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Arnett v. Bank of America, N.A.

United States District Court, D. Oregon

September 18, 2014

BANK OF AMERICA, N.A., in its own capacity and as successor by merger to BAC HOME LOANS SERVICING, L.P., Defendant.

Timothy S. DeJong, Scott A. Shorr, and Nadine A. Gartner, STOLL STOLL BERNE LOKTING & SHLACHTER P.C., Portland, OR; Eric L. Cramer, Shanon J. Carson, Patrick F. Madden, and Lawrence Deutsch, BERGER & MONTAGUE, P.C., Philadelphia, PA; Brett Cebulash and Kevin S. Landau, TAUS, CEBULASH & LANDAU, LLP, New York, NY; E. Michelle Drake and Kai Richter, NICHOLS KASTER, PLLP, Minneapolis, MN; Edward F. Haber and Adam M. Stewart SHAPIRO HABER & URMY LLP, Boston, MA, Of Attorneys for Plaintiffs.

Tanya Durkee Urbach and Peter D. Hawkes, LANE POWELL PC, Portland, OR; John C. Englander, Matthew G. Lindenbaum, and Brian M. LaMacchia, GOODWIN PROCTER LLP, E, Boston MA; David L. Permut, GOODWIN PROCTER LLP, NW, Washington DC, Of Attorneys for Defendant.


MICHAEL H. SIMON, District Judge.

This is a national class action under Federal Rule of Civil Procedure 23, brought on behalf of individuals who were allegedly required by Defendant Bank of America, N.A., in its own capacity and as successor by merger to BAC Home Loans Servicing, L.P. ("BANA"), to purchase excessive or unnecessary flood insurance between January 1, 2007 and April 4, 2014. This matter comes before the Court on Plaintiffs' Motion for Final Approval of Class Action Settlement (Dkt. 268) ("Final Approval Motion") and Plaintiffs' counsel's motion for attorney's fees, costs, and an incentive award for the class representatives (Dkt. 246) ("Fee Motion"), which are unopposed by BANA.

The Court has considered the Final Approval Motion, the Fee Motion, the proposed Settlement Agreement, the papers submitted in connection with both motions, the arguments of counsel, the response of the Settlement Class to the Notice of Class Action Settlement ("Class Notice"), all objections from Settlement Class Members, and the files, records, and proceedings in the above-captioned action ("Action"), which resolves seven separate pending federal court cases.[1] The final approval hearing was held on September 9, 2014.

For the reasons discussed below, Plaintiffs' Final Approval Motion is GRANTED. Plaintiffs' Fee Motion is GRANTED IN PART. Plaintiffs are awarded $2, 500 each as an incentive award, Plaintiffs' counsel is awarded $7, 750, 000 (25 percent of the Settlement Fund of $31, 000, 000) for attorney's fees and $736, 294.42 for costs, and Analytics, LLC, the Claims Administrator, is awarded $630, 328.15 in fees and costs.


On November 14, 2011, Larry and Ronda Arnett filed this putative class action before the Court alleging that BANA unlawfully and unfairly profited from commissions and other compensation arrangements with its lender-placed flood insurance vendors, and that BANA unlawfully required borrowers to maintain excessive flood insurance coverage. Alice A. Berger, Lee M. Berger, Susan Lass, Mark Lemmer, Pamela Lemmer, Karyl Resnick, Eric Skansgaard, Donna M. Wade, and Edward M. Wallace, Jr., filed similar putative class action lawsuits in district courts across the country.[3] The plaintiffs are referred to, collectively, as "Plaintiffs." The Wallace and Resnick actions concern BANA's flood insurance practices regarding borrowers with home equity lines of credit; the Lemmer action relates to borrowers in housing cooperatives; and the Arnett, Berger, Lass, and Skansgaard actions concern BANA's flood insurance practices in connection with residential mortgage loans written on various form mortgages.

On April 7, 2014, Plaintiffs filed a Consolidated Amended Class Action Complaint ("CAC") in this action, consolidating their claims and adding all other plaintiffs in addition to the Arnetts. Dkt. 225. The CAC asserts that BANA required Plaintiffs to purchase excessive flood insurance coverage and that BANA and its affiliates received improper commissions and other compensation in connection with lender-placed flood insurance. The CAC asserts claims for: (a) unjust enrichment; (b) violation of the Truth in Lending Act, 15 U.S.C. ยง 1601, et seq.; (c) breach of contract and of the implied covenant of good faith and fair dealing; and (d) conversion.

Before filing the CAC, there was significant litigation in the separate federal court actions. Each case involved some motion practice, including motions to dismiss, motions for judgment on the pleadings, discovery motions, and one summary judgment motion. In two cases, class certification was briefed. All cases involved significant discovery. The discovery efforts were coordinated by Plaintiffs' counsel even before the CAC was filed. A team of four attorneys handled all of the depositions, and the voluminous document production, storage, and review were divided among the various law firms.

The parties attended two full-day mediation sessions in New York on July 19 and 22, 2013. Professor Eric Green of Resolutions, LLC oversaw the mediation sessions. The parties continued negotiating and attended a third mediation session in Boston on September 16, 2013. The parties continued to negotiate and, after several months, finalized the Settlement Agreement.

On April 17, 2014, the Court granted preliminary approval of the Settlement Agreement, conditionally certified the proposed Settlement Class, designated class representatives, appointed class counsel and co-lead class counsel, approved the settlement administration plan, and approved a plan for giving notice to Settlement Class Members. The Court also set deadlines for objecting to the Settlement Agreement and objecting to the Fee Motion.

The Court received objections from seven objectors (collectively, "Objectors").[4] Of these, four objected to the Settlement Agreement and five objected to the Fee Motion.[5] With respect to the Settlement Agreement, Erich B. Neumann objects that the relief obtained is insufficient, payment through an escrow credit is unfair, and the release is too broad. Glenn and Carin Hanna ("the Hannas") object that the Class Notice was insufficient because it did not set forth the value of the claims and the value of class member's estimated specific recovery and that, for the same reasons, the Court cannot evaluate whether the Settlement Agreement is fair, reasonable, and adequate.[6] The Hannas argue that a new Class Notice must be provided. Francis Vitale objects that it is unfair to require class members to request an opt-out form during the injunctive relief time period, that the release is too broad, and that BANA should be required to pay fines or penalties. Daniel and Lanette Hall ("the Halls") object to the cy pres component of the Settlement Agreement.

With respect to the Fee Motion, Neumann, Vitale, Henry Clay Adkins, and Marie Halverson object that the requested fees are excessive and Mary Bennett objects that Class Counsel should not receive any award from the Settlement Fund. A final approval hearing was held on September 9, 2014. The Court requested supplemental information regarding expenses requested by counsel relating to two cases that were not part of the seven cases consolidated in the CAC; Class Counsel provided that information on September 15, 2014.


A. Certification of the Settlement Class

1. Notice to the Class

The Court granted preliminary approval to the parties' proposed notice procedure, after certain amendments to the Class Notice were made following request by the Court. Dkt. 243. The Court is satisfied that the notice procedure was carried out according to the applicable standards.

The Court finds that notice of the Settlement was given to the Settlement Class by the best means practicable under the circumstances, including mailing the Class Notice to Settlement Class Members by U.S. Mail, and publishing the Class Notice, Settlement Agreement, and other relevant documents on the settlement website ( The Court rejects the objections of the Hannas that the Class Notice was insufficient because it did not provide the estimated value of the claims, provide specific estimated recoveries for class members, or provide a mathematical formula to calculate recovery.

The Class Notice provided Settlement Class Members with all required information including, among other things: (1) a summary of the lawsuit and the claims asserted; (2) a clear definition of the Settlement Class; (3) a description of the material terms of the Settlement; (4) an explanation of which Settlement Class Members must submit a claim and instructions as to how they may do so and the deadline for doing so; (5) a disclosure of the release of claims should they choose to remain in the Settlement Class; (6) an explanation of Settlement Class Members' opt-out rights, the date by which Settlement Class Members must opt out, and information regarding how to do so; (7) instructions about how to object to the Settlement and the deadline for Settlement Class Members to submit any objections; (8) the date, time, and location of the Final Approval Hearing;[7] (9) the internet address for the settlement website and the toll-free number from which Settlement Class Members could obtain additional information about the Settlement; (10) the names of the law firms representing the Settlement Class, and contact information for the co-lead law firms; and (11) information regarding how Class Counsel and the named Class Representatives would be compensated. The Class Notice included a detailed plan for allocation of Settlement Shares and stated that the recovery from the Settlement Fund would be a pro rata portion of an individual claimant's Settlement Shares. This is sufficient. See Lane v. Facebook, Inc., 696 F.3d 811, 826 (9th Cir. 2012) (reaffirming that a class notice need only "generally describe[] the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard" and that proper notice "does not require an estimate of the potential value of [the] claims" (citation and quotation marks omitted)); Rodriguez v. West Publ'g Corp., 563 F.3d 948, 962 (9th Cir. 2009) (holding that notice to the class is sufficient if it "describes the aggregate amount of the settlement fund and the plan for allocation" and stating that "[w]hile the Notice does not... analyze the expected value [of the claims], we do not see why it should").

The form and method of notifying the Settlement Class fairly and adequately advised Settlement Class Members of all relevant and material information concerning the Action and the terms of the proposed Settlement.[8] The Court finds that the Class Notice fully satisfies the requirements of due process and Rule 23.

2. Final certification

Plaintiffs move, without objection by BANA, to resolve this case as a Settlement Class. In order to certify a Settlement Class, the requirements of Federal Rule of Civil Procedure 23 must be satisfied. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). Rule 23 affords this Court with "broad discretion over certification of class actions...." Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir. 2011). A plaintiff seeking class certification must satisfy each requirement of Rule 23(a)-numerosity, commonality, typicality, and adequacy of representation-and at least one subsection of Rule 23(b). See, e.g., Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 724 (9th Cir. 2007). The parties agreed to certification of the class for settlement purposes, and the Court previously evaluated the requisite factors in conditionally certifying the class for settlement purposes in the preliminary approval of the Settlement Agreement. Having fully reviewed the record, the Court finds no reason to alter that assessment. Accordingly, the Court certifies for settlement purposes the following class:

All persons who were sent a flood insurance cycle letter by BANA, Countrywide Home Loans, Inc., or Countrywide Home Loans Servicing, LP or who were charged for lender-placed flood insurance by BANA, Countrywide Home Loans, Inc., or Countrywide Home Loans Servicing, LP on or after January 1, 2007 and before April 4, 2014 in connection with a residential mortgage loan, home equity line of credit, reverse mortgage loan, or loan secured by shares in a cooperative housing association.

B. Settlement Agreement

To approve a class action settlement, a court must find that the settlement is "fair, reasonable, and adequate." Fed.R.Civ.P. 23(e); Lane, 696 F.3d at 818. The settlement must be considered as a whole, and although there are "strict procedural requirements on the approval of a class settlement, a district court's only role in reviewing the substance of that settlement is to ensure it is fair, adequate, and free from collusion.'" Lane, 696 F.3d at 818-19 (quoting Hanlon 150 F.3d at 1027). A number of factors guide this review, including: (1) the strength of plaintiff's case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant;[9] and (8) the reaction of the class members to the proposed settlement. Id. at 819. Courts within the Ninth Circuit "put a good deal of stock in the product of an arms-length [sic], non-collusive, negotiated resolution." Rodriguez, 563 F.3d at 965.

Additionally, class action settlements involve "unique due process concerns for absent class members who are bound by the court's judgments." Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157, 1168 (9th Cir. 2013) (citation and quotation marks omitted). Where the settlement agreement is negotiated before formal class certification, as in this case, the court should engage in "an even higher level of scrutiny for evidence of collusion or other conflicts of interest than is ordinarily required under Rule 23(e)...." Id. (citation and quotation marks omitted). Evidence of collusion may not be evident on the face of a settlement and a court should consider whether there is evidence of more subtle signs of collusion. Staton v. Boeing Co., 327 F.3d 938, 958 n.12, 960 (9th Cir. 2003). Such evidence may include: (1) when counsel receives a disproportionate distribution of the settlement or when the settlement class members receive no monetary distribution but class counsel is amply rewarded, Hanlon, 150 F.3d at 1021; (2) when the parties negotiate an arrangement providing for the payment of attorney's fees separate and apart from class funds, which carries "the potential of enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class, " Lobatz v. U.S.W. Cellular of Cal., Inc., 222 F.3d 1142, 1148 (9th Cir. 2000); or (3) when the parties arrange for fees not awarded to revert to the defendant rather than be added to the class fund. See Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781, 785 (7th Cir. 2004).

The Court reviews, in turn, the relevant factors bearing on the evaluation of whether the Settlement Agreement ...

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