Kardonick v. JP Morgan Chase & Co. et al

Filing 468

MOTION for an Order Authorizing Distribution of Settlement Funds by David Kardonick. (Attachments: # 1 Memorandum, # 2 Text of Proposed Order)(Ku, Brian)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
Case No. 1:10-cv-23235/HOEVELER

DAVID KARDONICK, JOHN DAVID and
MICHAEL CLEMINS, individually and on
behalf of all others similarly situated and the
general public,
Plaintiff,
v.
JPMORGAN CHASE & CO. and CHASE
BANK USA, N.A.
Defendants.

MEMORANDUM OF LAW IN SUPPORT OF LEAD
PLAINTIFFS’ APPLICATION FOR ORDER AUTHORIZING
DISTRIBUTION OF SETTLEMENT FUNDS
Lead Plaintiffs David Kardonick, John David, and Michael Clemins
(“Lead Plaintiffs”), by and through their attorneys, respectfully submit this
memorandum of points and authorities in support of their Application for an
Order in the above-captioned class action (the “Action”): (1) authorizing
distribution of the Net Settlement Fund to approved claimants; (2) approving
the payment of expenses to the Claims Administrator (as defined below);

and (3) approving payment of remaining tax expenses.1
I.

INTRODUCTION
On September 11, 2011, a hearing was held before this Court on Lead

Plaintiffs’ Motion for Final Approval of Class Action Settlement. Having
found that due and adequate notice of the Settlement, including the terms of
the Plan of Administration and Distribution, was given to the Class, this
Court issued a Final Judgment and Order of Dismissal dated September 16,
2011 (the “Final Approval Order”) approving the Settlement as fair and
reasonable, approving the Plan of Administration and Distribution, and
dismissing the action with prejudice in accordance with the terms of the
Settlement and the Final Approval Order. In the Final Approval Order, the
Court expressly retained jurisdiction for, among other things, determining
any matters relating to the distribution of the Settlement Fund.
Pursuant to the Settlement, as Claims Administrator, Heffler, Radetich
& Saitta LLP (“Heffler” or the “Claims Administrator”) was charged with
the responsibilities of administrating and calculating Proof of Claim forms
and distributing the Net Settlement Fund, subject to court approval. In
accord, Heffler has issued a report in the form of the Declaration of Ronald
1
This Memorandum incorporates by reference the definitions in
the Stipulation and Agreement of Class Action Settlement (the “Settlement”)
dated December 20, 2010 and all terms used herein shall have the same
meanings as set forth in the Settlement.
2

A. Bertino, C.P.A. (the “Heffler Report”), contemporaneously submitted
herewith, wherein it identified 217,023 Proof of Claim forms as payable and
18,606 Proof of Claim forms as non-payable. For the reasons set forth
below, Lead Plaintiffs request this Court approve the recommendations of
Heffler in accepting and rejecting claims filed in this matter and order
distribution of the Settlement Fund in accord therewith.
At this time, the amount in the Settlement Fund, after prior payment
of attorneys’ fees and expenses, service awards, and administration fees and
expenses, is approximately $12,077,694.87. The Claims Administrator has
incurred fees and expenses above the Notice and Administration Fund
provided for in the Settlement and approved by this Court in the Preliminary
Approval Order and in subsequent orders.2

These additional fees and

expenses were incurred through the claims administration process and are
itemized on an invoice from Heffler, which is attached to the Heffler Report
as Exhibit C. See Heffler Report ¶ 17 and Ex. C. Lead Counsel has
reviewed this bill and believes the fees and expenses are reasonable and
appropriate; therefore, Lead Counsel recommends that such expenses be
approved for payment out of the Settlement Fund. Thus, should the Court
approve to pay the balance of the requested settlement administrator’s fees
2
As reflected in Heffler’s invoice, the current outstanding
balance owed to Heffler is $224,346.88. See Heffler Report ¶ 17 and Ex. C.
3

and expenses, there will be approximately $11,853,347.99 in the Settlement
Fund available for distribution.
II.

AMOUNTS PREVIOUSLY DEDUCTED FROM THE GROSS
SETTLEMENT FUND
In the Final Approval Order, this Court awarded Lead Counsel

attorneys’ fees in the amount of $3.5 million and reimbursement of litigation
expenses in the amount of $62,676.54. The Court also awarded each of the
three Settlement Class Representatives a service fee in the amount of $2,500.
These amounts were paid from the Settlement Fund.
Additionally, administration expenses and fees in the amount of
$4,344,961.09 have been paid from the Settlement Fund. See Heffler Report
¶ 17.
III.

TAXES TO BE DEDUCTED FROM THE NET SETTLEMENT
FUND
Pursuant to §468 of the Internal Revenue Code, the Net Settlement

Fund itself may be responsible for the payment of additional income tax on
the income earned subsequent to the deposits into the Settlement Fund. Any
additional tax liability the Net Settlement Fund might have will be calculated
immediately prior to distribution (in order to take account of interest as it
continues to accrue) and must be deducted from the Net Settlement Fund.

4

IV.

FEES AND EXPENSES OF THE CLAIMS ADMINISTRATOR
TO BE PAID FROM THE NET SETTLEMENT FUND AND
ACCOUNT BALANCE
Pursuant to the Settlement, as Claims Administrator, Heffler was

charged with the responsibilities of administering and calculating Proof of
Claim forms and distributing the Net Settlement Fund, subject to court
approval.

In carrying out the administration process, the Claims

Administrator has incurred fees and expenses above the Notice and
Administration Fund and any other amounts previously authorized by this
Court. See Heffler Report ¶ 17. The Claims Administrator has provided
Lead Counsel with an invoice for its fees and expenses, which is attached as
Exhibit C to the Heffler Report.

This invoice reflects that the Claims

Administrator has an outstanding balance of $224,346.88.

See Heffler

Report at ¶ 17 and Exhibit C. Lead Counsel have reviewed the invoice and
believe the fees and expenses are reasonable and appropriate and
recommend that such expenses be approved for payment out of the Net
Settlement Fund. Thus, should the Court approve the requested Claims
Administrator’s

fees

and

expenses,

there

will

be

approximately

$11,853,347.99 in the Settlement Fund available for distribution, exclusive
of any additional tax payments. See Heffler Report at ¶ 13.

5

V.

DISTRIBUTION OF THE NET SETTLEMENT FUND
Lead Plaintiffs respectfully request that the Court authorize the

distribution of the Net Settlement Fund, i.e., the Settlement Fund less any
further allowances for taxes and payment of the balance due to the Claims
Administrator, to eligible Settlement Class Members, on a pro rata basis.
The Heffler Report includes all of the necessary information to effectuate the
distribution of the Net Settlement Fund.
A.

Summary of Payable and Non-Payable Claims

As of October 31, 2012, Heffler has received and processed 235,629
Proof of Claim forms in accordance with the terms of the Settlement and
court-approved Plan of Administration and Distribution. See Heffler Report
¶ 5. Of the 235,629 claims received, 217,023 claims have been adjudged as
payable claims and 18,606 claims have been identified as non-payable
claims. See Heffler Report ¶¶ 8-9. The claim numbers of these non-payable
claimants, and the reason(s) Heffler has rejected these claims, are set out in
the Heffler Report. In short, the 18,606 non-payable claims were rejected
for one or more of the following reasons: (a) filing a duplicate claim; (b)
improper information or documentation; and (c) filing after the extended
claims filing deadline of September 9, 2011. See Heffler Report ¶¶ 5-6, and
9.

6

Each claimant who filed a deficient claim was sent a rejection letter
advising the claimant of the reason for the rejection of his claim and
allowing the claimant to respond if the claimant wished to correct the claim.
See Heffler Report ¶¶ 6-7 and Exhibit A. A total of 1,445 corrections or
responses were received by Heffler that cured deficiencies. Id. at ¶ 7. As
such, these 1,445 claimants have been included in the payable claims.
B.

Request for Approval of Heffler’s Report

Pursuant to the Settlement and Plan of Administration and
Distribution, Lead Counsel request that the administrative determinations of
each claim listed in the Heffler Report be affirmed and approved by the
Court. Each claim that has been rejected in whole or in part should be so
rejected. Each claim that has been accepted in whole or in part should be so
accepted.
C.

Request for Distribution to Valid Claimants

Under the direction of Lead Counsel, Heffler intends to distribute the
Net Settlement Fund promptly after the proposed Settlement Distribution
Order becomes final.

Currently, the Net Settlement Fund amounts to

$12,077,694.87. See Heffler Report ¶ 13. This amount is prior to the
reduction of the requested fees and expenses of the Claims Administrator in
the amount of $224,346.88 and any additional income tax payment. As

7

noted above, the requested fees and expenses were incurred through the
claims administration process and are itemized on an invoice from Heffler,
which is attached to the Heffler Report as Exhibit C. See also Heffler
Report ¶ 17. Lead Counsel have reviewed this invoice and believe the fees
and expenses are reasonable and appropriate and recommend that such
expenses be approved for payment out of the Net Settlement Fund. Thus,
should the Court approve the requested settlement administrator’s fees and
expenses, there will be approximately $11,853,347.99 in the Net Settlement
Fund available for distribution.

See Heffler Report ¶ 13.

Under the

Settlement and Plan of Administration and Distribution, class members who
submitted Payable Claims will receive approximately $37.81, $64.14, or
$151.22, depending on the nature of their claim.
Lead Counsel submit that six months after the initial distribution of
the Net Settlement Fund to Authorized Claimants, it will be appropriate to
distribute any unclaimed monies remaining in the Net Settlement Fund, if
any, in a secondary distribution to the Class if, in Lead Counsel’s discretion,
there are enough monies remaining to warrant a secondary distribution.
Lead Counsel further submit that six months after the secondary
distribution of the Net Settlement Fund, or, if no secondary distribution
occurs, six months after the initial distribution of the Net Settlement Fund, it

8

will be appropriate to distribute any unclaimed monies remaining in the Net
Settlement Fund to a charitable or educational entity designated by Lead
Counsel and approved by counsel for the Defendants.
Lastly, Lead Counsel request the Court to permit the Claims
Administrator to destroy all Proof of Claim forms and related
correspondence one year after the initial distribution of the Net Settlement
Fund to Authorized Claimants. The Settlement Distribution Order provides,
however, that the Claims Administrator must retain all administrative
records, including its copy of the Charged-Off List, Payable Claims and
Non-Payable Claims, and its computer database used to create these lists for
a period of three years after the initial distribution of the Net Settlement
Fund to Authorized Claimants.
VI.

CONCLUSION
For the foregoing reasons, Lead Counsel respectfully request that the

Court grant this Motion and authorize the distribution of the Net Settlement
Fund to Authorized Claimants.
DATED: November 30, 2012

/s/ Brian Ku
Ku & Mussman, P.A.
Brian Ku (FL Bar # 610461)
Louis Mussman (FL Bar # 597155)
M. Ryan Casey (LA Bar #30192)
12550 Biscayne Blvd., Suite 406
Miami, Florida 33181
Tel: [phone]
Fax: [phone]
[e-mail]
9

Richard M. Golomb
Ruben Honik
Kenneth J. Grunfeld
GOLOMB & HONIK, P.C.
1515 Market Street, Suite 1100
Philadelphia, PA 19102
Tel: [phone]
[e-mail]
Allen Carney
Randall K. Pulliam
Tiffany Wyatt Oldham
CARNEY WILLIAMS BATES
PULLIAM & BOWMAN LLC
11311 Arcade Drive, Suite 200
Little Rock, AR 72212
Tel: [phone]
Fax: [phone]
Allan Kanner
Conlee S. Whiteley
KANNER & WHITELEY, L.L.C.
701 Camp Street
New Orleans, Louisiana 70130
Tel: [phone]
[e-mail]
ATTORNEYS FOR PLAINTIFF
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing has been
filed and served on all counsel of record on this 30th day of November 2012,
via Court’s CM/ECF Filing system.
_/s/ Brian Ku _______
Brian Ku (FL Bar # 610461)

10