Kardonick v. JP Morgan Chase & Co. et al

Filing 298

Plaintiff's MOTION for Attorney Fees and Reimbursement of Litigation Expenses by David Kardonick. Responses due by 8/15/2011 (Attachments: # 1 Exhibit Declaration, # 2 Exhibit 1, # 3 Exhibit 2, # 4 Exhibit 3, # 5 Exhibit 4, # 6 Exhibit 5, # 7 Exhibit 6, # 8 Exhibit 7, # 9 Text of Proposed Order)(Ku, Brian)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
DAVID KARDONICK, JOHN DAVID,
and MICHAEL CLEMINS, individually
and on behalf of all others similarly
situated,
Plaintiffs,
v.
JPMORGAN CHASE & CO. and
CHASE BANK USA, N.A.

C. A. No. 1-10-cv-23235-WMH

Defendants.

JOINT DECLARATION OF ALLEN CARNEY AND RICHARD M. GOLOMB IN
SUPPORT OF MOTION FOR FINAL APPROVAL OF CLASS ACTION
SETTLEMENT, PLAN OF ALLOCATION, APPLICATION FOR AN AWARD OF
ATTORNEYS' FEES AND REIMBURSEMENT OF EXPENSES, AND APPLICATION
FOR REIMBURSEMENT OF CLASS REPRESENTATIVES' TIME AND EXPENSES

Allen Carney and Richard M. Golomb, Settlement Counsel in the matter of Kardonick et
al. v. JPMorgan Chase & Co., et al. (the "Litigation"), hereby state:
1.

We, Allen Carney of the law firm of Carney Williams Bates Pulliam & Bowman,

PLLC ("Carney Williams") and Richard M. Golomb of the law firm of Golomb & Honik, P.C.
("Golomb & Honik") (collectively “Settlement Counsel”), submit this declaration in support of
Class Representatives’1 application, under Federal Rule of Civil Procedure 23(e) and Rule 408 of
the Federal Rules of Evidence, for this Court=s approval of: (a) the settlement of this litigation
(the “Litigation”); (b) the Plan of Allocation of settlement proceeds; (c) application for an award
of attorneys’ fees and reimbursement of expenses; and (d) application for an incentive award to
the Class Representatives.2 On February 11, 2011, this Court appointed Carney Williams and
Golomb & Honik as Settlement Counsel in this case. We are thus familiar with the issues raised,
the work that counsel performed on behalf of the Class, and the risks assumed in the prosecution
of the litigation. We have personal knowledge of the matters set forth in this declaration, and if
called to testify, could and would competently testify thereto. Biographical resumes for Carney
Williams and Golomb & Honik, along with Kanner & Whitely, LLC; Ku & Mussman, P.A.; and
Ademi & O’Reilly, LLP, are attached hereto as components of Exhibits 1-5, respectively.
2.
(a)

the history of the case, including the work performed by counsel;

(b)

the fairness of the Settlement and the Plan of Allocation;

(c)

1

This declaration discusses the following topics:

the risks Plaintiffs assumed in undertaking this Litigation;

Class Representatives are defined to include David Kardonick, John David and Michael Clemins.

2

Pursuant to the Court’s Preliminary Approval Order, Class Representatives’ submissions in support of final
approval of the Settlement and Plan of Allocation will be filed on or before August 27, 2011.

2

(d)

(e)
I.

Settlement Counsel's request for attorneys’ fees and reimbursement of expenses;
and
the application for Incentive Awards for Class Representatives.

INTRODUCTION
3.

Class Representatives and Settlement Counsel have devoted considerable time,

energy, effort and resources to the prosecution of this Litigation. As a result of these efforts, the
parties to this Litigation have reached a settlement (the “Settlement”) creating a common fund in
the amount of twenty million dollars ($20,000,000) for the benefit of the Class.
4.

The Settlement represents a significant recovery for the Class and is the product

of time-consuming, intensive investigation, aggressive litigation and extensive arm's-length
negotiations. More specifically, the Settlement was reached only after Settlement Counsel:
(a) conducted an extensive factual investigation; (b) interviewed numerous witnesses; (c)
reviewed and analyzed Defendants' regulatory filings, financial reports, marketing materials and
client statements; (d) filed a detailed and comprehensive complaint; (e) reviewed and analyzed
thousands of pages of documents produced by Defendants; (f) assessed the likelihood of
prevailing on any motion to dismiss, motion for class certification, or motion for summary
judgment, as well as at trial; (g) analyzed the damages likely to be proven at trial; (h) attended
pre-mediation meetings; (i) propounded discovery requests; (j) successfully negotiated at arm's
length a favorable Settlement for the Class with the substantial assistance of a highly regarded
and experienced mediator; and (k) conducted confirmatory discovery, which included witness
interviews. Furthermore, it is important to note that the early Settlement was possible only as a
result of Settlement Counsel's efforts in the recently resolved matter of Spinelli v. Capital One
Bank (USA), N.A. et al, case no. 8:08-CV-132-T-33 EAJ (M.D. Fla) (the “Capital One
3

Litigation”). The Capital One Litigation afforded Settlement Counsel significant insight into the
payment protection products offered by credit card companies. This knowledge, the product of
more than three years of hard-fought litigation, instructed strategy, negotiations and case
valuation in the present Settlement. See discussion at ¶¶ 16 to 19.
5.

As such, the Settlement was negotiated on both sides by experienced counsel with

a firm understanding of the strengths and weaknesses of their client’s respective claims and
defenses as well as the practicalities concerning the numerous risks and obstacles of continued
litigation. It is respectfully submitted that under these circumstances the Settlement should be
approved as fair, reasonable and adequate.
6.

The proposed Plan of Allocation of Settlement proceeds, which is set forth fully

in the Notice, is fair, reasonable and adequate, and should be approved.
7.

Additionally, the application by Settlement Counsel for an award of attorneys’

fees in the amount of 25% of the Settlement Fund and reimbursement of expenses in the amount
of $62,676.54 that were reasonably and necessarily incurred in prosecuting this action, is fair and
reasonable.

Settlement Counsel committed considerable resources to the Litigation,

notwithstanding the significant uncertainty as to whether the Litigation would succeed. Such
litigation risk faced by plaintiffs is exemplified by the United States Supreme Court’s recent
decision in AT&T Mobility, LLC v. Concepcion, 563 U.S. ____ (2011), which has the potential to
profoundly impact consumer rights in the compulsory arbitration context. See discussion at ¶ 29.
As discussed below, the requested fee falls well within the parameters that are recognized as
appropriate in class actions and is justified in light of the benefits conferred upon the Class, the
risks undertaken, the quality of representation, and the risks of continued litigation.

4

II.

BACKGROUND AND HISTORY OF THE LITIGATION
8.

As set forth in the Stipulation, the following three class actions (the "Related

Actions") were filed against Defendants beginning on or about September 8, 2010:
(1)

Kardonick v. JPMorgan Chase & Co., et al., No. 1:10-cv-23235WMH, Southern District of Florida;

(2)

David v. JPMorgan Chase & Co., et al., No. 4-10-cv-1415, Eastern
District of Arkansas; and

(3)

Clemins v. JPMorgan Chase & Co., et al., No. 2:10-cv-00949-PJG,
Eastern District of Wisconsin.

Settlement Counsel endeavored to settle all pending litigation in the United States relating to the
Chase Payment Protection product, and sought inclusion of all counsel of record therein. In
addition to Settlement Counsel, the law firms of Kanner & Whitely, LLC; Ku & Mussman, P.A.;
and Ademi & O'Reilly, LLP, were involved in the Litigation. Each of these law firms has
performed valuable work in advancing the interests of the Class, and each has been instrumental
in achieving resolution of the claims against Defendants.
9.

Each of the Related Actions was predicated on similar facts and each contained

allegations that Chase engaged in breaches of contract, breaches of an implied covenant, and
violations of the unfair and deceptive acts and practices statutes of various states, among other
matters, in connection with marketing and selling of debt cancellation and suspension products
known as “Chase Payment Protector,” “Payment Protection,” and other monikers offering
similar coverage.
10.

On or about November 1, 2010, the Chase Defendants filed a motion to dismiss in

Kardonick v. JPMorgan Chase & Co., et al., No. 1:10-cv-23235-WMH, Southern District of
Florida. In their Motion to Dismiss, Defendants argue that Plaintiff Kardonick’s state consumer
5

protection claims are not actionable as preempted by federal law, and that Plaintiff Kardonick’s
other common law claims should be dismissed for failure to sufficiently identify the provision of
the contract allegedly breached.

Defendants further argued that Plaintiff Kardonick’s

unconscionability claim is barred by the statute of limitations. Plaintiffs anticipate that similar
motions would have been filed by Chase in the other Related Actions in the absence of the
Settlement.
A.

Settlement Negotiations

11.

Subsequent to the filing of the Related Actions, counsel for Defendants contacted

Settlement Counsel to inquire whether settlement negotiations would be productive. As a result
of this initial inquiry, counsel conducted numerous follow-up telephone conferences, and
attended a lengthy pre-mediation meeting in New York, NY with defense counsel and
representatives of Defendants. On November 10 and 11, 2010, the parties engaged in a two-day
mediation, facilitated by a reputable and skilled mediator, Jonathan B. Marks, in Washington,
D.C. See attached Exhibit 6, Declaration of Jonathan B. Marks.
12.

Prior to and during the mediation process, counsel for the Defendants provided

Settlement Counsel access to non-public information and documents regarding the companies
and their Payment Protection products.3 This exchange, coupled with the extensive investigation

3

Before the mediation, the parties exchange mediation briefs outlining their positions. Chase also
provided documents and data on a wide variety of subjects, including:
•
•
•
•
•
•
•
•
•

the number of Payment Protector enrollees;
the average fee paid by enrollees;
the number of enrollees who requested benefits;
the number of enrollees who received benefits;
the number of enrollees who were denied benefits;
the rate at which benefits were approved;
the reasons why benefits were denied;
marketing materials and disclosures provided to Payment Protector enrollees;
the telemarketing scripts employed by Chase's customer service representatives; and

6

and research already conducted by Settlement Counsel in the present matter and in the Capital
One Litigation, allowed Settlement Counsel to fully assess the strengths, weaknesses and
valuation of both Plaintiffs’ claims, and the potential defenses available to Defendants. Against
this background and with the aid of an experienced mediator, the parties were able to effectively
engage in informed, arm’s length negotiations.

In this regard, the negotiations involved

experienced counsel on both sides who vigorously represented their respective parties’ position.
On the last day of mediation, the parties reached an agreement in principle and executed a
Settlement Term Sheet outlining the Settlement. Over the next two weeks, the parties continued
negotiations and worked in good faith to use the Settlement Term Sheet to develop written,
mutually acceptable settlement papers. Subsequently, on November 22 and 23, 2010, the initial
mediation session was followed by a second meeting. On those dates, counsel for all parties met
in Washington D.C., and worked to finalize the settlement papers, which led to the execution of
the Stipulation of Settlement, dated December 20, 2010.
13.

Moreover, to confirm the reasonableness of the Settlement’s terms and conditions,

Settlement Counsel engaged in confirmatory discovery. This process, which began after the
parties executed the Settlement Term Sheet, included reviewing and analyzing thousands of
pages of internal documents from Defendants and interviewing the product manager of the
Payment Protection program.

This lengthy, and at times contentious, interview served to

confirm prior representations made by Defendants, and allowed for a discussion and further
examination of the information contained in the document production.
14.

Additionally, in accord with the terms of the Settlement, Plaintiffs filed an

Amended Complaint on behalf of the following class (the “Class”):
•

the written disclosures provided to Payment Protector enrollees.

7

All Chase credit card holders who were enrolled or billed by Chase for a Payment
Protection Product4 at any time between September 1, 2004 and November 11,
2010. Excluded from the class are all Chase cardholders whose Chase Credit
Card Accounts that were enrolled or billed for a Payment Protection Product were
discharged in bankruptcy.
15.

The Amended Complaint asserts that Chase engaged in breaches of contract,

breaches of implied covenant, and violations of the Truth in Lending Act of 1968, Regulation Z,
and unfair and deceptive acts and practices statutes of various states, among other matters, in
connection with marketing and selling Payment Protection Products.
III.

THE CAPITAL ONE LITIGATION
16.

As mentioned in the Introduction to this Joint Declaration, the Capital One

Litigation afforded Settlement Counsel significant insight into the payment protection products
offered by credit card companies, and a brief discussion is merited here. This experience
instructed strategy, negotiations and valuation in the present Settlement. Indeed, before initiating
the litigation on behalf of Plaintiff Kardonick on September 8, 2010, Settlement Counsel had
spent much of the previous three years litigating similar claims to a favorable outcome in the
Capital One Litigation.
17.

During the litigation of the claims against Capital One, Settlement Counsel gained

a wealth of information about the payment protection product, the ways in which it is
administered, and the vernacular of the field. Settlement Counsel brought that knowledge and
experience to bear against Chase, and Chase was most assuredly aware of that fact when its

4

“Payment Protection Product” means the debt cancellation and suspension products offered by Chase,
including Chase Payment Protector, Chase Payment Advantage, Account Protection Plan, Total
Protection Plan, Account Security Plan, and Chasebusiness card and private label account debt suspension
or cancellation products. “Payment Protection Product” does not include a non-credit product offered by
a Chase affiliate.

8

attorneys, during preliminary discussions of otherwise procedural issues raised the possibility of
a global resolution of the dispute.
18.

The lessons learned by Settlement Counsel during the lengthy, and often heated,

litigation against Capital One proved valuable during the mediation with Chase. Building upon
their extensive knowledge of the Payment Protection device, attorneys for the Class entered the
sessions with a clear idea of the most relevant factors demanding inquiry. This resulted in a very
efficient process, allowing the participants to quickly cut to the crux of the matter. One thing
that was extremely important to Settlement Counsel was Chase's policy with regard to the
enrollment into its Payment Protection Plan of persons who could never qualify for benefits – a
group known as “per se ineligibles” – and Chase was adamant that it did not as a practice
subscribe such people into the program. On the strength of this and other representations – all of
which would be tested during confirmatory discovery – the parties agreed in principle to the
terms of settlement at the close of two days of hard-fought mediation.
19.

As discussed in ¶13, Settlement Counsel at that point turned to confirmatory

discovery, with particular focus on the statements Chase had made during the mediation (such as
its assertion regarding the bank’s policy for per se ineligibles). Again, Settlement Counsel was
able to draw on the efforts against Capital One when requesting documents from Chase, making
sure to review crucial documents such as those substantiating the average length of time
cardmembers remained enrolled in Payment Protection Products. At the end of this process –
after numerous hours reviewing many thousands of documents and an interview with the officer
at Chase ultimately answerable for the Payment Protection Plan – Settlement Counsel confirmed
the accuracy of Chase's statements upon which were based the agreement reached at the

9

mediation.

As a result, the parties on December 21, 2010 jointly moved this Court for

preliminary approval of the Settlement.
IV.

PRELIMINARY APPROVAL OF SETTLEMENT AND NOTICE
20.

On February 11, 2011 the Court signed the Order Preliminarily Approving Class

Action Settlement and Providing for Notice (the “Preliminary Approval Order”). Pursuant to the
Preliminary Approval Order, a total of 15,139,676 Notices were mailed to members of the Class
and their nominees.
21.

The Notice advised members of the Class of the terms of the Settlement, the

proposed Plan of Allocation, Class Members’ rights with regard to the Settlement, courtapproved deadlines, and Settlement Counsel’s intention to file an application for an award of
attorneys’ fees and reimbursement of litigation expenses (the “Fee and Expense Application”). It
also stated that a hearing (the “Fairness Hearing”) will be held before this Court at 10:30 a.m. on
September 9, 2011, at which time the Court will consider the fairness of the Settlement, the Plan
of Allocation, and the Fee and Expense Application.
22.

By virtue of that same order, Summary Notice was published in the USA Today

National Edition and transmitted over PR Newswire, and copies of the Notice and Proof of
Claim forms were posted on the Claims Administrator’s website.
23.

The Notice program fairly apprised class members of the terms of the Settlement,

the proposed Plan of Allocation, the request for an award of attorneys' fees and costs, and the
options available to Class Members. The Notice program constitutes the best practicable notice
available to Class Members, and satisfies all due process requirements.

10

V.

THE SETTLEMENT AND RISK ANALYSIS OF THE LITIGATION
24.

The Settlement provides for payment of a settlement fund of $20,000,000 in cash

for the benefit of the Class, and resolves all claims asserted by Class Representatives and the
Class in this Litigation against Defendants.
25.

The Settlement represents a significant recovery for the Class and is the product

of time-consuming, intensive investigation, aggressive litigation and extensive arm's-length
negotiations. More specifically, the Settlement was reached only after Settlement Counsel:
(a) conducted an extensive factual investigation; (b) interviewed numerous witnesses; (c)
reviewed and analyzed Defendants' regulatory filings, financial reports, marketing materials and
client statements; (d) filed a detailed and comprehensive complaint; (e) reviewed and analyzed
thousands of pages of documents produced by Defendants; (f) assessed the likelihood of
prevailing on any motion to dismiss, motion for class certification, or motion for summary
judgment, as well as at trial; (g) analyzed the damages likely to be proven at trial; (h) attended
pre-mediation meetings; (i) propounded discovery requests; (j) successfully negotiated at arm's
length a favorable Settlement for the Class with the substantial assistance of a highly regarded
and experienced mediator; and (k) conducted confirmatory discovery, which included witness
interviews. Furthermore, it is important to note that the efficient arrival at Settlement was
possible only as a result of Settlement Counsels’ efforts in the Capital One Litigation. The
Capital One Litigation afforded Settlement Counsel significant insight into the payment
protection products offered by credit card companies. This knowledge, the product of more than
three years of hard-fought litigation, instructed strategy, negotiations and case valuation in the
present Settlement. See ¶¶ 16 to 19.

11

26.

As demonstrated herein, Settlement Counsel entered into settlement negotiations

after substantial review of public and non public relevant and material documents and with full
knowledge of the strengths and weaknesses of Class Representatives’ claims as well as the
potential defenses available to Defendants. Moreover, throughout the settlement discussions,
Settlement Counsel and Counsel for Defendants vigorously negotiated on their respective
clients’ behalf. As such, the settlement negotiations were adversarial and conducted at arm’s
length.
27.

Further, the Settlement was negotiated with the substantial assistance of highly

regarded and experienced mediator Jonathan B. Marks. The participation of a neutral mediator
in the settlement process underscores the fact that the proposed Settlement is fair, reasonable and
absent of collusion. See Exhibit 6.
28.

What is more, the $20 million Settlement is an excellent result for the Class, both

quantitatively and when considering the risk of a lesser recovery if the case proceeded through
dispositive motions and trial. The Settlement provides members of the Class an immediate
benefit without the risks, costs, and delay of further litigation. Indeed, if the Litigation were to
proceed, there would undoubtedly have been additional motions to dismiss, motions for
summary judgment and motions in limine, motion for class certification, followed by an
extended trial that would have involved dozens of witnesses and hundreds (if not thousands) of
exhibits. As such, continuing to litigate against Defendants would mean a sharp and certain rise
in litigation costs without any corresponding certainty for a sharp (or any) rise in recovery.
Thus, the benefits of the Settlement fit squarely within the range of reasonableness and clearly
outweigh the risks of protracted litigation.

12

29.

These litigation risks are exemplified by the recent United States Supreme Court's

decision in AT&T Mobility, LLC v. Concepcion, 563 U.S. ____ (2011). The AT&T decision has
significantly impacted the enforceability of consumer arbitration clauses.

It is likely that

Defendants here would argue that claims brought by private label Chase cardholders should be
dismissed pursuant to the arbitration clause contained in the cardholder agreement. While
Plaintiffs believe the circumstances present at bar would allow them to avoid application of the
mandatory arbitration provisions, there can be no guarantee of success.
30.

Moreover, even if Class Representatives were able to prove liability, they faced

significant risks with respect to damages. The Defendants would surely have challenged Class
Representatives’ damage claims in the context of motions to dismiss and for summary judgment
and/or at trial.

Settlement Counsel and counsel for Defendants had extensive discussions

concerning damages during the course of settlement negotiations that confirmed the parties’
polarized views on this issue.
31.

Further, resolution of the expert issues alone could have required substantial

Daubert hearings as well as lengthy pre-trial hearings. The cost of experts over the course of the
litigation would have been significant.

Should the case have proceeded to trial, Plaintiffs

expected the entire trial to take several weeks. Moreover, whatever the outcome of trial, appeal
certainly would have been taken to the Eleventh Circuit and perhaps even to the United States
Supreme Court. All of the foregoing would have extended the case, thus delaying the ability of
the Class to recover for years, if at all, while being extremely expensive for the parties.
Settlement at this juncture results in a substantial and tangible present recovery, without the
attendant risk and delay of trial and appeals, as well as the associated expense.

13

32.

The immediate benefit to the Class is significant. Class members throughout the

United States can receive recovery attributable to fees paid for Payment Protection from
September 1, 2004 forward, statutes of limitations are waived, defenses to claims are waived,
and litigation risks are avoided.
33.

Furthermore, if this action were to proceed to trial, the determination of loss

causation and damages would no doubt have involved a battle of the experts with conflicting
opinions and testimony. In this Litigation, the amount of damages Class Representatives legally
could recover would have been seriously disputed and hinge on a jury’s interpretation of
conflicting expert testimony. Thus, whether Class Representatives would succeed on this point,
in the face of Defendants’ vigorous opposition, was far from certain.
34.

Notably as well, there can be no certainty that a class would have been certified or

that the Class Representatives would have been able to maintain the Class through trial. For
example, Defendants repeatedly advanced the argument that the unique nature of individual
cardmember enrollments renders class certification unobtainable. While Settlement Counsel was
confident of certification, there can be no guarantee of success.
35.

In short, continuing to litigate against the Defendants would mean a sharp and

certain rise in litigation costs without any corresponding certainty for a sharp (or any) rise in
recovery. Thus, the benefits of the Settlement clearly outweigh the risks of continued litigation
and is infinitely better than another possibility - no recovery at all.
36.

In light of the substantial benefits that the Settlement provides to the Class, the

substantial risks Plaintiffs faced in establishing liability and damages, as well as the further
inherent risks presented by prosecuting a complex class action before a jury, Settlement Counsel

14

believes that the proposed Settlement is clearly fair, adequate and in the best interests of the
Class, and deserves this Court’s approval.
VI.

THE FAVORABLE REACTION TO THE SETTLEMENT
37.

Upon preliminary approval of the Settlement, the court-approved Notice was

mailed to approximately 15,139,676 members of the Class. The Notice advised the members of
the Class of the Settlement and of their rights in connection therewith, including their rights to
exclude themselves or to object to any aspect of the Settlement or Class Counsels’ request for
attorneys’ fees and reimbursement of litigation expenses. As of the date of this Declaration,
some 12 "objections5" have been received by Class Counsel, each of which is addressed below.6
These numbers represent a fraction of one percent of the Settlement Class (.000079%). As such,
Settlement Counsel respectfully submit that the favorable reaction of the Class validates both the
extraordinary nature of the Settlement and the reasonableness of Settlement Counsels’ fee and
expense request. An appendix prepared by Settlement Counsel detailing each of the responses is
attached as Ex. 7.
38.

Of the objections received, seven (7) (docket nos. 82, 91, 200, 232, 244, 294 and

an unfiled objection, attached to the Joint Declaration as Exhibit 8) respondents object to the
individual amounts to be received by cardholders because they feel they are inadequate. See
Exhibit 7. These seven objections effectively challenge the Settlement for not achieving the
ceiling in damages.7 However, such a position does not embody the essence of compromise,
5

Several of the 12 "objections" are vague, and indeed may not in fact be objections to the Settlement. See
discussion herein.
6

In addition to those letters classified as objections, Settlement Counsel received __ responses that seeking
exclusion from the Settlement. Further, as detailed in Exhibit 7.
7

Docket no. 196 also seeks to opt out, and accordingly, lacks standing to object. See Mayfield v. Barr, 985 F.2d
1090, 1093 (D.C. Cir. 1993) (generally, former class members who opt-out do not have standing to object to class

15

which is that the “best possible” recovery must be tempered by the risks of further litigation. See
Canupp v. Sheldon, Case No. 2:04-cv-260-FTM-99DNF, 2009 U.S. Dist. LEXIS 113488, at *11
(M.D. Fla. Nov. 23, 2009) (noting “inherent in compromise is a yielding of absolutes and an
abandoning of highest hopes”). As such, while these objections raise a legitimate interest in
achieving the best possible recovery, they do not state a ground for finding the Settlement, which
embodies a compromise negotiated at arms’ length, deficient. Additionally, two "objectors"
(docket nos. 129 and 274) state that their personal interactions with Defendants were positive.
Again, these statements do not provide a basis to deny final approval. Further, docket no. 293
states "I think the Court should reject the settlement," but offers no discussion in support of an
objection. Similarly, docket no. 297 complains of losses associated with bank overdraft charges,
but offers no criticism in support of an objection.
39.

It is important to note that the above-referenced objections to the Settlement were

received out of a total mailing of approximately 15 million, representing a fraction of one
percent. See Lipuma v. Am. Express Co., Case No. 04-20314-CIV-ALTONAGA, slip op. at p.
45 (S.D. Fla. Dec. 20, 2005) (noting forty-one (41) objections out of a mailing of approximately
8.8 million “militates in favor of approval”). Second, and as noted above, while Settlement
Counsel is mindful that each member of the Settlement Class desires the “best possible”
recovery, Settlement Counsel is also mindful that “a jury verdict in [plaintiffs’] favor against the
settling Defendant is by no means a certainty.” Biben v. Card, [1991-1992 Transfer Binder] Fed.
Sec. L. Rep. (CCH) ¶96,512 at 92,330 (W.D. Mo. Dec. 10, 1991). Thus, in harmonizing these
two sentiments, Settlement Counsel tempered the “best possible” recovery with the risks of
further litigation during the negotiation process. In doing so, it is Settlement Counsels’ informed

settlement.)

16

belief that the immediate and substantial benefits provided in the Settlement are fair and
represent a better option than many potential outcomes in this Litigation. Finally, it must also be
noted that the objectors had the choice to opt out of the Settlement and preserve their claims but
chose not to do so. Consequently, the small number of objectors have not presented a sufficient
basis for this Court to reject the proposed Settlement.
40.

Lastly Settlement Counsel received two "objections" to any award of attorneys’

fees and reimbursement of litigation expenses.8 (Docket Nos. 70 and 196). Docket no. 70 while
seeking to participate in the Settlement states, "Its not fair for attorneys to get all the money for
themselves." As set forth in detail in the Memorandum in Support of Attorneys' Fees, Settlement
Counsel is entitled to an award of fees, and the amount sought here is well within the
benchmarks adopted by courts in this circuit and nationwide.
41.

As stated in Plaintiffs’ Motion for Award of Attorneys’ Fees, Reimbursement of

Litigation Expenses, and Approval of Service Payments to Class Representatives, based upon the
relevant factors, Settlement Counsel are entitled to an award of reasonable fees and expenses.
VII.

THE CLASS SHOULD BE FINALLY CERTIFIED FOR SETTLEMENT
PURPOSES
42.

The Court’s Order Preliminarily Approving the Settlement and Providing for

Notice preliminarily approved a Class for settlement purposes defined as “a class comprised of
all Chase Cardholders who were enrolled or billed for a Payment Protection Product at any time
between September 1, 2004 and November 11, 2010. Excluded from the class are all Chase
Cardholders whose Chase Credit Card Accounts that were enrolled or billed for a Payment
Protection Product were discharged in bankruptcy.”

8

As previously noted, the drafter of docket no. 196 lacks standing to object.

17

43.

The Class amply satisfies the requirements of Federal Rule of Civil Procedure

23(a) and 23(b)(3), and warrants final certification by the Court for the purpose of effectuating
the Settlement.
A.

The Class Satisfies the Requirements of Rule 23(a)

44.

Under Rule 23(a), class certification is appropriate where:

(1)

the class is so numerous that joinder of all members is impracticable,

(2)

there are questions of law or fact common to the class,

(3)

the claims or defenses of the representative parties are typical of the claims or
defenses of the class, and

(4)

the representative parties will fairly and adequately protect the interests of the
class.

The Class in this Litigation easily satisfies each foregoing requirements.
1.
45.

Numerosity

Many courts have determined that the numerosity requirement is satisfied when a

proposed class involves at least 40 members. Plaintiffs need not show that joinder is impossible;
impracticability of joinder will suffice. Here, Settlement Counsel identified some 15 million
potential Settlement Class members who were sent the court-approved Notice. Consequently,
the threshold for numerosity is readily met.
2.
46.

Commonality

Rule 23(a)(2) requires that there be common questions of law or fact, not that

every question be identical or common. This criterion is satisfied where there is even one single
issue common to all members of the Class, and therefore it is easily met in this case.

18

47.

Here, Plaintiffs, and members of the Settlement Class all challenge the same

course of conduct of Defendants. Indeed, Plaintiffs’ claims and those of other Settlement Class
members all arise from the same body of facts as they were all injured by the same series of
misleading and deceptive statements. In addition, the claims of Plaintiffs and other Settlement
Class members arise under identical legal theories. Accordingly, there are numerous common
issues of law and fact in the present case, including:
a)

Whether the Defendants’ sales, billing and marketing scheme is
deceptive, unlawful and/or unfair;

b)

Whether Chase's common and uniform sales, billing and marketing
schemes related to the Payment Protection product constitute a deceptive
trade practice;

c)

Whether Plaintiffs and the members of the Class are entitled to restitution
of all amounts acquired by Defendants through their common and uniform
scheme;

d)

Whether Plaintiffs and the members of the Class are entitled to injunctive
relief requiring the disgorgement of all wrongfully collected fees by
Chase;

e)

Whether Plaintiffs and the members of the Class are entitled to
prospective injunctive relief enjoining Chase from continuing to
engage in the fraudulent, deceitful, unlawful and unfair common scheme
as alleged herein; and

f)

Whether Plaintiffs and the members of the Class are entitled to recover
compensatory and punitive damages as a result of the Defendants’
wrongful scheme.

3.

Typicality

fraudulent,

48.

The typicality requirement set forth in Rule 23(a)(3) requires an inquiry into

whether the Class Representatives’ claims are based upon a legal theory that differs from that
upon which the claims of other Class members are based. “Typical” does not mean identical.

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Instead, the questions of law and fact merely need to arise out of the same legal or remedial
theory.
49.

Class Representatives’ claims are typical of the claims of the members of the

Class they seek to represent because Class Representatives, and the Class members each
sustained damages arising out of Defendants’ wrongful conduct. The Class Representatives’
claims arise from the same course of conduct and are predicated on the same legal theories as the
claims of other Class members, thus satisfying Rule 23(a)(3).
4.
50.

Adequacy of Representation

The adequacy requirement under Rule 23(a)(4) is designed to ensure that absent

class members’ interests are fully protected, while serving to uncover conflicts of interest
between named plaintiffs and a class.

Demonstrating that the named plaintiffs adequately

represent the class requires a showing that: (1) the named plaintiffs have interests in common
with, and not antagonistic to, the Class’ interest; and (2) plaintiffs’ attorneys are qualified,
experienced, and generally able to conduct the litigation.
51.

Here, there are no conflicts between the Class Representatives and the other Class

members. More particularly, the Class Representatives’ interests are directly aligned with, and
not in conflict with, the interests of the Settlement Class members.
52.
litigation.

There also can be no dispute that Class Counsel are capable of prosecuting this
Indeed, Class Counsel have extensive experience in prosecuting securities and

consumer fraud class actions. See Exhibits 1-5.

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53.

Furthermore, the Settlement is the product of lengthy negotiations with eminently

qualified defense counsel. The aggregate size of the Settlement validates the excellent quality of
Settlement Counsel’s representation of the Class.
B.

Predominance of Common Questions and Superiority of the Class Action to Other
Methods of Adjudication
54.

Rule 23(b)(3) authorizes class certification where: (1) the court finds that the

questions of law or fact common to the members of the class predominate over any questions
affecting only individual members, and (2) a class action is superior to other available methods
for the fair and efficient adjudication of the controversy. Both of these circumstances are present
in this Litigation.
1.

55.

Common Legal And Factual Questions Predominate Over Individual
Issues

Here, the issue of Chase's liability is centered on whether representations made by

Chase in connection with its Payment Protection program were misleading, deceptive and/or
unconscionable, and these issues predominate over any individual issues that theoretically might
exist. See, e.g., Bank One, 2002 U.S. Dist. LEXIS 8709, at *22 (“The issues of law and fact that
flow from Defendants’ alleged misstatements and omissions predominate over any individual
issue.”).

Thus, the evidence needed to prove the claims of all Class members would be

substantially the same. Accordingly, central issues therefore predominate over any individual
issues that theoretically might exist in the Litigation.
2.

56.

Superiority of the Class Action to Other Methods of Adjudicating
Plaintiffs’ Claims

When confronted with a request for settlement-only class certification, it is largely

unnecessary for a district court to inquire whether the case, if tried, would present intractable

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management problems. Nevertheless, absent class action treatment, the expense of individual
litigation of the claims presented in this Litigation would likely prevent Class members from
obtaining any recovery of their losses. Where, as here, each Class member suffered harm, but
the possibility and amount of individual recovery may not be sufficient to make individual
litigation worthwhile, a class action is the superior method for addressing these claims.
57.

Based on the factors set forth above, the Class amply satisfies the requirements of

Fed. R. Civ. P. 23(a) and 23(b)(3), warranting final certification by the Court.
VIII. THE PLAN OF ALLOCATION
58.

After the parties reached the proposed Settlement, Settlement Counsel formulated

a fair plan of distribution of the Settlement Fund to the Class (the “Plan of Allocation”). If
approved, the Plan of Allocation will govern how the proceeds of the Settlement Fund, less
appropriate costs, fees, and expenses (the “Net Settlement Fund”), shall be distributed among
Class Members who submit valid and timely Proof of Claim forms.
IX.

SETTLEMENT COUNSEL’S FEE AND EXPENSE APPLICATION
59.

The prosecution of this Litigation was undertaken by Settlement Counsel on an

entirely contingent basis. As compensation for the efforts expended to achieve this outstanding
result for the Class, Settlement Counsel now seek fair and reasonable compensation for
Settlement Counsel’s services.

Specifically, Settlement Counsel respectfully requests an

aggregate fee award of 25% of the Settlement Fund, which amounts to $5.0 million, as well as
reimbursement of $62,676.54 for their out-of-pocket expenses reasonably incurred in the
prosecution of this Litigation.
60.

A summary of each firm’s time and expense is attached hereto as Exhibits 1-5.

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61.

As shown in detail in Exhibits A-E, Settlement Counsel expended 3344.30 hours

resulting in a lodestar of more than $1,912,853.00.

Settlement Counsel also collectively

underwrote expenses of $62,676.54 during this period, all of which was at risk in this Litigation.
Moreover, Settlement Counsel's experience with dozens of other class action settlements reveals
that we can expect to spend several hundred additional hours in settlement administration, which
are not reflected in Exhibits 1-5.
62.

The effort expended by Settlement Counsel was significant.

As discussed,

Settlement Counsel believes that the persistence and the quality of those efforts were responsible
for the superior result achieved for the Class here.
63.

Settlement Counsel also prosecuted the Litigation efficiently.

At all times

Settlement Counsel jointly divided responsibilities to prevent duplication of effort. To the extent
Settlement Counsel used unappointed counsel, such was carefully supervised by Settlement
Counsel to ensure that the work quality was consistent throughout and that results could be
achieved in a timely fashion.
64.

There is no question that had the Settlement not been reached, the factual and

legal questions at issue would continue to be the subject of lengthy, complex and highly
adversarial litigation. Numerous issues would be involved in proving liability, damages and loss
causation.
65.

The risks of this Litigation are also clear. Class Representatives faced risks with

respect to numerous issues relating to liability and damages. Presenting these issues to a jury
would have involved enormous risk. All of these issues presented potential obstacles to securing
a recovery for the Class absent the Settlement.

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66.

In addition, there was substantial risk of a jury verdict for the Defendants, or after

judgment for Plaintiffs, an appellate reversal, any of which would have left the Class and
Settlement Counsel without any recovery whatsoever.
67.

Settlement Counsel’s financial investment in the Litigation was significant – and

wholly at risk. Settlement Counsel understood that they were embarking on a complex, riskladen, expensive and lengthy litigation with no guarantee of ever being reimbursed, let alone
compensated, for the investment of time and money the case would require. In undertaking that
responsibility, Settlement Counsel obligated themselves to ensure that sufficient dollars and
attorney resources were dedicated to the prosecution of this Litigation. Frequently, Settlement
Counsel takes contingent cases such as this and, after expending thousand of hours and many
thousands of dollars, receive nothing. The risk of non-payment in complex cases such as this
one is real. Even if one succeeds, there could be changes in the law or unexpected evidence. It
is commonplace for Counsel to have expended thousands of hours in various class actions and to
have received nothing for their diligence and expertise in litigating those cases through motion
practice, pretrial discovery and trial.9
68.

When Settlement Counsel undertook to act for the Class, we were aware that the

only way we could be compensated was to achieve a successful result. We believe we have done
so. Investment of these resources limited our firms’ ability to staff other matters and to accept
new profit-generating matters. Risks and consequences of these kinds weigh in favor of the 25%

9

See, e.g., Kalish v. Franklin Advisers, Inc., 742 F.Supp. 1222 (S.D.N.Y. 1990); Robbins v. Kroger
Properties, 116 F.3d 1441 (11th Cir. 1997); Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990);
Krinsk v. Fund Asset Management, Inc., 715 F. Supp. 472 (S.D.N.Y. 1988), aff’d, 875 F.2d 404 (2d Cir.
1989); Landy v. Amsterdam, 815 F.2d 925 (1st Cir. 1987); Spielman v. General Host Corp., 402 F.Supp.
190 (S.D.N.Y. 1975), aff’d, 538 F.2d 39 (2d Cir. 1976).

24

fee sought here. The Class recovery is not only successful, especially in light of the risks of this
complex and unusual litigation, but demonstrably and quite concretely an excellent result.
69.

Settlement Counsel are actively engaged in complex federal civil litigation,

particularly the litigation of consumer class actions. Our experience in the field allowed us to
identify the complex issues involved in this case and to formulate strategies to effectively
prosecute them. Further, Settlement Counsel were lead counsel in an action against Capital One
involving that Company's payment protection product. This experience was vital to efficiently
and effectively litigate claims against Chase. 10 We believe that our reputations as attorneys who
will zealously carry a meritorious case through the trial and appellate levels as well as our
demonstrated ability to vigorously develop the evidence in this case placed us in a strong
position in settlement negotiations with Defendants.
70.

Defendants here were represented by Covington & Burling, LLP. Among the top-

tier law firms in the country, this firm has dozens of attorneys in its litigation department.
Throughout the Litigation, Defendants’ counsel unfailingly zeroed in on the weakest elements of
the Litigation. Furthermore, in litigating against the Defendants, Settlement Counsel faced
litigants with no meaningful limits on the resources they could mount to defend.
71.

As discussed in more detail in the accompanying fee memorandum, the requested

fee of 25% falls well within the range of practice and precedent in this Circuit and throughout the
country, where district courts commonly award fees in amounts between 20% and 33% of
common funds obtained and multiples of three times lodestar in complex class action cases.
72.

A recent empirical study selected for the 2009 Conference on Empirical Legal

Studies at Vanderbilt Law School found that for federal class action settlements in 2006 and
10

See discussion of the Capital One Litigation at ¶16-19.

25

2007, the mean and median fee awards in cases applying a percentage-of-the-settlement method
was approximately 25%. Brian T. Fitzpatrick, An Empirical Study of Class Action Settlements
and their Fee Awards, 7 J. EMPIRICAL L. STUD. 811, 838 (2010).
73.

Moreover, the findings of this report is consistent with another study published in

the Journal of Empirical Legal Studies that examined fee awards between 1993-2002. The study
used published opinion data as well as class action reports data and concluded that the median
fee award in settlements applying a percentage-of-the-settlement method was between 24% and
30%. Theodore Eisenberg and Geoffrey P. Miller, Attorney Fees in Class Action Settlements: An
Empirical Study, 1 J. EMPIRICAL L. STUD 27, 52 (2004).
74.

Accordingly, the requested fee is fair and reasonable.

75.

Moreover, the requested fee is further justified based on a lodestar cross-check.

See Fee Memorandum at pp. 8-9. As previously indicated, collectively, Settlement Counsel have
expended 3344 hours, or $1,912,853.25 in lodestar, in the prosecution and settlement of this
Litigation. As such, the requested fee award represents a lodestar multiplier of 2.6.
76.

The multiplier requested here -- 2.6 -- is well within the range awarded in class

action litigation. The multiplier is justified by both the extraordinary recovery achieved and
practice and precedent in similar cases. See In re Visa Check/Mastermoney Antitrust Litig., 297
F. Supp. 2d 503, 524 (E.D.N.Y. 2003) ("multipliers of between 3 and 4.5 have become
common"), In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465, 489 (S.D.N.Y. 1998)
(court approved fee equaling a multiplier of 3.97, and noted that "in recent years multipliers of
between 3 and 4.5 have become common"). See also 1 Conte, Attorney Fee Awards § 2.06
(1993), p. 39 (multiplier of 5-10); 3 Newberg on Class Actions § 14.03, p. 14-5 and n. 21 (1992)

26

(citing multipliers of five and ten in "large common fund" cases). These decisions and the
decisions cited in the accompanying fee memorandum (at p. 8), show that the multiplier
requested is fair.
77.

Settlement Counsel’s hourly rates are also fair and compare favorably with the

rates recently charged by defense counsel, who, moreover, operate without risk of nonpayment.
For example, a fee request recently submitted by Skadden, Arps, Slat, Meagher & Flom, LLP
bills more than $16 million for 3½ months of work, at partner rates that average $775/hour (and
range from $620 to $835) and at associate rates that average $448/hour (and range from $295 to
$540), yielding a blended rate exceeding $550 per hour for all attorneys and $486 per hour
overall.
78.

Public policy considerations are well-stated by the Honorable Denise Cote in her

opinion in In Re WorldCom, Inc. Securities Litigation, 388 F. Supp. 2d 319, 359 (S.D.N.Y.
2005), where she held:
Public policy also supports the approval of this fee request. The size of the
recovery achieved for the class - which has been praised even by several objectors
- could not have been achieved without the unwavering commitment of Lead
Counsel to this litigation. Several of the lead attorneys for the Class essentially
devoted years of their lives to this litigation, with the personal sacrifices that
accompany such a commitment. If the Class Representatives had been
represented by less tenacious and competent counsel, it is by no means clear that
it would have achieved the success it did here on behalf of the Class. In order to
attract well-qualified plaintiffs' counsel who are able to take a case to trial, and
who defendants understand are able and willing to do so, it is necessary to provide
appropriate financial incentives. After all, this litigation was conducted on an
entirely contingent fee basis, and Lead Counsel paid millions of dollars to fund
the litigation. While some significant recovery in a case of this magnitude may
seem a foregone conclusion now, the recovery achieved here was never certain.
79.

The same applies here. Settlement Counsel’s initiative and tenacity in pursuing

the claims against the Defendants resulted in the $20,000,000 settlement. Thus, Settlement

27

Counsel should be rewarded for their singular effectiveness in obtaining the results achieved for
the Class.
80.

Settlement Counsel are also requesting reimbursement of their out-of-pocket

expenses necessarily incurred and advanced by them in the prosecution of the Litigation in the
amount of $62,676.54. The expenses incurred by Settlement Counsel relate to the costs incurred
in connection with litigating an action against well-financed Defendants. As is detailed in
Settlement Counsel’s individual affidavits (Ex. 1-5), counsel have carefully reviewed each of the
expenses to ensure that they accurately reflect costs necessarily incurred in obtaining the
Settlement.
81.

The foregoing summary of expenses incurred in the prosecution of the Litigation

are described in further detail in the individual exhibits to this Declaration. These costs do not
include the expenses of the Claims Administrator associated with providing Court ordered notice
to the Class and administering claims. Those amounts will be separately requested on behalf of
the Claims Administrator, after the settlement administration is complete.
82.

Settlement Counsel believe these expenses were reasonably and necessarily

incurred and were, in fact, critical to Class Representatives' ability to obtain the recovery here.
83.

In addition, the Notice provided to the members of the Class informed them that

Settlement Counsel would seek reimbursement of their expenses incurred in the prosecution of
the Litigation of no more than $150,000. To date, no member(s) of the Class has raised an
objection to that request.
84.

The work performed and the results achieved by Settlement Counsel in this

Litigation demonstrate the proficiency, commitment and quality of representation provided to

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Class Representatives and the Class. As such, it is without question that the Settlement was
obtained through the diligence, skill, and litigation efforts of Settlement Counsel.
85.

Indeed, the experience, dedication, and expertise of Settlement Counsel allowed

them to effectively represent the interest of the Class to a favorable resolution. In this regard,
Settlement Counsel’s firm resumes, attached hereto as components of exhibits A through E,
attest to the substantial experience Settlement Counsel has in securities and consumer class
actions and provides a summary of the cases and significant recoveries they have litigated and
obtained.
86.

Settlement Counsel also respectfully petition this Court for a service award in the

amount of $2,500.00 for each named Plaintiff. Each Class Representative has been committed to
and actively involved in this Litigation from its very inception. Among other things, Class
Representatives have (i) reviewed and approved numerous submissions throughout this
Litigation, including the Amended Complaint; (ii) had extensive and regular telephonic and
email communications with Settlement Counsel, as well as in person meetings, regarding
strategy for and developments in the Litigation; and (iii) fully participated in all settlement
discussions on behalf of the Class. These are precisely the types of activities Courts have found
to support service awards to class representatives. Accordingly, the application of a service
award to Class Representatives in the amount of $2,500.00 should be approved.
X.

CONCLUSION
87.

In sum, it is the considered and informed judgment of Settlement Counsel, based

on all the proceedings to date and their extensive experience in litigating class actions, the
Settlement now before the Court is fair, reasonable, adequate and in the best interest of the Class.

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As such, and based on fee awards in similar cases, Settlement Counsel respectfully submit that
the outstanding recovery achieved and the risks and challenged undertaken by Settlement
Counsel warrant the granting of the requested fee and expense award.
I declare under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct.
Executed this 28th day of July, 2011.
/s/ Allen Carney
Allen Carney

/s/ Richard Golomb
Richard Golomb

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