Kardonick v. JP Morgan Chase & Co. et al

Filing 354

RESPONSE in Opposition re 17 Joint MOTION Preliminary Approval of Class Action Settlement re 16 Stipulation,, 194 MOTION to Appear Pro Hac Vice, Consent to Designation, and Request to Electronically Receive Notices of Electronic Filing for Richard Golomb, Ruben Honik, James Allen Carney and Curtis L. Bowman. Filing Fee $ 300.00. Receipt # 17680/17681., 298 Plaintiff's MOTION for Attorney Fees and Reimbursement of Litigation Expenses, 18 Plaintiff's MOTION Memorandum of Law In Support of Joint Motion For Preliminary Approval of Class Action Settlement re 17 Joint MOTION Preliminary Approval of Class Action Settlement re 16 Stipulation,, 16 Stipulation,Plaintiff's MOTION Memorandum of Law In Support of Joint Motion For Preliminary Approval of Class Action Settlement re 17 Joint MOTION Preliminary Approval of Class Action Settlement re 16 Stipulation,, 16 Stipulation, Objection to Settlement and Award of Attorney fees filed by Douglas Paluczak, Chris Schulte, Laura Fortman. (Weinstein, Matt)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
C. A. No. 1-10-cv-23235-WMH
AVID 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.
Defendants.
______________________________________
OBJECTIONS TO SETTLEMENT AND AWARD OF ATTORNEYS’ FEES
BY CLASS MEMBERS
DOUGLAS PALUCZAK, CHRIS SCHULTE AND LAURA FORTMAN
AND INCORPORATED MEMORANDUM
COMES NOW, Douglas Paluczak, 203 Runyon Ave. St. Louis, Missouri 63125, d.o.b.
xx/xx/58, S.S. No. xxx-xx-6750, postcard verification #8v30sju, and Chris Schulte, 3266
Country Knoll Drive, St. Charles, Missouri 63303, d.o.b. xx/xx/70, S.S. No. xxx-xx-1145, Claim
No. 420459, and Laura Fortman, 1217 Old Stone, O'Fallon, Missouri 63368, xx/xx/66, postcard
verification I61N75L, Claim #417628, by and through their attorneys, and hereby file their
OBJECTIONS TO SETTLEMENT AND AWARD OF ATTORNEYS’ FEES, objecting to the
Stipulated Class Action Settlement and application for attorneys’ fees by settlement counsel for
the following reasons:
I. The amount requested as attorneys’ fees by Counsel is excessive in view of the
actual work performed, relief obtained, and the benefit provided to the class resulting in a
windfall to Settlement Counsel that is not supported by Law.
The actual work performed does not justify the attorney’s fee claim.

Plaintiffs’

counsel who are seeking some five million dollars in fees (whom we will hereinafter refer to, as
they themselves do, as “Settlement Counsel, ” See Motion for Fees and Expenses, [DE 298] p.
1-17), devote pages of text to convince this Court and their class members that merely filing a
Complaint and entering into settlement negotiations justifies 25% of the common fund,
calculated by Settlement Counsel to be a fee award of Five Million Dollars. Class Counsel seeks

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this amount despite having completed little formal discovery, opting instead for informal
discovery with only settlement, not litigation on the merits, in mind. In fact, the attorneys
claiming the vast bulk of the lodestar calculated fees have just recently been admitted pro hac
vice, apparently for the sole purpose of getting paid.
Managing Class Action Litigation: A Pocket Guide for Judges, p. 21, 2010 3rd ed.
(downloadable from the internet at http://www.uscourts.gov) warns the judiciary to beware of
settlements involving attorneys who are not directly involved in litigating class claims
(“Sometimes, the settlement will be with an attorney who has not been involved in litigating the
class claims that other attorneys have been pursuing, an especially suspicious circumstance”)
Here, the class counsel seeking the vast bulk of the fees could only conduct informal
discovery, as they (a) are not licensed to practice in this court and (b) were not even admitted pro
hac vice until after the settlement had been reached! Notice of the stipulated settlement was
filed Dec 6, 2010 [DE 14] only 90 days after the action was filed; The Stipulation of Settlement
itself was filed Dec 21, 2010; And the claimants of most of the fees were not admitted until April
2011 (Steven Owings, April 20, [DE 156], and Richard Golomb, Ruben Honik, James Allen
Carney, & Curtis Bowman, on April 22, [DE 194] ), some four months later!
Indeed, the only Florida attorneys representing the Plaintiff at inception of this case on
September 8, 2010, were Ku & Mussman, P.A., who claim a lodestar amount of only $40,875.00
(Exh. 4 of Motion in Support of Fees (hereafter, “Fee Motion,” p. 2). The ones with the biggest
claims: James Allen Carney, Lodestar claim $365,000 + $510,000 for others in his firm; [Ibid.
Exhibit 1]; Richard Golomb, Lodestar claim of $345,000 [Ibid., Ex 2]; Ruben Honik, Lodestar
claim of $305,000 [Ibid., Ex 2] are all April-Come-Latelys.
Recently admitted Settlement Counsel allege that “confirmatory discovery” occurred,
and that “interviews” occurred, and “thousands of pages of documents” were reviewed along
with regulatory materials (Fee Motion, p. 3). What is absent is any mention of any actual
litigation that occurred in this particular case that would somehow justify millions of dollars in
attorneys fees.
Indeed, Settlement Counsel boasts that the real litigation, or controversy fought by the
parties occurred in another suit where “. . . settlement counsel had spent much of the previous
three years litigating similar claims to a favorable outcome in the Capital One Litigation.” (Fee
Motion p. 8). Suit was only filed in this case after concluding the previous litigation. Id.
Moreover, Settlement Counsel does not reveal “what is in their wallet” as a result of such
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litigation with Capital One, but on its face argues to this Court that payment of millions of
dollars is justified because of the “favorable outcome” against Capital One. At best, it gives the
appearance that Settlement Counsel is seeking recovery for work performed in another case.
Ultimately, what Settlement Counsel did with Capital One is irrelevant for purposes of
requesting fees from this Court. In reality, Class Counsel is seeking additional payment for work
it has already been paid for.
At minimum, Settlement Counsel’s reference to settlement of another similar case
demonstrates that Settlement Counsel are involved in this particular case for no other purpose
other than settlement, designated by the Pocket Guide at page 21 as an “especially suspicious
circumstance.” This does not begin to address the issues of Settlement Counsel seeking fees for
work performed when they were not admitted to practice before this Court, who submitted
Declarations that do not inform the Court of the times or days that such work was performed
(Fee Motion, DE 298 Exh. 1 & 2).
Settlement Counsel cites the case of Camden v. Dunkle, 946 F.2d 768, 774 (11th Cir.
1991), as supportive of their fee application, noting that such fees are determined based upon the
“facts” of each case. (CC’s Mot. Fees p.5). The facts of this case do not support the claimed
attorney’s fee award. Indeed they cast doubt on credibility of even the Lodestar claim amounts.
The Court docket reflects that the only substantive litigation pleading between the parties in
this case was (1) the filing of the Complaint on September 8, 2010[DE 1]; (2) the filing of
Defendant’s Motion to Dismiss on November 1, 2010 [DE 11]; which Motion Plaintiffs did not
have to respond to, as (3) Plaintiff quickly filed an Amended Complaint [DE 15] on December
21. The Stipulation for Settlement [DE 16] was filed that same day.
In sum, the “facts” are that Settlement Counsel (all but two of whom were not admitted
to practice in this court) filed a complaint copied from an earlier case (the Capital One
litigation); and an amended complaint. They never responded to any dispositive motions, nor
performed any formal or substantive discovery and promptly negotiated a settlement awarding
themselves 25% of a Twenty Million settlement while leaving the class members with, as we
shall see below a payment of less than $1.00 per class member.
Not only do the Court’s docket entries fail to support Settlement Counsels’ claims but so
does the lack of documentation in their fee application. This Court’s Local Rule 7.3 setting the
standard for fee applications requires each application to not only list the hours claimed for each
timekeeper “a description of the tasks done during those hours;” and to “describe and
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document with invoices all incurred and claimed fees and nontaxable expenses.” Those
items do not appear in Settlement Counsel’s application, and with good reason. The Court
Docket shows that less than 90 days after filing this class action, Notice of Settlement was filed
with the Court on December 6, 2010 [DE 14] and this case has been pending for the last 8
months in the posture of settlement with no other litigation activity. In short, not only do the
facts but the lack of facts fail to support Settlement Counsel’s claims.

II. The settlement is unfair to the class members because it is insufficient.
Class Counsel argues this is a fair settlement, but avoid mentioning the fact that if each
and every class member submitted a claim - and only made one claim - that such claimant would
receive less than One Dollar. Class Counsel fails to direct the Court’s attention (and that of the
class members, by failing to post their Motion for Fees on the website designed to inform their
class members, www.kardonicksettlememnt.com ) to the “administration cost” of $3,607,350.00
to be paid to the claims administrator who provided notice and is burdened with processing
claims (Settlement Agreement, p.21-23; 23 G.; p. 17, VI. A, B). The Settlement Fund created
for payment of claims is thus reduced by almost 18% just for providing notice and tracking the
minimal pay-outs made to those class members who are not charged off, or whose accounts have
been sold to third parties.
After administration costs, the fund available for distribution is actually only
$16,392,650.00. If then further reduced by the sought for Five Million dollars in fees, the fund
shrinks to only $11,392,650.00 to pay claims for a class consisting of over 15 Million persons.
That is less than a dollar per class member. Such amount is woefully inadequate to compensate
the class members in exchange for their agreement not to sue the Defendants in this case for the
damages they have incurred for having the privilege of Defendants providing them with a
“payment protection plan” for which they neither asked nor were able to utilize when needed;
and is especially inadequate for those members who were further damaged when their accounts
were “charged off” by Defendants or whose overdue accounts were sold to third parties for
collection (Settlement Agreement [DE 16] . p. 16, par. 6; p. 25-D).
The common fund doctrine authorizes the trial court to deduct reasonable attorneys' fees
from the damages recovered from the defendant, which are held in a common fund for the class
pending distribution. Leonard v. Enterprise Rent a Car, 279 F.3d 967, 974 (11th Cir., 2002).
This doctrine provides that "a person who at his own expense and for the benefit of persons in
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addition to himself, maintains a successful action for the preservation, protection or creation of a
common fund in which others may share with him is entitled to reasonable attorney fees from
the fund as a whole." Blue Cross Blue Shield Health Care Plan v. Gunter, 541 F.3d 1320, 1323
(11th Cir., 2008)
Here, under the Leonard and Gunter Courts’ definition of “common fund”, the only
funds “held in a common fund for the class pending distribution” and in which “others may
share” are at best $16,392,650 out of the $20 Million, as $3.6 Million is for payment for the cost
of notice and accounting and processing of the claims. Stated differently, the $3.6 Million
Defendants have paid for giving notice to the class is not “damages” recovered from Defendants
that are to be distributed to the class. Therefore, such amount should not be included in the
calculation of the attorney’s fees in accordance with the 11th Circuit’s definition of “common
fund.”
Thus, any recovery by Settlement Counsel from the common fund that they created
should be based upon the $16,393,650.00, and not 20 Million Dollars. So even if the Court
determined Settlement Counsel were entitle to 25% of the common fund, that amount would be
$4,098,162.50 and not Five Million Dollars.

III. The settlement is unfair because the attorney fees to be paid Settlement Counsel
is excessive in relation to the benefits accruing to the class.
The Pocket Guide advises the court that a “hot button indicator” that a settlement is
unfair exists when there is “an imbalance between the cash value of the settlement to the class as
a whole and the agreed amount of attorneys fees is a prime indicator of collusion by settling
attorneys.” Pocket Guide “Reverse Auctions” and the like” 2010 ed. p. 20. Collusion: This case
appears to be nothing more than one of collusion between Settlement Counsel and Defendant to
pay Settlement Counsel an exorbitant fee in exchange for eviscerating the rights of the class
members; protecting the Defendants from suit and damages, while leaving the class members
with less than a Dollar each.
The Pocket Guide warns judges to be vigilant regarding Class Counsel who seek fees
for what is nothing more than settlement of the case at hand, evidencing collusion or a “Reverse
Auction” among the parties:
A typical element of a reverse auction is a promise to pay attorneys
more than a reasonable value for the time they invested in
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negotiating the settlement. Generally, the overpayment of the
attorneys originates in an underpayment of what the class should
receive based on an objective assessment of the merits of the class
claims. (Pocket Guide, p. 21).
Settlement Counsel has conceded that the majority of the “work” performed occurred
during settlement, or while negotiating settlement, and while they were not admitted to practice
before this Court. Class Counsel identifies themselves in their Memorandum supporting their
Motion for Attorneys Fees as “Settlement Counsel” (Memo. Support. Fees, p. 1-17), indicating
to this Court that the only “work” performed was simply settling the case.
Moreover, as discussed below, Defendants are not prohibited or enjoined from
conducting such unlawful activities in the future, and are free to prey upon their cardholders and
bind them to unnecessary and worthless protection plans in the future. It is anticipated that a
large percentage of the class will receive no funds, since their accounts were either charged off,
or sold to third parties once they were not longer able to make their payments. At minimum, due
diligence required discovery, particularly on the issue of the number of class members that
would be subject to no recovery due to Defendants’ labeling them as “Charged Off” or the
account sold to third parties. Class Counsel claims that discovery occurred, including
depositions, and yet the Court’s docket fails to reflect any such activities. Notably, the lack of
injunctive relief to the class demonstrates that whatever discovery was had, the class certainly
did not benefit therefrom even if conducted informally (Memo. Support Fees p. 16).
The Pocket Guide also warns the judiciary to be leery of settlements that are presented
without corresponding claims data, and advises that the recovery of class counsel should be
based upon a percentage of the claims actually made:
Your appraisal of the settlement should focus on the value actually
distributed to the class-based on the number and percentage of
class members who have filed a claim. . . Because there is no clear
standard for predicting class response rates, consider calculating
any attorney fee award as a percentage of the amount of the
settlement fund that has already been distributed to claimants-even
if that means deferring final determination of all or part of the fee
award until the claims process is complete. (Pocket Guide, p. 16,
2010 ed).
Stated differently, the only basis for paying Class Counsel Five Million Dollars is if, and
only if, claims are submitted in an amount requiring payment by the claims administrator of
Twenty Million Dollars, and if this Court finds that paying the class members little more than
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$1.00 each is fair in this settlement negotiated by attorneys who were not admitted to practice
before this Court, and did not represent them at any stage of this litigation other than after
settlement.
It is proper for courts to review the actual claims made and the amount paid before
calculating an attorney’s fee award. Schwartz v. Dallas Cowboys Football Club, Ltd., 157 F.
Supp. 2d 561 (E.D. Pa. 2001); accord, Sylvester v. CIGNA Corp., 369 F.Supp. 2d 34, 50-53 (D.
Me. 2005). Here, the claims administrator is providing this Court with data concerning the
number of claims filed and the aggregate amount of the claims to be paid approximately 15 days
before the fairness hearing (Stlmt Agrmt, [DE 16] p. 27, XI), and this Court should refrain from
entertaining the calculation of an attorney’s fee until all the claims data is received, including the
number of class members who were “charged off” or had their accounts sold, and therefore
received nothing while releasing the Defendants from liability.
Under the circumstances described above, Settlement Counsel should not be
compensated for work they performed that is related only to settlement of the case, particularly
since they were not authorized to practice law in this Court until April of 2011, over eight (8)
months after the case was filed. As such Settlement Counsel is entitled to a nominal fee, in line
with the nominal work performed on behalf of the class.

IV. The Proposed Settlement is unfair as it fails to provide injunctive
relief preventing Defendants from engaging in the conduct alleged by Plaintiffs as harming
the class members after settlement.
Settlement Counsel, along with the other firms actually admitted to practice before the
Court originally sought injunctive relief “Enjoining Chase from engaging in the deceptive,
unlawful and unfair scheme described in this Complaint.” (Complaint, p. 23, par. 106; Amended
Complaint, p. 25, par. 110). Instead, it is the class members who are enjoined and prohibited
from prosecuting their claims (Preliminary Approval Order, p.10, par. 28).

Nothing in the

Settlement Agreement proposed by the parties prohibits the Defendant from engaging in the very
same scheme of activity that resulted in this suit being filed.
The Pocket Guide warns this Court that it should “Question whether injunctive relief will
truly benefit class members in the case at hand.” Pocket Guide, p. 21., 2010 ed. Injunctive relief
would benefit the class. As it now stands, this Settlement does nothing to prevent the Defendant
from “signing up” class members for yet another payment protection plan for which they bill
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their account holders, and nothing prevents Defendant from denying claims that are made on
such plans, or places any limitations on the exclusions Defendant can use to keep their account
holders from obtaining the benefits of such payment protection plans. Class members get the
chance to file a claim that might pay them a monetary award up to $60, $30 or $15 for each
claim filed. This is nothing more than a “small award” that the Pocket Guide would have this
Court avoid by instead promoting injunctive relief:
In many cases, by putting an end to illegal practices, an injunction
will benefit more class members than a small award. It will also
avoid clogging the judicial system with the administration of small
awards to thousand of class members. Pocket Guide, p. 21-22,
2010 ed.
And here, the class members number over fifteen million when the sums available to them is less
than Twelve Million. Dollars. Putting a stop to the deceptively used “payment protection plan”
is worth more to class members instead of a guarantee of less than One Dollar for each class
member.
Looked at another way, the Defendants can recoup whatever money they have paid out
by continuing to engage in the same deceptive practices that led to the filing of this suit against
account holders who no longer have a remedy against Defendants, and have released them from
such claims.
V. The Proposed Settlement is unfair as it fails to address the need for
the creation of subclasses for the class members who were:1) denied claims under the
payment protection plan; 2) did not make a claim for benefits under the payment
protection plan but fit one or more qualifying groups; 3) merely unhappy with the payment
protection plan; 4) members whose accounts were Charged Off and would receive only a
credit and no payment under the settlement; and 5) members whose claims were sold to
third parties.
The Supreme Court has made clear that "[s]ettlement is relevant to a class certification."
In re Pet Food Products Liab. Litig. Jim W. Johnson And Dustin Turner, 629 F.3d 333,341 (3rd
Cir., 2010); Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 619 (1997). Consequently, a district
court "may take the proposed settlement into consideration when examining the question of
certification." In re Prudential Ins. Co., 148 F.3d 283, 308 (3d Cir. 1998). In Amchem, the
Supreme Court explained:
Confronted with a request for settlement-only class certification, a
district court need not inquire whether the case, if tried, would present
intractable management problems, for the proposal is that there be no trial.
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But other specifications of [Rule 23]—those designed to protect absentees
by blocking unwarranted or overbroad class definitions—demand
undiluted, even heightened, attention in the settlement context. Such
attention is of vital importance, for a court asked to certify a settlement
class will lack the opportunity, present when a case is litigated, to adjust
the class, informed by the proceedings as they unfold.
In Re Pet Food Products Liab. Litig., 629 F.3d. at 341, Amchem, 521 U.S. at 620. Under
such circumstances, the Supreme Court mandates that Class Counsel must show that "'the
representative parties will fairly and adequately protect the interests of the class.'" Id. at 342. The
adequacy of the representation is paramount to the Supreme Court on cases where certification
has occurred for settlement purposes only. Id. The dominant concern then becomes whether a
proposed class “has sufficient unity so that absent class members can fairly be bound by
decisions of class representatives. That dominant concern persists when settlement, rather than
trial, is proposed." Id.
When appropriate, a class action may be divided into subclasses that are each treated as a
class under [Rule 23]. Fed. R. Civ. P. 23(c)(5). In Re Pet Food Products Liab. Litig., 629 F.3d. at
343. Subclasses are appropriate "'[w]here a class is found to include subclasses divergent in
interest.'" In Re Pet Food Products Liab. Litig., 629 F.3d. at 343; In re Ins. Brokerage Antitrust
Litig., 579 F.3d 241, 271 (3d Cir. 2009) (quoting Fed. R. Civ. P. 23(c) advisory committee's
note); see also Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999) (explaining that Amchem
requires "a class divided between holders of present and future claims" to be "divi[ded] into
homogeneous subclasses... with separate representation to eliminate conflicting interests of
counsel"). Accordingly, "[a] district court hearing a class action has the discretion to divide the
class into subclasses and certify each subclass separately." In Re Pet Food Products Liab. Litig.,
629 F.3d. at 343; In re Cendant Corp. Sec. Litig., 404 F.3d 173, 202 (3d Cir. 2005).
Here, this case was certified only for purposes of settlement, and the following class
definition followed, as set forth on the website www.kardonicksettlement.com:
All Chase credit card holders who were enrolled in 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.
This proposed settlement is notable for who is not included in the release of claims

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against the Defendants: Only those cardholders who were discharged in bankruptcy. As
described, everyone else is a class member, so long as such persons were enrolled in or billed for
a payment protection product anytime during September 1, 2004 and November 11, 2010. This
definition is overbroad, and releases claims of persons who have not even, or may never make a
claim for payment protection plan benefits.
While on its face this may appear sufficient, but as they say “the devil is in the details”
and Settlement Counsel ignored such critical details in failing to create the necessary subclasses
described below, in their quick grab for $5 Million in fees from Defendants. This Court should
establish the following subclasses under the holdings of Amchem and its progeny:
Subclass A: Class Members who submitted one or more claims under the payment
protection products, and such claims were denied.
Settlement Counsel created such subclass when it determined with Defendants for such
class members that “If you made a claim for payment protection plan benefits and your claim
was denied, it is estimated you will receive $60.00 before fees and expenses”
(kardonicksettlement.com, FAQ-“What benefits can I receive as a part of this Settlement?”) In
this scenario, this subclass includes only those class members who actually submitted a claim to
Defendants-and such claim was denied. It is understood that the damages of such class members
would be readily ascertainable as a consequence of denying such claim, evidencing a greater
likelihood of prevailing on the merits of this action as a class member.
Settlement Counsels’ Amended Complaint does not allege that any of the three (3)
named plaintiffs had claims that were denied, but the pleadings show that they were selfemployed and retired and were enrolled in such payment protection plans. (Amended
Complaint, p. 12; par. 58; p. 13; par. 62 & 64). Settlement Counsel must show that "'the
representative parties will fairly and adequately protect the interests of the class.'" In Re Pet
Food Products Liab. Litig., 629 F.3d. at 341, Amchem, 521 U.S. at 620. The adequacy of the
representation is paramount to the Supreme Court on cases where certification has occurred for
settlement purposes only. Id. Since the named plaintiffs in this suit never filed a claim for
benefits under the payment protection plan(s), they are inadequate to represent parties who
indeed had claims that were denied, and additional named class plaintiffs are necessary as
Kardonick, David and Clemins fail to demonstrate the critical areas of typicality and
commonality which must be established prior to certification of this as a settlement class.
Here, Settlement Counsel created several subclasses when they established the priority of
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pay-outs, or the maximum amount of payout per claim. Under the analytical framework of
Amchem described above, these class members have a present claim for relief, as to be
distinguished from the next group, Subclass B, where such class members demonstrate they may
have a future claim for relief, requiring this Court to establish subclasses for future and present
claims, congruent with the Supreme Court’s determination of when this Court should establish
subclasses. Supra, Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999). Under the holding of
Ortiz, separate counsel must also be appointed for Subclass A and new class representatives
selected, such as Objector Douglas Paluczak, whose claim was denied under the payment
protection plan. Id.
Subclass B: All class members who did not submit a claim under the payment protection
plan, but were involuntarily enrolled in such product(s), and at any point during
enrollment qualified as any of the following: self employed, retired, seasonally employed,
employed less than 30 hours per week (or less than 15 hours per week for students), or left
employment.
Settlement Counsel created, or at least fully described this sub-class immediately after
defining Subclass A above, with the language:
If you were billed for or enrolled in a Chase payment protection
product without your knowledge or consent and/or at any point
during your enrollment you were self employed, retired, seasonally
employed, employed less than 30 hours per week (or less than 15
hours per week for students), or forefeited your job (resigned) it is
estimated you will receive $30.00 before fees and expenses.
(Kardonicksettlement.com. FAQ-“What benefits can I receive as a part of this Settlement?”)
Objector Laura Fortman is a class member under Subclass B. Under Ortiz, these class members
have a future claim, in that they have not had a claim denied because it was not submitted,
therefore requiring establishment of this subclass and appointment of new counsel. Named
plaintiffs Kardonick, David and Clemins cannot remain as proper class representatives, as they
meet the definition of being self-employed, and retired (Amended Complaint, p. 12; par. 58, p.
62; par. 62 & 64), but no allegation is raised that such persons were enrolled in the payment
protection plan(s) “without their consent” as alleged as a requirement for receiving the $30.00
(Amended Complaint p. 12-13) and therefore fail to meet the Amchem test for adequacy of the
representatives for this subclass.
Settlement Counsel essentially lumps everyone together who did not have a claim denied,
and arbitrarily decided to pay up to $30.00 before fees and expenses, while this subclass has not
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been harmed or damaged as Subclass A. Stated differently, Subclass B is releasing all its claims
against Defendants even though such persons described above never made a claim for benefits
under the payment protection plan.
Subclass B is distinctly different, and unique given none of such members need have
made a claim for payment protection plan benefits in order to waive their rights to bring suit
against Defendants in the future. In the alternative, such Subclass B may be determined
unnecessary, and such persons not included in the settlement, and should be specifically
excluded like the cardholders who have filed bankruptcy. The consequence of not either
establishing this subclass or specifically excluding these persons from the settlement is that they
are relinquishing their right to bring suit against Defendants, when they have not had a claim
denied. This effectively eviscerates the rights of this Subclass, creating a group of persons who
are barred from seeking relief against Defendants on claims they may not need to bring until
after settlement, when they may need to invoke the “benefit” of the payment protection plan.
Subclass B is further prejudiced, because no injunctive relief exists that would compel
the Defendants to process a future claim under the payment protection plan, leaving Subclass B
without a remedy, and an uncertain future. Subclasses are appropriate "'[w]here a class is found
to include subclasses divergent in interest.'" In Re Pet Food Products Liab. Litig., 629 F.3d. at
343; In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 271 (3d Cir. 2009) (quoting Fed. R. Civ.
P. 23(c) advisory committee's note); see also Ortiz v. Fibreboard Corp., 527 U.S. 815, 856
(1999). As described above, Subclass B’s interest diverge away from Subclass A, since they
have not necessarily filed their claim under the payment protection plan, and if and when they do
in the future, they have no mechanism to force Defendants to process such claim and are simply
left with pennies on the dollar from Defendants that are not obligated to approve such a claim in
the future, and have no remedy against Defendants as a consequence of the Settlement
Agreement.
Subclass B would require that the Defendants agree to injunctive relief to process any
payment protection plan claims made at any future date by such class members, so long as those
payment protection plans show enrollment for class members during the 6 year time period
established by the parties.
Subclass C: All Class Members who do not fall within the definitions of Subclass A or B,
and who are not satisfied with the payment protection products for which they were
enrolled.

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Here, Settlement Counsel has attempted to sweep under the rug this vaguely defined
group that number in the millions, consisting of persons simply unhappy with the payment
protection plan. Without regard to measuring “unhappiness” as damages, they are described for
payment purposes immediately below Subclass B, almost as an afterthought as:
If none of the above categories apply to you, but you are not
completely satisfied with the Chase Payment Protection Product(s)
in which you were enrolled at any point between September 1,
2004 and November 11, 2010, it is estimated that you will receive
$15.00 before fees and expenses.
(Kardonicksettlement.com, FAQ-“What benefits can I receive as a part of this Settlement?”).
Subclass C must have separate representation and be either established as a subclass or excluded
from this settlement. How does one quantify damages for “not completely satisfied with the
payment protection products”? Settlement Counsel has arbitrarily assigned a value for
settlement purposes of $15.00.
However, it is unclear what legal theory would allow this subclass to prevail on a claim
based on the subjective personal experience of satisfaction or dissatisfaction. Settlement
Counsels’ Amended Complaint is devoid of any allegation that one or more named plaintiffs are
“satisfied” or “unsatisfied” with the payment protection plans in which they are enrolled. Like
Subclass B, these class members interest are completely divergent, because whether or not they
were enrolled in a payment protection plan voluntarily is not an issue, nor whether or not they
meet one or more of the criteria of Subclass B (retired, self-employed, etc.). Subclass C has the
primary issue of promoting their interest in having the ability to file a claim under the payment
protection plan, and not having coverage denied by Defendants, and not waiving their rights to
file suit against Defendants if such coverage is denied.
Conflict between this Subclass and Groups A goes to the lack of injunctive relief, and the
fact that Subclass C members may file a claim under the payment protection plan that they
voluntarily or involuntarily are enrolled in the future, and no guarantee, or judicial mechanism
exists for requiring Defendants to honor or process such claim under the protection plan, and yet
they have all released their claims against Defendants concerning such protection plan.
In the alternative, Subclass C must be excluded from this settlement, since they cannot
quantify or measure their damages which may or may not occur in the future. It is foreseen that
these class members will make up the bulk of the “claims”, and that these are the very persons
that need relief tailored to aid them in the future, should they make a claim under the respective
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payment protection plan(s). Notable, Defendants and Settlement Counsel fail to disclose how it
was determined that such class members are “unsatisfied” or “satisfied”.
For example, if you are “satisfied” with the payment protection plan, what do you do?
According to Settlement Counsel, if you are “satisfied” then you do not submit your claim form,
but you are part of the class, and you lose your legal rights to seek redress against Defendants if
and when you ever make a claim for payment protection plan benefits. Or, fill out the claim
form, and take a chance at getting $15.00 and still lose such rights. Essentially, these class
members are part of the “class” for no other reason than releasing their legal rights against
Defendants for claims they may have in the future related to non-payment of benefits under the
payment protection plan(s). As if this were not murky enough to deny class certification,
exclude such cardholders, or create yet another subclass, those persons described in Subclass D
get zero recovery, yet are still subject to suit by Defendants and 3rd parties, but release all claims.
Subclass D: Any class member whose account(s) were “Charged Off” who otherwise
would qualify under the definitions of Subclass A, B, or C.
Here, Settlement Counsel is allowing Defendants to merely give a credit to those class
member account(s) that were “charged off”, resulting in zero benefits to such class members.
Settlement Counsel touts this as some added benefit, or additional consideration, describing such
class further on its website:
Under the Settlement, Chase has agreed to create a Settlement
Fund of twenty million dollars ($20,000,000), plus additional
consideration in the form of credit to the unpaid balances of certain
Charged-Off Class Members as stated in Section IX.D of the
Settlement Agreement . . .
(Kardonicksettlement.com, FAQ-“What benefits can I receive as a part of this Settlement?”)
The Settlement Agreement fails to define the term “charge-off”, but clearly shows such class
members are still part of the class, even if class members’ accounts were sold to 3rd parties for
collection.
“Charged-Off Account” means an account giving rise to a class
member’s membership in the Settlement Class if the account (1)
had been charged off as of the Retrieval Date, and (2) had a
balance due and owing to Chase as of the Retrieval Date. If, as of
the Retrieval Date, an account had been sold and the balance due
was owed to a third party and not to Chase, then the account is not
a Charged-Off Account. For the avoidance of doubt, this
Settlement shall not preclude Chase from selling any Charged-Off
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Accounts that it would have sold in the absence of this Settlement.
(Stlmt Agrmt, p. 5). A charged off account is defined generally as “[t]o treat (an account
receivable) as a loss or expense because payment is unlikely; to treat as a bad debt.” Black’s
Law Dictionary p. 227 (7th ed. 1999). The Amended Complaint makes no mention of Plaintiffs
Kardonick, David and Clemins as “Charged Off” accounts, and therefore they are inadequate to
represent the interests of such class members in Subclass D.
Notable, these class members are still subject to having their accounts sold to 3rd parties,
and also have no recourse against Defendants for denying claims under the payment protection
plan (Subclass A), or simply having the misfortune of having “participated” in a payment
protection plan meeting one or more classifications under subclass B, or are satisfied or
dissatisfied with the payment protection plan (Subclass C). Moreover, the language of in the
Settlement Agreement is ambiguous as to whether or not an account sold to a 3rd party qualifies
as part of the class, demonstrating the possibility of further litigation by such account holders
against 3rd parties and Defendants.
Subclass D is the harmed most by Settlement Counsels’ quick trip to Defendants’ ATM
for millions in Fees. Subclass D waives its rights to bring suit for what is their damage by
having their account placed in collections, damaging their credit, and arguably is the result of
denying their payment protection plan coverage. Such class members receive zero Dollars and
no Cents. This is common sense, as it is likely that a person denied payment protection plan
coverage would become a charged off account, because they are invoking the benefits of the
payment protection plan because they cannot make their payments. It is obvious that Subclass D
has divergent interests to that of their brethren subclasses, as they are the ones who are directly
damaged in a concrete, calculable manner.
Subclass D should have as its remedy that such accounts are considered paid/satisfied
according to Defendants’ records, and the adverse reporting to the numerous credit reporting
agencies redacted. Further, Subclass D should not be subject to having their accounts sold to 3rd
parties who will then attempt to collect funds from such Subclass D members. In essence,
Subclass D faces additional collection efforts from 3rd parties that Defendants profited from by
selling their accounts, and they have no recourse against Defendants. Such class members
should either be completely excluded from settlement or a subclass created with new counsel
appointed to protect the rights of such persons who were most harmed by Defendants’ conduct

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that gave rise to this litigation. Injunctive relief should be entered that prohibits 3rd parties from
collecting on such accounts, or in the alternative required Defendants to make payment to 3rd
parties to satisfy such debts and release account holders from such obligation(s).
WHEREFORE, Objectors hereby pray that this Court deny the proposed Settlement
stipulated into between the parties and enter the following additional relief:
(1) An Order overruling Settlement Counsels’ application for attorney’s fees of 5 Million
Dollars and imposing an order that Settlement Counsel will receive a nominal fee or no
fee;
(2) In the alternative, an Order compelling Settlement Counsel to submit their time records
to this Court to determine what hours of work performed are compensable, as time
devoted to settlement is not factored into the lodestar or the percentage of the fund
method;
(3) An Order limiting the application of attorney fees to the common fund that was
established without including the $3,607,350.00 of administration costs into such
calculation;
(4) An Order withholding the calculation of the attorney’s fees until this Court makes a
determination of the number of claims actually submitted and paid, and the value of each
claim;
(5) An Order removing Plaintiffs Kardonick, David and Clemins as the named class
representatives;
(6) An Order Appointing Objector Douglas Paluczak as the named Class Representative for
Subclass A;
(7) An Order appointing Laura Fortman as the named Class Representative for Subclass B;

(8) An Order providing sixty (60) days for appointment of class representatives for
Subclasses C and D;
(9) An Order compelling Settlement Counsel to provide this Court and the parties with
information concerning the number of persons who are participants in each subclass: a)
who made a claim under the payment protection plan; b) meet the criteria set forth in
Subclass B; c) are considered “satisfied” or “unsatisfied” with the payment protection
plan; and d) the number of account holders who are “charged off” and whose accounts
have been sold to 3rd parties or will be sold; and
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(10) Any further relief necessary within the premises based upon the objections set
forth above and herein.
Dated: August 19, 2011
S/ Matt Weinstein
MATT WEINSTEIN, fbn 113320
Co-Counsel for Objectors
Douglas Paluczak, Chris Schulte, Laura Fortman
9200 South Dadeland Blvd., Suite 400
Miami, FL 33156
ph:305-670-5200
S/ Paul M. Kade
PAUL M. KADE, fbn
Co-Counsel for Objectors
Douglas Paluczak, Chris Schulte, Laura Fortman
9200 South Dadeland Blvd., Suite 400
Miami, FL 33156
ph:305-670-6990
Certificate of service
I hereby certify that onAugust 19, 2011 , I electronically filed the foregoing document
with the Clerk of the Court using CM/ECF. I also certify that the foregoing document is
being served this day on all counsel of record via transmission of Notices of Electronic
Filing generated by CM/ECF or in some other authorized manner shown below for those
counselor parties who are not authorized to receive electronically Notices of Electronic
Filing.
S/ Matt Weinstein
MATT WEINSTEIN, fbn 113320
attorney for Objectors Paluczak, Schulte & Fortman
Service List
Carney Williams Bates Bozeman &
Pulliam, PLLC
11311 Arcade Drive, Suite 200
Little Rock, Arkansas 72212

Golomb & Honik, P.C.
1515 Market St., Suite 1100
Philadelphia, P.A.

Covington & Burling LLP
1201 Pennsylvania Avenue NW
Washington, DC 20004
Ku & Mussman, P.A.
12550 Biscayne Blvd. #406
Miami, FL 33181

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