A federal judge has given final approval to a $4 million class settlement in a case that alleged mortgage holders were charged excessive premiums in captive reinsurance arrangements by various progeny of Washington Mutual.
All factors weighed in favor of the settlement, U.S. District Judge Thomas N. O’Neill Jr. of the Eastern District of Pennsylvania said in his opinion issued this week in Alexander v. Washington Mutual. He also approved the $1.2 million sought in attorney fees.
"Allowing the more than 1,000 covered homeowners in the settlement class in this action to file individual lawsuits would waste judicial resources in the event of litigation, since representative plaintiff contends that each lawsuit would likely involve the same evidence regarding defendants’ reinsurance programs as well as the same issue as to whether the programs violated RESPA," O’Neill said, referring to the Real Estate Settlement Procedures Act.
"A class action here promotes judicial economy, avoids inconsistency, and provides a single forum to resolve numerous common claims," O’Neill said.
Over 42,000 people are included in the class and each will get about $94, according to the opinion. Essentially, the Washington Mutual defendants charged more for reinsurance coverage than the services rendered were worth, the plaintiffs contended.
In weighing the class settlement against the nine Girsh factors, laid out by the U.S. Court of Appeals for the Third Circuit in its 1975 opinion in Girsh v. Jepson, O’Neill found that none of them weighed against the settlement.
"Prior to reaching a settlement, this litigation had gone on for over four years. If the parties were to continue to litigate this case, further proceedings would be complex, expensive, and lengthy," O’Neill said.
He noted that the plaintiffs’ likelihood of success on the merits at trial is tenuous and, similarly, that aside from this settlement agreement, the court may well have denied class certification.
"Other courts have denied certification of similar RESPA claims," O’Neill said, citing a 2010 opinion from the Western District of Washington in Contos v. Wells Fargo Escrow.
Also, O’Neill said, only five class members opted out of the class settlement and nobody submitted a formal objection to it.
In November, the Texas attorney general expressed concern over the scope of the settlement’s release and "its potential to circumscribe the state’s civil enforcement powers," O’Neill said. The language of the release was modified accordingly, he said.
From the $4 million settlement fund, the class counsel will be paid $1.2 million, which was their requested fee.
"The Court of Appeals for the Third Circuit generally favors the percentage-of-recovery method for fee calculation in common fund cases," O’Neill said in a separate opinion awarding attorney fees.
The requested amount is 30 percent of the recovery total, O’Neill said, which is in line with similar cases.
"Importantly, this amount also fits within the range of approved fee awards in other cases involving similarly complex issues where there were few or no objectors to a proposed class action settlement," O’Neill said.
All together, lawyers representing the plaintiffs spent 1,963 hours working on the case, according to the opinion, and O’Neill held that it was reasonably spent on various aspects of the litigation so far.
The class counsel calculated the lodestar to be $884,858.75, O’Neill said in his "lodestar cross-check." In order to get to the requested amount of $1.2 million, there must be a 1.36 multiplier, which O’Neill found to be appropriate.
"The court of appeals has recognized that multipliers ‘ranging from one to four are frequently awarded in common fund cases when the lodestar method is applied,’" O’Neill said, citing the Third Circuit’s 2006 opinion in In re Prudential.
Neither James Maro Jr. of Kessler Topaz Meltzer & Check in Radnor, Pa., who represented the class, nor James McGarry of Goodwin Procter in Boston, who represented Washington Mutual, could be reached for comment.
(Copies of the 19-page opinion in Alexander v. Washington Mutual, PICS No. 12-2278, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •