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)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
Esslinger, et al.

.

Docket #10-CV-3213

(BMS)

Plaintiffs,
•
vs.

.

•
HSBC Bank USA,

Inc., et al.,

.

United States Courthouse
Philadelphia, PA
October 1, 2012
9:02 a.m.

Defendants.

TRANSCRIPT OF FAIRNESS HEARING
BEFORE THE HONORABLE BERLE M. SCHILLER
UNITED STATES DISTRICT COURT JUDGE
APPEARANCES:
For The Plaintiffs:

Richard M. Golomb, Esq.
Golomb & Honik
1515 Market Street-Ste.
Philadelphia, PA 19107

1100

Kenneth J. Grunfeld, Esq.
Golomb & Honik
1515 Market Street-Ste. 1100
Philadelphia, PA 19107
Randall Pulliam, Esq.
Carney Williams Bates Pulliam
& Bowman, PLLC
11311 Arcade Dr.-Ste. 200
Little Rock, AR 72212
Rachel Geman, Esq.
Lieff Cabraser Heimann
& Bernstein, LLP
250 Hudson St.- 8th Fl
New York, NY 10013

EXHIBIT

2
Diane E. Sainmons, Esq.
Nagel Rice, LLP
103 Eisenhower Pkwy-Ste.
Roseland, NJ 07068

103

Kevin Landau, Esq.
Taus Cebulash & Landau, LLP
80 Maiden Lane-Ste. 1204
New York, NY 10038
For the Defendants:

Julia Strickland, Esq.
Stroock & Stroock & Lavan, LLP
2029 Century Park E.-l6th Fl.
Los Angeles, CA 90067
Jason S. Yoo, Esq.
Stroock & Stroock & Lavan, LLP
2029 Century Park E.-l6th Fl.
Los Angeles, CA 90067
William T. Mandia, Esq.
Stradley Ronon Stevens
& Young, LLP
2005 Market Steet-Ste. 2600
Philadelphia, PA 19103

For James L.

Chastain:

For The States of West
Virginia, Mississippi &
Hawaii

A. Camden Lewis, Esq.
Lewis Babcock & Griffin, LLP
P.O. Box 11208
Columbia, SC 29211
Russell W. Budd, Esq.
Baron & Budd, PC
3102 Oak Lawn Ave.-Ste.
Dallas, TX 75219

1100

Jules B. LeBlanc, IV, Esq.
Baron & Budd, PC
3102 Oak Lawn Ave.-Ste. 1100
Dallas, TX 75219
For Kimberly Peterson:

Lewis A. Zipkin, Esq.
Zipkin Whiting Co, LPA
3637 South Green Road
Beachwood, OH 44122

3
Dawn Kuderna, Esq.
Zipkin Whiting Co, LPA
3637 South Green Road
Beachwood, OH 44122
Audio Operator:

Chris Campoli

Transcribing Firm:

Writer’s Cramp, Inc.
6 Norton Rd.
Monmouth Jct., NJ 08852
732-329-0191

Proceedings recorded by electronic sound recording,
produced by transcription service.

transcript

4
1

THE COURT:

This is a hearing in the case of

2

Esslinger et al., vs. HSBC Bank, et al., Civil #10-3213.

3

Counsel,

4

identify yourselves for the record.
MR. GOLOMB:

5

Golonb for the Class.

6

MR.

Good morning, Your Honor, Richard

7

Good morning, Your Honor, Randy

Pulliam also for the Class.

8
9

PULLIAM:

MR. GRUNFELD:

Your Honor, Ken Grunfeld for the

Class.

10

THE COURT:

11

MR. GOLOMB:

12

Rachel Geman,

13

Okay.
And Your Honor,

if I may, we also have

Class.

and Diane Sammons, and Kevin Landau for the

14

THE COURT:

15

MS.

16
17
18
19
20
21
22

Okay.

STRICKLAND:

Good morning, Your Honor,

Julia

Strickland of Stroock and Stroock and Lavan on behalf of HSBC.
MR.

YOO:

Good morning, Your Honor,

Jason Yoo,

Stroock and Stroock and Lavan, on behalf of HSBC.
MR. MANDIA:

And Bill Mandia for Stradley Ronon on

behalf of HSBC.
THE COURT:

Okay.

Now, we also have some objectors

out here, right?

23

MR.

24

THE COURT:

25

MR.

LEWIS:

LEWIS:

Yes, Sir.
All right,

let me hear from you.

I’m Cam Lewis for South Carolina.

5
1
2

THE COURT:

MR.

LEWIS:

South Carolina, as well as

5
6

Well, we have a class that we have in

Well, what do you mean for South

Carolina?

3
4

Okay.

THE COURT:
Mr. Chastain?

--

You’re from the South Carolina group,

You represent Mr. Chastain?

7

MR.

8

THE COURT:

9

MR. BUDD:

LEWIS:

Yes, Sir.
Okay.
Russell Budd and Burton LeBlanc

10

representing the states of West Virginia, Mississippi and

11

Hawaii.

12

THE COURT:

Wow.

13

back and say,

14

somewhere.”

15

state when you fly in.

16

Remember this day.

You can look

Yes.

17

MR.

“I represented three states of the United States
I hope that can give you, you know,

ZIPKIN:

18

Kuderna.

19

Go ahead, who else?

a key to the

Anybody else?

Lewis Zipkin and my partner Dawn

Cleveland, Ohio.

20
21
22
23

We represent objector Peterson, Your Honor,

THE COURT:

Okay.

Anyone else?

Nobody?

from

Okay,

please be seated.
MR.

ZIPKIN:

impaired so if I

Your Honor,

if I may,

I am hearing

--

24

THE COURT:

25

MR.

ZIPKIN:

So am I.

Are you wearing hearing aids?

That’s it.

6
1

THE COURT:

2

MR.

3

THE COURT:

4

MR.

ZIPKIN:

ZIPKIN:

THE COURT:
6

MR.

7

THE COURT:

8

MR.

9

ZIPKIN:

THE COURT:

MR.

13

THE COURT:

15

Are you wearing hearing aids?
Two of them.

They don’t seem

.......e .a.,,e ea. or

--

..l..

-

Both.
Oh, okay.
Neither one of them do much good, Your

Would it be helpful to you if you sat up

closer?

12

14

I didn’t hear what you said.

Honor.

10
11

ZIPKIN:

Hum?

ZIPKIN:

Thank you,

I would appreciate that.

Well, come on up.

All right, good.

right, Mr. Golomb, you want to start?
MR.

GOLOMB:

Yes, Sir.

May it please the Court,

16

Your Honor, we’re here seeking an order

17

final approval and the other for fees in this case.

18

think that Your Honor needs to answer the following six

19

questions.

20

fair and reasonable.

21
22

All

--

two orders, one for
And I

Nunther one is whether the settlement amount is

THE COURT:

Boy,

I’m only used to answering four

questions, but now we have six.

23

MR.

24

THE COURT:

25

MR.

GOLOMB:

GOLOMB:

Well

-

-

Okay.
Whether the notice plan and plan of

7
1

allocation is appropriate, whether a final approval order and

2

judgment should be entered, whether the amount of attorneys

3

fees and costs requested is fair and reasonable, whether the

4

amount of service awards requested for the class

5

representatives is fair and reasonable,

6

objections should be overruled in this final approval order.

7

and whether the

If I may suggest to Your Honor a way to go about this,

8

it’s okay with Your Honor,

9

in answering the first of those five questions.

if

I hopefully will assist the Court
With respect

10

to the objections, Mr.

11

if we could,

12

petition.

13

questions and then have Ms.

14

and then have the objectors speak, and then we can respond to

15

the objectors,

Pulliam will handle the objections, and

I’ll go through the settlement and the fee

And then I assume either the Court may have some
Strickland address those issues,

is that okay?

16

THE COURT:

17

MR.

GOLOMB:

Okay.
As Your Honor knows,

this is the fourth

18

of five cases that we have been litigating since 2008.

19

first three cases that have already been settled and finally

20

approved are cases against Capital One, Discover, and Chase.

21

And the reason why I say that

22

settled with BOA that has not yet been finally approved.

23

Final approval on that case is in January

24

through the course of these litigations, as you’d note in this

25

case and some other cases,

--

The

and there’s a fifth case that

--

is because

the settlements came rather

8
1

quickly.

2

class certification and were able to really get to the heart

3

of the matters.

4

documents to review to evaluate liability,

5

settlement.

6

That’s because we litigated the first case through

We know what documents we need, what
to evaluate

We’ve been working

THE COURT:

That was one of my questions that I

7

wanted to ask.

8

discovery between the parties to adequately evaluate the

9

strengths and weaknesses of the case?

10

MR.

Was sufficient information exchanged in

GOLOMB:

Absolutely.

We had discovery both

11

before mediation and also after mediation.

12

have gotten a very good list of things that we need in all

13

these cases.

14

liability.

15

settlement purposes, revenue numbers, numbers of members,

16

what category claims,

17

have,

18

able to fine tune the discovery requests to get right to the

19

heart of the matter.

20

Plus, you know,

Like I said, we

We know what documents we need to review for
We know what documents we need to review for

those kinds of things.

in

So we really

since the experience in Capital One, have really been

these cases,

they have some very

21

significant defenses, both arbitration as well as preemption

22

defenses.

23

Dismiss based on federal preemption, and that issue had been

24

fully briefed,

25

mediator that we used in this particular case is somebody that

In this particular case, HSBC had filed a Motion to

and then we went and we mediated the case.

The

9
1

we’ve used in a number of financial services cases, but in

2

particular, also used him in other payment protection cases.

3

So we are

4

we’ve reviewed, when you look at the interviews,

5

informal depositions

--

when you look at the thousands of documents that

6

THE COURT:

7

MR.

8

ZIPKIN:

Mr.

the kind of

Zipkin, can you hear?

Barely, but I am hearing.

Thank you,

Your Honor.

9

THE COURT:

10

MR.

11

microphone,

12

ZIPKIN:

Okay, go ahead.
If you would speak closer to the

Honor.

13

that would be helpful.

MR.

GOLOMB:

I’m appreciative, Your

And when you look at the thousands of

14

documents that we reviewed, the preparation that went into

15

mediation,

16

particular case post-mediation, the negotiations,

17

tedious negotiations over the settlement agreement release

18

language, which you’ll hear more about later, and you look at

19

this particular settlement as compared to the other cases that

20

we have already settled and have already gotten final

21

approval, we’re very comfortable with the settlement and I

22

hope Your Honor is as well.

23

is a fair and reasonable settlement that we will be seeking

24

final approval on.

25

the confirmatory discovery that we did in this
some very

I think that you’ll see that it

And what you’ll hear also is, you know, we had

--

there

10
1

were three separate mediation sessions in June and July of

2

2011, and then there was an additional session with the

3

mediator to finalize the release terms.

4

confirmatory discovery,

5

documents, we also conducted interviews,

6

if you will, of two people:

7

marketing who was responsible for the ancillary products

8

including this payment protection product.

9

interviewed, kind of a 30(b) (6),

In terms of the

in addition to reviewing all those
informal depositions

One was the Vice President of

And we also

if you will, of Jill Dowd,

10

who is their analytics and metrics person, who discussed the

11

product.

12

So when you look at this settlement,

it is, we think,

13

very fair and reasonable.

14

settlement, meaning not everybody who’s got the product is

15

dissatisfied with the product.

16

with the product who fall under one of three classes,

17

filed a claim,

18

--

19

respect to certain folks in that class,

20

for the products,

21

believe that they’re going to get almost 75 cents on the

22

dollar of what they paid out.

23

this to other settlements,

24

next question that Your Honor needs to answer is whether or

25

not the notice is reasonable, and there was at least one

is

like I said,

And as you know,

this a claims made

Those who were dissatisfied
then

and we’re happy to report that with respect to
there’s three separate classes, but with
those who were slanmied

those who unknowingly got the product, we

So I think when you compare

it’s very, very favorable.

The

11
1

objection about the notice.

2

notice that Your Honor approved,

3

Honor approved at preliminary approval.

4

million individuals received notice in this case, and they

5

received notice by email,

6

written notice in their billing statements,

7

notice by postcard,

8

the cost of noticing this case.

9

And by the way,

this is the

the plan of notice that Your
You know,

over 16

they received notice by receiving
they received

and over $4 million was spent already in

THE COURT:

10

MR.

11

THE COURT:

12

MR.

GOLOMB:

GOLOMB:

You didn’t text them?
No.
Oh, okay.

Go ahead.

In addition to that,

there was also a

13

summary notice that was published in the USA Today,

14

also created a web page, Esslingersettlement.com, so that

15

people could easily go on the website and have their questions

16

answered, and if need be,

17

I know that our office also received a number of calls to

18

answer questions that anybody may have.

19

million notices, only 800 people, approximately 800 people,

20

opted out of this settlement,

including Mr. Chastain, who

21

opted out of the settlement.

There were

22

people,

there were

23
24
25

they could call the administrator.

And out of over 16

out of 16 million

-

THE COURT:
Peterson?

and we

What about Mr.

Peterson?

Peterson opt out?
MR. GOLOMB:

Not to my knowledge.

What about

12
1
2

THE COURT:

Peterson’s still in the class,

right?

3
4

No,

MR.
out.

ZIPKIN:

Peterson did not, unfortunately, opt

Missed the deadline.

5

THE COURT:

6

MR.

GOLOMB:

And at

7

MR.

ZIPKIN:

Nor did she understand what that was

8

Oh.
--

about, Your Honor.

9

THE COURT:

10

MR. GOLOMB:

Okay.
So out of over 16 million notices in a

11

class of over 20 million people,

12

which is

13

infinitesimal amount of people.

14

settlement,

15

consider the fact that obviously the law encourages

16

settlement.

17

settlement and certainly comports with the other cases that

18

we’ve handled that have already received final approval in

19

this case.

20

there were 15 objections,

.000000, that’s six zeros,

9135%,

obviously an

So when you consider this

the notice that we provided to all these members,

We think that this is a very fair and reasonable

So I think the next question Your Honor needs to look at

21

is whether or not this settlement satisfies the criteria for

22

considering the following Girsh factors, and that is the

23

complexity, expense, and likely duration of the litigation,

24

the reaction of the class,

25

risks of establishing liability,

the stage of the proceedings,

the

the risks of establishing

13
1

damages,

2

ability of the Defendant to withstand a greater judgment,

3

range of reasonableness of the settlement in light of the
best

4

recovery in this case,

5

the settlement to a possible recovery in light of the risks of

6

litigation.

7

I think I have to some extent, and that is even with,

8

post Concepcion world, even with the issue of arbitration out

9

there for some, not all of the class, but for some of the

the risks of maintaining the class through trial,

the

and the range of reasonableness under

And I want to address that last point first, and

10

class that is a large risk.

11

class that comes

12

would affect them.

13

world,

14

the

- -

in a

There’s about a third of the

that there is no arbitration clause that
And obviously, in the post-Concepcion

they are seriously affected,

it is a serious risk.

Federal preemption is a risk for this entire class, and that

15

is the issue that has been briefed and stayed pending the

16

mediation and settlement in this case and hopefully final

17

approval.

18

as I said before, Your Honor, you know, we had estimated that

19

there were three separate sub-classes of folks here.

20

the people who were slammed for the product;

21

didn’t know that they had the product for one reason or

22

another.

23

were starting to get billed the product,

24

down this settlement road, we had estimated that they would

25

receive about $60 apiece, given the fact that they had put in,

And when I talk about the range of reasonableness,

One are

that is, they

Through some sort of communication with HSBC they
and when we started

14
1

on average,

2

as it turns out,

3

max under the settlement agreement of $150 a person.

4

somewhere around 175 to $200 per individual.

But

they’re going to get probably closer to the

The next class of individuals that we had estimated were

5

going to get about $30.

6

denied.

7

And then there’s the overwhelming majority of folks that we

8

had estimated at $15 are going to get more like $30, and those

9

are people who knowingly asked for the product, has never made

10

a claim, and just had to certify during the claims process for

11

whatever reason that they were dissatisfied with the product

12

and they’re going to get $30.

13

think this is a fair and reasonable settlement.

14

Those were people whose claims were

We think that they’re going to get closer to $70.

So again,

another reason why we

In terms of the complexity, expense and likely duration

15

of the litigation, you know, obviously it’s a very complex

16

case.

17

upper-mid six figures in just getting the discovery in this

18

case, experts in this case, et cetera.

19

as Your Honor know from other cases that we’ve had with you,

20

it could be four or five years before this case is resolved.

21

And so again,

22

case, a very fair resolution, we’re happy with the settlement.

Discovery alone would cost in the, you know,

the mid to

And likely duration,

we think that with an early resolution in this

23

The reaction of the class I already talked about.

24

16 million class members received notice in this case;

25

them have opted out,

Over
800 of

15 of them have objected, and of those

15
1

objectors,

2

have standing to object, and Mr.

3

three are here today.

One, we believe, doesn’t
Pulliam will address that.

The risk of establishing liability, establishing damages,

4

maintaining the class through trial,

5

already adequately covered that,

6

particular case.

7
8
9

I think that we’ve

as well as the notice in this

As far as the plan of allocation,
believe that rather than,
-

again,

I discussed that.

We

as we put in our papers and in the

that rather than the class members getting 15,

30 and

10

$60, based on the number of claims to date, we think it will

11

be closer to 30,

12

are about 160,000 claims to date.

13

70 and 150,

somewhere in that area.

And then the last thing I want to address,

There

the last

14

question on the fairness of the settlement,

15

certification of this settlement class is appropriate.

16

for that Your Honor has to look at the criteria in Rule 23(a)

17

and Rule 23(b), which I’ll address separately.

18

we

19

again,

20

received notice; so clearly under 23(a) (1)

21

sufficiently numerous.

22

there are common questions of law and fact that exist under

23

23(a) (2).

24

class to satisfy 23(a) (3).

25

representative, and us as class counsel, have and will

--

is whether
And

Under 23(a),

clearly the class is sufficiently numerous.

There’s,

over 20 million class members, over 16 million have
the class is

As we have explained in the papers,

The class representatives are very typical of the
And we think that the class

-

16
1

continue to adequately protect this class.

2

On the 23(b)

factors, obviously, again,

the common

3

questions of law and fact predominate pursuant to 23 (b).

4

obviously in this case,

5

of resolving this claim rather than individual claims.

6

think that certification of the class settlement is

7

appropriate under both 23(a)

8
9

And

the class action is a superior method
So we

and 23(b).

Before I move on to the fee petition and the request for
service awards, does Your Honor have any questions?

10

THE COURT:

11

MR.

12

THE COURT:

GOLOMB:

Before you do I want to hear from HSBC.
Okay.
There seemed to be

--

in the papers you

13

both filed, you seemed to be slightly

14

on it, but I thought that was maybe you were talking past one

15

another on the preclusive effect of this settlement on states’

16

abilities to file any actions.

--

you differ slightly

Was I misreading that or did I

17
18

MR.

19

THE COURT:

GOLOMB:

20

HSBC,

in its papers,

21

this,

then

--

I’ll let

--

It looked like you were disagreeing, and
said wait a minute,

if they’re saying

have you now gotten together on this?

22

MS.

23

THE COURT:

24

MS.

25

No, well,

STRICKLAND:

I’ll address that, Your Honor.

Okay.

STRICKLAND:

The answer, Your Honor,

not differ slightly, we differ dramatically.

is we do

We would ask the

17
1

Court to approve the settlement, assuming that the Court

2

agrees with our reading of what we believe to be the reading

3

of the plain language of the release and the injunction to be

4

entered in connection with the final approval order.

5

THE COURT:

6

MS.

Well, what’s the disagreement then?

STRICKLAND:

The disagreement, Your Honor,

is

7

with respect to how the release applies to the claims of State

8

AGs for direct relief to individual consumers who are members

9

of the class.

10

THE COURT:

All right, before you go on,

is it your

11

position, Mr. Golomb,

12

Attorneys General from filing on behalf of class members?

13

MR.

14

THE COURT:

15

MR.

16

GOLOMB:

GOLOMB:

rather have Mr.

that the release does not preclude the

It is, Your Honor.
And what’s the basis for that?
Well, if it’s okay with Your Honor,

Pulliam address that issue

17

THE COURT:

18

MR. GOLOMB:

I’d

--

Okay.
--

after the objectors state their

19

positions, because I think once you also hear from the states

20

as well,

21
22

I think it will become clearer.
THE COURT:

you

--

All right,

let me hear that first before

I’ll call you again.

23

MR.

24

THE COURT:

25

MR.

GOLOMB:

GOLOMB:

You want to hear from Mr.
Yes,
--

I want

--

or from the states?

Pulliam

--

18
1
2

THE COURT:
ahead,

I want to know why

let me hear from you, Mr.

3

MR.

4

THE COURT:

5

MR.

PULLIAI4:

--

what is

--

go

Pulliam.

Good morning, Your Honor.
Good morning.

PULLIAN:

If I may,

as just a preliminary issue,

6

we learned this morning that in the course of this litigation

7

over some time we believed that we had moved to pro hac me

8

into this Court, and upon a docket review,

9

that has not happened.

10

this afternoon,

So I can assure the Court we will move

I’ve appeared

11

THE COURT:

12

MR.

13

I’d just ask the right
THE COURT:

15

MR.

16

THE COURT:

17

MR.

PULLIAM:

PULLIAM:

--

Okay.

PULLIAN:

14

it appears that

--

in this District several times.

--

Go ahead.
--

to be heard.

I thought you were, but go ahead.
Your Honor,

so the situation that we

18

have is that there is a dispute in three other Courts between

19

the States of West Virginia, Mississippi, and Hawaii and HSBC

20

related to actions brought by those states against the bank

21

related to payment protection,

22

today.

23

this settlement is on those actions.

24

issue, Your Honor, until we have a settlement,

25

agreement reads that HSBC may use this settlement as a defense

same product we have here

So the dispute has arisen as to what the effect of
Well, as a threshold
the settlement

19
1

to any later filed actions or any other actions that try and

2

bring released claims.

3

cart before the horse a little bit here in that they’re

4

seeking

5

has taken,

6

they negotiated a settlement, notwithstanding the fact that we

7

have clear and unambiguous release language,

8

saying we will only agree to this settlement if we can go

9

ahead and get an opinion from you as to how this settlement

--

Well,

for one,

the position that Ms.

they’re putting the

Strickland has taken, HSBC

in their papers is notwithstanding the fact that

they’re now

10

will be interpreted down the road.

11

Your Honor,

12

the Middle District of Florida.

13

One filed seeking to have these very states

14

Virginia, who’s already settled with Capital One, but Hawaii

15

and Mississippi

16

mentioned, we’ve already

17

bigger litigation, and Capital One had already settled their

18

payment protection claims.

19

very same issue that you have today,

20

appropriate for the respective Courts that the other

21

litigation,

22

issue of what the preclusive effect of this settlement is.

23

respectfully, Your Honor, where we are at today,

24

settlement should be approved and with the order already

25

agreed upon by the parties and presented to the Court,

What should happen here,

is exactly what happened in the Spinelli matter in

--

Several weeks ago, Capital

having them enjoined
--

this is,

--

--

not West

as Mr. Golomb

in our minds, part of a

Judge Covington,

faced with the

said that it is

the second filed litigation,

is in to rule on the

this

and

So

20
1

then if HSBC

--

2

THE COURT:

3

MR.

4

Exhibit,

Who submitted that order?

LIAN:
4
PUI

I believe,
THE COURT:

6

MR.

8
9

It’s at

F to the preliminary approval.

5

7

The parties jointly did.

Okay.

PULLIAN:

And in that order,

it states

--

again,

paragraph 13 sets out how HSBC can go about using this relief
--

release as a defense.

HSBC has also stated in its papers

that it will only support settlement if the order,

the

10

proposed order that I just referenced,

11

material modification.

12

that we have.

13

dramatically.”

14

this order.

15

Now, HSBC has now come along and said, well,

16

later filed

17

and tell us what will happen there.

18

such a slippery slope because there are, no doubt, hundreds,

19

maybe thousands of collection actions and other cases that in

20

some way may be impacted by this order.

21

come back to you.

22

will note in the very case that HSBC cited to the Court as

23

support for this,

24

factually different in that unlike here, where there is a

25

great dispute between these objectors, between HSBC if these

Your Honor,

is entered without

that’s the same position

So I don’t know if I agree with the “we differ
We have worked upon, negotiated and signed

We’re each submitting the same order to you.

--

in addition,

this

this other litigation, we want you to go ahead
And Your Honor,

that’s

All of those can’t

That’s not what is intended by this.

for one

--

the Prudential case

And I

it’s

21
1

claims are even part of the settlement,

2

the Prudential case there was no dispute.

3

parties were class members,

4

in that case,

5

--

that’s in dispute.

In

The later filed

they even acknowledged that.

But

the Court found any doubts as to the proprietary

propriety of a federal injunction against a State Court

6

proceeding should be resolved in favor or permitting the State

7

Courts to proceed in an orderly fashion to finally determine

8

the controversy.

9

So Your Honor,

I don’t know that we’re that far apart.

10

We certainly stand by the order that we’ve negotiated.

11

are other Judges that have this litigation that are prepared

12

to rule on it.

13

an important note,

14

will stop that litigation because it

15

is only relates to certain claims brought by the various AGs.

16

So even if this Court were to enjoin those certain claims,

17

rest of the claims continue.

18

efficiency here at all.

19

this order exists or not an order from you barring those

20

cases.

21

certainly consistent with the settlement agreement that we

22

have is for Your Honor to enter the order as submitted and to

23

follow

24

in the Capital One case and let the various Judges who have

25

these State AG cases and every other Judge who’s ever going to

Interestingly, Your Honor,

There

and I think this is

there’s nothing that this Court can do that
even HSBC’s position

--

So that

--

the

there’s no judicial

Those cases will continue whether

I think what makes sense at this point and what is

--

{clears throat} excuse me

--

Judge Covington’s lead

22
1

be presented with this settlement to rule upon the impact that

2

this settlement has.

3

THE COURT:

4

MS.

Okay.

STRICKLAND:

All right.
So Your Honor, what Mr.

Pulliam has

5

iust asked the Court to do is kick the can down the road,

6

which is

--

7

THE COURT:

8

MS.

9
10

STRICKLAND:

THE COURT:
on the order?

14

THE COURT:

Well,

STRICKLAND:

first of all, did you both agree

We

--

You both submitted the same order, did

you not?

16

MS.

STRICKLAND:

17

MR.

PULLIAM:

18

MS.

STRICKLAND:

19

21

Pulliam that

You submitted an order to me.

MS.

20

In any

the issue iust be deferred for another day.

13

15

It’s America, Your Honor.

event, let me first address the suggestion of Mr.

11
12

Seems to be de rigeur around here.

THE COURT:

We did agree

--

Yes, Your Honor.
--

on the order, Your Honor,

and

--

Now you’re trying to tell me I shouldn’t

enter it?
MS.

STRICKLAND:

Well,

I am trying to tell you that

22

you shouldn’t enter it unless the order is interpreted by what

23

we believe to be its plain language, which is that

24
25

THE COURT:

Well,

is that for me to do?

--

I’m only

going to approve the settlement as being fair and reasonable

23
1

with the order that you both agreed on.

2

MS.

STRICKLAND:

Your Honor, it is for you to do.

3

The issue is squarely before Your Honor both because HSBC has

4

presented it, because the release that

5
6

THE COURT:

--

Well, that doesn’t mean I have to rule

onit.

7

MS.

STRICKLAND:

Certainly the case.

But HSBC has

8

squarely presented that issue and the AG objectors have

9

squarely presented that issue.

10

the release mean.

11

And the question is what does

the injunction.

12

THE COURT:

That release is before Your Honor, as is

What State Judge

--

because it’ll be

13

State Judges in these different states

14

by something I say about the meaning of this agreement?

15

MS.

STRICKLAND:

--

is going to be bound

Well, Your Honor,

the issue is not

16

that,

17

the injunction and the release that is before Your Honor.

18

this

19
20
21

the issue is the meaning that Your Honor attributes to
So

--

THE COURT:

Well,

shouldn’t you have thought about

that before you submitted your order?
MS.

STRICKLAND:

Your Honor, we thought that we knew

22

what it meant.

23

seemingly don’t agree with us, once they went out and

24

solicited AGs to bring lawsuits.

25

that maybe there was not a meeting of the minds.

It was only the surprise that Plaintiffs

That was when we learned
And so, we

24
1
2
3
4

would ask

--

THE COURT:

You’re saying that the Plaintiffs

solicited the AGs?
MS.

STRICKLAND:

Your Honor,

the Golomb firm

5

actually is counsel to the AGs in the cases.

6

that came as a huge surprise to our client.

7

$23.5 million.

8

for a complete release according to the plain language of the

9

release and then the related injunction that’s in the final

And so certainly
Our clients paid

Our client understood that it was bargaining

10

approval order,

11

Our understanding, based on controlling law,

12

Circuit’s decision in the EEOC versus U.S.

13

2nd Circuit’s decision in the Baldwin United case, both of

14

which tellingly Mr.

15

Our understanding was based on those decisions that the

16

release would,

17

that we’re discussing with Your Honor.

18

are not challenging that the AG,

19

power can seek,

20

That isn’t the issue before Your Honor.

21

Plaintiffs have sort of tried to blur the issues here in an

22

effort to avoid a decision from this Court.

23

very simple, which is to the extent that the AGs act in their

24

representative capacities, act on behalf of class members, act

25

derivatively, all terminology used in the cases,

from claims by or on behalf of class members.
including the 3rd

Steel case, and the

Pulliam has not discussed with this Court.

in fact, extend to exactly the type of claims

for example,

Let’s be clear.

We

in pursuit of its enforcement

a penalty payable to the state.
And the AG5 and

Our position is

in the EEOC

25
1

versus U.S.

2

case,

in the Baldwin United case, in the Applied Card Systems

3

case,

in the AmRep case.

4

extent that there were claims brought on behalf of class

5

members,

6

shock to us that we are paying $23.5 million only to be sued

7

for the exact recovery that we understood was being released

8

by the class members for themselves and persons acting on

9

their behalf.

10
11

So how do you respond to that, Mr.

MR.
--

PULLIAJ4:

15

MR.

16

THE COURT:

MR.
claims that

20

the AG cases
--

It doesn’t matter.

PULLIAI4:

It did

--

How do you respond to the fact that

PULLIAM:

THE COURT:
representing them?
MR.

23
24

MR.

Well, why aren’t the AGs barred from
They’ve already given up their rights.

THE COURT:

virginia.

Class members are giving up all the

--

22

25

first of all,

class members are giving up their rights by way of settlement?

18

21

Your Honor,

all three of these AG cases existed prior to
THE COURT:

19

It came as a great

Pulliam?

14

17

in the Prudential

Our understanding was that to the

those claims would be barred.

THE COURT:

12
13

Steel case from the 3rd Circuit,

PULLIAM:

PULLIAM:

The AGs are bringing these cases
On behalf of who?
On behalf of the state of West

-

26
1

THE COURT:

2

MR.

3

THE COURT:

4

MR.

For what?

PULLIAM:

The state of Mississippi.
For what?

PULLIAM:

5

understand,

6

the parens patriae

For what?

They’re bringing them for, as I

they’re bringing these eases for penalties under

7

THE COURT:

8

MR.

9

--

THE COURT:

No,

PULLIAM:

there’s no dispute.

Penalties?

Uhm-hum.
No problem.

10

MR.

11

cases under,

12

statute that allows the state to seek restitution.

13

PULLIAM:

And then,

they are bringing these

at least in the case of West Virginia, a specific

THE COURT:

But if the people have already given up

14

their right to restitution by way of settlement, why should

15

they be able to pursue it again for the same people?

16
17

MR.
One,

PULLIAM:

the state

THE COURT:

19

MR.

20

THE COURT:

21

MR.

22

THE COURT:

23

MR.

25

two answers.

--

18

24

Because, Your Honor,

You don’t know, do you?

PULLIAM:

Well, yeah,

You’re fumbling around now

PULLIAM:

PULLIAM:

I do.

I have an opinion.
Mr.

--

Pulliam.

The state has rights to bring actions

to protect its citizens.
THE COURT:

-

Of course they do.

27
1

MR.

2

THE COURT:

3

But second

--

But if the citizen has given up its

right, what right does the state have to do it again?

4

MR.

5
6

PULLIAM:

PULLIAN:

Well, Your Honor

THE COURT:

--

Isn’t that a double recovery for the

individual?

7

MR.

PULLIAM:

Look at

the state of West Virginia

8

has settled with Capital One for $13.5 million after a release

9

was signed in the Capital One case that even included parens

10

patriae claims,

11
12

THE COURT:

MR.
The

That’s between them and Capital One.

PULLIAM:

But it’s the same issue, Your Honor.

--

15
16

--

can’t help that.

13
14

the Consumer Protection and Finance

THE COURT:

Am I not bound by the 3rd Circuit

opinion?

17

MR.

PULLIAM:

But there’s no 3rd Circuit opinion

18

that requires you to enter an order at this point that enjoins

19

these claims.

20
21

THE COURT:

Well,

the law in this circuit is,

22

MR.

PULLIAM:

I can’t turn a blind eye to what
can I?

But here’s the other issue, Your

23

Honor,

24

have the same counsel,

25

has referred to them in general.

We have lumped all of the states together because they
they filed the same objection.

HSBC

All of those cases are

28
1

brought under different statutes.

2
3

THE COURT:
statutes.

MR.

5

THE COURT:

6

MR.

7

THE COURT:

8

MR.

9

determine

PULLIAM:

MR.

It’s up to that trial judge to

Why?
--

Your Honor.

Because those are the

facts of that case as to whether or not
THE COURT:

14

MR.

15

THE COURT:

16

MR.

17

THE COURT:

18

MR.

19

THE COURT:

--

You represented a bunch of Plaintiffs

PULLIM4:

We did, Your Honor.
Sixteen million or whatever it is.

PULLIAM:

Uhm-hum.
And you made a deal

PULLIAM:

--

We did.
--

that they gave up any rights against

HSBC to collect money based on this product.

21

MR.

22

THE COURT:

25

--

Who do they represent and for what?

PULLIAM:

13

24

And it’s up to that trial judge

- -

11

23

--

who do they represent?

PULLIAM:

THE COURT:

20

--

Exactly Your Honor

PULLIAM:

10

12

--

They can be brought under 4 billion

The question is

4

They

PULLIAM:

We made a deal

--

And now you’re telling me, well yeah,

but they can get it again?
MR.

PULLIAM:

I’m not, Your Honor.

We made a deal

that all claims that these individual class members possessed

29
1

were released.

2

state can bring a claim for restitution.

Now,

it’s a separate question of whether a

3

THE COURT:

4

you’re saying but maybe not.

5

MR.

6

THE COURT:

7

MR.

8

THE COURT:

9

MR.

You’re saying were released, but now

PULLIAM:

No, Your Honor,

those

--

What kind of deal is that?

PULLIAM:

--

claims were released.

That’s an illusory bargain,

PULLIAM:

No, Your Honor.

10

released.

11

bargain in that whether or not

isn’t it?

Those claims were

And I certainly don’t believe it was an illusory

12

THE COURT:

13

MR.

14

THE COURT:

Well,

PULLIAM:

--

if they were released

The Federal Government

--

--

If they were released, what right does

15

any state have to collect that same amount against HSBC for

16

the same people?

17
18

MR.
West Virginia

PULLIAN:
--

it’s a separate statute

19

THE COURT:

20

MR.

21

THE COURT:

22

MR.

23

THE COURT:

24

MR.

25

They may have a statutory right.

PULLIAM:

PULLIAM:

--

But the people don’ t

PULLIAM:

--

--

--

than what we filed

have a right

--

The

--

the people

--

I agree.
don’t have a right to that money.
I agree, Your Honor.

But, who are we

if the West Virginia or any of these other AGs brings a case

30
1

for penalties and then chooses to set up a restitution

2

THE COURT:

3

MR.

4

THE COURT:

5

MR.

6

- -

Penalties is different.

PULLIAM:

But chooses to set up

--

She anits that.

PULLIAM:

--

a restitution fund

stop where the money eventually goes.

--

HSBC can’t

I think it’s important

7
8
9

THE COURT:

The penalty can be put in any fund the

state wants to put it in, but it’s a penalty.

10

MR.

11

THE COURT:

12

MR.

Yes, Your Honor.
It has nothing to do with the

restitution.

13

PULLIAM:

14

PULLIAJ4:

state, Your Honor.

15

But the restitution also goes to the

Now,

MR. GOLOMB:

if the state chooses

Your Honor,

--

that’s actually not

16

accurate.

17

the argument for us as to why

18

the road,

it’s who’s got proper jurisdiction to answer that

19

question,

and you are actually making the argument as to why

20

this issue should go back to that state, because as an

21

example,

22

there’s case law,

23

--

24

specifically allows for double recovery in that case.

25

let’s rementher, and that is it’s that the

And that’s why you, Your Honor,

in West Virginia,

--

are actually making

it’s not kicking the can down

there is a statutory right and

the CVS case,

that says

--

specifically says

they don’t use the word “double recovery,” but it

--

Because

31
1
2

THE COURT:

Well, let me ask you,

in the context of

this settlement, do you think that’s right?

3

MR.

4

THE COURT:

5

MR.

6

THE COURT:

7

MR.

8

THE COURT:

9

MR.

GOLOMB:

GOLOMB:

GOLOMB:

GOLOMB:

Absolutely.
Fair?
Yeah, but this

-

That there should be a double recovery?
Absolutely.

And it was

- -

There should be?
Absolutely.

The state has a right to

10

collect restitution for their constituents.

11

statutory right and they have a legal right.

12

THE COURT:

13

MR.

14

the

GOLOMB:

THE COURT:

16

MR. GOLOMB:

17

THE COURT:

18

MR.

19

THE COURT:

20

MR.

22
23

If the constituent already recovered

--

But the state didn’t, and that’s what

--

15

21

They have a

GOLOMB:

GOLOMB:

What is the state recovering?
The state is recovering restitution

--

For whom?
On behalf of their constituents.
Is the money going to the constituents?
It’s up to the state as to whether they

want to or not.
THE COURT:

What do you mean?

behalf of an individual

24

MR.

25

THE COURT:

GOLOMB:

The state is suing on

--

Right.
And the individual doesn’t get the money

32
1

the state is suing

- -

2

MR. GOLOMB:

3

THE COURT:

4

MR.

GOLOMB:

Whether or not
--

--

on behalf of?

Whether or not the state gives the

5

money back to the individuals or uses the money for the state

6

treasury for some other consumer use is up to that individual

7

state, which is exactly why the issue with respect to West

8

Virginia should go back to the state Court in West Virginia.

9

In Hawaii,

it should go back to the state Court in Hawaii.

10

And in Mississippi,

11

Covington said.

12

that is,

13

civil penalties end of it, and as Mr.

14

litigation with the AGs is gonna have to go back to that state

15

anyway, because they’ve gotta litigate the civil penalties

16

issues.

17

as to why it should go back, not to be decided by you.

18

mean,

19

the state Court,

and that’s what Judge

And that’s what we’re asking you to say.

And

this is not an issue for you to decide, even on the
Pulliam said,

this

But, again, Your Honor is really making the argument

essentially what they’re asking for
THE COURT:

I

--

What if I had in my order the fact that

20

any individual class member cannot collect any additional

21

money other than the amount in this settlement?

22
23

MR.

GOLOMB:

I don’t think that’s

think that’s for you to decide.

24

THE COURT:

25

MR.

GOLCMB:

Why not?
Well, because

--

--

again,

I don’t

33
1
2

THE COURT:

5

--

what’s a

settlement then?

3
4

Otherwise, why is there even

MR.
--

GOLOMB:

Because essentially what they’re asking

because you don’t have jurisdiction over that issue.

mean, essentially what they’re asking for is

6

THE COURT:

Well,

I

--

I can say any individual class

7

member is barred from getting anything more than this

8

settlement pays it.

9
10

MR.
still collect

GOLOMB:

Well, and

--

but that the state can

- -

11

THE COURT:

12

for the judge down the road.

13

MR.

14

THE COURT:

GOLOMB:

I’m not going to say that.

Well

That’ll be

--

But if the individual is barred from

15

receiving another same amount of money somewhere else,

16

that’s the end of it for him.

17
18

MR.

21
22

Yeah,

I don’t think you have

jurisdiction over that question.

19
20

GOLOMB:

then

THE COURT:

I have jurisdiction over the class

member.
MR.

GOLOMB:

Well, except that the state is not a

class member.

23

THE COURT:

24

MR.

25

THE COURT:

GOLOMB:

I’m not talking about the state.
But it affects

--

I’m talking about the individuals.

34
1

MR.

GOLOMB:

Well,

then you have to be

--

if you’re

2

going to do that,

3

gonna do that,

4

the civil penalties claim survives, and the restitution

5
6

and I don’t think you should, but if you’re

then you need to be clear that number one,

THE COURT:

that

--

No one’s disagreeing with the civil

penalties claim.

7

MR.

GOLOMB:

And the restitution claim survives as

8

long as it doesn’t get distributed to the individual

9

consumers,

that it stays in the state treasury.

If that’s

10

what you’re gonna do,

11

merits,

12

you need to say that not only that it doesn’t go to the

13

individuals, but that the restitution claim survives for the

14

state treasury purposes.
THE COURT:

MR. GOLOMB:

THE COURT:

20

MR.

21

THE COURT:

23

I think then,

What is the purpose of the restitution

It’s to recoup funds that were paid

out.

19

22

if you’re going to, on the

claim?

17
18

--

if you’re gonna answer that question,

15
16

then that

GOLOMB:

Funds that someone laid out.
Right.
Well,

the person already got reimbursed

for that.
MR.

GOLOMB:

Well, now we’re getting back into the

24

issue of what the law in each state and what the statute in

25

each state says and allows.

And that’s

--

again,

that’s why I

35
1

don’t think you have jurisdiction over this question.

2

that’s what, you know, and what Judge Covington did was, and

3

you’ve got that order and that memorandum, and what she said

4

is,

5

be enjoined, because they are issues of individual states that

6

have individual

7

have due process here in this Federal Court,

8

District of Florida, because they weren’t members of a class,

9

so they didn’t have an opportunity to opt out.

10

at least to her,

it’s obvious that those claims should not

that have their own claims.

--

you enjoin those claims,

11

THE COURT:

I mean,

They didn’t

in the Middle

Therefore, if

there’s no due process.

I understand that.

But I have authority

12

over the class members, and I can bar them from getting a

13

double recovery.

Can’t I?

14

MR.

15

THE COURT:

16

MR.

17

THE COUT:

18

GOLOMB:

I don’t think you can.
Why not?
Again, because I

-

They’ve already given up their rights

here in this agreement.

19
20

GOLOMB:

MR.

GOLOMB:

Because I think that you have to look

-

—

21

THE COURT:

22

MR.

GOLDMB:

Do you represent them?
I think you have to look at the

23
24

THE COURT:

25

MR.

GOLOM:

Did you represent them?
Do I represent the class?

do I

36
1

THE COURT:

2

MR.

3

THE COURT:

4

MR. GOLOMB:

5

THE COURT:

6

GOLOMB:

they’re waiving

Yes.
Yes.
And all the individual class members?
I do.
And you’re getting their money?

--

7

MR.

8

THE COURT:

9

MR.

GOLOMB:

GOLOMB:

Hopefully so.
--

their rights to any further money.

For this case here.

10

use your words, double recovery,

11

it relates to the West Virginia statute,

12

that.

13

And

But I do think,

to

I think that it, at least as
that it allows for

And that is a fair fight to have in the state Court.
THE COURT:

And they can still have that fight,

14

except that I can say that they can’t get it twice.

15

the state can argue well, we’re doing whatever we’re doing.

16

They can make that argument down there in West Virginia.

17
18

MR.

GOLOMB:

THE COURT:

20

MR.

21

THE COURT:

23
24
25

Yeah,

I just don’t agree with

that last statement.

19

22

Okay.

And then

again.

GOLOMB:

I know you don’t.
Yeah.
Okay.

Let me hear from Ms.

Strickland

Do you have anything else to add on this?
MS.

STRICKLAND:

I do, Your Honor.

myself a note.
THE COURT:

All right.

I’m just writing

37
1

MS.

STRICKLAND:

I have many things to add on this

2

subject,

3

think it’s instructive to read the release.

4

with that.

5

claims are brought directly by or on behalf of any class

6

member in a representative action or in any other capacity

7

with respect to any form of relief,

8

limitations damages, restitution, disgorgement, penalties, and

9

injunctive or declaratory relief.”

and we’ve obviously fully briefed this as well.

I

So let me start

The release “releases claims whether the released

including without

Now,

I think it’s then

10

instructive to match that release up with what the AGs seek

11

and which Plaintiffs’

12

role,

13

look at exactly hat the AGs seek.

14

the AG seeks “excess charges under their Consumer Protection

15

Act which specifically provides that those excess charges and

16

certain penalties are payable directly to the consumer by way

17

of a refund.”

18

double recovery, but it is also a recovery if the consumers

19

were to get money,

20

under the release in this case.

21

specifically seeks the recovery of money for consumers in

22

three places; paragraphs 3,

23

restitution and disgorgement as well as penalties payable to

24

consumers.

25

paragraph 89,

counsel in their somewhat conflicted

are scrambling to preserve for the AGs,

and there you

In the West Virginia case,

Those are the class members.

Not only is it a

of monies that they released a claim for
The prayer in their complaint

5, and 7, where it seeks

The Hawaii complaint is similar.

There,

in

the state seeks to (quote), and this is the

38
1

language from the complaint,

2

that’s repeated in the prayer in paragraphs 3 and 7.

3

Mississippi complaint seeks restitution and disgorgement and

4

the Mississippi statute similarly provides for restitution to

5

consumers.

6

double talk from the Plaintiffs about the kind of relief

7

that’s being sought.

8

and other recoveries such as West Virginia, which is somewhat

9

unique, because t has a penalty provision for penalties

“make whole the consumers,” and
And the

So, what’s happening here is a fair amount of

Plainly,

the AGs are seeking restitution

10

payable to consumers,

11

penalties payable to the state.

12

penaltaties payable to the state.

13

payable to consumers, which we think are released.

14

THE COURT:

15

MS.

there’s a separate penalty provision for
We do not take issue with the
We take issue with monies

Okay.

STRICKLAND:

So,

let me also comment on a few of

16

the cases that have come up in argument.

17

cases here are the EEOC versus U.S.

18

I {quote}

19

represent grievance by attempting to obtain private benefits

20

on their behalf,

21

Preclusion must be applied.’”

22

decided the extent of the release.

23

different Court.

24
25

The controlling

Steel case which says, and

“when a governmental agency {quote)

Similarly,

‘seeks to

the Doctrine of Representative Claim
And there,

the District Court

It wasn’t kicked to a

the 2nd Circuit in Baldwin United goes through

the entire analysis in very much the same situation.

A bunch

39
1

of AGs filed a bunch of lawsuits making claims that

2

intersected with claims that were released in a class action

3

settlement,

4

analysis, which is, we believe,

5

reasoning should be controlling here, making exactly the

6

distinction we’ve made, which is the release bars restitution

7

claims.

8

is that, according to the 2nd Circuit and other related cases?

9

Because if not, yu could never settle a class action.

and the 2nd Circuit goes through a very lengthy
instructive here, and that

It bars claims that would go to the consumers.

Why

And

10

the Courts,

11

others,

12

“to allow a parallel state Court proceeding undermines the

13

possibility of settling any class action.”

14

logical response to what’s going on in this Courtroom is why

15

would I settle th.a case if I think I’m buying a release from

16

class members of their monetary claims, only to discover that

17

I can be sued the next day by an AG in a different case

18

seeking to recover exactly the money that’s been released by

19

the Plaintiffs?

20

Plaintiffs’

21

Golomb, did not allow for double recovery.

22

misstatement of what the case held.

23

CAFA removal case,

24

the AG’s claims were in the nature of a class action subject

25

to CAFA removal,

including in Baldwin United, but as well as

the Prudential case which has been cited,

state that

I mean,

the

The CVS case, which I can’t remember which of

counsel cited it,

I think it was actually Mr.
That’s actually

The case was actually a

and the analysis in that case was whether

and the Court went through an analysis

--

40
1

we’ve briefed this.

2

different from a res adjudicata, you know,

3

release analysis.

4

an over-arching basis; some on a claim-by-claim basis.

5

res adjudicata analysis is necessarily a claim-by-claim

6

analysis of the type that we’re discussing with Your Honor,

7

which is the restitution claim is barred.

8

claim is barred.

9

Penalties payable to the state, not barred.

The CAFA analysis is actually quite
construction of

Some Courts do a CAFA analysis on sort of
The

A disgorgement

A penalty payable to consumer is barred.
You have to look

10

at as the Baldwin United Court did in the 2nd Circuit.

11

by claim, CVS is riot that case,

12

was represented to Your Honor.

13

Claim

and actually doesn’t say what

With respect to the Spinelli case, which Plaintiffs are

14

waiving around,

15

it’s a decision from another District Court not binding on

16

this Court.

17

the settlement actually had been final for close to two years

18

and maybe more.

19

asked for broad relief, not distinguishing as we have here

20

between money payable to consumers and money payable to the

21

state, Capital One asked for sort of an overarching order

22

barring the cases,

23

fact that the Court in that case did not retain jurisdiction,

24

and the Court said,

25

more judicial way,

completely different situation.

First of all,

Completely different also, because in that case,

And then Capital One went into the Court,

and the Court’s decision is driven by the

“I didn’t retain jurisdiction,” and in a
but I’m going to put it in plain English,

I

41
1

don’t want to hear about it.

2

situation in this case.

3

THE COURT:

4

MS.

Not my case.

That’s not the

That’s something I would say.

STRICKLAND:

But Your Honor,

this is squarely

5

before Your Honor.

6

retain jurisdiction when it signed the class action settlement

7

order.

8

--

9

respect to the scope of the release, but frankly,

That’s

--

And that Court expressly declined to

we’re before Your Honor.

we’re in this Court.

We’ve got matters

The Court did reach conclusions with
they’re

10

dicta, and pretty irrelevant since the Court by its own

11

statement said it didn’t have jurisdiction.

12
13

THE COURT:

MR.

GOLOMB:

THE COURT:

17

MR.

GOLOMB:

THE COURT:

20

MR.

And if, Your Honor,

could we also hear

GOLOMB:

Who represents the states?
Yeah.

On this issue that we’re talking

about.

22
23

Go ahead.

from Mr. Budd, whc represents the states on this issue?

19

21

Can we respond briefly to what was just

said?

16

18

Let me hear from you about

your fees.

14
15

All right.

THE COURT:

Right.

Who

Mr. Budd, where are you

from?

24

MR.

25

THE COURT:

BUDO:

Dallas, Texas.
Okay.

Let me hear from you.

I’ve got

42
1

deference for Texans.

2

MR.

BUDD:

My wife’s a Texan.

Go ahead.

Thank you, Your Honor.

We represent the

3

states of Mississippi, West Virginia, and Hawaii,

4

respectfully object to the settlement

5
6

THE COURT:

--

How’d you from Texas end up representing

those states?

7
8

and we

MR.

BUDI:

{laughs} Just lucky I guess.

We’ve had

some experience with representing states in financial

9

THE COURT:

10

MR.

11

THE COURr

12

MR. BUDD:

BUDD:

Oh,
--

--

okay.

and environmental claims.

All right.

Go ahead.

We respectfully object to the proposed

13

order and ask that the states not be subject

14

in any way or have their actions affected in any way by this

15

settlement order.

16

completely separate and distinct from the consumer claims, and

17

we’ve brought those as separate and distinct claims from the

18

consumer claims.

19
20
21
22
23
24
25

-

We believe that the states’

I think

THE COURT:

-

not be barred

claims are

--

Well, aren’t you asking for the same

money?
MR.

BUDD:

We’re asking for restitution and

disgorgement as one of many different claims.
THE COURT:

Well,

I’m asking you.

Why should an

individual class member be allowed to get paid twice?
MR. BUDD:

Well,

it’s up to each of the State Courts

43
1

in this instance to decide

2

THE COURT:

3

MR. BUDD:

4
5

--

No it’s not.
--

if

--

well if

--

to decide what the

state law is with respect to that.
THE COURT:

No,

state law cars be whatever it is, but

6

I can bar a class member from receiving any more money than is

7

allowed under this settlement.

8

MR.

9

THE COURT:

BUDE’:

Well,

Can’t I?

I think

--

Can I do that?

10

MR. BUDO:

11

jurisdiction, enact whatever

12

THE COURT:

I think the Court can, as part of its
--

Limit the recovery of each class member

13
14

MR. BUD2:

15

THE COURT:

16

MR. BUDD:

17

THE COURT:

19

MR. BUOD:

20

THE CCThT:

21

MR.

22

THE COURT:

24
25

--

-- to what he gets in this settlement.
But I don’t think the Court can limit

what the states

18

23

Limit recoveries of

BUDE:

The state can do whatever it wants
The states can bring whatever action
--

but I can limit

--

--

--

-- it wants.
I can limit what each class member is

entitled to receive.
MR.

BUDD:

And what the Court

--

what the states are

asking for here is simply a ruling that the states are not

44
1

barred or affected at all

2

THE COURT:

3

MR.

4

THE COURT:

BUDO:

Ms.
--

--

--

Strickland didn’t say

--

by this settlement agreement.
that you’re barred.

She says you

5

have every right to get penalties that go to the state,

6

whatever the state wants to get, but the

7

MR. BUDO:

8

THE COURT:

9
10

Well,
--

--

the states also

class members

--

--

but what she’s

saying is you cannot collect on behalf of a class member and
pay the class member that which you might collect.

11

MR.

BUDD:

The states that we represent believe that

12

they have the irdependent right as sovereigns to bring their

13

claims under their states’

14

THE COURT:

15

MR.

16

THE COURT:

BUDD:

statutes for whatever

All right.
--

--

Now,

--

let me ask you

--

whatever the law allows them to bring.
let’s say Joe Schmoe is a member of a

17

Class.

18

by this settleriert I bar Joe Schmoe from collecting any more

19

than he would g’t in this settlement.

20

you’re going to get on behalf of Joe Schmoe?

21

He also lives in one of the states you represent.

MR.

BUDD:

And

What do you think

The states do not ask for anything on

22

behalf of their respective Joe Schmoes.

23

their claims brought independently as sovereigns.

24
25

THE CCUT:

They’re asking for

And if you do that, what can you collect

and for whom if La’s barred from getting any money?

45
1

MR.

BUDD:

For whatever the state law provides that

2

they shouldn’t be allowed to collect.

3

to collect on behalf of the consumer or the citizens.

4

asking to collect on behalf of the state independently.

5

THE COURT:

6

MR. BUDD:

7

THE COURT:

8

MR. BUOD:

9

THE COURT:

10

MS.

Again, we’re not asking
We’re

Just for the state.
Yes.
Not for the individuals.
Yes.
Ms.

Strickland, what do we

STRICKLAND:

Your Honor,

--

I suggest that he read

11

his own complaints.

12

what the statutes on which they base their complaints say.

13

mean,

That’s actually not what it says, nor

I’m happy to read

14

MR.

BUDU:

15

MS.

STRCKLAND:

--

Your Honor
--

--

Your Honor,

for example,

the

16

West Virginia st;itute, and we can tie it down to the complaint

17

they filed.

18

accurate.

19
20

MR.

Wha::’s been said to Your Honor is actually not

BUOD:

Your Honor, we specifically litigated

this issue before the Federal Court in West Virginia.

21

THE cO::T:

22

MR. BUDD

Right.
That case, our case, was filed in State

23

Court against tht various credit card companies,

24

HSBC.

25

brought our ciir.s on behalf of our citizens,

including

The credit card companies allege that we had in fact
on behalf of

46
1

individual claimants and that it was in the nature of a class

2

or a mass action.

3

Action Fairness Act.

4

independent.

5

this action are asserted on behalf of the general public and

6

not individual claimants or members of a purported class.

7

said in this case,

8

General is exercising his quasi-sovereign power on behalf of

9

the state rather than prosecuting consumers’

10

It was subject to removal under the Class

We,

And we said, no,

in our remand motion,

our claim is totally
said all the claims in

there is one plaintiff.

THE COURT:

We

The Attorney

claims.

I understand that completely and I’m not

11
12

MR.

13

THE COURT:

BUDD:

14

about.

15

of the state,

16

this settlement,

17

And the Judge

- -

That’s not what this discussion is

action?

18

This discussion is about in your state,

MR.

the AG,

any more money.

20

if the individual has gotten money from

why should they get any more by your AG

BUDD:

19

the capacity

I don’t know if the individual should get

as a result of

The state is asking that it receive the money

21

THE COURT:

22

MR.

23

BUDD:

What money?

What money?

For independent rights that the state

has.

24

THE COURT:

25

MR.

BUDD:

Penalties and things like that?
No.

Independent rights that the state

47
1

also has for restitution or disgorgernent.

If the state has an

2
3

THE COURT:

4

MR. BUDD:

Restitution to whom?
To the state,

in this instance,

to

5

prevent activities like this from occurring in the future.

6

The state has an independent right to ask that these

7

Defendants,

8

ill-gotten gains.

9

precisely what the state has as a remedy

for their bad acts, deliver to the state their

10

THE COU?.T:

11

MR.

12

THE COURT:

13
14

BUDD:

That’s what disgorgement is.
- -

Will any of the money
--

And that’s

--

on behalf of its own

--

Will any of the money go to any of these

individual claimants who are in your state?
MR.

BUDO:

That depends, again, on the state law but

15
16
17

THE CCtT:

MR. BUDD:

19

THE COURT:

21

that’s the point.

That’s a

weaselly answer.

18

20

See,

Well, you know,

in some instances

--

If I bar any individual from getting

more than they get in this settlement, can I do that?
MR.

BUDD:

I think under state law,

if the state has

22

an independent ri;ht to restitution or disgorgement,

23

should be allowed to bring that claim.

24

THE CCURT:

25

MR.

BUDD:

they

As far as who the

--

That’s not what I said.
Well,

as far as who the money goes to

--

48
1

THE COURT:

2

MR.

BUOD:

Right.
--

that,

again, we would respectfully

3

submit is up to the State Courts to decide based upon state

4

law.
THE COURT:

6

Not if I’ve already barred that

individual from getting it twice.

7

MR.

BUDD:

Again, Your Honor,

8

object to that ut we believe

9

THE COURT:

10

--

that’s going to be too bad because

I’m going to take care of that.

11
12

Well,

MR.
states’

13

BUDD:

the states would

Okay.

Anything else?

Well, again, we would just ask that the

rights not be affected or barred.
THE COT:

I don’t have jurisdiction to bar a state

14

from doing whater the statute wants, but I do have a right

15

to bar an individLial from getting paid twice,

16

shouldn’t settle.

17

MR. B:DTh:

18

THE COURT:

19

MR.

20

THE CcJT:

21

MR.

22

THE CUT:

23

here

BUDD:

WJt:

And again,

otherwise they

the states didn’t settle

--

I understand that.
--

the states were not class members..

I understand that.
And the states’

claims were not released.

I’m allowing you to make an argument

--

24

MR.

25

THE CCU?..T:

BUtiD:

Thank you.
--

and I understand what your argument

49
1

is.

2

MR.

3

THE COUIT:

4

MR. BUDD:

5

THE COURT:

6

MR.

BUDO:

Okay.
Okay,

thank you.

Thank you, Your Honor.
Go ahead.

GOLOMB:

Also before Your Honor is our fee

7

petition and our request for the service awards.

8

want to

9

make in the order

first. of all,

--

-

And I just

there are two corrections I want to

-

10

THE COURT:

11

MR. GOLOMB:

All right.
--

and that is at paragraph H on page 2

12

of the order,

it says that the requested fees and expenses

13

amount in

of the gross.

14

Honor,

15

paragraph, parg:aph 3,

16

And if you look in the body of our request,

17

$3,500, not $2,502.

18

in most cases ir

19

the recovery.

20
21

331/3

and I’ll go through the numbers.

THE CDt2T:

331/3,

0LJMB:

MR.

23

THE COtT:

24

MR. GO0MB:
there’s

--

Your

And on the last

it says $2,500 for each service award.
it’s actually

So what we have asked for, Your Honor,

as

Circuit, we’ve asked for a percentage of

I notice you didn’t submit a lodestar

comparison.

22

25

It’s actually 33%, not

We actually did.
You did?
Yeah.

There was over

--

you know,

50
1

THE COUFT:

But it was based on an hourly rate.

I

-

2
3
4

MR.

GOLOMB:

•
.

6

MR.

7

THE CDU:

8

MR.

9

THE COURT:

GOLOMB:

MR.

11

THE COURT:

GOLOMB:

MR. G’;Ls::

14

THE COURT:

15

MR.

16

THE COURT:

17

MR. GOL)MB:

i.... ,..
IJUL.

The hourly rate times hours

--

Right.
--

for lodestar cross-check.

Your hourly rate

--

Yeah.
--

how does it compare with the

You’re referring to the Laf fey Matrix?
Right.

GOL;MB:

It’s within the Laffey Matrix.
Okay.
That’s what we’ve used in all these

cases.

19

21

i....
P,..1L%JW

comparison that e use in this District?

13

20

r

i.

GOLOMB:

10

18

That’ s

our——

5

12

Yeah, well that’ s the lodestar.

THE CCtLST:
it’s

All right.

I just want to make sure

--

MR.

GD1:

Yeah,

22

Your Honor.

23

almost 7,500 hours.

24

fees and costs,

25

are just under 11,000.

it’s within the Laffey Matrix,

There were 15 firms that worked on this case,
And what we’re asking for is,

3% or a total of 7,755,000.

for both

The actual costs

And so you’ve got the hours, and it

51
1

gives us a multiplier of 1.85, which is within

2

range, actually, of multipliers within this Circuit that have

3

recognized multipliers in the double digits.

4

believe it’s reasonable.

5

notices,

6

in a kind of a weak way, refer to the fee and they more or

7

less are just saving that there’s not enough money in the

8

fund, which I think we’ve already covered.

9

people, a lot of these people are going to get 70 cents on the

10
11

Again,

--

on the lower

So clearly we

there’s over 16 million

15 objections, and only two of those objections, even

dollar back.

Most of these

So we think that’s clearly within reason.

Some other factors for Your Honor to look at,

and that is

12

look at the priov experience that we’ve had in litigating

13

these other cases, which is what really allowed us to bring

14

this case to a rather quick and efficient resolution, but

15

despite that, we also pt in,

16

hours.

17

The other factors,

these 15 firms, almost 7,500

the complex factual and legal issues

18

that were invo1vd in this case,

19

nonpayment givi the defenses in this case,

20

percentage of the fees that we’re asking for in this

21

particular case ae entirely consistent with both other cases

22

in the 3rd Circuit,

23

cases like this litigated around the country.

24

that when you lock at the, you know,

25

recovery, as wcIl as the lodestar cross-check,

the significant risk of

as well as other cases,

and, you know,

the

financial services
So we believe

the percentage of
that this is

52
1

the fair and reasonable request.

2

questions

--

3

THE COURT:

4

MR.

5

TBE COURT:

6

No,

GOLOMB:

I don’t.

Thank you, Your Honor.
Now, we have some objectors here.

Let

me hear from them.

7

MR.

8

THE COURT:

Okay.

9

MR.

Well,

10

Unless Your Honor has any

LEWIS:

LEWIS:

THE COURT:

11

earlier then.

12

way up if you don’t

It’ll take me just a minute.
Take as much time as you need.
that, by the day, gets longer.

It’s all right.

We can hear.
--

You’ll have to start

You don’t have to walk all the

if it’s too much of a problem.

13

MR.

14

THE COURT:

Okay.

15

MR.

I’m glad you can hear me.

16

THE CO]T:

Again,

17

MR.

Cam Lewis and I represent Mr. Chastain

18

LEXI5:

5:

LEWIS:

I’m okay, Your Honor.

for the record, your name is?

and his class.

19

THE

Okay.

20

MR. LU:IS:

And I came here with a lot of good notes

21

as to what I c.1d say,

22

arguments that Dnxe before me, and I was excited because I

23

think the Court reeds to be reminded that this other approval

24

was a preliminary approval.

25

And we come her

and I sat down and listened to the

There is nothing etched in stone.

today, and we have the two sides that are

53
1

supposed to be in agreement in disagreement.

2

eliminates the settlement, and I’m very excited about that

3

because there is one side that says that all the people in the

4

states of West Virginia and so forth are released, and the

5

other side says, no, we can still get money for them.

6

they’re asking you, Your Honor,

7

preliminary apprcval where this was not an issue to choose

8

sides.

9

in a preliminary

THE COURT:

No,

--

And

after a

That’s what Judges do.

MR.

10

And I think that

LEWIS:

Sir,

they do not choose sides on a

11

settlement.

12

They approve settlement terms as reasonable.

13

settlement terms down one side or another.

14

differ with you cn that one.

15

THE COURT:

16

MR.

They do not choose sides on settlement terms.

ER:s:

Now, my, me, my little guy, we have some

real

18

with some things ie said.

19

we were I guess

THE COURT:

And so I beg to

Okay.

17

-—

They don’t force

as they argue today,
My side

they agreed

--

Just for the record, your client has

20

opted out, has h not?

21

MR.

22

time,

LES:

He’s opted out and stayed in at the same

and that’ allowed.

23

THE COUT:

24

MR.

LEWIS:

THE COC.O:

He’s

--

Sir?

25

That’s allowed

He’s opted out and stayed in?

opted out and stayed in?

54
1

MR. LEWIS:

For this,

for objecting.

You can do

2

that because this Court’s obligations under the law is to take

3

whatever information it had

4

it’s a fair and reasonable settlement.

--

can get to get to determine if

5

TBE coU:RT:

That is correct.

6

MR.

And so it doesn’t mean that I have to

7

have some particc1ar standing to be able to argue about that.

8
9

LEWIS:

THE COURT:
statement

-

-

10

MR.

11

THE CCU?.1:

12

record,

I never stopped you from making your

LEWIS:

No,
--

Sir

--

I’m just trying to get,

for the

that your client has opted out of this class.

13

MR.

14

THE COT:

All right.

15

MR. LEWIS:

So and I appreciate that you’re

16

L:W::S:

listening to

And he’s objected,

too.

I really do.

17

THE CO’:

Some Yankees have an open mind.

18

MR.

Maybe.

19

LIIS:

(Laughtei)

20

MR.

LEWIS:

Now, we were talking about whether or

21

not Mr.

22

remember he wa

23

arbitration or uisemption with reference him and, we say, with

24

reference his cZss.

They say that they get 75 percent

25

cents on the dct lar.

He paid in about I think it was 4,000-

Chastain had a different position.
sued by the bank and he

--

You have to
there is no

--

55
1

plus dollars, but and he’s not going to get back but 70.

2

the release

3

first filed document, as was already argued

4

--

Now,

oh, by the way, we stand on our filing of the
--

THE COURT:

And I already disagreed with you on

6

MR.

Sir?

7

THE COURT:

I disagreed with you on that.

8

MR.

Yes,

5

9

that.
LEWIS:

LEt:Is:

that again.

10

THE CI:

No

11

MR. LEWIS:

No

12

THE COURT:

--

13

MR.

14

Sir, but we don’t want to argue

LEWIS:

it, Your Honor

--

--

once is enough.

I didn’t think I’d change your mind on

-

15

THE COURT:

16

MR.

LES:

No.
--

I didn’t think so.

Now, why are we

17

different?

18

arbitration ard greemption.

19

action rule is

20

don’ t have the 2

(b), which is the terrible one.

21

an easier way t:

get to be a class action.

22

important?

23

case there are

24

How do I say tJaL?

25

around, we’ve r:a’er been invited to a mediation, we’ve never

I’e told you about the different defenses,
Now,

in South Carolina,

ifferent than in State

W&1

--

the class

Federal Court.

We

So we have

And why is that

I think that’s important because in this
iite a bit of differences between the parties.
I’ve never understood, Your Honor, we were

56
1

been invited

2

out what the basis of this settlement was.

3

listened to the cther side tell me about it, and they used

4

general words that didn’t say anything.

5

to this day what they looked at.

6

great ability to make discovery requests.

7

if they got the discovery,

8

the discovery,

9

statements as to liability and damages.

--

we were stopped to doing any discovery to find
I sat here and

And so I don’t know

They kept saying they had
They never told us

they never told us what they saw in

they don’t have any charts,

they don’t have any

They don’ t have

--

10

have you heard oe dollar amount of damages for this case?

11

No, Sir.

12

especially to ray type people where I’m representing a class.

13

And I think that in of itself would require that this be

14

disapproved.

15

I think it’s not been totally open to everybody,

And finally,

I wanted to make sure we understood that the

16

requirements her today

17

different

18

action settlement are the exact same as if it was litigated.

19

We don’t get

20

lighter load.

21

look at them and apply them just like it was litigated.

22

if we do that anJ we listen to what was said today, we don’t

23

even have an aç2ec-ment, and they want you to choose sides, and

24

I don’t think tat’s correct.

25

cane,

--

--

and I heard them say something

the requirements here today to approve a class

if I cari.

have an easier burden.

We don’t have a

You have to look at all of the elements and
And

And I’m going to pick up my

57
1
2

THE COURT:

Wait a minute, here’s your

MR.

4

THE COURT:

6

your

partner’s going to pick it up for you.

3

5

-

LEWIS:

Thank you, Your Honor.
You can always raise cane in this

Courtroom.
(Laughter)

7

MR.

8

THE COURT:

9

MR.

LEWIS:

I like your sense of humor.
There’s another objector.

PJLLIAM:

Your Honor,

if I may, Ms.

Strickland

10

and I spoke at the

11

unfortunately she missed the deadline to opt out.

12

are certainly agreeable, and if the Court is agreeable,

13

this one Plaintiff to extend the deadline and to deem Ms.

14

Peterson to be a opt-out of this settlement and retain her

15

rights as such.

16

MR.

--

ZIIN:

17

very happy if

18

objection.

19

than opting out

Ms.

Peterson’s counsel said

I am sure, Your Honor,

The parties
for

they would be

Peterson dropped out and withdrew her

She’s more concerned about pursuing her objection

20

THE CCT:

21

MR.

this point in time.

ZIPKIN:

All right, proceed.
Thank you, Your Honor.

22

the Court,

23

counsel.

24

today, and my fi:t suggestion, Your Honor,

25

consider sending :his back to mediation.

Plaii.iff’s counsel, Ms.

If it please

Strickland, Defense

I ha listened carefully to all of the arguments
is that the Court
Notwithstanding all

58
1

that I’ve heard,

2

minds between the parties.

3

address those issues that were brought up already in today’s

4

hearing immediately after I give a brief presentation.

5

presume Your Honor has read the objections that we have filed

6

sothatldonotgetin-

it’s clear that there’s not a meeting of the

7

THE COURT:

8

MR.

9

I would like very briefly to

I

That’s correct.

ZI?’UN:

All right,

lot of time on that.

so I don’t want to spend a

I want to talk about what is called a

10

protection pla:. which was originally sold to cardholders,

11

class members.

12

in the event cf their injury, death or disability.

13

Honor’s probably aware by now that there are many class

14

holders who perLps were not employed, but that

15

notwithstanding.

16

period of tine,

17

this coverage,

the

The concept of that plan was to protect them
Your

‘ere sold this plan and paid for it over a
a Ms.

Peterson did,

and she paid $700 for

which didn’t cover her.

18

THE COURT:

19

MR.

ZIPFIN:

Did she ever make a claim?
Yes,

she is in the midst of litigating

20

this in Shaker :Eiqhts Municipal Court, where under the Fair

21

Protection Crec’i

22

se for

Act she is entitled to $1,000 of damages per

--

23

THE CCU;.T:

24

MR.

25

zIP:::N:

That’s the statutory damages.
Thank you, Your Honor.

And she’s also

entitled to at:tcey fees, and she’s also entitled to recover

59
1

her $700.

2
3

THE COURT:

Well,

then it made sense for her to opt

out, didn’t it?

4

MR.

5

THE COURT:

6

MR.

ZIPRIN:

Well,

it might have and it might be.

Okay.

ZIPKIN:

In this case,

there are numerous issues

7

which affect the validity of this protection plan.

8

issues and alieci.tions of fraud and misrepresentation in the

9

sale of this and similar products sold to prospective card

These

10

holders.

11

very well have had significant claims against HSBC,

12

Ms.

13

instance of Peterson, who is similarly situated,

14

stated,

15

statute that ‘iis-a-vis this plan she gives up,

16

typical card hoar.

17

lawyers around t! country examined these claims, and as Your

18

Honor is awar€,

19

brought.

20

counsel compia:: bout how difficult this type of litigation

21

in fact might he against the Defendant HSBC,

22

claim, Your

23

is not complex ]Zigation,

24

simple litigati.

25

As a matter of fact,

Peterson dc€,

there t

the

--

or a card holder may

for this alleged protection plan.

In the

as I’ve

at least a $2,800 claim protected by the
and she is a

So several highly skilled class action

there are a multiplicity of class actions

Whera there’s smoke there’s fine.

This was

just like

I’ve heard

It’s Peterson’s

that this is not difficult litigation,

this

this is rather elementary and

involving fraud and misrepresentation.
this product was called the protection plan.

60
1

Who was it protecting?

2

because HSBC was selling this insurance so in the event the

3

cardholder or class member ran into a problem,

4

under the plan and HSBC could,

5

argues that this proposed settlement is nothing but an HSBC

6

protection plan again.

7

in the brief.

8

detail of that.

9

It was actually protecting HSBC

it was covered

in fact, get paid.

Peterson

It is highly self-serving, as stated

And again,

I don’t want to get into all the

There are approximately 23 million cardholders.

I have

10

heard how huge z..is 23 million settlement is.

11

the word that’s been used.

12

settlement.

13

be divided appro.imately 7 million to Plaintiff’s counsel

14

and I don’t like to argue that Plaintiff’s counsel is not

15

entitled to compnsation.

16

million, HSBC tas the remaining 16 million, puts it in a

17

fund,

18

cards.

19

paid out.

20

where each party gives up something.

21

proposed settleim.nt is that all the class members are waiving

22

their rights,

23

obtain $2,800 sta:utorily,

24

million strictly at their option and crediting the credit

25

cards.

Your Honor,

This, Your Honor,

Settlement is

this is not a

is a plan that 23 million can
--

But if you look at the plan for $7

and with tht fund, Your Honor,
They dcn’t pay it out.

they credit credit

I keep hearing money being

A set’ lement means an agreement between two parties

r..çits like Ms.

What’s happening in this

Peterson’s, who,

in Court,

can

and HSBC is taking the remaining 16

They arer’t required to pay the cash out.

I keep

61
1

hearing money being paid.

2

money,

3

number they are receiving,

4

HSBC,

5

credits, which they’ll receive in the amount of about $16

6

million on consumer credit cards, class member credit cards.

7

Class members aren’t receiving

class members are receiving

--

and I haven’t heard the

and this is a beautiful plan for

it’s a protection plan for them,

they’re receiving

What is very strange about this plan

8

excellent word,

9

Your Honor, but

it’s a claims made plan.

--

and that was an

I don’t know about

receive about four to five notices every

10

single month about a class action of which I’m a member.

11

lawyer who’s involved in class action litigation,

12

probably any of them.

13

lawyer familiar with class action litigation.

14

are not lawyers, but a card member who looked at that

15

preliminary notia has no idea as to what they’re agreeing to

16

or not agreeirc t,

17

involved to make. a claim or how to make a claim.

18

Interestingly enough, Your Honor,

19

agreement

20

have to make he claim yourself, you can’t have a lawyer do

21

it.

22

at that docurnert

23

arose here in Phiadelpia years ago.

24

have a lawyer reresent him and make a claim, but in the

25

notice it says yc can’t have a lawyer do it.

--

As a

I don’t read

Once in a while I’ll read one.

I’m a

The cardholders

and most of them don’t know what’s

in the agreement,

the

in t±e notice, the notice specifically says you

It amazes n why the parties don’t want lawyers to look
It’s a basic right in this country that
Everyone’s entitled to

That’s because

62
1

apparently they didn’t want lawyers to come along and say,

2

well,

3

HSBC credits yotr account,

4

years old or five years old,

5

that governs the law, your old debt may be revived.

6

fact,

7

or maybe it isn’t, but in their brief in opposition to our

8

brief,

9

members,

10
11

there’s a lot of issues here.

it is revived.

Are you aware that if

if your account is either three
depending on the Virginia statute
And in

Now, HSBC says, well, maybe it’s revived

they didn’t address that issue with all the class
they m::ely said as it relates to Peterson, she’s not

part of that because it doesn’t involve her.
Well,

it c’oes involve other class members, Your Honor,

12

and if a client came to me and said here’s a notice I got,

13

what do I do i th this notice,

14

well, you’re giving up all of your rights and you’re reviving

15

the Statute of L:Lmitatioris.

16

That notice nctti:

17

told what that :acice is about, and that’s probably why

18

nobody’s respanded to it;

19

discloses a lct. :f information, but it tells you don’t see a

20

lawyer,

21

when your accoua. is credited,

22

collection by

23

probably will,

24
25

I’d look at it and I’d say,

Well,

that’s not in the notice.

some adjustment, and class members should be

they don’t know what it’s about.

and you hnow something,

It

the Statute of Limitations,
now may no longer bar

They may be allowed to, and in fact
aze after yow.

It’ s very creative.

The big isc in this hearing today is are class members
going to be ba:ta off with the settlement or are class

63
1

members going to be better off without the settlement.

2

there are

3

number.

4

have responded to get some money,

5

credit card.

6

small that the numbers who didn’t respond are now going to be

7

removed from beinr in a position to pursue their rights under

8

statutory law.

9

HSBC says we can co ahead and collect and you have no rights

--

what is it,

500 who filed claims?

Out of 23 million,

Sure,

I missed the

there’s a minuscule amount who
to get credited on their old

Th number of persons who have responded is so

tthat is interesting,

again,

is the Defendant

10

to counterclaim anymore.

11

collect.

12

HSBC is corret that they do have the right to pursue the

13

rights they ha ithout having a counterclaim brought against

14

them.

15

Class attorneys say no,

they can’t

I dont know who’s right or wrong, but I believe

If the setIment is approved as currently designed,

16

class members tate the necessary

17

affirmative act ien to receive this credit, and that, Your

18

Honor,

19

Why is it that both parties want affirmative action as opposed

20

to we’ll credit our account?

21

case,

22

my briefs have tioned,

23

depositions.

24

looked at tho:ans of docuraents;

25

dump.

--

must take the necessary

certaiIy :reates a lot of questions in a class action.

Your Hoo:.

What is so amazing in this

in additic to what I’ve mentioned and what
in this case there were no

;a heard counsel for Plaintiff say we’ve
that sounds like a paper

I don’t. hn why they had to look at thousands of

64
1

documents,

2

thousands of documents doesn’t make it determinative on what’s

3

fair and reasonable for the class members.

4

simple case,

5

the documents were examined in informal interviews.

6

not one deposition taken.

7

side say there waF an affidavit signed or multiple affidavits

8

signed.

9

inaccurate.

HpEully, if t1ere is an affidavit or

10

depositions,

the Court could say,

11

involving $23 million without one deposition, without one

12

affidavit,

13

mediations.”

14

this is a fair ad reasonable settlement.

15

discussions r:ding the documents, Your Honor,

16

“confidential”

17

the documents that were reviewed or the importance of them.

18

The worse of this is under the proposed settlement,

19

approved today c:. October 1 and on October 2,

20

Defendant cou’d

21

absolutely no -znctive relief as there is in the case

22

against its parrt company.

23

this is not that complex of a case.

Looking at

It’s a relatively

it’s not complex and what is so interesting,

is

There was

I did not hear counsel for either

We dort know if the documents were accurate,

“Well,

this is a case

just informal discussions and interviews and
Ne of that should be determinative to say that

{quote, unquote).

Most of the
are

Nobody knows the fairness of

if we’re

tomorrow, the

:ntinue purcuing these practices.

There’s

Try to be Zck with my comments and what I heard.

24

already addres’:ecno depositions, documents have not been

25

disclosed.

Thc::uands of documents

--

I’ve been in a lot

I’ve

65
1

smaller cases where I’ve had thousands of documents,

2

doesn’t mean arvthing unless there are

3

very few documents that would be applicable,

4

substantive issues of this case.

5

issues like advising the

6

in some instances and they

7

receive a $30 :.inent as what is called a settlement and the

8

IRS could come aI.ng and say,

9

$4,000, you n:v have to pay taxes on that benefit.”

tax

--

—-

that

there are probably
to the

The notice misses important

effect

because there’s recapture

some of the class members could

“Well, you’ve written off
That’s

10

not even addressd in the settlement agreement nor do the

11

class members kncr about it.

12

dollar,

13

class member

14

there’s actuall illions and millions and millions of dollars

15

beyond the 23,COD,000 involved in this case.

16

submits, Your Hoor,

17

help the parties,

18

class members.

22

That doesn’t sound fair and reasonable when

Peterson

that this is a self-serving agreement to

their counsel and HSBC,

not to help the

hank you, Your Honor.

THE. CURT:

All right.

Ms.

Strickland, do you

want to respoz’c

21

MS.
Honor.

23

A

less than a dollar, 70 cents after legal fees per

19
20

Is it fair and reasonable?

STE.ICKLAND:

Certainly, very briefly, Your

We
THE COURT:

24

somehow creditin

25

kind.

I’m interested in the argument that

the accounts creates a novation of some

66
1

MS.

STRICKLAND:

Your Honor, we don’t believe that’s

2

true.

3

voluntary payment by the Plaintiff,

4

that isn’t the situation here.

5

benefit being conferred on the card member, as opposed to a

6

Plaintiff coming from the card member which revive the debt.

7

We briefed this, we just don’t think that what Ms.

8

argued is legally correct.

But also,

9

correcting in tat context,

some of what may be a

We actually briefed the issue.

If there were a

that might the case, but

Here it’s a

--

an actually a

Peterson

it’s probably worth

10

misunderstanding of Ms.

11

the money was all being paid by credit, by way of credit to

12

account holders.

13

option of applying credits.

14

23 million accounts more or less involved in the case,

15

only 6 million of those accounts even remained open at the

16

time of notice which was, you know,

17

And 16 million were closed,

18

there is a closed account, credit isn’t even an option.

19

the overwhe1mr.g majority,

20

greater now,

21

can be applied !rd just a check’s going to go out.

Peterson’s counsel.

He indicated that

That actually isn’t accurate.

HSBC has the

But it’s to be noted that of the
that

five or six months ago.

so obviously to the extent that
So,

and probably the numbers are even

of he numbers, are situations in which no credit

22

THE COURT:

23

MS.

Okay.

STRICKLAND:

It’s also worth noting that with

24

respect to the nount of the settlement, we don’t believe the

25

case is meritorious under any event and we believe we have

67
1

case dispositive defenses and that the Plaintiffs could not

2

have certified a class,

3

litigation class, no.

4

THE COURT:

5

MS.

6

THE COURT:

7

MR.

a settlement class perhaps, but a

Okay.

STRICKLAND:

Thank you, Your Honor.

Do you have anything to say?

PULLThM:

Very briefly, Your Honor.

Regarding

8

Mr. Chastain’s claims, he clearly, on page one of his filing,

9

opted out.

The Court noted that he opted out.

The case that

10

Mr. Chastain cites that he can both be an opt-out and an

11

objector simply doesn’t stand for that proposition.

12

case,

13

them opted

14

outs opt out ni ‘eard from the objectors.

But they’re two

15

different people.

Chastain has

16

provided that ir’s one person that’s able to simultaneously

17

keep these role

18

is my disagreements with Mr.

19

counsel, begar:. rçht after he said his name.

20

he said who h represents.

22.

Carolina class.

22

what is consume:$. in our class that’s already been

23

preliminarily rpproved.

24

objections.

25

interesting, Mr.

like this,

In that

there were a large number of people, some of
of them objected.

The Court let the opt-

There’s no case that Mr.

keep this dual role.

And the other issue

Chastain, or at least his
And that’s when

He does not represent a South

There is no South Carolina class, but for

He lacks the standing to make these

E;e:- the objections he makes, Your Honor,

it’s

Iswis feels we didn’t do enough work; Mr.

68
1

Zipkin feels like we did too much work.

2

in this role, where Plaintiff’s counsel often finds itself.

3

Regarding

Ms.

So, we’re

--

that’s

Strickland accurately pointed out,

I

4

believe,

5

counsel.

6

not allowed to have counsel,

7

do not need cou:.el.”

8

when we did Capital One, we did not put that on there and

9

people felt like they were

the misconceptions held by Ms.

Peterson and her

I’ll also note his statement that class members were
What the statement said is,

“You

What we found in prior of these cases

--

needed to hire a lawyer and they

10

incurred expense that they didn’t necessarily have to do.

11

other very quick issue, Your Honor,

12

of objectors who did file, properly file the papers that are

13

not here toda’,

14

in sort of two .ategories, eight of those effectively in one

15

version or another said they wished the settlement was more.

16

I will point out, of those eight,

17

aggregate,

18

their recovery on the settlement will actually exceed what

19

they spent or coia close to it.

20

a Ms.

21

and feels like that that was,

22

that fact and that our case didn’t remedy it.

23

Polistad is a prisoner in the State of Washington, and he

24

really wanted to be here today.

25

field trip,

One

there are a small handful

Where’s about ten of them.

I would put them

five of them,

in the

speni $81 on the product, according to HSBC.

The other objectors,

So,

there’s

Hunter who objects to the fact that her debt was sold

I cor’t know, but

she was somehow prejudiced by

--

So,

I don’t

And Mr.

--

maybe as a

69
1
2
3

THE COURT:

I didn’t sign to bring down.

(Laughter)
MR.

PtJLLIAM:

So, but I think what’s

--

sort of in

4

summary on these objections,

5

3rd Circuit characterized 30 objections out of 1.1 million

6

class members as infinitesimally small.

7

15 objectors in 20 milliom people, which is 1/40th the number

8

of objectors in Bell Atlantic.

9

adjective to be able to describe that, other than I think it’s

10
11
12

clear that th

in the Bell Atlantic Case,

So,

the

Here, we have about

I wouldn’t even know what

Diass supports the settlement.

THE COtJPT:

Is there anything else?

another objector here or something?

13

MR.

14

THE OQURT:

15

MR.

16

THE

18

MR.

19

THE COf?:

20

MR.

Anyone have any more

--

he just said ab:ut me.

17

xn I missing

z:tpc:N:

Yes,
--

IPiN:

--

Sir,

I’d like

--

to say?
say something in opposition to what

Go ahead.
ZIPRIN:

ZI:IN:

May I sit here, Your Honor?
bsolutely.
Well,

I listened real carefully and he

21

doesn’t want t:

22

prior hearino: w preliminary, which gives everybody the right

23

to change their ind.

24

asking you to cb:’se sides.

25

you can’t be ar r:jector and opt out.

t3Ik about this being a preliminary

--

the

He didn’ t mention the fact that they’ re
When he came in here and he said
Well, what we

--

maybe,

70
1

however you look at it,

2

whatever I think would be helpful

3

THE COURT:

4

MR.

5

complaining about it.
THE COURT:

7

MR.

8

--

And you did.

z::PKIN:

6

I should be able to give the Court

--

and I did,

And he said

and I don’t see why he’s
--

Maybe he thought you were too effective.

ZIPKIN:

Well,

I agree with him

--

(Laughter)

9

MR.

ZiPi:N:

--

and I’m sorry,

if he took offense to

10

the fact that I aid he didn’t do enough work.

11

didn’t know if he did enough work because he hid it all from

12

us,

13

Your Honor,

14

preliminary aiproval, you come to the final approval, things

15

happen in bet

16

should deny the eproval.

I said I

just like the gentleman on the other side said.
thi

--

is just a perfect example of why you have a

er and they dDn’t agree and now Your Honor

17

THE COUflT:

18

MR.

19

THE CDJ?:

20

MR.

Anything else?

PUThIAM:

Your Honor,
Who’s that?

PUL:IAM:

Mr.

21

here.

22

in an abundan:

23

wasn’t swmtioned Is Court.

Mr.

But I

FirzIand,

24

THE CiU!2:

25

MR.

if I may?
Oh, okay.

Oreck Finneland (phonetic)

is

and he received a post card notice and

caution, he’s here today to make sure he
So,

I wanted the Court to just

Do you know what this is about,

:NzLAND:

No,

Sir.

I ‘ m sorry,

sir?

then I got

--

71
1

lost.

I was supposed to be here at 9 o’clock.

2

THE COURT:

3

MR. FINNELAND:

4

THE COURT:

5

at HSBC,

6
7

Okay.

At one time or other, you had an account

a credit card?
MR. FINNELAND:

I don’t know.

I don’t know about

that.

8
9

That’s okay.

THE COURT:
notice.

Okay, you’re here because you got a

You thought it was a summons to Court?

10

MR. FINNELAND:

11

THE COURT:

Yes.

It wasn’t.

This is about people who are

12

representing people who either had credit cards with HSBC and

13

were involved in a protection plan and they’re trying to

14

settle the claimE. against HSBC.

15

was, but

16
17

--

MR.
member

is he part of the class?
PULIAM:

THE COURT:

19

MR.

Presumably, he’s a putative class

Oh.

PULLIAM:

and I think he may have just

--

misunderstood th notice.

21
22

I guess he is.

--

18

20

I don’t know what your status

THE COUT:

Okay.

All right, you can leave if you

want.

23

MR.

24

THE CT:

25

MR.

FINNELAND:

Thank you so much,

Okay,

FINNELAND:

thank you.

Thank you.

Judge.

72
1

MR.

2

THE COURT:

3

MR.

ZIPKIN:

I can speak from here, Your Honor?
Sure.

ZIPKIN:

I just want to point out that it’s not

4

the nuitiber of ob-lectors that is important,

5

significance of the objections.

6

addressed the issue of no discovery,

7

limitations is revived vis-a-vis the credit to the account and

8

the tax recapture issue.

9
10
11

THE COUT:
the tax recapture?
MS.

Ms.

Neither

it’s the

COUflSC1

have

that the statute of

Strickland, what’s the issue with

I don’t know what that

STRICKLAND:

Your Honor,

--

the issue with respect

12

to tax recapture,

13

perspective is

14

recapture.

Ob;ius1y,

15

situations,

so it’s not something that we include in a notice

16

typically nor is there any need,

17

create more confusion than is necessary.

I believe from Ms.

Peterson’s counsel’s

!at we should have disclosed the potential for

18

THE CDJRT:

19

MS.

20

THE cotrT:

taxation is a matter of individual

Okay.

STRICKLAND:

To?

I think it would probably

Now,

Thank you.
is there anyone else who has

21

anything to say?

22

you to propose some language for me along the lines of barring

23

individual class members from getting double recoveries.

24

don’t intend to ar Attorneys General from doing whatever they

25

think they have o do, but as far as individual class members

All right, Ms.

Strickland,

I would like

I

73
1

who think they might get double recovery,

2

about that.

3
4

MS.

THE COURT:

MS.

You can file a response if you don’t

STRICKLAND:

Your Honor, would you like us to do

that in the form of an amended final approval order?

9
10

I’ll do

like it.

7
8

Thank you, Your Honor.

that.

5
6

STRICKLAND:

I want some language

THE Cc:fJRT:

And you can maybe agree on a particular

language because you know where I’m going on that.

11

MR.

OLO:

Well,

can I

--

let me just ask this

12

question,

13

Generals have ti right to pursue the civil penalties claim.

14

I think what yoi’re also saying is,

15

the Attorney Geza1s do not have the right to pursue

16
17

then.

I think we’re clear that the Attorneys

THE COURT:
want.

I’m barr

--

that
--

They have the right to do whatever they
the individuals

18

MR.

19

THE CCT:

20

MR.

OCCM:

21

MR.

CCT:

22

MR.

GCLO:

23

I think is that

GOLOMB:

--

Okay.
--

from collecting any money twice

Okay and so
--

--

--

--

for the same claims.
okay, but you’ re not barring the

Attorney Gener

24

THE COURr:

25

MR.

GZ1’iB:

They can do whatever they want.
--

from pursuing

--

I

--

74
1

THE COURT:

2

MR.

3

THE COURT:

4

G’JLOMB:

can’t control them

--

--

--

a restitution claim?
they’re not even parties to this

--

class action.

5

MR.

GOLO:

Okay,

I but just wanted

--

you’re not,

6

at least you’re thinking now is that you’re not barring them

7

from pursuing a restitution claim.

8

allow to pay

9

THE CJ:T:

It’s just they’re not

The restitution claims

10

MR.

11

THE COURT:

12

MR.

13

THE CDUT:

14

MR.

15

TEE ClT:

16

MS.

17

THE COUT:

18

MR.

GXOMB:

19

MS.

STtCKLAND:

20

and I should

21

--

exact topic;.

GOLOMB:

GOLOMB:

:4oLoMB:

--

the consumers.
behalf of the State

--

Okay.
--

that’s their business.

All right.
--

--

Your Honor,

but if it’s
Your

if I just

--

--

--

for the individuals

--

Okay.
Your Honor, we’ll propose language

be surprised if we’re back here again on this

THE CCRT:

23

MS.

25

-

STRICKLAND:

22

24

-

Great,

S’TCKLAND:

--

all right.
judging by listening to Mr.

Golomb.
THE C:irT:

All right.

75
1

MS.

STRICKLAND:

So, we will propose language which

2

will be along the lines that a class member is barred from

3

recovering any monies by virtue of the AG actions for

4

restitution and other claims payable directly to class

5

members.

6
7

THE COUPT:

we’ll see what the response is.

8
9

I understand what you’re saying and

MR. LEWIS:

Your Honor,

are we all going to get

copied on that?

10

THE COURT:

You’re on the docket as a lawyer?

11

MR. LEWIS:

I’m on the docket as a objector’s

13

THE ct:nT:

Well, make sure.

14

MS.

12

lawyer.

sT:CKLAND:

Your Honor,

15

is,

16

then run by Pli:ttiff’s counsel

I guess the question

I suspect what we will do is create a draft which we will

17

THE COJRT:

18

MS.

--

Right.

STRICKLAND:

--

and certainly once there’s

19

something filec. ith the Court,

20

get copied.

everyone on the docket will

21

THE CDJRT:

Okay.

22

MR.

And will that require a new notice?

23

TE c:::

lIWIS:

No,

it on’ t require a new notice.

24

I’m asking yot

25

in it, that’s vh?t I want.

do is suggest language for me.

All

That wasn’t

__________________

___________

_

76
1

MR. LEWIS:

Yes,

2

THE COURT:

Okay.

3

you’re on the docket.

4

Sir.
But you’ll get a copy because

thank you.

5
6

ALL:

Anything else?

Okay, we’re adjourned,

Thank you, Your Honor.

(Court adjourned)

7
8
9
10
11
12
13
14
15
16
17

CERTIFICATION
I certify that the foregoing is a correct transcript from the
electronic sour.d recording of the proceedings in the above
entitled matter.

10/4/12
Signature of Transcriber

Date