Trombley v. Bank of America Corporation
Filing
119
ORDER denying without prejudice 105 Motion for Attorney Fees; denying without prejudice 117 Motion for Attorney Fees; denying without prejudice 108 Motion for Settlement; denying without prejudice 116 Motion for Settlement: The instant motions are denied without prejudice to filing motions to approve a revised settlement agreement and a revised request for an award of fees and costs that comply with the requirements for approval. So Ordered by Judge Joseph DiClerico (New Hampshire) on 5/3/2012. (Duhamel, John)
UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF RHODE ISLAND
Bruce J. Trombley and Ryan Sukaskas
v.
Civil No. 08-cv-456-JD
Bank of America Corporation
0 R D E R
The plaintiffs, Bruce J. Trombley and Ryan Sukaskas, sued
Bank of America Corporation ("BAC"), on their own behalf and on
behalf of a putative class, alleging, inter alia, breach of the
implied covenant of good faith and fair dealing. 1
The parties
reached a settlement, and the court granted, in part, the
plaintiffs' unopposed motion for preliminary approval of the
settlement agreement and for preliminary certification of a
settlement class.
The plaintiffs filed an unopposed motion for
an award of attorneys' fees and for class certification and final
approval of the settlement.
The plaintiffs also filed an
unopposed revised request for approval of attorneys' fees and for
final approval.
1
Trombley and Sukaskas also alleged breach of contract,
violation of the Truth in Lending Act, and unconscionability of
the credit card agreements. The parties stipulated to the
dismissal of the unconscionability claim without prejudice.
The
court granted motions in favor of BAC on the breach of contract
and Truth in Lending Act claims.
Background
Trombley and Sukaskas alleged that BAC imposed fees and
other penalties when they made their credit card payments on or
close to the due date.
Trombley made a payment in person at a
BAC branch on the due date, but BAC did not credit the payment on
that date, imposed a late fee, and cancelled his promotional
interest rate.
Sukaskas attempted to make an online payment for
his credit card balance but was informed that BAC would not
credit the payment on that day because it was the due date.
To
avoid paying late, he paid by telephone, and BAC imposed a
telephone payment fee.
They further alleged that BAC has imposed
similar fees and charges on the putative class members for
timely-tendered payments.
Trombley and Sukaskas filed this case as a putative class
action on November 24, 2008, alleging breach of contract, breach
of the duty of good faith and fair dealing, violation of the
Truth in Lending Act, and unconscionability of the credit card
agreements.
The parties initially litigated whether the claims
were subject to arbitration, until BAC withdrew its motion for
arbitration.
The parties stipulated to the dismissal of the
unconscionability claim without prejudice.
The court granted
motions in favor of BAC on the breach of contract and Truth in
Lending Act claims, leaving only the claim that BAC violated the
2
duty of good faith and fair dealing by failing to post the
plaintiffs' and the putative class members' payments on the day
they were received, without imposing additional fees or charges.
The parties entered a Settlement Agreement that is dated
June 27, 2011.
For purposes of settlement, the parties have
agreed to the following definition of the settlement class:
all Persons who, at any time between August 1, 2006 and
February 22, 2010: (x) had a credit card account with
FIA2 and (y) made a Qualifying Payment in connection
with that account (I) in person at a Bank of America
banking center; (ii) by phone using Bank of America's
pay-by-phone service; or (iii) electronically using
Bank of America's online banking services; and (z) who
incurred a late payment fee, finance charge, or other
fees, penalties or charges, in connection with the
timing of such payment that was not waived or refunded.
Settlement Agreement
§
2(bb).
"Qualifying Payment" for purposes
of the settlement class means:
payment by a FIA cardholder on a FIA credit account
where the payment is (x) equal to or in excess of the
minimum payment due for the monthly billing cycle in
which it is made {y) not determined by Defendant to be
deficient for non-sufficient funds; and (z) made, or
alleged by the cardholder to be made, on or before the
same day as the "Payment Due Date" or other deadline
stated in the operative cardholder agreement,
cardholder statement or other disclosure to the
cardholder.
Settlement Agreement § 2(u).
2
FIA Card Services, N.A. is the successor-in-interest to
Bank of America, N.A. and is a wholly-owned subsidiary of BAC.
Settlement Agreement, § 1, Recitals.
3
Under the terms of the Agreement, the settlement amount is
defined as $5,000,000, except that
the Bank shall have no obligation to pay any difference
between five million U.S. dollars ($5,000,000) and the
amount necessary to pay: (1) all distributions to
Approved Settlement Class Members; (2) Representative
Plaintiffs' service award; (3) all attorneys' fees and
costs; (4) Settlement Costs; (5) the Cy Pres amount (if
any); and (6) any other deduction from the Settlement
Amount that is approved by the Court, in the event that
the sum of (1) through (6) is less than five million
U.S. dollars ($5,000,000).
Agreement, 2(aa).
BAC agreed to pay up to $28 from the
settlement amount to each settlement class member who the
settlement administrator determines has satisfied the
requirements and to pay Trombley and Sukaskas $5,000 each as a
service award.
If the total of all claims and other agreed
distributions is less than $5,000,000, funds remaining of the
settlement amount, up to $450,000, will constitute a cy pres fund
for distribution to three designated organizations, as agreed in
the Settlement Agreement.
BAC is not obligated to pay any more
than the agreed distributions.
The settlement agreement also addresses attorneys' fees and
costs.
BAC agreed not to oppose the plaintiffs' motion for fees
and costs as long as the request did not exceed one third of
$5,000,000 ($1,666,667), and the requested amount was approved by
4
the court.
The parties also agreed that the fees and costs would
be paid out of the settlement amount.
Although notice was sent to 393,792 potential class members,
only 3,591 claims were filed and approved.
Eighteen people
requested to be excluded from the class, and one objection was
filed.
The plaintiffs ask for service awards to Trombley and
Sukaskas in the amount of $5,000 each.
If approved, the total
disbursement for claims and service awards under the Settlement
Agreement would be $110,548.
The costs of administering the
class settlement, as submitted, are $218,052.71.
The plaintiffs initially requested $1,650,000 in fees and
costs as "reasonable compensation for obtaining the Settlement
"
As agreed, the motion was not opposed by BAC.
In April,
the plaintiffs filed a supplemental and amended motion for fees
and costs in which they reduced the requested amount to
$1,500,000.
Discussion
The court's review of the plaintiffs' motions has raised
issues that must be addressed before final approval can be
considered.
The request for fees and costs is excessive in
comparison to the benefit to the class.
5
The benefit to the class
is particularly meager because the proposal for cy pres awards
does not meet the requirements for such awards.
A.
Fees and Costs
"In a certified class action, the court may award reasonable
attorney's fees and nontaxable costs that are authorized by law
or by the parties' agreement."
Fed. R. Civ. P. 23(h).
Even when
the parties have agreed to an award of fees, however, "courts
have an independent obligation to ensure that the award, like the
settlement itself, is reasonable."
In re Bluetooth Headset
Prods. Liability Litig., 654 F.3d 935, 941 (9th Cir. 2011).
Generally, the court should address the attorneys' fees and costs
before approving the settlement.
Weinberger v. Great N. Nekoosa
Corp., 925 F.2d 518, 523 (1st Cir. 1991).
In the process of considering a class action settlement and
a request for fees and costs, the court must scrutinize the
agreement for indicia of collusion between class counsel and the
defendant.
Weinberger, 925 F.2d at 524.
The defendant's
"agreement not to contest fees up to a stated maximum
exacerbate[s] the potential conflict of interest between the
plaintiff class and class counsel."
agreement," not to contest fees,
Id.
A "clear sailing
"by its nature deprives the
court of the advantages of the adversary process."
6
Id. at 525.
The amount of class counsel's requesteq fees and costs,
$1,500,000, dwarfs the recovery to be paid to the class members,
which totals only $110,548.
If the proposed fees, distributions,
and cy pres awards were approved, BAC would be obligated to pay
only $2,278,600.71, which is less than half of the proposed
settlement amount of $5,000,000.
The amount of requested fees
and costs is nearly 66% of the actual settlement amount.
At that
rate, the amount of requested fees and costs is excessive. 3
The
settlement terms, including the "clear sailing" provision for
fees, are warning signs that require careful scrutiny of the
settlement agreement.
See, e.g., In re Bluetooth, 654 F.3d at
947.
B.
Benefit to the Class
To be binding on the class, a settlement in a class action
must be approved by the court, following a hearing, and must be
3
Higher percentage rates for attorneys' fees generally are
reserved for cases that settle after the completion of formal
discovery when the case is close to trial. See, e.g., In re P.R.
Cabotage Antitrust Litig., 815 F. Supp. 2d 448, 462, 465 (D.P.R.
2011); In re Tyco Int'l, Ltd. Multidistrict Litig., 535 F. Supp.
2d 249, 269-70 (D.N.H. 2007).
In this case, the discovery plan
was not approved until July 30, 2010, and the motion to stay the
case pending settlement negotiations was filed on January 20,
2011.
It is far from clear that the parties had completed
discovery at that time; class certification had not been
addressed; and a trial date had not been scheduled.
7
based on findings that the settlement is fair, reasonable, and
adequate.
Fed. R. Civ. P. 23(e); Nat'l Ass'n of Chain Drug
Stores v. N. Eng. Carpenters Health Benefits Fund, 582 F.3d 30,
44 (1st Cir. 2009).
The court's assessment of whether the
proposed settlement is fair, reasonable, and adequate requires
consideration of a variety of factors, including the terms of the
settlement, the risks of litigation, the negotiation process, the
reaction of the class to the settlement, and the course of the
litigation prior to settlement.
Supp. 2d at 259-60.
See, e.g., In re Tyco, 535 F.
The approval process "involves balancing the
advantages and disadvantages of the proposed settlement as
against the consequences of going to trial or other possible but
perhaps unattainable variations on the proffered settlement."
Chain Drug Stores, 582 F.3d at 44.
When a settlement is reached before the class is certified,
the settlement agreement is subject to heightened scrutiny for
fairness.
In re Bluetooth, 654 F.3d at 946; D'Amato v. Deutsche
Bank, 236 F.3d 78, 85 (2d Cir. 2001).
Provisions for reversion
of unclaimed funds to the defendant and a "handsome fee for class
lawyers" are warning signs that the proposed settlement may not
be the result of arms length bargaining.
Mirfashihi v. Fleet
Mtg. Corp., 450 F.3d 745, 747 (7th Cir. 2006).
8
As proposed, BAC agreed to pay distributions of $28 to each
approved class member.
Because of the small number of claims,
the total amount to be paid as compensation to the class,
including the representative awards, would be only $110,548 out
of a potential settlement amount of $5,000,000.
The parties
represent that the actual fees paid by each class member to BAC
were between $35 and $39.
The plaintiffs point to the cy pres
awards, which would total $450,000, as an additional benefit to
the class.
urn class actions, courts have approved creating cy pres
funds, to be used for a charitable purpose related to the class
plaintiffs' injury, when it is difficult for all class members to
receive individual shares of the recovery and, as a result, some
or all of the recovery remains."
In re Pharm. Ind. Average
Wholesale Price Litig., 588 F.3d 24, 33 (1st Cir. 2009).
Such cy
pres awards are used to augment the class's recovery through
indirect means and to deter misconduct by preventing a defendant
from benefitting when practical obstacles may result in a small
number of claims.
Id.
When participating class members will
receive less than 100% compensation under the terms of the
settlement, however, unclaimed funds should be used to augment
the class members' recovery before they are allocated to cy pres
9
distributions. 4
In re Lupron Mktg. & Sales Practices Litig.,
F.3d ---, 2012 WL 1413372, at *9 (1st Cir. Apr. 24, 2012).
The proposed payments to the class members here are less
than 100% compensation for the fees they paid.
At the same time,
$3,171,399 of the $5,000,000 settlement amount is unclaimed.
To meet the requirements of a reasonable settlement when there is
unclaimed money in the settlement amount, the class members must
receive compensation for at least 100% of their losses before
additional benefits of cy pres awards may be considered.
In this
case, it appears that each class member should receive at least
$39, which would total $150,049 including the representative
awards.
As proposed, however, the settlement provides too little
benefit to the class to be approved as fair, adequate, and
reasonable.
Conclusion
For the foregoing reasons, the plaintiffs' motions for
attorneys' fees and costs (documents nos. 105 and 117) and for
class certification and final approval of the settlement
(documents nos. 108 and 116) are denied without prejudice to
4
The plaintiffs addressed Lupron in a notice filed on May 2,
2012.
In their discussion, the plaintiffs did not address the
full compensation issue, which is pertinent to the decision here.
Lupron, 2012 WL 1413372 at *9.
10
filing motions to approve a revised settlement agreement and a
revised request for an award of fees and costs that comply with
the requirements for approval.
SO ORDERED.
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~·
JOSePh A. DiClerico,
United States District Judge
(Sitting by designation.)
May 3, 2012
cc:
Michael D. Donovan, Esquire
David J. Fioccola, Esquire
Robert G. Flanders, Jr., Esquire
Andrew S. Kierstead, Esquire
Mark P. Ladner, Esquire
Michael J. Quirk, Esquire
Adam M. Ramos, Esquire
Peter N. Wasylyk, Esquire
11
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