It is a generally accepted ‘best practice’ for a court considering a class action settlement to take the amount of the settlement into account when approving it. In the usual case, the size of the settlement is the only thing that the parties ask the court to conceal. Reams of paper have been spent recording the opinions of judges and other lawyers about the benefits of open settlements openly arrived at, or at least with the amount openly stated. See Goesel v. Boley Int’l (H.K.) Ltd., 738 F.3d 831, 834 (7th Cir. 2013)(Posner, J., motions judge for the Seventh Circuit in this consolidated case, citing numerous authorities including the Federal Justice Center’s publication, Sealed Settlement Agreements in Federal District Court).
In the case of Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156 (E.D. Pa. September 18, 2014), the Federal District Court was presented with Plaintiffs’ Unopposed Motion for Final Approval of Class Action Settlement, Certification of Settlement Class, Approval of Plan of Allocation, Appointment of Class Representatives, and Appointment of Lead Class and Class Counsel. The Federal District Court approved a rather large class to be bound by the class action settlement, as requested by the parties in their settlement agreement:
The Parties have proposed the following Settlement Class:
All persons who obtained residential mortgage loans originated and/or acquired by GMAC Mortgage, GMAC Bank (now known as Ally Bank), and/or their affiliates on or after January 1, 2004, with private mortgage insurance which was reinsured by Cap Re.
Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, *1 (E.D. Pa. September 18, 2014).
However, the Federal District Court entered its Order approving the class action settlement without once mentioning the amount of the settlement.
Perhaps the amounts of money actually involved in the case contain reasons why none of these amounts were mentioned when the Federal District Court approved the class action settlement in GMAC Mortgage. The settlement agreement is attached to the Plaintiffs’ Unopposed Motion for (etc.) as an exhibit. The settlement agreement reveals that the amount of the class action settlement in this case was $6,250,000.00 before deductions for awards to the named plaintiffs and for attorney’s fees and costs, among other things. Dkt. No. 272-3, ¶ 3.1, at p. 9. Download Moore v. GMAC Mort Dkt 272-3 is Settlement Agreement, Ex 1 to Dkt 272 Motion Approve S.A. (ED Pa. No. 07-4296).
The Federal District Court awarded $15,000.00 to three named plaintiffs, Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, ¶ 8 at *7 (E.D. Pa. September 18, 2014). The Federal District Court entered a separate Order in which it mentioned the settlement amount and in which the Court awarded $1,875,000.00 in attorney’s fees and $454,097.14 in costs, for a total award of fees and costs in the amount of $2,344,027.14. Dkt. No. 296, at p. 1. Download Moore v GMAC Mort Dkt 296 09.19.14 Order Attys Fees (ED Pa. No. 07-4296).
Deducting just these two amounts from the settlement amount before distribution to the class in that case– the amounts awarded to the named plaintiffs, and the amounts of attorney’s fees and costs which were awarded -- resulted in some $3,906,000 to distribute to the participating class members in accordance with a formula suggested to the Court by the parties in their settlement agreement. The formula was essentially based on the extent to which the given plaintiff’s primary mortgage was reinsured under a reinsurance policy issued by one of the main defendant’s subsidiaries which was winding up its business in dissolution. The Federal District Court approved the formula suggested by the parties. See Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, ¶ 10, at *7 (E.D. Pa. September 18, 2014).
It is unclear and perhaps unknowable how much money each plaintiff in the class might have been entitled to receive under the settlement formula used in this case. The size of the class is known, however, at least insofar as the Federal District Court recognized that the proposed class actually increased to “122,963 Members at Final Approval.” Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, *2 (E.D. Pa. September 18, 2014). [Emphasis added.]
For talking purposes, so to speak, if each participating class member were entitled to an equal share of the remaining settlement amount, then each participating class member would receive:
$31.77 apiece, rounding up.
The author is at work on a book on “Lender Force-Placed Insurance” which includes analysis of reinsurance schemes and class action settlements. The American Bar Association has scheduled it for publication this Spring.
©2015 by Dennis J. Wall. All rights reserved. No claim to Original U.S. Government Works.