A federal judge has given final certification to a $23.5 million class settlement with HSBC in a case in which the plaintiffs alleged that the bank acted deceptively in administering its “debt cancellation” and “debt suspension” plans.
Over the objections from three states’ attorneys general, U.S. District Senior Judge Berle Schiller of the Eastern District of Pennsylvania approved the settlement, finding nearly all of the factors that courts are required to consider weighed in favor of the settlement. The attorneys general for Hawaii, Mississippi and West Virginia aren’t members of the class, so they don’t have standing to object, Schiller said.
He explained in a footnote, “Because they are not class members, the AGs may continue to bring claims belonging to their respective states, such as state criminal and regulatory actions.” However, Schiller specified that members of this class settlement won’t be able to “double recover” on state actions.
Richard Golomb, of the Philadelphia class-action law firm of Golomb & Honik, represented the plaintiffs in the Eastern District case, Esslinger v. HSBC, and said of the objections from the attorneys general, “It’s the first time this has ever occurred.” This settlement agreement applied to six cases, including ones in California, Washington, New Jersey and two in different districts of Illinois.
The states were reasonably taking a “belt and suspenders” approach, Golomb said, explaining that they wanted to make sure that their state claims could survive.
Schiller’s reasoning in answering the objections was sound, both legally and equitably, Golomb said.
According to the opinion, 12 members of the class, which includes over 16 million people, objected to the settlement. Schiller wasn’t convinced that they raised valid reasons for rejecting the settlement.
“The most common complaint was that the settlement amount was insufficient to compensate the individual objector for his or her estimated losses,” Schiller said. “While the court is sympathetic to the objectors’ individual experiences, a settlement is, by its nature, a compromise.
“Considering the legal and factual obstacles that plaintiffs must surmount to prove their claims, the class members face a serious risk of recovering nothing without the settlement. Likewise, the fact that the objectors represent a fraction of 1 percent of the overall class strongly favors settlement.”
Most members of the class will get between $15 and $60. Anyone who was enrolled in HSBC’s “debt cancellation” or “debt suspension” programs, which would suspend or eliminate his or her credit card payments if he or she were to lose his or her job or become temporarily disabled for a monthly fee that was usually less than $200 between July 2, 2004, and February 22, 2012, can be part of the class, according to the opinion.
Schiller found that all but one of the factors in each of the two tests he applied weighed toward approving the settlement.
He first discussed the nine Girsh factors, from the U.S. Court of Appeals for the Third Circuit’s 1975 opinion in Girsh v. Jepson, and then, briefly, the Prudential factors, from the Third Circuit’s 1998 opinion in In re Prudential Insurance.
“All of the Girsh and Prudential factors are neutral or weigh in favor of settlement, with the exception of whether defendants could withstand a greater judgment,” Schiller said. “This court believes that the settlement represents a fair compromise between two parties seeking to end litigation whose outcome is murky and uncertain.”
Because HSBC is a multinational bank operating in more than 88 countries, it could probably survive a larger judgment, Schiller said. However, that’s the only factor that he found against the approval of the settlement.
Notably, no formal discovery had yet taken place, although there had been cooperation between the parties with HSBC giving thousands of pages of documentation to the class’s counsel.
Schiller awarded 30 percent of the settlement amount as attorney fees, which nearly met the class counsel’s request of $7.7 million. The percentage-of-recovery method that Schiller chose to determine the amount of attorney fees netted them $7.1 million. He also awarded them costs of about $101,000.
Nearly all 10 of the Third Circuit’s factors for weighing the suitability of attorney fees weighed in favor of 30 percent of the settlement, Schiller found, with only the final factor, considering how innovative the terms of the agreement were, weighing in as neutral.
“The court finds that a 30 [percent] fee, a reduction from class counsel’s requested percentage of approximately 33 [percent], is a fair recovery considering the size of the fund and number of beneficiaries,” Schiller said, citing an opinion from his court earlier this month in In re Processed Egg Products Antitrust Litigation, which had approved a 30 percent attorney fee award on a $25 million settlement.
Andrew Stutzman of Stradley Ronon Stevens & Young in Philadelphia represented HSBC and couldn’t be reached for comment.
(Copies of the 30-page opinion in Esslinger v. HSBC, PICS No. 12-2207, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •