a year later, class counsel in Briggs filed a motion to intervene in an attempt to revive the mooted interest-related claims (Dkt. No. 92 in CV 07-5760 WHA). Since the Briggs action had already been litigated to an advanced stage, the motion to intervene was denied (Dkt. No. 104 in CV 07-5760 WHA). Final approval of a class action settlement in Briggs is imminent. The instant case was borne from the failed motion to intervene in Briggs. Indeed, the proposed intervenor in Briggs -- Taylor Russell -- was the named plaintiff and proposed class representative in the instant action. In November 2009, however, approximately four months after the instant action was filed, plaintiff Russell's claim pertaining to interest charged on his UCDPP credit-card debt was dismissed as moot (Dkt. No. 29). The remaining claim pertaining to DPP interest charges was also dismissed as moot in an order filed on March 30, 2010 (Dkt. No. 61). For both of these claims, the government had simply (and voluntarily) adjusted the credit 2 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 card accounts of plaintiff Russell and over 30,000 other putative class members prior to class certification and had issued full refunds based upon the adjustments. The March 30 order also denied, without prejudice, plaintiff's motion for class certification (filed after the government had moved to dismiss the case as moot) and left the question of plaintiff's entitlement to attorney's fees for another day.2 Importantly, the March 30 order left open "the possibility that another plaintiff, whose account has not been adjusted, to come forward, to intervene, and assume the role of lead plaintiff so long as this is done before the resolution of the lingering attorney's fees issue" (id. at 7) (emphasis added). This window of opportunity was provided due to counsel's view that the government's voluntary refunds had not been given to the entire putative class. Two days after the March 30 order issued, counsel filed a motion to intervene, a motion for a preliminary injunction, and a motion for class certification in the instant case (Dkt. Nos. 6265). On April 8, counsel then filed -- in the related Briggs action -- an administrative motion to enlarge time, which (as will be explained shortly) is directly related to the three motions filed in the instant case. A hearing on these motions was held on April 14, 2010. ANALYSIS Both of plaintiff Russell's claims have been dismissed as moot. As such, this action currently lacks a named plaintiff with a justiciable case or controversy. Given this backdrop, all of the pending motions hinge upon the success of counsel's motion to intervene. In other words, if counsel's motion to intervene fails, so too will the motions for a preliminary injunction and class certification -- without a plaintiff with "live" claims, these motions automatically fail. The proposed intervenor is veteran Charles Davidson. While the March 30 order clearly stated that any proposed intervenor must be an individual "whose account has not been adjusted" by the AAFES, Mr. Davidson's account was adjusted by the AAFES in September 2009 to the minimum 12% interest rate specified by his credit agreement (Bedison Decl. 59). This adjustment was made in 2009 because Mr. Davidson was (and still remains) a member of the Since claims for attorney's fees ancillary to a case "may be heard even though the underlying case has become moot," this issue survived the government's motion to dismiss. Williams v. Alioto, 625 F.2d 845, 848 (9th Cir. 1980). 2 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 2 3 4 5 6 7 8 9 10 certified class in the earlier and almost completed Briggs class action (id. at 6, 9). According to the United States, all members of the Briggs certified class, including Mr. Davidson, had their interest rates voluntarily and retroactively adjusted to the minimum rate of 12%. This occurred months before similar adjustments were made for plaintiff Russell and other putative class members in the instant litigation (id. at 5, 6, 8). After making this voluntary adjustment, the AAFES then planned to issue refund checks to Briggs class members in for interest overcharges, including Mr. Davidson (id. at 8; Quinn Decl. 3). At the request of class counsel in Briggs, however, these refund checks were not issued to Briggs class members (Quinn Decl. 35). The reason for this request, as stated by Attorney S. Chandler Visher (who represents plaintiffs in both actions), was that the voluntary interest refund might "interfere with the Court's intended distribution of [the class] fund" (id. at Exh. 3). The Briggs case is now on the verge of final approval of a class-wide settlement, where the government has offered to refund 100% of everything improperly collected by the AAFES. As a Briggs class member, Mr. Davidson will be receiving a settlement payment (minus reasonable attorney's fees) of close to $400, "which includes a full refund of money collected [by the AAFES] on his debts since 2001 relating to principal, interest charges (including any alleged overcharges), and penalties" (Opp. 7; Bedison Decl. 9) (emphasis added). In other words, the approximately $45 of overcharged interest payments sought by Mr. Davidson in the instant litigation (if he were allowed to intervene) are already bundled into his pending Briggs settlement payment. This is exactly why counsel filed, on April 8, an administrative motion in Briggs to enlarge the opt-out period to allow Mr. Davidson to belatedly opt out of the Briggs settlement. The merits of the opt-out motion, filed in the Briggs action, is addressed below. * * * United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 To opt out of the pending Briggs settlement, a class member had to have sent a letter to class counsel requesting exclusion from the settlement, (2) the letter had to have been signed by the class member, and (3) the letter had to have been postmarked no later than March 31, 2010 4 1 2 3 4 5 6 7 8 9 10 (Dkt. No. 149 in CV 07-5760 WHA). Despite failing to follow any of these procedures, Briggs class member Davidson now seeks to enlarge the opt-out period to permit his exclusion from the Briggs settlement so that he can intervene and become the named plaintiff in the instant action.3 The test for determining whether a class member should be allowed to opt out of the class after the applicable deadline has passed is whether his failure to comply with the deadline is the result of "excusable neglect." See Silber v. Mabon, 18 F.3d 1449, 1454-55 (9th Cir.1994). This standard allows courts, "where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances beyond the party's control." Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 388 (1993). When evaluating whether "excusable neglect" applies, a court should consider the "degree of compliance with the best practicable notice procedures; when notice was actually received and if not timely received, why not; what caused the delay, and whose responsibility was it; how quickly the belated opt out request was made once notice was received; how many class members want to opt out; and whether allowing a belated opt out would affect either the settlement or finality of the judgment." Silber, 18 F.3d at 1455 (internal footnote omitted). Additionally, the court should consider the danger of prejudice to the opposing party, and whether the movant acted in good faith. Pioneer, 507 U.S. at 395. Having considered the full scope of equitable factors under Pioneer, this order finds that "excusable neglect" has not been shown by Mr. Davidson. While it is true that Mr. Davidson's opt-out request -- made directly by Attorney Visher to the United States on April 1, 2010 -- was only one day late, it was nevertheless late. Additionally, the following factors also support a rejection of the opt-out request: First, it is undisputed that the individual, mailed notice provided in Briggs easily met the due process requirements required for class actions. See Eisen v. Carlisle & Jacqueline, 417 U.S. 156, 173-77 (1974); Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In addition to objecting to the opt-out motion on the merits, the government objects to the use by counsel of an administrative motion under Civil Local Rule 7-11 rather than a properly noticed motion under Civil Local Rule 7-2. While this order agrees with the United States that an opt-out motion is not a "miscellaneous administrative matter" and a properly noticed motion should have been filed by counsel, this is a moot point. As explained herein, counsel's motion fails on the merits. 3 5 1 2 3 4 5 6 7 8 9 10 (1985). Indeed, it would be a strange twist of events if counsel for Mr. Davidson, who is also class counsel in Briggs, were to argue that notice in Briggs wasn't the "best notice practicable." Second, while it is unquestioned that Mr. Davidson did not receive actual notice of the class action or the proposed settlement in Briggs, and was not "at fault" for failing to receive such notice (the details of why he didn't receive actual notice are explained below), this does not -- without more -- warrant a finding of "excusable neglect." Indeed, the circumstances underlying Mr. Davidson's opt-out exercise bespeaks manipulation. Here's what happened: Approximately six months prior to when the first notice of the Briggs class action was mailed (announcing the pendency of the class action), Mr. Davidson temporarily relocated from San Francisco to Hawaii for the period of one year (Davidson Decl. 2). He then moved back to California, except not to the same residence where the Briggs class notices -- including the second notice pertaining to the pending settlement -- had been mailed (ibid.; Visher Decl. 4). The only reason Mr. Davidson was alerted to the Briggs class action and the pending settlement was because Attorney Visher took the affirmative step of contacting him by phone on March 31, 2010, and on April 1, 2010 (Davidson Decl. 2). During the April 1 phone conversation, Attorney Visher informed Mr. Davidson of his right to opt-out of the Briggs settlement (even though the settlement will provide a 100% recovery for Mr. Davidson) (Visher Decl. 56). Apparently, Attorney Visher did not inform Mr. Davidson in the March 31 phone conversation that the deadline for exclusion from the Briggs settlement was set to expire that very day. In the April 1 phone conversation, Mr. Davidson told Attorney Visher that he wanted to be excluded from the Briggs class settlement (Davidson Decl. 6). The reasons behind Mr. Davidson's untimely request were the following (id. at 810): 8. I chose to opt out of the Briggs class and corresponding settlement so I could be a class representative in the Russell lawsuit. Mr. Visher has advised me that the government claims that if I receive a refund as a class member in Briggs I will not have a claim in Russell. Although my understanding is that the Briggs settlement does not affect my claims in Russell, I would rather opt out of the Briggs class than have this issue possibly affect my suitability as a class representative. 9. I would like to be a class representative in the Russell lawsuit. I understand that, with no representative, the case cannot go forward, which would mean that thousands of veterans 6 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 overcharged by AAFES would have no remedy. I am more interested in helping these veterans than receiving an approximately $350 refund. 10. As a class representative in the Russell case, I have no expectation of receiving compensation beyond my refund as a member of the class. I understand and expect that my recovery, if the case is successful, will be the same as every other class member[.] . . . I know that sometimes class representatives receive some compensation for the time and trouble of being a class representative, but I am motivated by a desire to ensure veterans are treated fairly rather than a desire for personal gain. Given Mr. Davidson's declaration, a few obvious points must be made: Prior to this phone call, Mr. Davidson had no idea whatsoever that the Briggs class action even existed, or that he was about to receive a 100% refund (well over $350) under the Briggs settlement agreement (id. at 3). As such, he would not have brought the administrative motion, and would never have requested exclusion from the pending Briggs class settlement had Attorney Visher not taken the affirmative steps to solicit him to intervene and be the class representative in the instant action. Moreover, based upon the above declaration, Attorney Visher apparently told Mr. Davidson that in order to be a more "suitable" class representative for this instant action (where his individual claim would be worth approximately $45), he must forego his pending settlement payment in Briggs, which amounted to a full refund of everything improperly charged or offset by the government. Finally, Attorney Visher apparently told Mr. Davidson that "thousands of veterans overcharged by AAFES would have no remedy" if the instant case remained without a class representative.4 This manipulation is troubling. On April 1 (the same day Mr. Davidson informed counsel that he wanted to opt out of the Briggs settlement), Attorney Visher moved to intervene with Mr. Davidson in the instant case. Six days later, on April 7, the government filed its opposition to the motion. In its opposition, the government noted that Mr. Davidson's account had already been adjusted and that he would be receiving a 100% refund of everything -- including interest overcharges -- as part of his settlement payment as a Briggs class member. Attorney Visher was therefore presented with a 4 Of course, as emphasized in the conclusion of this order, this is not true. Any veteran who believes he or she has not received full relief on the merits is free to assert his or her rights in court, by either intervening in the instant case or by filing a new lawsuit, with or without Attorney Visher. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 1 2 3 4 5 6 7 8 9 10 choice. He could (1) advise Mr. Davidson to remain in the Briggs settlement and keep his $350, but risk losing the motion to intervene, (2) advise Mr. Davidson to opt out of the Briggs settlement and forego his 100% refund to improve his chances of successfully intervening in the instant case, or (3) find a more suitable individual (perhaps someone who is not a Briggs class member and did not have his account adjusted) to intervene. While the last option would have been the best choice to avoid any manipulation, counsel selected the second option. This weighs very strongly against a finding of "excusable neglect." Indeed, the facts discussed above illustrate that it was not Mr. Davidson's "inadvertence, mistake, or carelessness" that caused him to file an untimely request to opt out. See Pioneer, 507 U.S. at 388. Rather, Mr. Davidson's declaration makes clear that it was counsel's affirmative acts of manipulation that caused the administrative motion to be filed. For these reasons, the motion to enlarge time to allow Mr. Davidson to opt out of the Briggs settlement must be DENIED. * * * United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Since Mr. Davidson's AAFES account has already been adjusted, and he is in line to receive a generous settlement check in Briggs representing "a full refund of money collected on his debts since 2001 relating to principal, interest charges (including any alleged overcharges), and penalties," he is not an appropriate intervenor to serve as a class representative in the instant action. Moreover, whether the settlement in Briggs is given final approval or not, Mr. Davidson's AAFES account has already been retroactively adjusted, and he stands to receive a refund for these alleged interest overcharges. For these reasons, counsel's motion to intervene is DENIED. Because there is still no plaintiff in this action with justiciable claims, counsel's motions for a preliminary injunction and for class certification must also be DENIED. Counsel will please understand that any new proposed intervenor in the instant action must be someone whose AAFES account has not been adjusted in preparation for a voluntary refund of alleged interest overcharges. Additionally, any proposed intervenor must be free from the manipulation of the type evident in Mr. Davidson's opt-out motion in Briggs. Finally, as stated in the March 30 order, a motion to intervene must be brought, if ever, before the resolution of the lingering attorney's fees issue. 8 1 2 3 4 5 6 7 8 9 10 With respect to the attorney's fees issue, if counsel wishes to pursue this issue, a motion -- noticed on the normal 35-day track -- must be filed no later than MAY 6, 2010. If no motion is filed by this deadline, judgment will be entered accordingly, and no further motions to intervene will be entertained. CONCLUSION A few closing points must be made. First, this order emphasizes the benefits of patience with respect to the pending settlement in Briggs. Waiting until the Briggs settlement runs its course will provide greater clarity as to whether any Briggs class members still have viable claims against the AAFES for interest overcharges. If it is true, as counsel insists, that some Briggs class members have not received full relief on the merits, they are free to bring a new lawsuit against the government, with or without Attorney Visher, or they may move to intervene in the instant lawsuit, so long as the motion precedes the resolution of the attorney's fees issue. Second, any veteran who is not in the Briggs certified class that has a valid claim against the government pertaining to AAFES interest overcharges is, of course, free to bring his or her own lawsuit, with or without Attorney Visher. Or, alternatively, that veteran may come forward to timely intervene in the instant lawsuit. In sum, nothing in this order should be construed as barring any veteran who believes he or she has not received full relief -- whether a member of the Briggs class or not -- from asserting his or her rights in court. Third, if such a motion to intervene in the instant action is timely made, the United States is barred from further adjusting the account of that specific intervenor and sending an interest refund check to that intervenor until the Court can sort out the issue of mootness. This bar, however, would not apply to anyone else. The United States would be free, and is encouraged, to issue and mail refund checks to all veterans entitled to them. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IT IS SO ORDERED. Dated: April 23, 2010. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 9

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