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Waters v. City of Chicago

OPINION FILED DECEMBER 14, 1982.

EFFIE WATERS ET AL., PLAINTIFFS-APPELLEES,

v.

THE CITY OF CHICAGO, ET AL., DEFENDANTS. — (AMELIA ANDREJEWSKI ET AL., PLAINTIFFS,

v.

THE CITY OF CHICAGO, ET AL., DEFENDANTS. — DOROTHY EPSTEIN ET AL., OBJECTORS-APPELLANTS.)



Appeal from the Circuit Court of Cook County; the Hon. Reginald J. Holzer, Judge, presiding.

PRESIDING JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:

Rehearing denied January 11, 1983.

A plaintiff class comprised of all tort judgment creditors of defendant city of Chicago who hold judgments that were entered prior to November 16, 1979, and who had not assigned their judgments as of that date, brought an action seeking relief from the city's practice of postponing the payment of tort judgments of over $1,000 for an extended period of time. A settlement of the action was approved by the trial court on October 20, 1981. A group of class members who filed objections to the settlement in the trial court appeals, contending that: (1) the notice to the class of the proposed settlement was defective; (2) the award of fees to the class attorneys was an abuse of the trial court's discretion; and (3) the trial court erred in denying the objector's motion to intervene and in dismissing a separate complaint brought by certain objectors.

This is the third time that this matter has been before this court. In 1975, plaintiff John Nebel filed a class action which sought relief from the city's practice of postponing the payment of tort judgments of over $1,000 for extended periods of time. The trial court dismissed the complaint, and we reversed. (Nebel v. City of Chicago (1977), 53 Ill. App.3d 890, 369 N.E.2d 74.) On remand, the action was consolidated with plaintiff Effie Waters' similar class action. The trial court approved a settlement of the cause over the objections of several class members and objectors appealed. In Waters v. City of Chicago (1981), 95 Ill. App.3d 919, 420 N.E.2d 599, we vacated the settlement agreement, holding that the assessment of 1.3% of all judgments held by class members for payment of attorney and trustee fees was unfair to those class members who held judgments for less than $1,000. Those plaintiffs received no benefit from the acceleration of payments which resulted from the settlement because the city's policy prior to the agreement had been to pay judgments of $1,000 or less as soon as possible after they were presented for payment, and payment of those judgments would usually be made in the same fiscal year as the entry of the judgment. Holders of larger judgments had had to wait up to 52 months to obtain payment of their judgments. We also expressed doubts as to the fairness of the settlement as it applied to holders of judgments which were nearly 52 months old, since the holders of those judgments were informed of their right to opt out of the class, and given instructions on how to do so, but were not informed of the consequences attaching to a decision to opt out of or remain included in the class. We regarded this deficiency of notice as significant because holders of older judgments would have been paid just as quickly in the normal course of payment, and the priority of payment given to class members under the settlement would have given them no benefit in return for the deduction of 1.3% of their judgments for payment of attorney fees. (95 Ill. App.3d 919, 925 n. 5.) We also stated that the trial court made insufficient findings of fact in its award of $100,000 in fees to both of the class attorneys in that the court failed to give careful scrutiny to the hourly fee requests of the attorneys and made no findings of fact to justify the application of a multiplier to those hourly totals. 95 Ill. App.3d 919, 926-27.

Shortly after this court's mandate was filed, proceedings were instituted in the trial court to gain that court's approval of a modified settlement of this case. The modified settlement was in essentially the same form as the vacated settlement. The class was defined as "all unpaid tort judgment creditors as of November 16, 1979, of the defendant, City of Chicago, but the class shall exclude all persons who have sold or assigned their judgments as of November 16, 1979." The proposed settlement also provided that no deductions for attorney or trustee fees would be assessed from judgments for less than $1,000.

On July 13, 1981, the trial court approved a notice to the class of the hearing on the modified settlement. This notice detailed the settlement and contained instructions on filing objections. The notice did not inform the class members of their right to opt out of the class.

On July 20, 1981, the court granted the city's motion to dismiss the complaint of Amelia Andrejewski. That complaint was filed as a class action on behalf of members of the Waters class who had been paid their judgments less a 1.3% deduction for fees pursuant to the vacated settlement. The complaint sought a refund of the deductions.

In August 1981, the court received objections to the settlement from objectors here, and supplemental petitions for fees were filed by the plaintiff's attorneys.

On October 20, 1981, the trial court entered its order approving the modified settlement. In that order the court recited findings of fact on the issue of attorney fees, approving hourly fee requests, or lodestar figures, of $53,700 for attorney Byron Knight and $57,200 for attorney Larry Drury. The court applied multipliers of 1.87 to the former figure and 1.75 to the latter. The total awards approved by the court were $100,419 to attorney Knight and $100,100 to attorney Drury. The city was ordered to continue deducting 1.3% from all judgments over $1,000 payable to class members. That money was to be held in a settlement fund for the payment of attorney and trustee fees.

Objectors appeal from that order. During the pendency of this appeal, trustee Sheldon Garber's seventh report was filed as a supplement to the record. That report indicates that at this time, all class members have been paid their judgments less deductions, and that virtually all those judgment creditors who opted out of the class have been paid the full amount of their judgments.

• 1 The threshold question in this case is whether, as plaintiffs contend, this case is moot because of the fact that all class members have received payment of their judgments. This question is easily answered because the issue in this case has never been the right of the class members to receive payment of their judgments, but rather the propriety of the terms of the settlement and the notice of settlement to the class. The class members have had 1.3% of their judgments deducted for the payment of attorney fees, and objectors contest the propriety of the settlement embodying that deduction. Therefore, a contention that all actual controversy between the parties has been resolved is meritless.

Objectors' first contention on appeal is that the notice to the class of the proposed settlement was defective, and the settlement was therefore unfair, because class members were not apprised of the possible benefits to them that might result from opting out of the class.

In Waters, we held that the original settlement was unfair to class members holding judgments for $1,000 or less because the settlement did not benefit them and the notice failed to inform them that they would receive no benefit from remaining in the class. With regard to the notice, we stated that:

"This defect of notice also raises questions concerning the fairness of the settlement to absent class members holding judgments greater than $1000. While the notice adequately informed class members of their right to opt out, and provided clear instructions on the method of opting out, the notice did not reveal the consequences of opting out, and thus necessarily failed to give class members a basis for evaluating their two options. Even though the settlement gave most class members a quid pro quo (accelerated satisfaction in return for a 1.3% reduction), fairness might dictate that a class member's decision to remain in the class be a fully informed one. In particular, creditors whose judgments were already 52 months old in February 1980 had no ...


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