Kardonick v. JP Morgan Chase & Co. et al

Filing 464

REPLY to Response to Motion re 456 Defendant's MOTION for Order to Show Cause and Supporting Memorandum of Law filed by Chase Bank USA, N.A.. (Attachments: # 1 Exhibit Declaration of R. Wick, # 2 Exhibit Responses & Objections to Request for Production, # 3 Exhibit Responses & Objections to Interrogatories, # 4 Exhibit Correspondence to counsel, # 5 Exhibit Correspondence to counsel, # 6 Exhibit E-mail between counsel, # 7 Exhibit Transcript of hearing)(Campbell, Dennis)

COvINGT0N & BURLING
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RE JUG

BRUSSELS
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ANDREW SOUKUP
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ASOUKUP

SAN

COy CCV

DEOO

SAN FRANCACO

SVJCON

VALLEY

WASHNGYON

April 17, 2012

BY EMAIL
L. Lee Javins, II
Bucci Bailey & Javins LC
213 Hale Street
Charleston, WV 25301
Re:

State of West Virginia ex rel. McGraw v. JPMorgan Chase & Co.,
No. 1 l-C-094-N (Mason County Cir. Ct.)

Dear Lee:
As you know, Chase entered into a nationwide class action settlement of claims related
to
its payment protection products in an action called Kardonick v. JPMorgan Chase
& Co. ci al.,
No l:lO-cv-23235-WMH (S.D. Fla.). The federal court order approving that settlem
ent includes
an injunction barring class members or anyone acting on their behalf from litigating
claims
released by the settlement. We write to ask the Attorney General to enter into an approp
riate
stipulation confirming that he will comply with the Kardonick injunction along the lines
of the
attached. We describe the injunction and the settlement below.
A.

Chase’s Settlement with West Virginia Subscribers to Chase Payment
Protection Products.

In 2010, certain individuals brought putative class action lawsuits against Chase
challenging the marketing and sale of Chase payment protection products. See Kardonick
v.
JP’t’Iorgan Chase & Co. eta!., No l:l0-cv-23235-WMH (S.D. Fla.), David v. .JPMorgan
Chase
& Co. eta!., No 4-l0-cv-l415 (E.D. Ark.), and Cleinins v. I?Morgan Chase & Co. et al.,
No
2:l0-cv-00949-PJG (ED. \Vis.). The plaintiffs in those cases sought relief on behalf of
themselves and a class of all other 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.
(Exhibit A, Stipulation & Agreement of Class Action Settlement, at 11-12.)
On I)ecember 20, 2010. the parties entered into a global settlement. As a part of the
settlement, settlement class members agreed to “not take any step whatsoever to commence,
institute, continue, pursue, maintain, prosecute, or enforce any Released Claim, directly or
indirectly, against” Chase. (Id. at 28,) The “Released Claims” include any present or
future
claims arising out of or in any way relating to (i) any act, omission, event, incident,
matter,

EXHIBIT

C0vINGT0N & BURLING

L. Lee Javins. II
April 17, 2012
Page 2
dispute, or injury regarding a Payment Protection Product, includ
ing, without limitation, the
development, sale. pricing, marketing, claims handling, enrollm
ent procedures, disenrollment
procedures, or administration of such a product, that took place
on or before the date of
execution of the Memorandum of Settlement; for] (ii) any acts or
omissions that were raised or
could have been raised within the scope of the facts asserted in
the Amended Consolidated Class
Action Complaint or the Litigation.
(Id. at 10.)
.

.

.“

Pursuant to the notice requirements of the Class Action Fairne
ss Act of 2005 (“CAFA”),
28 U.S.C. § 1715, Chase notified the Attorney General of the propos
ed settlement agreement.
The Attorney General did not object. We understand, moreover,
that the Attorney General was
on notice of the settlement from the outset. Among other things, Richar
d M. Golomb, formerly
counsel to the Attorney General in this action, also was counsel to
the Kardonick settlement
class.
On September 16, 2011, the United States District Court for the Southe
rn District of
Florida approved the settlement. (See Exhibit B, Final Judgment
& Order of Dismissal.) In its
approval order, the court issued an injunction barring any assertion
of claims released by the
settlement:
Each and every Settlement Class Member, and any person actually
or purportedly acting on be half ofany Settlement Class
Member(s), is hereby permanently barred and enjoined from
commencing, instituting, continuing, pursuing, maintaining,
prosecuting, or enforcing any Released Claims (including, without
limitation, in any individual, class or putative class, representative
or action or proceeding), directly or indirectly, in any judicial,
administrative, arbitral, or other forum, against the Released
Parties.
(Id.

¶

17; emphasis added.)

The court concluded that the “permanent bar and injunction is necessary
to protect and
effectuate the Settlement Agreement, this Final Judgment and Order of Dismis
sal. and this
Court’s authority to effectuate the Settlement Agreement, and is ordered in aid
of this Court’s
jurisdiction and to protect its judgments.” (Id,)
Pursuant to the settlement, individual notice was mailed to approximately 15 million
individuals who appeared in Chase’s records as subscribers to a Chase payme
nt protection
product during the period in question. This individual notice was supple
mented by publication
notice. The Kardonick court’s final approval order found that the notice
procedures “fully
satisfy Rule 23 of the Federal Rules of Civil Procedure and the require
ments of due process,
were the best notice practicable under the circumstances. provid
ed individual notice to all

COvINGTON & BURLING

L. Lee Javins. 11
April 17, 2012
Page 3
members of the Settlement Class who could be identified through reasonable
effort, and support
the Couris exercise of jurisdiction over the Settlement Class as contem
plated in the Settlement
and this Order.” (See Exhibit B, Final Judgment & Order of Dismissal,
10.)

¶

B.

The Settlement At A Minimum Bars the Attorney General’s Claims on
Behalf of West Virginia Consumers.

Under the terms of the court’s order, the Attorney General and his counsel
are barred
from pursuing relief relating to Chase payment protection products on behalf
of settlenwnt class
members. This includes, at a minimum, all claims that the Attorney Genera
l is asserting under
Section 46A-7-1 11(1) of the West Virginia Code because such claims, by
definition, seek
restitution to consumers. See W. Va. Code § 46A-7-l 11(1) (“If it is found
that an excess charge
has been made, the court shall order the respondent to refund to the consum
er the amount of the
excess charge.”); State ex rd. McGraw v. Scott Runyan Ponilac-Buick Inc.,
461 S.E.2d 516, 524
(W. Va. 1995) (noting that the Attorney General is “act[ing] on behalf of consum
a
er when
[seeking] an ‘excess charge”).
Case law confinns that this injunction applies to the Attorney General and his
counsel to
the extent that they seek relief on behalf of West Virginia consumers. For
example, in In re
Baldwin-United Corp., 770 F.2d 328 (2d Cir. 1985), the parties entered into
a global settlement
of several multidistrict class actions against broker-dealers who sold securit
ies in bankrupt
corporations. Prior to the entry of final judgment approving the settlem
ent, the attorneys general
of several states publicly announced their intent “to enforce state laws author
izing them in their
representative capacities to seek restitution and monetary recovery from the
defendants to be
paid over to those of the state’s citizens who are plaintiffs in the consolidated class
actions.
Id at 332-33. The court upheld a nationwide injunction against the attorne
ys general:
.

Because, as a condition of the settlement, the plaintiffs agreed to
release all claims arising under federal and state law on account of
the purchase of the Baldwin SPDAs from the settling defendants,
such a post-settlement injunction would have barred the states
from bringing state law claims derivative of the plaintiffs’ rights.
Were this not the case, the finality of virtually any class action
involving pendent state claims could be defeated by subsequent
suits brought by the states asserting rights derivative of those
released by the class members. For instance, as a practical matter
no defendant in the consolidated federal actions in the present case
could reasonably be expected to consummate a settlement of those
claims if their claims could be reasserted under state laws, whether
by states on behalf of the plaintiffs or by anyone else, seeking
recovery of money to be paid to the plaintiffs. Whether a state
represented itself to be acting as a “sovereign” in such a suit or

.

CovNGToN & BuRLING

p

L. Lee Javins, II
April 17,2012
Page 4
described its prayer as one for “restitution” or a “penalty” would
make no difference if the recovery sought by the state was to be
paid over to the plaintiffs. The effect would be to threaten to
reopen the settlement unless and until it had been reduced to a
judgment that would have res judicata consequences.
Id at 336-37 (citations omitted), Likewise here, the federal courts injunction
bars the Attorney
General from seeking relief on behalf of West Virginia consumers who were
members of the
class.’
*

*

*

*

Chase would like to enter into an appropriate stipulation to avoid motion practice
concerning the Kardonick settlement and injunction. We look forward to your
response.

Andrew Soukup
Attachments

See a/so In ‘e Prudential Ins. Co. ofArn. Sales Praei’ice Lilig., 261 F.3d 355. 365 (3d Cir.
2001) (11 is now settled that a judgment pursuant to a class settlement can bar later claims
based
on the allegations underlying the claims in the settled class action. This is true even though
the
precluded claim was not presented. and could not have been presented, in the class action
itself.”): Carlough i’. Ainchem Prods., Inc., 10 F.3d 189, 204 (3d Cir. 1993) (upholding an
injunction against a West Virginia state court action because it “would be disruptive to the
district court’s ongoing settlement management and would jeopardize the settlement’s fruition”):
Commonwealth of Pennsylvania v. BA SF Corp., No. 3127, 2001 WL 1807788, at *8 (Pa.
Ct.
Cmn. Pls. Mar. 15, 2001) (“In order to assure the finality of the Class Action settlement and to
adhere to the District Court’s exclusive jurisdiction over the settlement, this court cannot
now
allow the Commonwealth to assert parens parriae claims on behalf of Pennsylvania
citizens who
released the Defendants for the same conduct alleged in this action.”).

IN THE CIRCUIT COURT OF MASON COUNTY. WEST VIRGINIA

STATE OF WEST VIRGINIA cx rel.
DARRELL V. MCGRAW, JR., ATTORNEY
GENERAL,
Case No. II -C-094-N
Plaintiff,
Hon. David Nibert
V.

JPMORGAN CHASE & CO. and CHASE
BANK USA, N.A.,
Defendants.

STIPULATION REGARDING PLAINTIFFS’ CLAIMS
Whereas, Defendants JPMorgan Chase & Co. (“JPMorgan”) and Chase Bank USA, N.A.
(“Chase”) entered into a class action settlement in Kardonick v. JPMorgan Chase, No. I O-cv
23235 (U.S. District Court, S.D. Fla.) (“Kardonick”); and
Whereas, Paragraph 17 of the final approval order approving the Kardonick settlement
enjoins “[ejach and every Settlement class Member and any person actually or purportedly
acting on behalf ofany Settlement Class Member(s)” from comrnencing, instituting, continuing,
pursuing. maintaining, prosecuting, or enforcing any Released Claims (including, without
limitation, in any individual, class or putative class, representative or other action or proceeding),
directly or indirectly, in any judicial, administrative, arbitral, or other forum” against JPMorgan
and Chase (the “Kardonick injunction”):
Now. therefore. JPMorgan, Chase, and the State of West Virginia (“State”), acting
through its Attorney General. Darrell V. McGraw, Jr. (the Attorney General”) hereby AGREE
and STIPULATE as follows:

1.

The State will not seek in this action to recover any monetary relief (whether

denominated as money damages, equitable relief, or otherwise) on behalf of or payable to West
Virginia consumers who were members of the settlement class in Kardonick

i’.

JPMorgan

Chase, No. I O-cv-23235 (S.D. Fla.) (“Kardonick”). except as permitted in Paragraph 2.
2.

The stipulation in Paragraph 1 does not bar or limit the State from seeking to

recover monetary relief (a) to be kept by the State rather than refunded or paid over to
consumers, (b) payable to or on behalf of West Virginia consumers who were not members of
the Kardonick settlement class, (c) payable to or on behalf of West Virginia consumers who were
members of the Kardonick settlement class solely to the extent that such monetary relief is
recoverable pursuant to a claim that a consumer would not be barred by the Kardonick settlement
from asserting on his or her own behalf.
3.

In consideration for the foregoing stipulation. Chase agrees (a) not to seek

enforcement of the Kardonick injunction against the State or its counsel in connection with any
claim asserted in this action, and (b) not to undertake any action of any kind against the State or
its counsel in the Kardonick court in connection with the claims asserted in this action. Chase
reserves all other rights and defenses it may have to the claims asserted in the action, including
but not limited to any rights and defenses that Chase may have under W. Va. Code
111(1).

§

46A-7-

DATED:

April 17. 2012

STIPULATED AND AGREED TO BY:

Lee Javins (WVSB No. 6613)
Special Assistant Attorney General
BUCCI BAILEY & JAVINS LC
2 13 Hale Street
Charleston, WV 25301

William W. Booker (WVSB #401)
Thomas H. Ewing (WVSB #9655)
KAY CASTO & CHANEY PLLC
1500 Chase Tower
707 Virginia Street, East
Charleston, WV 25301
Tel: [phone]

Attorneys for Plaintiff

Attorneys for Defendant

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