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In a rare move, a three-judge panel of the 3rd U.S. Circuit Court of Appeals ruled from the bench last week to uphold a $1.75 million settlement in a class action suit, rejecting objections from lawyers who said it had undermined their similar case pending in federal court in Georgia. The ruling in Hall v. Midland Group upholds a decision by Judge Jay C. Waldman of the U.S. District Court for the Eastern District of Pennsylvania, who found that when two parallel, overlapping class action lawsuits are filed in different federal courts, one of the suits can settle independently with the approval of just one judge. After a full oral argument last week, the three appeals judges left the bench and returned just minutes later to announce their ruling. U.S. Circuit Judge Jane R. Roth said the court had concluded that the case in Georgia “is not a superior proceeding” and that Waldman had not abused his discretion when he approved the settlement. The ruling is a victory for lawyers on both sides of the Philadelphia case — defense attorney Burt M. Rublin of Ballard Spahr Andrews & Ingersoll for Midland Group and plaintiffs’ attorneys Stuart A. Eisenberg and Carol McCullough of McCullough & Eisenberg. In the suit, plaintiff Gary B. Hall alleged that Midland engaged in the “forced placement” of hazard insurance through agencies owned by affiliates for residential properties with mortgages serviced by Midland and then debited mortgagors’ escrow accounts for excessive and unauthorized premiums. The class consists of mortgagors for whom Midland force-placed such insurance over the past 20 years. When the lawyers in Hall submitted a proposed settlement for court approval, they were met with fierce objection from the lawyers and plaintiffs in Kirkland v. Midland Mortgage Co., a similar class action filed in the Southern District of Georgia. On appeal, attorney John C. Bell Jr. of Bell James & Bentley in Augusta, Ga., the lead plaintiffs’ attorney in the Kirkland case, argued that Waldman should have rejected the settlement because Midland had effectively chosen Eisenberg over the Georgia lawyers. Bell urged the judges to see “badges … of inadequate representation,” and said Eisenberg had agreed to the settlement before he had a clear idea of the extent of the plaintiffs’ damages. But Eisenberg argued that Bell simply couldn’t back his claim of “collusion” between Midland and the Philadelphia plaintiffs’ team since he can show that the lead plaintiff, Gary Hall, was referred to Eisenberg’s office through his mortgage broker. Eisenberg said his office also has extensive experience in handling forced-placed insurance cases. Of 15 such cases filed nationwide, he said, his firm has handled nine and Bell’s firm has handled just two. Rublin told the judges that the appeal had nothing to do with “core principles” of class action litigation, as Bell had argued. Instead, Rublin said, “the real reason we’re here today on this appeal is because Mr. Bell and his colleagues lost out on a six- or seven-figure attorney fee payout that they were hoping to get in their own class action against Midland in Georgia.” Rublin said he could “understand their frustration” upon learning that their years of work were wasted when a settlement in a far-away court “subsumed their case.” But Rublin said the Georgia lawyers were not alone and that numerous courts have approved settlements that subsume other, pending cases. The court’s task, Rublin said, is to focus only on whether the settlement is in the best interests of the class. In that respect, he said, the Hall settlement was clearly fair and reasonable because more than 37,000 class members were notified and only a handful objected. The only objections, Rublin said, were brought by “class members whose attorneys have financial self-interest in scuttling this settlement and starting all over again.” Rublin said that if the appellate court overturned the settlement, it would not benefit the class because “there will surely be several years of protracted litigation with … no assurance of victory.” Plaintiffs’ lawyers have had very little success in forced-placed insurance cases, Rublin said. “Case after case has been thrown out or has entered into settlements that are no better than the settlement here,” Rublin said. Only one such case ever went to trial, Rublin said, and the jury rejected it. In the proceedings before Waldman, the Georgia lawyers also levied an attack on Eisenberg, arguing that the court should reject him as class counsel due to a recent, lengthy disbarment, his personal bankruptcy, a $250 sanction in 1989, and his lawsuits against former clients and business associates. Waldman flatly rejected each accusation, saying none were relevant to the question of whether Eisenberg was an adequate lead lawyer on the case. Generally, Waldman found that both Eisenberg and his partner, Carol B. McCullough, “have the experience and skill ably to represent the proposed class.” Attorney Thomas W. Tucker of Tucker Everitt Long Brewton & Lanier in Augusta, Ga., charged collusion between McCullough & Eisenberg and Midland, but Waldman found that the charge “was predicated on assumptions which have been unsupported and flatly contradicted by the sworn statements of those with knowledge.” Tucker also stressed that Eisenberg was disbarred between 1990 and 1998. But Waldman found that the disbarment was “upon consent” and was brought on by an “impairment,” which Eisenberg admitted had affected his ability to function as a lawyer. “Mr. Eisenberg overcame his impairment and was reinstated to practice after an investigation by state bar authorities and upon a finding of fitness. He was not found fit to represent only certain clients in particular kinds of cases. He was found fit to practice,” Waldman wrote. “To accept that the disbarment is disqualifying is to give at most limited recognition to the reinstatement. There has been no showing of any conduct by Mr. Eisenberg in the two and a half years he has been reinstated to suggest he is not fit to conduct this litigation.” Waldman also found that the lawsuits Eisenberg filed against former clients to collect fees and against former business partners over the dissolution of their endeavors together “suggest nothing disqualifying about Mr. Eisenberg’s character.” Likewise, Waldman said, “neither does the fact he found himself in a position almost 10 years ago that resulted in personal bankruptcy.” Roth was joined on the panel by Senior U.S. Circuit Judges Judge Joseph F. Weis Jr. and Leonard I. Garth.

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