Commission authorization of amicus brief filing: The Commission has authorized the staff to file a motion for leave to file an amicus brief in Schneider v. Citicorp Mortgage, Inc., No. CV-97-837 (E.D. N.Y.). The case involves allegations that Citicorp Mortgage Inc., now known as CitiMortgage, Inc. (CMI), and Citicorp violated the Real Estate Settlement Procedures Act (RESPA) and state consumer protection statutes in connection with their payment of yield spread premiums (YSPs) to mortgage brokers. The brief raises concerns about whether the settlement class satisfies legal requirements, whether there is actual value in the coupons class members would receive, and whether the payment of up to $659,500 in fees and costs to the class counsel is justified.
The brief suggests that this settlement class may not satisfy the prerequisites of Rule 23, which requires that, among other things, there are questions of law or fact common to the class and that these common issues predominate over issues unique to each class member’s claim. In addition, the brief contends that, if the court values the plaintiffs’ claims at greater than nuisance value, the proposed settlement is far from adequate. The settlement provides for coupons worth $100 against the cost of obtaining a new first mortgage directly from CMI through its telesales channel. The coupon must be used within two years and cannot be redeemed in conjunction with any other offer or promotion. Class members may only redeem one coupon in connection with any single loan. The coupons are not transferrable at public sale or auction. The Commission’s brief contends that it is highly unlikely that the face value of the coupons, $7.7 million, represents their actual value, since it is highly unlikely most class members will use them in light of their low value and limitations.
The brief argues that, if the court finds that plaintiffs’ class claims are indeed valued at near zero, it must then determine whether the payment to class counsel of up to $659,500 in fees and costs is reasonable in light of the recovery they obtained on behalf of the class. The brief contends that counsels’ anticipated fee request seems excessive if the value of the coupon settlement benefits is likely far less than its face value. Finally, the brief suggests ways of improving the proposed settlement with the class members, if the court finds that the plaintiffs have claims sufficient to justify a distribution to them.
The Commission vote authorizing the staff to file the amicus brief was 5-0, with Commissioner Pamela Jones Harbour concurring in part and dissenting in part, and issuing a separate statement. Chairman Timothy J. Muris and Commissioners Orson Swindle and Thomas B. Leary issued a separate joint statement. Commissioner Mozelle W. Thompson issued a separate statement. All statements are available on the FTC’s Web site.
In her statement, Commissioner Harbour said: “Today the Commission has voted to file a brief amicus curiae in a consumer class action lawsuit pending in a United States district court. One purpose of the Commission’s brief is to critique the proposed settlement coupon, which the Commission believes is of negligible value to the class, and I concur with that portion of the Commission’s brief. The Commission advises the court and the litigants that the settlement is not fair, adequate or reasonable from the perspective of the class members, and therefore should not be approved.”
“Were that substantially all the brief had to say, I gladly would vote to file it, without dissenting in part. I take issue, however, with the Commission’s decision to opine on the ‘highly fact-based, difficult and complex’ issues of class certification and attorneys’ fees. Under these circumstances, offering these other opinions weakens the strength of the Commission’s legitimate advocacy on the objective merits of this proposed settlement. Therefore, I dissent in part from the Commission’s decision to file the brief.”
In their separate statement, Chairman Muris and Commissioners Swindle and Leary responded to Commissioner Harbour’s statement. “Lawyers who, in exchange for a contingent fee, labor mightily to produce a reward for consumers should certainly receive a fair share of what they have produced,” the statement said. “If the court agrees that the result for consumers is largely valueless, however, then the result for the attorneys who produced it should be largely valueless as well. In this settlement, the clients get largely valueless coupons, but the lawyers get cold, hard cash.”
“Attorneys should not be the only parties who benefit from a class action settlement,” their statement concluded, “and consumers ultimately are harmed when attorneys have an incentive to pursue settlements of this kind.”
In his separate statement, Commissioner Thompson said, “I agree with Commissioner Harbour that it is ultimately within the Court’s discretion to determine whether the settlement is fair to consumers. But the Commission’s substantial experience with consumer redress settlements can assist the Court in this regard. The Court will also be able to determine whether plaintiff’s contingency fee petition should be approved. To the extent the settlement provides little or no value to consumers, I believe the attorneys’ fees should be adjusted accordingly.” (FTC File No. P044210; staff contact is Robert M. Frisby, Bureau of Consumer Protection, 202-326-2098.)
Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.