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United States District Court, N.D. Illinois, Eastern Division

November 17, 2004.

MAV MIRFASIHI, on behalf of himself and all others similarly situated, Plaintiffs,

The opinion of the court was delivered by: JOAN H. LEFKOW, District Judge


This case concerning a settlement of a putative class action brought on behalf of 1.6 million persons whose mortgages were owned by Fleet Mortgage Corporation ("Fleet") is before the court following remand by the court of appeals. The court of appeals held that the district court should not have approved the settlement and remanded for further proceedings consistent with its opinion. Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781 (7th Cir. 2004).*fn1 Many of the facts are set out in that opinion and will not be repeated here. The facts stated herein are gleaned from the court of appeals' opinion, the record, and the representations of counsel in the various documents now before the court. A nationwide class, certified by way of the approval of the settlement, consisted of two groups known as "the telemarketing class" (190,000 members) and "the information-sharing class" (1.4 million members). In the settlement, the telemarketing class was to receive $2.63 million (including $243,000 representing the profit Fleet made on the challenged conduct) distributed in amounts ranging from $10 to $135, depending on the individual transactions with telemarketers who allegedly received the class members' contact and financial information from Fleet.*fn2 An additional $750,000 would compensate class counsel. The settlement provided no injunctive relief, although Fleet had (either before or after the settlement, it's not clear) sold its mortgage business to Washington Mutual and could no longer offend as alleged. For the information-sharing class, however, the settlement offered (in the court of appeals' parlance) "a big fat zero." Even the $243,000 profit, said to be derived solely from the information-sharing class, was given to the telemarketing class. The court of appeals pointed out that damages alone to a successful information-sharing class could be as high as $35 million (the basis for this statement is not explained), yet the district judge made no finding that would justify the big fat zero, i.e., that the class had "no claim large enough to justify a distribution to them." Id. at 785.

Although not mincing disparaging words for class counsel regarding the settlement, the court was stern with the district court: "Because class actions are rife with potential conflicts of interest between class counsel and class members, district judges presiding over such actions are expected to give careful scrutiny to the terms of proposed settlements in order to make sure that the class counsel are behaving as honest fiduciaries for the class as a whole." Id. It denounced the district court's failure to discuss the settlement's questionable features but at the same time stated that it was not laying down any terms for an acceptable settlement; rather, it was requiring that all the factors be actually considered in assessing the litigation value of the class claims and determining whether the settlement is a reasonable approximation of that value.

  The task at hand is to resume the litigation or send the parties back to craft a different deal. Defense counsel report in their papers that they are doing the latter at present. At the threshold, however, Michael Green and Angela Perry, the objecting parties who successfully upset the settlement, seek to intervene — not merely to present their claims but to substitute themselves as class representatives and their counsel, Adkins, Kelston & Zavez, P.C. ("AKZ"), as lead counsel — on the basis that existing class counsel have demonstrated themselves inadequate to represent the information sharing class.

  In addition to being members of the class in this case, Green is the named plaintiff in a similar class action filed in Massachusetts and Perry (a Massachusetts citizen) is a member of that class. Similar class actions were also filed in California, Maryland, Minnesota, and Wisconsin. The Minnesota and California actions settled with court approval. A global effort to settle the remaining cases included AKZ, class counsel in the Massachusetts case. Eventually, only AKZ declined to sign on to the global settlement of which this case was a part. According to plaintiff's counsel, AKZ refused to join the settlement because Massachusetts law would give the information sharing class statutory damages. Prior to the approval of the settlement, the court dismissed Perry's objections because they had not been timely served. It denied Green's motion to intervene for a variety of reasons, including that the motion coming at the time for approval of a settlement was too late, the opt-out and notice procedures were fair, and Green's interest would not be impaired by the settlement. Green's and Perry's appeal included these issues, but the opinion of the court of appeals did not address them, thus permitting the inference that the district court's discretionary rulings were not unreasonable.

  Under Rule 24(c) a person desiring to intervene must serve a motion that states the grounds therefor, accompanied by "a pleading setting forth the claim or defense for which intervention is sought." Fleet opposes the motion out of the box because the movants did not accompany their motion with a pleading. Movants have since filed a pleading, and the court will not reject the motion on this procedural ground, as Fleet has not demonstrated that the tardy filing has prejudiced it.

  Fleet further opposes the motion under principles of Rule 24(a), which concerns intervention as of right. This motion plainly does not present a case of intervention as of right because the whole notion of a class action is to facilitate the disposition of multiple claims without the necessity of joining all who have the same claims as the named plaintiff. Nevertheless, Rule 23(d)(2) permits the court "for protection of the members of the class or otherwise for the fair conduct of the action" to allow members of the class "to intervene and present claims or defenses, or otherwise to come into the action. . . ." Permissive intervention Rule 24(b) requires only that movants as class members have a claim that "has a question of law or fact in common with the complaint" pending in this court, as the movants do.

  As stated, the court's discretion is to be guided by whether intervention would serve to protect the interest of the class or otherwise promote the fair conduct of the action. As it stands, the case is still in the pleading stage, the order to answer having been vacated because of the anticipated settlement. A class has not been certified nor has a determination been made that the existing plaintiff is an adequate class representative or that putative lead counsel is suitable. The intervention question does not bear on these issues. The question of who is a proper class representative and which lawyers should represent the class is simply a question for another day.

  The court is persuaded that intervention by Green and Perry is appropriate because the interest of the putative class will be served by their participation. If a settlement is proposed, the court will be required to address all the issues raised in the court of appeals' opinion. Yet, despite the court of appeals' admonition, as a practical matter evaluation of a consumer class settlement is a nearly impossible task for a judge because there is normally no one with sufficient incentive to raise any argument or fact in opposition to the settlement, nor is the court in a position to independently investigate and analyze the economics of the proposal. For these reasons, the motion to intervene is granted.

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