Trombley v. National City Bank

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RAMONA TROMBLEY, et al., on behalf
of herself and all others similarly situated,
Plaintiffs,
v. Civil Action No. 10-00232 (JDB)
NATIONAL CITY BANK,
Defendant.
MEMORANDUM OPINION
Presently before the Court are plaintiffs' motions for final approval of the settlement and
for approval of attorney fees, reimbursement for costs and expenses, and incentive awards to the
representative plaintiffs. For the reasons explained below, the Court concludes that final
certification of the class and final approval of the settlement are warranted, and grants the
petition for awards, fees, and costs.
BACKGROUND
I. PROCEEDINGS IN THIS CASE
Much of the procedural history and background of this case has been discussed in
Trombley v. National City Bank, 759 F. Supp. 2d 20 (D.D.C. 2010), where the Court granted
preliminary class certification and preliminary approval of the settlement agreement. Plaintiffs
filed their class action complaint on February 17, 2010, alleging that defendant National City
Bank1 engaged in unlawful and deceptive practices by improperly charging its customers
1
On December 31, 2008, the PNC Financial Services Group acquired National City Bank. Compl. ¶ 7.
National City Bank was merged into PNC Bank, N.A. (“PNC”) on November 6, 2009 and no longer exists as a legal
entity. In the Revised Settlement Agreement, references to "National City" or "defendant" mean National City Bank
with references made to the separate entities National City or PNC depending on the context. Similarly, the Court
will generally refer to National City, which incorporates and includes both National City and PNC, but may make
references to the separate entities depending on the context.
overdraft fees for insufficient funds on debit card transactions in violation of various state and
federal laws. Compl. ¶¶ 2, 13-14. Specifically, plaintiffs allege that National City Bank
"reorder[ed] electronic debit transactions from the highest dollar amount to lowest dollar amount
so as to deplete the customer’s available funds as quickly as possible while maximizing the
number of overdraft fees collected." Compl. ¶ 2. Plaintiffs also allege that National City Bank
provided false and misleading account balance information and failed properly to disclose its
overdraft policies. Id.In May 2010, the Court received notification from the U.S. Judicial Panel on Multidistrict
Litigation ("MDL Panel") that an order had been entered, directing that this case be conditionally
transferred to the Southern District of Florida to Multidistrict Litigation Proceeding No. 2036, In
re Checking Account Overdraft Litigation ("MDL No. 2036"),which has been assigned to U.S.
District Judge King. See Docket Entry No. 3. On July 28, 2010, plaintiffs and National City
Bank (collectively, "the parties" or "the settling parties") entered into a settlement agreement and
moved for preliminary approval in this Court. Soon thereafter, the parties informed the MDL
Panel that they had reached a settlement, and the MDL Panel vacated its order to transfer the
action and returned the case back to this Court to evaluate the proposed settlement. The MDL
Panel's ruling did not bar the future transfer of the case to MDL No. 2036 if this Court did not
approve the proposed settlement or fully resolve the case. See Order Vacating Conditional
Transfer Order at 1 n.1, Docket Entry No. 14 (Aug. 9, 2010).
Robert Matos, the named plaintiff in Matos v. National City Bank, No. 10-cv-21771
(S.D. Fla. June 1, 2010), an overlapping class action that became part of MDL No. 2036,
objected to the proposed settlement. Matos is represented by plaintiffs' lead counsel and the
plaintiffs' executive committee ("PEC") in the multi-district litigation before Judge King. The
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Court held the preliminary fairness hearing on November 18, 2010 and heard arguments from the
settling parties and objections from the PEC on behalf of Matos. On December 17, 2010, the
Court held a brief telephone conference with counsel for plaintiffs and National City Bank to
discuss several concerns with the notice and release provisions of the settlement agreement.
Following that discussion, the parties filed a renewed motion for preliminary approval, a Revised
Settlement Agreement, and a revised proposed order. See Docket Entry No. 34 (Dec. 22, 2010).
After considering the submissions and arguments from the parties and the objectors, along with
the Revised Settlement Agreement, the Court granted preliminary approval of the settlement and
the notice plan, certified the settlement class, appointed Tycko & Zavareei LLP as class counsel
and Ramona Trombley, Jeff Doehner, and Brian Wells as representative plaintiffs, and scheduled
the final fairness hearing. See generally Order, Docket Entry No. 38 (Jan. 11, 2011); Trombley,
759 F. Supp. 2d at 30. The final fairness hearing was held on July 14, 2011, at which time the
Court heard argument from the parties and from two of the objectors. After the hearing, the
Court requested supplemental briefing from the parties and the objectors, along with a final
status report, all of which were duly submitted.
II. TERMS OF THE SETTLEMENT
The terms of the settlement, which are laid out in the Revised Settlement Agreement, and
the subsequent developments to those terms are briefly discussed below. Pursuant to the Revised
Settlement Agreement, the Settlement Class was defined as follows:
All persons who hold or ever held a National City Account2 who at any time during the
2
“National City Account” means “a non-business consumer deposit account originally maintained by or
with National City, and includes any account existing on or before November 6, 2009 that was subsequently
converted to a PNC account in connection with National City’s merger into PNC. Such term does not include
accounts originally opened with PNC or one of PNC’s predecessor banks (other than National City).” Id. ¶ 1(n).
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Class Period incurred at least one Overdraft Fee3 associated with at least one National
City Debit Card Transaction4 that was not previously reversed, refunded, or returned to
the Settlement Class Member by Defendant.
Excluded from the Settlement Class are National City Bank, any parent, subsidiary,
affiliate or sister company of National City Bank, and all officers or directors of National
City Bank, or any parent, subsidiary, affiliate or sister company at any time during the
Class Period, and the legal representatives, heirs, successors, and assigns of any of the
foregoing. The Court presiding over any motion to approve the Settlement Agreement is
excluded from the Settlement Class. Also excluded from the Settlement Class is any
person who timely submits a valid request to be excluded from this Settlement.
Revised Settlement Agreement ("Rev. Settlement Agreement") ¶ 7. The "Class Period" was
defined as July 1, 2004 through August 15, 2010. Id. ¶ 1(d). Moreover, customers who
originally opened accounts at PNC Bank or PNC Bank's predecessor banks other than National
City were not included in the settlement. Id. ¶ 4.
The agreement provided for a $12,000,000 settlement fund, inclusive of all attorneys’
fees, costs, expenses, and incentive payments to representative plaintiffs. National City Bank
also agreed to provide an additional $500,000 for notice and claims administration costs. On
March 14, 2011, the parties advised the Court that National City had agreed to increase its
contribution by an additional $1 million for notice and claims administration costs, see Docket
Entry Nos. 39-40, followed by an agreement by the parties that National City would pay an
3
“Overdraft Fee” means “an overdraft fee, daily overdraft fee, continuous overdraft fee, or other similar fee
charged by [National City Bank] to a holder of a National City Account and associated with a National City Debit
Card transaction.” Id. ¶ 1(s).
4
“National City Debit Card” means a “debit card, check card, or any other bank card used for debit
purchases and/or automated teller machine (“ATM”) transactions from a National City Account.” “National City
Debit Card” shall also include a “debit card, check card, or any other bank card issued by PNC, following National
City’s merger into PNC, to customers who were formerly customers of National City.” Id. ¶ 1(o). "National City
Debit Card Transaction(s) means "transaction(s) effectuated with or relating to such National City Debit Card(s),
including but not limited to ATM transactions and point of sale (POS) transactions. . . National City Debit Card
Transasction(s) shall also include those transaction(s) effectuated with or relating to PNC Debit Cards for those
National City customers whose accounts were converted to PNC accounts upon the merger of National City into
PNC. Id. ¶ 1(p).
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additional $300,000 towards notice and claims administration costs. See Ex. C to Final Status
Report (Aug. 31, 2011). Any costs in excess of the $1.8 million would be deducted henceforth
from the settlement fund. See Rev. Settlement Agreement ¶ 9-10. As a result, the ultimate
amount to be paid by National City for the settlement of the claims is $13.8 million. As part of
the settlement, National City also agreed not to object to incentive awards in the amount of
$5,000 to each of the representative plaintiffs, or an award of attorneys fees of not more than
25% of the settlement fund. Id. ¶¶ 10, 12.
Pursuant to the Revised Settlement Agreement, class members would receive a maximum
reimbursement of $36 for each eligible overdraft charge incurred during two calendar months
during the class period of July 1, 2004 to August 15, 2010. Claims would be paid from the
moneys remaining in the settlement fund after attorneys' fees, costs, and other expenses were
paid. Rev. Settlement Agreement ¶ 31. If any funds remained after accounting for all the fees,
costs, and claims, the leftover amount would then be distributed to claimants on a pro rata basis.
After that, any amount remaining would be paid out through a cy pres distribution to a mutually-
agreed upon organization subject to approval by the Court. Id. ¶ 31(b). At the final fairness
hearing, class counsel stated that because of the number of claimants and the number of
overdrafts per claimant, it was anticipated that there would be no cy pres fund. Final Fairness
Hr'g Tr. ("Tr.") 9:7-10.
With respect to notifying class members about the settlement, National City provided the
Notice Administrator, Hilsoft Notifications (“Hilsoft”), with the names and last known addresses
of National City customers who had incurred an overdraft fee. Individual notices were sent out
by first-class mail to potential class members. Rev. Settlement Agreement ¶¶ 15, 17-18;
Affidavit of Cameron R. Azari (“Azari Aff.”) ¶¶ 25-29 (May 26, 2011). In addition to
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individualized notices, other forms of notice were also employed. Published notice appeared
once on a weekday in the highest circulation newspaper in twenty two designated market areas,
which comprised 92% of National City branch locations. Rev. Settlement Agreement ¶ 19(a);
Azari Aff. ¶¶ 30-33. A press release was issued to 4,490 major press outlets. Rev. Settlement
Agreement ¶ 19(b); Azari Aff. ¶ 34. Electronic forms of notice were also provided, including
the creation of a website where class members could obtain information about the settlement and
documents such as claim forms, and file claims online. PNC's website also posted a notice
targeted to former National City customers with online accounts, directing these customers to the
aforementioned website. Rev. Settlement Agreement ¶ 19(c)-(d); Azari Aff. ¶¶ 36-37.
To receive a refund under the settlement agreement, a class member was required to
submit a claim form declaring under penalty of perjury that she or he incurred at least one
overdraft fee associated with that member's National City debit card transaction. On the form,
the class member could claim compensation for each incurred and eligible overdraft fee during
any two calendar months within the Class Period. The two months need not be consecutive. The
class member could opt to have the Claim Administrator, Epiq Class Action and Claims
Solutions (“Epiq”), determine the two months during the class period in which the member
incurred the greatest number of overdraft fees ("Option 1") using data provided by National City.
Alternatively, the class member could choose the two months ("Option 2"). Id. ¶¶ 26-27.
As of September 1, 2011, approximately 187,679 "timely claims" have been received and
verified, with a remaining number of 10,511 additional claims that are undergoing further
analysis. Final Status Report at 1-2. The majority of the claimants (183,339) selected Option 1,
allowing Epiq to determine the number of eligible overdrafts. An estimated 4,340 claimants
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chose Option 2, in which claimants themselves selected the two months for reimbursement.
Approximately seventy-six requests for opt-outs have been received. Final Status Report at 2;
Ex. B. Through July 31, 2011, Hilsoft has incurred approximately $192,620.00 in fees and
expenses, see Declaration of Robert Oseas ¶ 6 (Sept. 2, 2011); Ex. A to Final Status Report
(Hilsoft Statement of Activity),5 and Epiq has incurred $1,841,902 in fees and expenses
associated with the settlement. Combined, they together estimate that total notice and claims
costs will ultimately amount to $2.3 million, with $1.8 million of that amount to be paid by
National City, and the remaining amount to be paid out of the settlement fund. Final Status
Report at 3. In other words, the parties expect that approximately $500,000 would be taken out
of the settlement fund proceeds to be paid towards notice and claims administration costs. After
deductions for certain fees, costs, and expenses, including attorneys' fees, class counsel estimate
that approximately $8,407,000 will be available for distribution to claimants. Id. at 4.
The Revised Settlement Agreement also contained a release, discharging the "Released
Parties 6 . . . from any and all rights, claims, liabilities . . . that Releasing Parties 7 ever had . . . or
may have in the future, that result from . . . or relate to in any way to the conduct, omissions,
duties or matters alleged in the Complaint and in the MDL Proceedings (insofar as [they] relate
5
Although the settling parties indicate that the information provided by Hilsoft was accurate as of July 31,
2011, the Hilsoft Statement of Activity states that the data is current through August 2, 2011.
6
"Released Parties" is defined as "National City and PNC and each of its and their present and former
parents, subsidiaries, divisions, affiliates, predecessors, successors and assigns and all of the present and former
directors, officers, employees, agents, attorneys, and shareholders of National City and PNC and each of its and their
present and former parents, subsidiaries, divisions, affiliates, predecessors, successors and assigns. Revised
Settlement Agreement ¶ 1(x).
7
"Releasing Parties" is defined in relevant part as "[p]laintiffs and the members of the Settlement Class
(including members of the proposed National City national class and state subclass in the MDL Proceedings) who do
not opt out of the Settlement." Revised Settlement Agreement ¶ 1(y).
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to the putative National City national class and state subclass . . .)" Revised Settlement
Agreement ¶ 37. This release extended to and included any claims relating to (1) failures to
adequately and fully disclose the procedure for authorizing and approving overdrafts arising out
of debit card transactions, or the manner in which items were posted to accounts, (2) failures to
warn when debit card transactions would cause an account to be withdrawn, (3) authorizing and
approving debit card transactions when they resulted in overdrafts, (4) the use of posting orders,
and (5) violations of the Electronic Funds Transfer Act and Regulation E. See id. ¶ 37. After
entering into the Revised Settlement Agreement, PNC agreed to shorten the release period from
August 15, 2010 to June 21, 2010, the date in which PNC's integration of National City accounts
was completed. See Settling Parties Supp. Mem. ("Supp. Mem.") at 14, Docket Entry No. 52
(Aug. 29, 2011).
The notice provided to class members stated the following regarding the
release of claims:
Unless you exclude yourself, you give up the right to sue the Defendant for all of
the claims that the proposed settlement resolves. You must exclude yourself from
this Settlement Class to start your own lawsuit or be part of any different lawsuit
relating to the claims in this case. For example, unless you exclude yourself, you
will give up your right to be included in the proposed National City national class
and state subclass in the litigation currently pending in the U.S. District Court of
the Southern District of Florida as part of the In re Checking Account Overdraft
Litigation, MDL No. 2036, or any other litigation.
See Exs. 3-5 to Mot. for Prelim. Approval of Rev. Settlement Agreement, Docket Entry No. 34-
1.
III. ASSESSMENT OF DAMAGES
Edgeworth Economics ("Edgeworth") was retained by plaintiffs to quantify the injury to
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class members arising from the practice of resequencing electronic debt transactions, and
prepared a report authored by two economists, Jesse David and Kevin W. Christensen
("Edgeworth Report"). To prepare the report, Edgeworth relied on discussions with and
information provided by National City, documents produced through informal and formal
discovery, and public information. Edgeworth Report ¶ 8.
Edgeworth estimated damages for the class period in four steps. First, evaluating sample
data taken during September 2010, Edgeworth estimated the monetary difference between the
overdraft fees actually charged on the electronic debit transactions and what would have been
charged had National City's resequencing practice not been in place. From this amount,
Edgeworth calculated the average excess overdraft fee charged per each overdraft fee that was
actually charged ("Average Excess Overdraft Fee"). Id. ¶ 18A.8 Edgeworth engaged in two "but
for" scenarios to determine the range of damages. In the first scenario, where the transactions
would have been arranged from low-to-high, Edgeworth calculated an Average Excess Overdraft
Fee amount of $5.44 for each overdraft fee actually charged. Id. ¶ 24. Posting the transactions in
simulated chronological order resulted in an Average Excess Overdraft Fee amount of $2.15.9
Second, Edgeworth calculated the number of relevant overdraft fees incurred from August 2005
8
Edgeworth also indicated that National City and PNC had different policies with respect to the maximum
number of overdraft fees allowed to be imposed per day, as well as the fee amount. According to Edgeworth, PNC
had a maximum allowable limit of four overdraft fees per day while National City's limit was ten overdraft fees per
day. Moreover, PNC charged $25 for the first overdraft fee in a given day, with other fees assessed at a higher rate of
$36 per overdraft. National City charged $36 for each overdraft fee. Edgeworth applied a maximum rate of 10
overdraft fees and $36 to replicate National City’s policies, which would have been in place during the class period.
Edgeworth Report ¶ 20 n. 9.
9
There were no time stamps for transactions in the sample data. Hence, Edgeworth attempted to simulate
the chronological posting of the transactions by randomized order of these transactions and repeated such
randomized simulations one hundred times.
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to August 201010 using information provided by National City. Id. ¶ 18B. Third, Edgeworth
then applied the Average Excess Overdraft Fee to the number of overdraft fees charged during
the class period to obtain the total monetary amount of excess overdraft fees, adjusting for fees
that had been reversed or not collected by National City. Id. ¶ 18C. Fourth and finally,
Edgeworth made downward adjustments to the amount of projected damages to account for
reversed and/or non-collectible overdraft fees and "chronic" overdrafters. Id. ¶ 18.
Edgeworth estimated that a total of 59.7 million overdraft fees were charged by National
City during the class period. Because National City did not keep data distinguishing overdraft
fees incurred from electronic debit transactions from other types of transactions, the Edgeworth
Report relied on an FDIC study of overdraft programs, which provided an industry-wide estimate
that 48.8% of overdraft fees are caused by electronic debit transactions. Id. ¶¶ 26-27. Edgeworth
also adjusted this amount downward assuming a 26.52% rate of reversed and/or uncollectible
fees, which was the median uncollectible and reversed rate used by an expert in Gutierrez v.
Wells Fargo Bank, 730 F. Supp. 2d 1080 (N.D. Cal. 2010), concluding that an estimated total
number of overdraft fees of 29.2 million during the class period were attributable to electronic
debit transactions. Id. ¶ 27. Multiplying that amount by the Average Excess Overdraft Fee,
Edgworth concluded that based on the first scenario of low to high reordering, total damages
would have amounted to $116.5 million and, applying the two months with the greatest number
of overdraft fees to account for "frequent" or "chronic" overdrafters, total damages (i.e., excess
overdraft fees) would amount to $50.8 million. See id. ¶¶ 28-29. Edgeworth concluded if the
10
Because information from July 1, 2004 to July 31, 2005 was unavailable, Edgeworth estimated the
number of overdraft events for this time period "using a straight-line extrapolation based on the monthly overdraft
events from August 2005 through December 2008." Edgeworth Report ¶ 26.
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transactions had been chronologically ordered (the second scenario), the damages would amount
to $46 million and, applying the two months with the greatest number of overdraft fees, total
damages (i.e., excess overdraft fees) would amount to $20 million. Id. ¶¶ 28-29. Plaintiffs assert
that the estimated damages arrived at in the second scenario, representing chronological posting,
is more likely a proper representation of damages than the first scenario, where damages would
have been based on a requirement that banks post transactions from low to high. See Mot. for
Approval at 22. In summary, the range of damages spanned from $116.5 million to $46 million,
and, discounting for chronic overdrafters, from $50.8 million to $20 million. Hence, plaintiffs
assert that the $12 million settlement fund would be in the range of 10% to 26% of the two
damages calculations, and, taking the two months in which a class member incurred the greatest
number of overdrafts, 24% to 60% of the possible recovery. See id. at 20.
A. Impact of Regulation E
Edgeworth, relying on representations made by National City, explained that a data
sample containing account-level transaction data contemporaneous with the class period "was not
feasible to obtain" because of the way in which the data had been stored and archived when
National City merged with PNC. Id. ¶ 11 n.4. Instead, Edgeworth extracted a sampling of this
information during September 2010, which was taken from PNC account holders who had
previously been National City account holders ("sample data"). The sample data consisted of
approximately 1.3 million transactions and appeared to include all transactions on the day an
overdraft fee had been incurred, as well as all transactions from the previous day. Id. ¶ 11. From
this information, Edgeworth was able to determine the balance at the start of the day, the
transactions that caused the overdraft fee, and the overdraft fees assessed to compare the total
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overdraft fees charged to those that would have been charged but for the high to low reordering
of transactions. Id. ¶ 11.
The sample data was taken during a period of time after the Federal Reserve had made
recent amendments to 12 C.F.R. § 205 ("Regulation E"),11 which imposed certain disclosure and
affirmative opt-in requirements on banks before enrolling customers in overdraft protection
services. See Gutierrez, 730 F. Supp. 2d at 1135-36 (describing relevant changes to Regulation
E). Edgeworth assumed for the purposes of its report that "the average characteristics and
behavior of customers are the same before and after changes to Regulation E" and accordingly
calculated excess overdraft fees using the sample data as "representative of what would have
occurred during the Class Period. " Edgeworth Report ¶ 14. However, Edgeworth also
acknowledged that "it is possible that the average characteristics and behavior of customers with
overdraft protection . . . are somewhat different from the average characteristics and behavior of
customers with such protection prior to Regulation E." Id. ¶ 15.
At the final fairness hearing, the Court expressed concern with the Edgeworth Report's
reliance on post-Regulation E data in quantifying the damages that occurred as a result of
National City's resequencing policy. Plaintiffs conceded that the effect of Regulation E on the
incurrence of overdraft fees was unknown, but nevertheless urged this Court to assume that
Regulation E created no impact on the estimated valuation of damages. Tr. 15:4-16:9. The
Court directed the parties to submit supplemental memoranda to further substantiate this claim,
and to explain why the use of post-Regulation E data by Edgeworth was appropriate in this
11
Regulation E was issued pursuant to the Electronic Fund Transfer Act, 15 U.S.C. § 1693 et seq.
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circumstance, where the damages were incurred by the class prior to the enactment of Regulation
E. See Order for Supp. Br. & Final Status Rpt. ¶ 3, Docket Entry No. 47 (July 27, 2011).
In response, Edgeworth claimed that post-Regulation E data was used in only one aspect
of calculating damages -- to calculate the “Average Excess Overdraft Fee.” According to
Edgeworth, data regarding the actual number of overdrafts incurred by the class during the class
period (in other words, pre-Regulation E data) was used to determine the frequency or volume of
overdraft fees incurred by account holders on a per-day basis. As such, Edgeworth's damages
calculation was "based on the actual number of relevant overdrafts that occurred prior to the
implementation of Regulation E." David Decl. ¶¶ 5, 10.12 Edgeworth claims that it "did not
simply estimate the total amount of overall excess overdraft revenue (caused by high-to-low
reordering) from the post-Regulation E sample period and then use that amount to extrapolate
what might have happened in prior months. Instead, [Edgeworth] applied the Average Excess
Overdraft Fee Amount to the actual number of overdraft fees incurred by class members prior to
Regulation E." Id. ¶ 11 (emphasis added). Edgeworth also maintains that both before and after
filing its report, it conducted research regarding the effect of Regulation E on daily transactional
overdraft behavior (i.e. "the banking behavior of accountholders within the day" or "the average
composition of accountholders eligible to incur overdraft fees") and, based on that research,
found "no literature" to indicate "that any such changes . . . did occur." Id. ¶ 14. In any event,
Edgeworth claims that even if customers' behavior had changed due to Regulation E,
12
Edgeworth was given information with respect to class members for the relevant class period regarding
the total number of electronic debit transactions and overdraft fees for class member accounts on a monthly basis
from August 2005 to August 2010. Edgeworth Report ¶ 15. The transactional data from the class period includes
the number of overdraft fees by calendar month for approximately 2.5 million unique and individual accounts. Id. ¶¶
16-17. The amount of overdraft fees varied by account, but ranged from $25 to $36. Id. ¶ 19.
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Edgeworth's "methodology already includes a certain tolerance for such variation and implicitly
accounts for small variations that may occur through such changes." Id. ¶ 15. Hence, according
to Edgeworth, its assessment already "accounts for any changes in the rate or volume of overdraft
fees potentially caused by Regulation E." Id. ¶ 10.
B. Data Retrieval and Analysis of Class Period Data
At the final fairness hearing, the Court also expressed concern with respect to the settling
parties' generalized assertions that data retrieval and usage of National City Bank data from the
class period would be unduly burdensome and costly. The parties were therefore directed "to
provide specific information regarding the feasibility of obtaining and analyzing such data,
including the estimated cost of obtaining such data as well as the estimated time frames required
for providing such data . . . ." Order for Supp. Br. & Final Status Rpt. ¶ 2.
In response, the settling parties submitted a declaration from lead consultant Steven
Visser, the Managing Director of Navigant Consulting ("Navigant"). Navigant has significant
experience assisting banks in extracting customer transactional data from bank mainframe
systems. See Supp. Mem. at 2; Declaration of Steven Visser ("Visser Decl.") ¶ 2 (Aug. 26,
2011). It estimates that the total labor costs associated with locating, extracting, and converting
all known and relevant transactional data for National City account holders for the entire class
period into a database format would be approximately $620,000 and take approximately six
months to complete. Visser Decl. ¶ 16. Navigant also estimated that the additional non-labor
costs to support the data retrieval, which include hardware, software, and miscellaneous data
center costs, would be approximately $153,000, for a total cost of approximately $773,000. Id.¶¶ 17-18 & 21. These cost estimates do not account for additional relevant reports with
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information about authorizations, holds on deposits, and pending debit transactions, which, if
available, would cost an additional $387,000 to extract and convert. Id. ¶ 20. The estimated total
cost for the data retrieval project was projected by Navigant to be approximately $1,160,000. Id.
¶ 21. In addition to Navigant's projections, Edgeworth estimates that it would cost an additional
$175,000 to $300,000 to assess such data to perform a damages analysis for the class period for
each customer. David Decl. ¶ 19. Taking Edgeworth's and Navigant's estimates together, in
sum, the total estimated cost for retrieving and analyzing account level data for the class
members during the class period is estimated to be around $1,335,000 to $1,460,000.
IV. OBJECTIONS
Class counsel have identified ten objections that have been received as of July 9, 2011.
Three of these objections were timely filed with the Court and are summarized briefly below.13
Those three objections are addressed in further detail in the Court's discussion of whether final
class certification and settlement approval is warranted.
Robert Matos, represented by the Plaintiffs' Executive Committee, had objected to the
preliminary settlement in the case. The PEC renews its objections ("PEC Objectors" or "PEC
Objection") to the lack of pre-settlement discovery, the effect of the settlement on the claims of
existing PNC Bank customers, and the purpotedly arduous and unduly burdensome claims
process. The PEC Objectors now also object to the adequacy and distribution of the settlement
13
Seven other objections were submitted by class members. Of those objections, four do not lodge any
particular opposition to the settlement at all, and the remaining three do not alter the Court's finding that the
settlement is fair. One objection was premised on "the way overdraft fees are reimbursed" because "[o]verdraft fees
in most cases are just a small part of the actual cost involved" and pointed to hidden expenses such as "[b]uying a
money order, the travel cost, and the harm it does reputations." See Ex. 41-1. A second objection by a class
member participating in the settlement requested "$9000.00 for pain and suffering," which was outside the scope of
the class action claims and settlement. Id. Finally, a third objection requests reimbursement for the full amount of
overdraft fees incurred. Id.-15-
amount and what they claim is the broad definition of the class.
Ana Rosen is represented by Theodore Frank from the Center for Class Action Fairness.
Rosen appeared at the final fairness hearing, objecting to the requested amount of attorneys' fees,
the distribution scheme for the settlement fund, and the amount of the $5000.00 incentive fee
requested for each of the class representatives. See generally Objection of Ana Rosen, Docket
Entry No. 45 (June 27, 2011) ("Rosen Objection"). Rosen also objected to factoring in the
notice and administrative costs as part of the settlement when considering the fairness and
reasonableness of class counsel’s fees request. See generally Rosen Supp. Mem., Docket Entry
No. 52 (Sept. 8, 2011).
Sam P. Cannata did not appear at the final fairness hearing, but he filed an objection
focusing on (1) the lack of pre-settlement discovery; (2) the sufficiency of the settlement amount
itself, as well as the distribution scheme; (3) the use and implementation of cy pres distribution;
and (4) the "confusing" claims process. See generally Objection of Sam P. Cannata, Docket
Entry No. 46 (June 20, 2011).
STANDARD OF REVIEW
A class can be certified for "settlement purposes only" and such practice has become
increasingly common. See Radosti v. Envision EMI, LLC, 717 F. Supp. 2d 37, 50 (D.D.C. 2010)
(citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997)). However, class actions
seeking class certification and settlement at the same time require "closer judicial scrutiny" than
settlements that are reached after class certification. Manual for Complex Litigation, Fourth, §
21.612 (2004). Such class actions that settle early in the case "sometimes make meaningful
judicial review more difficult and more important." Id; see also Amchem, 521 U.S. at 620
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(observing that "settlement-only class certification" requires "undiluted, even heightened"
attention that is "of vital importance"); D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir.
2001) (calling for "a higher degree of scrutiny in assessing [the] fairness" of settlements
negotiated prior to class certification and the need to examine the "negotiating process leading up
to the settlement as well as the settlement's substantive terms").
Moreover, a proposed class action settlement requires the Court's approval.
Fed.R.Civ.Proc. 23(e). The Court has the discretion to approve or reject the proposed settlement.
In re Lorazepam & Clorazepate Antitrust Litig., 205 F.R.D. 369, 375 (D.D.C. 2002). When
deciding whether to grant approval, the Court must strike a balance between a rubber stamp
approval and "the detailed and thorough investigation that it would undertake if it were actually
trying the case." Meijer, Inc. v. Warner Chilcott Holdings Co. III, Ltd., 565 F.Supp.2d 49, 54
(D.D.C. 2008) (internal citation omitted)). Although the Court should undertake careful scrutiny
of the settlement terms, the discretion to reject a settlement is "restrained by the 'principle of
preference' that encourages settlements." In re Lorazepam, 205 F.R.D. at 375 (quoting Pigford v.
Glickman, 185 F.R.D. 82, 103 (D.D.C.1999)); see also United States v. District of Columbia,
933 F.Supp. 42, 47 (D.D.C. 1996) ("The trial court in approving a settlement need not inquire
into the precise legal rights of the parties nor reach and resolve the merits of the claims or
controversy, but need only determine that the settlement is fair, adequate, reasonable and
appropriate under the particular facts and that there has been valid consent by the concerned
parties.") (internal quotations omitted).
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DISCUSSION
I. CLASS CERTIFICATION
Before considering whether the proposed settlement should be finally approved, the Court
first turns to whether the settlement class meets the requirements for certification pursuant to
Rule 23. To certify a class for settlement, a court must consider whether the proposed class
meets the requirements of Federal Rule of Civil Procedure 23. For the reasons discussed below,
the Court concludes that final class certification is appropriate.
A Rule 23(a) Requirements
The proponent for class certification has the burden of establishing that each of the pre-
requisite elements of Rule 23(a) are satisfied: (1) the class is so numerous that joinder of all
members is impractical ("numerosity"), (2) there are questions of law or fact common to the class
("commonality"), (3) claims/defenses of representative parties are typical of the claims common
to the class ("typicality") and (4) the representative parties will fairly and adequately protect the
interests of the class ("adequacy"). All of these requirements are satisfied here.
1. Numerosity
Rule 23(a)(1) only requires that the class be "so numerous that joinder of all members is
impracticable." Fed. R. Civ. Proc. 23(a)(1). In this district, courts have found that numerosity is
satisfied when a proposed class has at least forty members -- a point not contested by any party
here. See Vista Healthplan v. Warner Holdings Co. III Ltd., 246 F.R.D. 349, 357 (D.D.C. 2007)
(citing Bynum v. District of Columbia, 214 F.R.D. 27, 32 (D.D.C. 2003)). Plaintiffs point to
claims submitted by well over 100,000 class members. The numerosity requirement is clearly
met. See Bynum, 214 F.R.D. at 32-33.
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2. Commonality
Questions of law and fact must be common to the class under Rule 23(a)(2). The
"commonality" requirement is satisfied when there is at least one issue, the resolution of which
would affect all or a significant number of the putative class members. Vista Healthplan, 246
F.R.D. at 357 (citing In re Lorazepam, 202 F.R.D. at 26). Factual variation amongst class
members will not defeat commonality, so long as a single aspect or feature of the claim is
common to all proposed class members. See Bynum, 214 F.R.D. at 33. Plaintiffs' complaint
alleged various claims and questions that would have been common to all members who incurred
overdraft fees during the class period, including allegations that National City failed to properly
disclose its overdraft fees to all its customers in breach of contract and the covenant of good faith
and fair dealing; that it was unjustly enriched; and that it violated Regulation E and the
Electronic Funds Transfer Act. See, e.g., Compl. ¶¶ 100 to 146. Hence, the class satisfies the
"commonality" requirement.
3. Typicality
Rule 23(a)(3) requires a finding that the representative parties' claims or defenses are
typical of the claims or defenses of the class. The requirement for "typicality" is satisfied "if each
class member's claim arises from the same course of events that led to the claims of the
representative parties and each class member makes similar legal arguments to prove the
defendant's liability." In re Lorazepam, 202 F.R.D. at 27 (quoting Pigford, 182 F.R.D. at 349).
The facts and claims of each class member do not have to be identical. See Daskalea v. Wash.
Humane Soc'y, 275 F.R.D. 346, 358 (D.D.C. 2011). Instead, courts have found the "typicality
requirement" satisfied when class representatives "suffered injuries in the same general fashion
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as absent class members." See In re Vitamins Antitrust Litig., 209 F.R.D. 251, 260 (D.D.C.
2002) (internal quotations omitted); see also Daskalea, 275 F.R.D. at 358 ("At bottom, the
typicality requirement is used to ascertain 'whether the action can be efficiently maintained as a
class and whether the named plaintiffs have incentives that align with those of the absent class
members so as to assure that the absentees' interests will be fairly represented.'") (citing In re
Lorazepam, 202 F.R.D. at 27).
Here, the class representatives, like the other class members, incurred overdraft fees
arising out of their debit card transactions with National City and were subject to the same
policies, procedures, and conditions for those transactions as other account-holders were. Mot.
for Approval at 38. Moreover, none of the objectors contest the assertion that the representative
plaintiffs' claims are "typical" of the class. Hence, the Court finds that the typicality requirement
is satisfied.
4. Adequacy
Under Rule 23(a)(4), the class representative must fairly and adequately protect the
interests of the class. Two criteria are generally recognized for determining the adequacy of
class representation -- (1) the interests of the named representative must not be antagonistic to or
compete with the interests of the unnamed class members; (2) the representative must appear
able to vigorously prosecute the interests of the class through qualified counsel. Twelve John
Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997) (internal quotations and
citations omitted); Vista Healthplan, 246 F.R.D. at 358.
Again, none of the objectors directly asserts that their objections relate to class
certification, rather than to the proposed settlement agreement. However, such objections, even
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if broadly construed as a challenge to the adequacy of class representation, would fail. Here, the
representative plaintiffs "shared the identical objectives of establishing liability and obtaining
damages." See Cohen v. Chilcott, 522 F. Supp. 2d 105, 115 (D.D.C. 2007) (applying this
reasoning to find the "adequacy" requirement satisfied). The Court also concludes that class
counsel satisfy the adequacy requirement, because they have served in that capacity in several
national class actions and in other complex litigation. See Chilcott, 522 F. Supp. 2d at 115-16(applying same reasoning to find that adequacy requirement as to class counsel was satisfied).
B. Rule 23(b)(3) Requirements
In addition to the Rule 23(a) requirements, proponents for class certification must
establish that the class can be maintained under Rule 23(b). Here, plaintiffs have asserted Rule
23(b)(3) as the basis for this class action; therefore, they must demonstrate (1) predominance of
common questions of law and fact to the entire class, and (2) superiority of the class action
method to other methods of adjudication for the controversy. See Fed. R. Civ. P. 23(b)(3). The
proposed class satisfies these two elements.
1. Predominance
Plaintiffs must establish that the common issues in this case pre-dominate over any non-
common issues, bearing in mind that "common issues need only be predominant, not dispositive
of the litigation." See Chilcott, 522 F. Supp. 2d at 116 (internal citations omitted). Courts in this
jurisdiction have observed that "[t]here is no definitive test for determining when common issues
predominate," but have found this factor to be satisfied when there is "generalized evidence
which proves or disproves an element on a simultaneous, class-wide basis, since such proof
obviates the need to examine each class members' individual position." See, e.g., Vista
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Healthplan, 246 F.R.D. at 359 (internal quotations and citations omitted); Chilcott, 522 F. Supp.
2d at 116 (internal citations omitted).
Here, proof of National City's liability would be based on the bank's policies and practices
that would have been applicable to all class members. Although this class action is proceeding
as a nationwide class, "the existence of minor differences in state law does not preclude the
certification of a nationwide class." See Chilcott, 522 F. Supp. 2d at 116 (citing In re Prudential
Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 315 (3d Cir. 1998). Hence, the predominance
factor is easily met.
2. Superiority
The superiority requirement under Rule 23(b)(3) is satisfied when a court determines that
a class action is superior to other available forms of adjudication. Vista Healthplan, 246 F.R.D. at
359-60. This requirement ensures that resolution by class action will "achieve economies of
time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated,
without sacrificing procedural fairness or bringing about other undesirable consequences."
Amchem, 521 U.S. at 615. As already discussed above, the size of the class and the uniformity
of issues regarding the bank's liability, along with the prohibitive costs of prosecuting complex
litigation like this case, weigh strongly in favor of finding that class action adjudication is
superior to other forms of adjudication. See Vista Healthplan, 246 F.R.D. at 360 (applying these
considerations to find superiority requirement met); Chilcott, 522 F. Supp. 2d at 117 (same).
Here, the Court readily concludes that Rule 23(b)(3)'s superiority requirement is met.
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II. THE PROPOSED SETTLEMENT
Because the Court has concluded that class certification is appropriate, it now considers
whether the proposed settlement is "fair, reasonable, and adequate." See Fed. R. Civ. P. 23(e). In
the D.C. Circuit, there is no single test for determining whether a proposed class action
settlement should be approved and the relevant factors may vary depending on the circumstances.
See In re Lorazepam, 205 F.R.D. at 375 (citing Pigford, 185 F.R.D. at 98 & n. 13). But
generally, in determining whether a settlement is fair, reasonable, and adequate, courts in this
Circuit have examined the following factors: (a) whether the settlement is the result of
arms-length negotiations; (b) the terms of the settlement in relation to the strength of the case; (c)
the stage of the litigation proceedings at the time of settlement; (d) the reaction of the class; and
(e) the opinion of experienced counsel. In re Lorazaprem, 205 F.R.D. at 375; In re Vitamins
Antitrust Litig., 305 F. Supp. 2d 100, 104 (D.D.C. 2004).
A. Arm's Length Negotiations
"A presumption of fairness, adequacy, and reasonableness may attach to a class
settlement reached in arm's-length negotiations between experienced, capable counsel after
meaningful discovery." Meijer, 565 F.Supp.2d at 55 (internal citations omitted). Class counsel
has described the negotiating process here (as well as the pre-settlement discovery and informal
investigation that was engaged in to determine the strength of plaintiffs' claims), indicating that
the negotiating process was an adversarial one. See, e.g., Zavareei Decl. ¶¶ 17-46; Mot. for
Attorneys' Fees at 6-10. The process included "dozens of phone calls and two in-person
settlement conferences" as well as "hundreds of hours spent researching, studying, and analyzing
the complex legal issues in this case" over the course of months. Zavareei Decl. ¶¶ 44-45.
Plaintiffs' counsel also states that "[t]he arm's length negotiations continued even after the
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Settlement was consummated," pointing to the additional amounts National City subsequently
agreed to pay towards notice and claims administration costs. Mot. for Approval at 14.
Moreover, counsel for both parties are clearly experienced and, as the Court already noted when
granting preliminary approval, there was no evidence or indication of actual collusion between
the parties. See Trombley, 759 F. Supp. 2d at 28. Although the PEC Objectors expressed
concerns about the settlement's timing, with particular emphasis on the accomplishment of the
settlement shortly before the case was slated to be transferred to the MDL forum, the Court
previously observed that this case was filed four months before Matos's lawsuit and that the
MDL Panel knew the Matos case was pending when it nevertheless transferred the case back to
this Court to evaluate the proposed settlement. Id. Hence, having found no evidence to indicate
that the settlement agreement resulted from anything other than arm's length negotiations, the
Court finds that this factor weighs in favor of settlement approval.
B. Settlement Terms in Relation to Strength of the Case
This factor has been called the most important factor a court considers when evaluating a
proposed settlement. See, e.g., Blackman v. District of Columbia, 454 F. Supp. 2d 1, 8 (D.D.C.
2006). The Court must evaluate the relief provided in the proposed settlement against the
relative strength of plaintiffs’ case, including their ability to obtain recovery at trial. See Equal
Rights Ctr. v. Wash. Metro. Area Transit, 573 F. Supp. 2d 205, 211 (D.D.C. 2008) (citing
Thomas v. Albright, 139 F.3d 227, 231 (D.C. Cir. 1988)). Because National City has strong
defenses should the case proceed to trial, and given the benefit to class members in having
"relatively prompt recovery", see Pigford, 185 F.R.D. at 104-05, this factor weighs in favor of
approving the proposed settlement.
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As an initial matter, if this case proceeded to litigation, the time until class members
would obtain relief for their damages and injuries would be substantially delayed. See Luevano
v. Campbell, 93 F.R.D. 68, 89 (D.D.C. 1981) ("[T]he delay in providing relief to the class if this
case were to be litigated is a factor strongly supporting the compromise reached by the parties.").
Even if plaintiffs could prevail at trial, that verdict would likely be appealed, resulting in even
further delay to the final resolution of the case, and the time at which class members would
receive any compensation. For instance, the verdict in Gutierrez v. Wells Fargo Bank, No. 07-
cv-5923, 2010 WL 3155934 (N.D. Cal. Aug. 10, 2010), in which plaintiffs were awarded $203
million in damages after a bench trial, remains on appeal before the Ninth Circuit.
Moreover, the legal environment for overdraft fee litigation remains unsettled. To
demonstrate this point, the settling parties initially relied on Baptista v. JP Morgan Chase Bank,
N.A., 640 F.3d 1194 (11th Cir. 2011), which dismissed a class action involving state and
common law claims (including unjust enrichment), relying in part on the reasoning that some of
the claims were preempted by the National Banking Act ("NBA"), 12 U.S.C. §§ 1 et seq.
Relying on the Baptista decision, several banks filed a motion to reconsider in the multi-district
litigation, challenging Judge King's denial of their motion to dismiss on similar preemption
grounds. Subsequently (and after memoranda already had been filed in this case), the motion for
reconsideration was denied in the multi-district litigation. See generally MDL. No. 2036, --- F.
Supp. 2d. ----, 2011 WL 2746171 (S.D. Fla. July 13, 2011). In rejecting the motion, Judge King
characterized the state statute at issue in Baptista as attempting to regulate a right expressly
granted to federally chartered banks by the NBA. Id. at *7. Because the relevant cases in the
multi-district litigation involved claims that were not premised on the bank's authority to charge
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fees, but instead challenged what was characterized as the "bad-faith manner in which an account
is reorganized to justify a larger number of overdraft charges," Judge King found no reason to
reconsider his previous denial of dismissal. See id. However, the preemption issue is by no
means resolved. Indeed, in his November 22, 2011 order granting final approval of a settlement
between class members and Bank of America that raises similar claims and allegations as those
raised before this Court,14 Judge King noted that despite his own rulings, the potential
preemption of claims raised by the plaintiffs against Bank of America "remains an open
question" and that "no federal appeals court has yet reached the NBA preemption issue in this
specific context." See BofA Order of Final Approval at 21-22.
In any event, the legal landscape for such suits remains challenging and riddled with
uncertainty. The settling parties point to the strength of anticipated arguments by the defendants
with respect to certain state consumer protection laws that are arguably more favorable to
National City than to plaintiffs. See Mot. for Approval at 17. Plaintiffs underscore the challenge
of "confront[ing] the well-known difficulty of managing a nationwide class action, where the law
from multiple states must be applied to determine liability." Id. Moreover, courts have rejected
challenges to the practice of reordering overdraft fees from high to low, and the adequacy of the
disclosures relating to such practices that are similar to those alleged in the class action
complaint in this case. See, e.g., Hassler v. Sovereign Bank, 374 Fed. App'x 341, 342 (3d Cir.
2010) (affirming dismissal of action by concluding that reordering did not violate New Jersey
Consumer Fraud Act and rejecting other breach of duty claims); Northhampton Rest. Grp. Inc. v.
14
The Order of Final Approval of Settlement issued by Judge King refers to several consolidated cases
against Bank of America. See generally Order of Final Approval, In re Checking Account Litig.,MDL No. 2036,
Docket Entry No. 2150 (S.D. Fla. Nov. 22, 2011) ("BofA Order of Final Approval").
-26-
Firstmerit Bank, N.A., 5:09-cv-2630, 2010 WL 3069494, at *3 (N.D. Ohio Aug. 3, 2010)
(granting motion to dismiss on all claims, including class action breach of contract claims
premised on bank's reordering practice).
Plaintiffs would also have to contend with the complex factual issues that would need to
be resolved in order to demonstrate the damages and injuries of the class members. The claims
brought by the plaintiffs should this case proceed to litigation "will not turn on pure legal
questions that could govern numerous later cases, but will require fact-bound and situation-
specific determinations concerning the terms of the parties' contract and Plaintiff's expectations
regarding Defendants' performance." See Joseph v. Commerce Bank, N.A., No. 10-0685, 2010
WL 3733557, at * 4 (W.D. Mo. Sept. 17, 2010).
Against this backdrop and with these considerations in mind, the Court will now consider
whether the $13.8 million recovery -- which includes additional notice and administration costs
National City has agreed to pay -- falls within the range of reasonableness. At the preliminary
approval stage, plaintiffs relied on the expert reports submitted in Gutierrez v. Wells Fargo Bank
and applied the expert damage analyses in that case to estimate that the projected recovery at trial
would be between $52 million and $72 million. At that time, plaintiffs had claimed that the $12
million settlement amounted to 17% to 24% of the best recovery plaintiffs could expect to obtain
if the case went to trial. See Trombley, 759 F. Supp. 2d at 25. The Court granted preliminary
approval but required the settling parties to conduct an independent analysis to justify the agreed-
upon settlement amount, and warned the parties that they must be able to explain and defend
their methodology. Id. at 25.
Plaintiffs provided the Edgeworth Report to support the damages assessment and the $12
million settlement amount. The findings from that report have been summarized and discussed
-27-
above, along with the supplemental memoranda and attached exhibits that were provided to the
Court subsequent to the final fairness hearing. The PEC Objectors contend that the Edgeworth
Report is deficient in several ways. They argue that the report undervalues the potential damages
incurred by the class because the settlement amount should have been compared to the total
amount of debit overdraft fees incurred by any class member for any reason (as opposed to fees
incurred due to resequencing), because that is how the class is defined. They further argue that
this approach would have yielded a higher damages amount than the estimated range of $46 to
$116.5 million determined by Edgeworth. PEC Objection at 10. The PEC Objectors also
challenge Edgeworth's use of post-Regulation E sample data and post-merger PNC Bank data as
opposed to pre-merger National City Bank data, which, in the PEC Objectors' view, renders the
Edgeworth Report's findings and conclusions unreliable. Id. at 11.
Although the Court initially expressed some concern with respect to the use of post-
Regulation E sample data in determining an Average Excess Overdraft Fee amount, it now finds
that the settling parties have sufficiently explained why the narrow and limited use of such data
was appropriate, given the demonstrable burdens of cost and time associated with the retrieval of
account-level transactional information for every class member during the class period.
Investigating and analyzing information about each class member to determine, with the level of
specificity suggested by the PEC Objectors, what transactions caused an overdraft fee to be
triggered due to the practice of re-sequencing, comes with its own costs, resulting in less money
available to pay the actual claims. See Schulte v. Fifth Third Bank, --- F. Supp. 2d ---- , 2011
WL 3269340, at *27 (N.D. Ill. July 29, 2011), appeals dismissed, Nos. 11-2922, 11-2963, 11-
2964 (7th Cir. 2011) (rejecting challenge to claims process because "there would presumably be
costs associated with investigating how much is owed to each Class Member . . . [h]ad the onus
-28-
of that process been placed on Defendant, there may have been less money available to pay
claims."). The settling parties have submitted support for their contention that significant costs
and time would be spent to retrieve the data the PEC Objectors believe this Court should require;
they indicate that obtaining and analyzing this information would cost around $1,335,000 to
$1,460,000 and take at least six months. In addition, PNC even suggested that the case might not
have settled if a condition of the agreement required PNC to mine National City's retired
mainframe and computer systems for such data. See Tr. 75:3-7 ("[I]t would have been millions
of dollars and months and months and months of time, to the point that it then says, do we really
want [to] do this settlement?")
Even if the Court had required PNC to mine National City's systems to retrieve more
specific data about the transactions that directly occurred due to the bank's resequencing
practices, it is not readily apparent that the data would even be complete. Furthermore, the terms
of the settlement agreement should be analyzed based on what information was known at the
time the settlement agreement was reached, and the effect of Regulation E on the frequency and
monetary amount of overdraft fees was not (and is not) fully known.15 See In re CIGNA Corp.,
Civ. Action No. 02-8088, 2007 WL 2071898, at *3 (E.D. Pa. July 13, 2007) (stating that
settlement fairness analysis must consider the risks at the time the settlement was reached, not
the risks or absence of risks that arose after the settlement).
In sum, the Court does not find that the narrow use of sample data from the post-
Regulation E period made the settling parties' valuation of damages so unreliable that it rendered
15
The settling parties also suggest that use of post-Regulation E data may even overstate the potential range
of damages, because account-holders who have opted-in to overdraft fee protection services might then make
vigorous use of such services, and, in turn "are likely to have been impacted more by the . . . reordering practice than
the average accountholder;" hence, their data "would, thereby, increase the amount of the Average Excess Overdraft
Fee." See Supp. Mem. at 7.
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the settlement unfair. See Schulte, 2011 WL 3269340, at *24. In assessing potential damages
scenarios, Edgeworth's calculations of between $46 million and $116.5 million would yield a
recovery range of approximately 10% to 26% without including the additional $1.8 million
payment attributable to notice and administration costs; including that additional $1.8 million
payment would yield a recovery range of approximately 12% to 30%. This seems to be within
the realm of reasonableness. See In re Newbridge Networks Sec. Litig., Civ. Action No. 94-
1678, 1998 WL 765724, at *2 (D.D.C. Oct. 23, 1998) ("Courts have not identified a precise
numerical range within which a settlement must fall in order to be deemed reasonable; but an
agreement that secures roughly six to twelve percent of a potential trial recovery, while
preventing further expenditures and delays and eliminating the risk that no recovery at all will be
won, seems to be within the targeted range of reasonableness."). In Schulte, Judge Dow found
that a settlement amount of approximately $10.1-$10.2 million (which included notice and
claims administration costs that the bank agreed to incur), in light of the potential maximum
damage calculation of $96.5 million -- "the most that the class could hope to recover" -- was fair
and reasonable under the circumstances. See Schulte, 2011 WL 3269340, at *14. And in his
opinion granting final approval of a class action settlement involving Bank of America's
overdraft fee-charging practices, Judge King found that "nine percent or higher constitutes a fair
settlement" and was well within the range of reasonableness. BofA Order of Final Approval at
20, 27-28. The recovery in this case, $13.8 million inclusive of notice and claims costs paid by
National City, compares favorably with the settlement agreement in those cases, and with other
complex litigation settlements. See, e.g., In re Rite Aid Corp. Sec. Litig., 146 F. Supp. 2d 706,
715 (E.D. Pa. 2001) (observing that settlements in securities class actions since 1995 have
recovered between 5.5 and 6.2% of the class members' estimated losses). Undoubtedly, optimal
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data is preferable, but considerations of costs, expense, and time to obtain such data must be
weighed against the terms of the settlement and the benefit to the class of obtaining relief sooner
rather than later. In re Newbridge, 1998 WL 765724, at *2.16
Having reviewed the voluminous evidence in the record -- including the parties' and
objectors' memoranda with respect to the preliminary settlement approval and certification as
well as final settlement approval and certification, the transcripts of the preliminary and the final
fairness hearings, and the documents, reports, affidavits, and information that have been filed --
the Court finds that the terms of the settlement agreement are fair and reasonable in relation to
the strengths of the case, and weigh in favor of approving the settlement. The Court concludes
this, taking fully into consideration the uncertain legal landscape for such claims; the complex,
time-consuming and costly further factual investigation that the parties would have to undertake;
and the uncertainty as to whether such specific data could even be fully obtained and analyzed
regarding the extent of damages incurred from National City's re-sequencing practices or other
practices relating to the charging of overdraft fees.
C. Status of Litigation Proceedings at Time of Settlement
As a general matter, early settlement is encouraged, although courts must still consider
"whether counsel had sufficient information, through adequate discovery, to reasonably assess
the risks of litigation vis-a-vis the probability of success and range of recovery." In re Lorazepam
& Clorazepate Antitrust Litig., MDL No. 1290, 2003 WL 22037741, at *4 (D.D.C. June 16,
16
The settlement finally approved by Judge King in the consolidated cases involving Bank of America
instructed that funds due to settlement class members who could not reasonably be identified because of problems
obtaining and analyzing the bank's older transaction data would instead be directed to a cy pres program, which
Judge King concluded was a reasonable result. See BofA Order of Final Approval at 34-39. Here, through their
settlement, the parties sought a way to provide compensation to class members despite the difficulties in obtaining
data from National City's systems.
-31-
2003). Here, in evaluating the status of litigation proceedings at the time of the settlement, the
Court finds that it does not come "too early to be suspicious nor too late to be a waste of
resources," but instead "at a desirable point in the litigation for the parties to reach an agreement
and to resolve the issues without further delay, expense, and litigation." Vista Healthplan, 246
F.R.D. at 362 (quoting In re Vitamins Antitrust Litig., 305 F. Supp. 2d at 103) (internal
quotations omitted).
The Court rejects the objections made by Cannata and the PEC Objectors regarding the
sufficiency of pre-settlement discovery, and finds that a sufficient factual investigation was
undertaken. Although the settlement occurred prior to any dispositive motions practice and at a
relatively early stage, the Court nevertheless concludes that the settling parties have sufficiently
established that they each possessed well-founded views of the merits of their positions and the
potential for and likely amount of any recovery prior to effectuating the settlement. See Chilcott,
522 F. Supp. 2d at 117.
The Court finds that the amount of factual investigation undertaken by the settling parties
is sufficient to establish that the settlement is fair, adequate, and reasonable. As the Court
already discussed above in addressing the arm's length negotiations between the parties, class
counsel has described the negotiating process, as well as the pre-settlement discovery and
informal investigation that it engaged in to determine the strength of plaintiffs' claims. Hence,
the negotiating process was an adversarial one and the Court does not find that the early
resolution rendered the proposed settlement unfair or otherwise unreasonable. See, e.g., Zavareei
Decl. ¶¶ 17-46; Mot. for Attorneys' Fees at 6-10; Schulte, 2011 WL 3269340, at *21-22.
Additionally, there has been no actual evidence of collusion, and this Court has already noted
that "formal discovery" is not a prerequisite, even for final approval purposes. See Trombley,
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759 F. Supp. 2d at 26, 28 (refusing to deny preliminary approval "[a]bsent some evidence of
actual collusion" and observing that formal discovery was not always a requirement "even for
final approval of a proposed settlement").
D. Reaction of the Class
The reaction of the class appears to be positive, which weighs in favor of approval. See
In re Lorazepam, 2003 WL 22037741, at *5. As of September 1, 2011, approximately 187,679
verified and timely claims had been received by Epiq, the Claims Administrator. Approximately
seventy-six opt-outs were also received. Final Status Report 1-2. Class counsel have identified
ten objections that have been received as of July 9, 2011, and at least three of these objections
have not substantively challenged the proposed settlement agreement in any way. Accordingly,
the relatively low number of objections and opt-outs, in light of the number of claims submitted,
weighs in favor of approval of the settlement. See In re Lorazepam, 2003 WL 22037741, at *6
("[T]he existence of even a relatively few objections certainly counsels in favor of approval.").
1. Objections
To the extent not already addressed above, the Court now addresses the remaining
objections to the settlement agreement and explains why they are rejected.
a. Claims Process
Both the PEC Objectors and Cannata challenge the use of a claims process in this case.
These objections are unfounded. Cannata argues that the claims form is confusing, and that the
claims mechanism places the burden on the customer, rather than the bank, to find records, which
will deter customers from making claims. The PEC objectors concede that the use of a claims
process, standing alone, is not objectionable, but instead urge for direct distribution of the
settlement proceeds. They point to the claims process in the consolidated cases in the multi-
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district litigation involving Bank of America (Exs. E and F to PEC Objection), where settlement
class members who are existing customers will have the fees automatically credited to their
accounts, and former customers will be sent checks to their most recent address. PEC Objection
at 14-15.
The Court has already dealt with this issue in granting preliminary approval of the
settlement agreement, including the claims process. See Trombley, 759 F. Supp. 2d at 27-28.
The same reasoning applies now, but with even greater force. Almost 188,000 verified and
timely claims have been received by Epiq, the Claims Administrator. This result strongly
suggests that concerns relating to an unwieldy or confusing claims process were overblown. See
Schulte, 2011 WL 3269340, at *24 (reaching same conclusion in observing that "more than
100,000 claims" were filed by class members). The Court has reviewed the notices, as well as
the claims forms provided to class members, and concludes that they comport with Federal Rule
of Civil Procedure 23, both in content and in the manner by which the information was
disseminated. Moreover, as this Court observed in considering the same challenge when
granting preliminary approval, a claims process is often used to ensure that money is fairly
distributed for valid claims. See Trombley, 759 F. Supp. 2d at 28 (citing cases and observing
that "[c]lass actions often require a claims process to ensure money is fairly distributed for valid
claims"); see Schulte, 2011 WL 3269340, at * 27 (citing cases and observing that "there is
nothing inherently suspect about requiring class members to submit claim forms in order to
receive payment"). Indeed, a claims process is frequently employed in common fund cases,
where a defendant's payout is capped. See id. (citing Newberg on Class Actions § 8:45 (4th
ed.)). And the claims process was a directly negotiated aspect of the settlement, which, the Court
concludes, is fair as a whole. See id. (reaching same conclusion and rejecting similar challenge
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by the PEC). Moreover, class members have the option of either specifying the two months or
allowing the claims administrator to determine them, and can complete the claims process by
mail or the internet. See Rev. Settlement Agreement ¶ 27. The form itself was straightforward
and required only basic information for reimbursement. Accordingly, the Court rejects the
objections to the proposed settlement premised on the use of a claims process to administer
reimbursements to class members from the settlement fund.
b. Overly Broad Class and Inclusion of the PNC Class
The PEC Objectors claim that the class as defined is overly broad because it includes all
customers who incurred an overdraft fee due to an electronic debit card transaction -- not just
customers who incurred such fees due to the bank's resequencing practices. The Court first
addresses the PEC Objectors' continued challenge to inclusion of PNC Bank customers within
the National City class, then turns to their contention that the class is overly and impermissibly
broad.
The Court considered this argument when it was initially raised in the proceedings for
preliminary approval and certification. At that time, the Court stated that "it has no reason to
believe that the settlement will affect the other pending cases against PNC in the MDL
litigation." See Trombley, 759 F. Supp. 2d at 29. The release of claims against PNC only applies
to those claims that are based on accounts opened originally with National City Bank; it does not
extend to cases concerning PNC accounts with no prior association with National City Bank.
See id.Nevertheless, the PEC Objectors still argue that the settlement unfairly releases the claims
of the previous National City (now PNC Bank) customers, because their claims currently pending
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in the multi-district litigation will be extinguished.17 As this Court observed, "[t]o the extent
Objector’s claims against PNC are based on accounts that were originally opened at National
City Bank, those claims will be extinguished for any Class Member who has not opted out of the
settlement if the settlement in this case is approved." See id. at 29 n.9.
However, the Court finds that the mere overlap of the classes, without more, fails to
render the proposed settlement unfair, unreasonable, or inadequate. Here, the notices stated that
a class member's claims would be released, and specifically identified the multi-district litigation
in Florida as ongoing litigation. The Court finds that the notices were reasonably clear as to the
release of claims, even informing class members of the pending litigation before Judge King.
See Docket Entry 34-1 ("For example, unless you exclude yourself, you will give up your right to
be included . . . in the litigation currently pending in the U.S. District Court of the Southern
District of Florida as part of the In re Checking Account Overdraft Litigation, MDL No. 2036, or
any other litigation"); In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503, 516
(E.D.N.Y. 2003) (nothing improper about overlapping classes and releasing the claims of the
overlapping classes, where "the expansive reach of the releases could not have been clearer" and
observing that there is "no requirement that the Class be specifically apprised of all pending
actions covered by the releases, as long as the releases themselves were reasonably clear"). Even
though any claims involving National City arising out of the same transactions would be
extinguished in the multi-district litigation, class members retained the perogative of opting-out
of this settlement. The settling parties have also agreed to shorten the release period from August
15, 2010 to June 21, 2010, the date on which PNC's integration of National City accounts was
17
The PEC Objectors had previously informed the Court that a Consolidated Amended Complaint had been
filed on December 6, 2010 against PNC as successor to National City Bank.
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completed, which will minimize the impact on some customers as to the release of their claims.
See Settling Parties Supp. Mem. ("Supp. Mem.") at 14, Docket Entry No. 52 (Aug. 29, 2011).
In a related objection, the PEC Objectors also challenge the class definition, composition,
and distribution of the settlement amount on the basis of intraclass equity. Specifically, the PEC
objectors argue that class members who incurred overdraft fees because of reordering "are forced
to share settlement proceeds with non-injured Settlement Class Members." PEC Objection at 7.
They also suggest that the settling parties could have narrowed the class to those customers who
incurred more than one debit card or ATM overdraft fee on the same day, because the current
class definition arguably does not account for National City's practice of reordering debit
transactions from high to low in order to maximize overdraft fees.
While admittedly the gravamen of the complaint focuses on resequencing, the distribution
scheme for the settlement proceeds already accounts for the strength of the claims based on
resequencing from high to low by limiting reimbursement to a two month period. This allows
the settlement proceeds to go to the unwitting victim rather than the chronic overdrafter, who
could be construed as having received constructive notice of the bank's resequencing practice
and, hence, has a weaker claim. See Schulte, 2011 WL 3269340, at *23-24 ("[I]t is appropriate
to weigh distribution of the settlement in favor of plaintiffs whose claims comprise the set that
was more likely to succeed . . . . By reimbursing customers for damages incurred in a 45-day
period, the settlement recognizes that customers who incurred 'surprise' charges have stronger
claims than the 'chronic overdrafters' who paid many fees over a long period of time . . . . The
way in which the settlement allocates benefits is fair.").
Moreover, the complaint reached issues beyond resequencing. The PEC Objectors claim
that the class is overly broad, see PEC Objection at 6-8, but in In re Adelphia Communications
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Corp. Securities and Derivative Litigation, 272 Fed. App'x 9 (2d Cir. 2008), the Second Circuit
rejected similar contentions that a class was "overly broad," reasoning that the investment losses
suffered by all class members shared a common factual predicate, even if the particular losses
had been the result of reliance on different documents. Id. at 13. The Adelphia court further
explained that a court could release not just the claims alleged in the complaint, but also claims
that could have been alleged in connection to any fact or matter set forth in the complaint. Here,
the complaint involved more than an attack on National City's resequencing policy. It also
challenged the bank's policy of assessing overdraft fees on electronic debit card transactions
without proper or good-faith disclosures, amongst other charges. But the class definition was
arrived at appropriately, as discussed above. Having found no impropriety or unfairness in the
overlap of classes, the class definition, or any problems with intraclass equity, the Court rejects
these objections raised by the PEC Objectors.
c. Adequacy of the Settlement Amount and Cy Pres
Both Cannata and the PEC Objectors contend that the settlement amount is inadequate,
pointing to Gutierrez and the settlement in the consolidated multi-district litigation cases
involving Bank of America, which awarded account holders $203 million and $410 million
respectively. However, as Judge Dow in Schulte observed, and which is equally applicable here,
the $203 million award obtained in Gutierrez is "not an appropriate basis for comparison."
Schulte, 2011 WL 3269340, at *19. The award in Gutierrez was a result of a bench trial and, in
any event, involved claims under California state law, which explicitly prohibited the practice of
resequencing. See id. (distinguishing Gutierrez).
With respect to the recent Bank of America settlement, which was finally approved by
Judge King on November 22, 2011, the $410 million award extends to a class of over 13 million
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class members. Moreover, as Judge King noted in rejecting similar assertions about the
inadequacy of the $410 million settlement amount in that case, "while the business practices of
banks may be similar, the manner in which those practices were implemented . . . may vary,
potentially leading to different findings and liability." See BofA Order of Final Approval at 28
n.13.
In any event, the Court's analysis of the fairness of the settlement considers what was
known to the settling parties at the time the agreement was reached. See In re CIGNA Corp.,
2007 WL 2071898, at * 3 (stating that settlement fairness analysis must consider the risks at the
time the settlement was reached, not the risks or absence of risks that arose after the settlement);
see BofA Order of Final Approval at 21 (applying the same reasoning). And it is not the Court's
role to use its own business judgment in place of the parties' assessment in determining the
fairness of the proposed settlement. See BofA Order of Final Approval at 27-29. Here, the
Court finds that the settlement amount is not so unfair, inadequate, and unreasonable as a whole
as to warrant rejection of the settlement. And when considering the difficulties in obtaining and
analyzing data, and the other challenges identified by this Court that would face plaintiffs, the
proposed settlement provides a favorable result for class members.
Finally, while the Court has already addressed many of Cannata's objections and
explained why they are unwarranted, the Court also rejects Cannata's concerns regarding the use
and implementation of cy pres distribution. Class counsel indicated at the final fairness hearing
that the fund was likely to be exhausted before cy pres would even be implicated. Tr. 9:7-10.
Hence, there is no real basis for objection. In any event, the Court would have approval to
oversee the funds distributed to a cy pres fund and the orderly administration of such funds.
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E. Opinion of Experienced Counsel
Class counsel is experienced in litigating and resolving complex cases, including other
class actions against banks involving their overdraft fee policies. See Zavareei Decl. ¶¶ 4-12.
Because the Court finds that the settlement was reached through arm's length negotiation, and
that an adequate factual investigation had been undertaken, counsel's opinion with respect to the
fairness, adequacy, and reasonableness of the proposed settlement will be credited. See In re
Lorazepam, 205 F.R.D. at 399.
III. ATTORNEYS' FEES, EXPENSES, AND INCENTIVE AWARDS
Having concluded that the terms of the proposed settlement agreement are fair,
reasonable and adequate, the Court now turns to the attorneys' fees, expenses and incentive
awards requested by the plaintiffs in their petition. Plaintiffs request $3 million in attorneys'
fees, which it calculates as equal to 25% of the $12 million settlement fund, or 22% of the overall
settlement (factoring in the additional amount National City will pay for notice and
administrative costs). Mot. for Attorneys' Fees at 1. Plaintiffs also request $77,857 in
reimbursement for their expenses, the majority of which is attributable to a $75,000 fee for the
services incurred by Edgeworth in preparing the damages report, and a $5,000 incentive award
payable to each of the three class representatives. These requests are dealt with in turn below.
A. Attorneys' Fees
Courts have a duty to ensure that claims for attorneys' fees are reasonable. Chilcott, 522
F. Supp. 2d at 122. To evaluate whether a fee request is reasonable, a court can consider (1) the
size of the fund created and the number of persons benefitted, (2) the presence or absence of
substantial objections by class members to the settlement terms or fees requested by counsel, (3)
the skill and efficiency of the attorneys involved, (4) the complexity and duration of litigation, (5)
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the risk of non-payment, (6) the time devoted to the case by plaintiffs' counsel, and (7) awards in
similar cases. See In re Lorazepam, 2003 WL 22037741, at *8.
Plaintiffs assert that notice was sent to 2.4 million class members and as of September 1,
2011 approximately 187,679 timely and verified claims have been received. Final Status Report
at 1-2. The ultimate amount incurred by National City for the settlement of the claims is $13.8
million. After deductions for notice and claims administration costs, the requested fees, costs
and expenses (including attorneys' fees and incentive fee awards), class counsel estimate that
approximately $8,407,000 will be distributed to claimants pursuant to the revised settlement
agreement. Id. at 4. The award requested for attorneys' fees is comparable to the fees requested
regarding a similar proposed class size and common fund. See Chilcott, 522 F. Supp. 2d at 122(analyzing Lorazepam factors in light of an estimated class of two million consumers and a
common fund of $8.3 million). As to the skill and efficiency of the attorneys involved and the
complexity and duration of litigation, the Court has previously noted that class counsel is
experienced in litigating and resolving complex cases, including other class actions against banks
involving their overdraft fee policies. See Zavareei Decl. ¶¶ 4-12. Hence, this factor weighs in
support of an attorneys' fee award of $3 million. Further, the settlement was obtained "in the face
of substantial defenses." See Chilcott, 522 F. Supp. 2d at 122. Although the duration of
litigation was relatively short (there were no dispositive motions filed), the issues to be resolved
in this case were complex. See Schulte, 2011 WL 3269340, at *32 (observing, in similar case,
that the stakes were high given the class size, the scale of the challenged activity and the
complexity and costs of the case).
The risk of non-payment also weighs in plaintiffs' favor. Class counsel have been
litigating this case on a contingency fee basis, and have not yet received any fees or payment for
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litigating this action. Mot. for Attorneys' Fees at 25-26. Moreover, the chance of recovery was
by no means assured given the risks -- as identified above -- including the likelihood of appeal,
the difficulty in ascertaining and quantifying damages, and the substantive defenses possessed by
the defendants to the charges lodged against them. See Schulte, 2011 WL 3269340, at *30
(noting that 33% attorneys' fee award was reasonable given "the number of potentially
meritorious defenses" possessed by Fifth Third Bank, the contingency fee arrangement, and the
high risks associated with litigating the case).
As to the number of objections, there have been few substantial objections to the
settlement terms, and only one objection regarding the request for attorneys' fees. Only Rosen
appears to object to the amount of attorneys' fees and the method by which the fees are
calculated.18 Rosen argues that an award of $3 million for attorneys' fees is unreasonably high
given the lack of risk in bringing this case and suggests that 10% of the common fund is a more
appropriate figure. See Rosen Objection at 1. Rosen also suggests that class counsel should
have supplied a lodestar, though she acknowledges that the D.C. Circuit applies a "percentage of
fund" method for determining attorneys' fees in common fund cases like this one. Id. at 9.
Finally, Rosen urges the Court to base the award of attorneys' fees on amounts actually received
by their clients, rather than the “theoretical” size of the award. Id. at 12.
As an initial matter, the Court rejects Rosen's objection to class counsel's calculation of
attorneys' fees without reference to a lodestar. In cases involving common funds (such as this
case), the D.C. Circuit has indicated a preference for applying a "percentage of the fund" method
for awarding attorneys' fees. See Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1266-67 (D.C.
18
At the final fairness hearing, the PEC Objectors stated that they had no issue with the awarding of
attorneys fees by the percentage of the fund method. See Tr. 62:11-14.
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Cir. 1993). Rosen does not contend otherwise. The benefit of applying a percentage of the fund
recovery method for awarding attorneys' fees is that it "directly aligns the interests of the Class
and its counsel for the efficient prosecution and early resolution of litigation, which clearly
benefits both litigants and the judicial system." In re Lorazepam, 205 F.R.D. at 383 (citing In re
Am. Bank Note Holographics, Inc. Sec. Litig., 127 F. Supp. 2d 418, 431-32 (S.D.N.Y. 2001)).
The Court also rejects Rosen's contention that 10% of the common fund is a more
appropriate award of attorneys' fees. It has been observed that fee awards nationally appear to
fall in a range of 20% to 30% of the common fund, and that the fees in this Circuit mirror those
nationwide numbers. See, e.g., In re Dep't of Veterans Affairs (VA) Data Theft Litig., 653 F.
Supp. 2d 58, 61 (D.D.C. 2009) (citing cases where fees in D.C. Circuit have ranged from 20 to
30%). In some cases, the percentage has been even greater. See Radosti, 760 F. Supp. 2d at 78
(granting award of 33% of the common fund). The attorneys' fee award of 22% or 25% here
(depending on the calculation) is still within this range of reasonableness. Class members also
were on notice of the proposed fee amount, because the notices clearly state that class counsel
would be requesting an award of attorneys fees of not more than 25% ($3 million) of the
settlement fund, plus reimbursement of all costs and expenses. Tellingly, only one objection was
received, which counsels in favor of granting class counsel's requested fee award. See Schulte,
2011 WL 3269340, at * 30 (noting that plaintiff's authorization to her attorney to seek a fee of up
to 33.3% of the potential recovery at the onset of the suit as evidence that the risks undertaken by
counsel were relatively high). The attorneys' fees were also negotiated separately, and after the
substantive terms of the settlement agreement had been reached. Zavareei Decl. ¶ 1.
Moreover, it is appropriate to award attorneys' fees out of the amount recovered, not just the
actual amount paid, because class members benefitted from class counsel’s efforts at negotiating
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the entire settlement agreement -- including National City’s agreement to pay certain notice and
administration costs, which were not an insignificant sum. See BofA Order of Final Approval at
41 ("It is well established that when a representative party has conferred a substantial benefit
upon a class, counsel is entitled to . . . attorneys' fees based upon the benefit obtained.") (internal
citations omitted); see also Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980) (noting that the
Supreme Court "has recognized consistently that a . . . lawyer who recovers a common fund for
the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee
from the fund as a whole").
As for the time devoted to the case, and awards in similar cases, these also support
plaintiffs' requested award of $3 million. Plaintiffs claim that "over 1000 hours of attorney and
litigation support time" were spent by their firm. Zavareei Decl. ¶ 69; Mot. for Attorneys' Fees at
25. These hours included research into National City Bank and its practices; analyses of
potential damages; engaging in formal and informal discovery; the filing of the class action
complaint; settlement negotiations; the process of obtaining preliminary approval of the proposed
settlement, including responding to objections and revising the settlement agreement.
See generally Zavareei Decl. Class counsel has also spent additional time responding to
objections, attending the fairness hearing, and responding to the Court's request for supplemental
briefing.
Finally, in comparing this award to the award of attorneys' fees in other cases, the Court
concludes that $3 million is a reasonable figure. In Mathena v. Webster Bank, 3:10 Civ. 01448
(D. Conn), a case involving the same class counsel, Judge Underhill approved a $2.8 million
settlement, and awarded $700,000 in attorneys fees, $4,577 in costs, and a $5,000 incentive
award to the representative plaintiff. The attorneys' fee amounted to 25% of the common fund.
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In Closson v. Bank of America, Case No. CGC 04436877, a case involving overdraft fees in the
California Superior Court, the parties settled the suit with a fund of $35 million, with a maximum
of $8.125 million for attorneys' fees and costs and a $10,000 incentive award, with attorneys' fees
and costs thus amounting to about 23% of the common fund.19 In Schulte v. Fifth Third Bank, an
overdraft fees class action case involving a $9.5 million settlement, Judge Dow awarded
$3,166,666 in attorneys' fees, or approximately 33% of the fund. See Schulte, 2011 WL
3269340, at *31-32. In the consolidated cases against Bank of America in the multi-district
litigation, Judge King awarded attorneys' fees amounting to 30% of a $410 settlement fund,
finding that the fee was appropriate and comported with customary fee awards in similar cases.
See BofA Order of Final Approval at 54. And, as previously noted, the award requested for
attorneys' fees is comparable to the fees requested regarding a similar proposed class size and
common fund in this jurisdiction, see Chilcott, 522 F. Supp. 2d at 122, and is within what the
D.C. Circuit has concluded as the realm of reasonableness for attorneys' fees in common fund
cases, see Swedish Hosp. Corp., 1 F.3d at 1272 ("[A] majority of common fund class action fee
awards fall between twenty and thirty percent."). In considering and weighing these factors and
the record as a whole, then, the Court finds that class counsel is entitled to the requested amount
of attorneys’ fees and will grant the petition and award the sum of $3 million in attorneys’ fees to
class counsel.
19
At the final fairness hearing, plaintiffs indicated that the Closson settlement was pending on appeal, but
that the PEC had withdrawn its objections to the settlement. See Tr. 80:21-81:5. From a review of the case dockets,
it appears that some, if not all, of the appeals have been voluntarily dismissed or abandoned. See Closson v. Bank of
Am., Case Nos. A127018, A126608, A126606, A126230, A125963 (Cal. App. 1st Dep't Super. Ct.).
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B. Incentive Awards
"[I]ncentive awards to named plaintiffs are not uncommon in class action litigation,
particularly where a common fund has been created for the benefit of the entire class." See In re
Lorazepam, 2003 WL 22037741, at *10. Indeed, "courts routinely approve incentive awards to
compensate named plaintiffs for the services they provided and the risks they incurred during the
course of the class action litigation." Id. (internal quotation marks omitted). To determine
whether incentive awards should be granted, and the proper amount of such awards, "courts
consider factors such as 'the actions the plaintiff has taken to protect the interests of the class, the
degree to which the class has benefitted from those actions, and the amount of time and effort the
plaintiff expended in pursuing the litigation." Id. (quoting Cook v. Niedert, 142 F. 3d 1004, 1016
(7th Cir. 1998)).
Here, class counsel requests incentive awards in the amount of $5,000 to each
representative plaintiff, which defendant agreed not to oppose as part of the terms of the
agreement. See Rev. Settlement Agreement ¶¶ 10, 12. Rosen challenges the proposed $15,000
incentive fee paid to the three class representatives and suggests that $5,000 total for the three
class plaintiffs is a more appropriate number. Plaintiffs respond that the representative plaintiffs
"actively assisted in the prosecution and settlement of this case" by participating in "many phone
calls" and providing "detailed descriptions of their banking behavior and experiences as well as
documentary evidence . . . that supported their allegations." Zavareei Decl. ¶¶ 71-72.
Moreover, plaintiff Trombley "made herself available for repeated consultations during
settlement negotiations." Id. at ¶ 72.
Admittedly, representative plaintiffs in other cases have participated in the litigation to a
far greater extent than was true here. See, e.g., Chilcott, 522 F. Supp. 2d at 124 ($7500 incentive
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award to named plaintiffs who provided documents and aid to counsel, and underwent cross-
examination for their depositions); Wells v. Allstate Ins. Co., 597 F. Supp. 2d 1, 9 (D.D.C. 2008)
($10,000 incentive awards granted to representative plaintiffs who were deposed twice, attended
the two-day class certification hearing, produced documents, and assisted in responding to
interrogatories). But the representative plaintiffs in those cases were rewarded accordingly, and
received greater incentive awards than the representative plaintiffs request here. In any event, the
court's function "is not to modify the terms of a proposed settlement; but rather to approve or
disapprove of the proposed settlement 'as a whole.'" See Schulte, 2011 WL 3269340, at *25
(citing Newberg on Class Actions § 24:126 (4th ed.)). The Court therefore concludes that the
$5000 award for each representative plaintiff falls within the range of reasonableness and grants
the incentive fee awards requested.
C. Reimbursement of Costs
In addition to attorneys' fees, class counsel may request reimbursement for reasonable
litigation expenses from the common fund. See Lorazepam, 2003 WL 22037741, at *10.
Class counsel requests $77,857.05 in costs and expenses. No objections were lodged with
respect to this amount and the itemization of class counsel's costs and expenses appears
reasonable. The largest expense incurred was for "Experts/Investigators," which was listed at
$75,000. See Ex. A to Zavareei Decl. Class counsel attests, however, that this amount was
incurred entirely by the services rendered by Edgeworth and is discounted by $22,278 from the
$97,278 that would normally have been charged by Edgeworth, in order to comport with
Edgeworth's pre-retention fee estimates. Zavareei Decl. ¶ 69. Class counsel also states that such
expenses incurred by the firm were "necessary to the successful prosecution of this case." See
Zavareei Decl. ¶¶ 69-70. Indeed, the work by Edgeworth focused on an issue raised by this Court
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as a matter of concern. In addition, these fees and expense requests do not include an additional
declaration submitted by Edgeworth or the retention of Navigant Consulting in response to the
Court's request for supplemental briefing. The other fees and expenses -- including for example,
travel, meals, and lodging; legal research; court fees; photocopies; and telephone calls -- amount
to $2857.05, and are the kinds of expenses expected and anticipated during the ordinary course of
litigation. Accordingly, because these fees all appear to be reasonable, and because no objections
have been made as to the amount, the Court will grant class counsel's request and award
$77,857.05 in costs and expenses.
CONCLUSION
For the reasons set forth above, the Court grants final certification of the class and final
approval of the settlement, finding that it is fair, reasonable, and adequate. The Court also grants
class counsel's request for attorneys' fees in the amount of $ 3,000,000.00 and $77,857.05 in
costs and expenses. Finally, the Court awards $5000.00 incentive fees to each of the three
representative plaintiffs, Ramona Trombley, Brian Wells, and Jeff Doehner. A separate order
shall accompany this memorandum opinion.
/s/
JOHN D. BATES
United States District Judge
Date: December 1, 2011
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