The opinion of the court was delivered by: Murphy, District Judge
This matter is before the Court on a motion brought by Plaintiff Kenneth Kitson, individually and in his capacity as proposed Settlement Class Representative, requesting preliminary approval of a proposed Class Action Settlement Agreement between the Settlement Class Representative and Defendant Bank of Edwardsville (the Bank), for conditional certification of a Settlement Class, for appointment of class counsel, for designation of Kenneth Kitson as class representative, for approval of the proposed Notice to Bank of Edwardsville Commercial Loan Borrowers regarding the change in the Bank's commercial loan interest accrual practices, for approval of the proposed Notice of Proposed Class Action Settlement for mailing to Settlement Class members, and for scheduling a final fairness hearing (Doc. 42). The Bank does not oppose this motion.
In November 2002, Plaintiff Kitson filed this putative class action against the Bank in the Twentieth Judicial Circuit Court, St. Clair County, Illinois (the State Court). The State Court granted class certification on December 18, 2003, over the Bank's objection.
In August 2005, the Bank joined Harland Financial Solutions, Inc., (HFS) as a third-party defendant in the action pending in State Court. HFS is the licensor of LaserPro(r) computer software to the Bank. Kitson subsequently added a claim against HFS, and the case was removed to this federal Court. On Plaintiff's motion, the case was remanded to the State Court, and Kitson voluntarily dismissed the claim against HFS. Kitson and the Bank agreed on the terms of a proposed settlement, which the State Court preliminarily approved on June 30, 2008.
On June 4, 2008, Plaintiff Kitson was granted leave to amend the pending complaint in the State Court to re-assert previous and new claims against HFS. On July 16, 2008, HFS again removed the entire action to this Court under the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.) (CAFA). This Court subsequently denied Kitson's motion to remand, finding CAFA's local controversy exception inapplicable (see Doc. 19). On February 9, 2009, this Court granted HFS's motion for judgment on the pleadings and dismissed with prejudice all claims asserted by Kitson against HFS (see Doc. 32).
In the Second Amended Complaint, which is the operative complaint, Kitson alleges that the Bank computed interest using the 365/360 basis of interest accrual without adequate disclosure in its commercial loan documents. Kitson claims that, as a result, the Bank computed interest at a rate in excess of that stated in its commercial loan documents, thereby violating the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq.; breaching the terms of loan contracts executed by the Bank's commercial borrowers; and violating the Illinois Interest Act, 815 ILCS 205/1 et seq.
The Bank denies liability. But in its third-party claims, the Bank asserts that if it is held liable to Kitson or any member of the class he seeks to represent, such liability resulted from a deficiency in the commercial loan documents generated by the Bank using HFS's LaserPro(r) software; specifically, the language was deficient in describing the fact that interest was being accrued on a 365/360 basis. The Bank's third-party claims against HFS were referred for resolution by the State Court to an Arbitrator appointed by the American Arbitration Association (the Arbitration), where such third-party claims remain pending.
Kitson, on behalf of the Settlement Class, and the Bank have engaged in extensive discovery, with the Bank responding to hundreds of written discovery requests and producing tens of thousands of documents. Importantly, the Bank prepared summaries of the more than 11,000 commercial loans made or extended from June 1, 1998, through March 2, 2008 (the Class Period). Kitson and the Bank also have engaged in extensive settlement discussions, beginning while this case was pending in State Court and continuing to the present.
This Court already has twice denied preliminary approval of prior agreements between Kitson and the Bank to settle this action. The parties have again revised their agreement, which is attached to the motion as Exhibit A (see Doc. 42, Ex. A). Separately but concurrently, the Bank and HFS have agreed to settle the Bank's third-party claims against HFS in the Arbitration, and the Bank has agreed to contribute the entire proceeds of its settlement with HFS to the Settlement Class as additional consideration for the new proposed Class Action Settlement Agreement. Therefore, this Agreement proposes to resolve this action in its entirety.
Having carefully reviewed the proposed Settlement Agreement, Plaintiffs' Motion for Preliminary Approval of Class Action Settlement Agreement, the statements of Kitson's counsel, and the entire record in this matter, and recognizing the Court's duty to make a preliminary determination as to the reasonableness of a proposed class action settlement before making any final determination on the settlement, the Court is prepared to rule on the pending motion. The Court specifically finds that a hearing on the motion is not necessary because this Court is familiar with the case and the parties' positions, having considered two motions based on previous agreements and having held a hearing in June 2009.
II. CONDITIONAL CLASS CERTIFICATION AND APPOINTMENT OF CLASS REPRESENTATIVE AND CLASS COUNSEL
As noted above, the State Court certified a class, for litigation purposes, in December 2003. However, that was more than five years ago and pursuant to the class certification standards established by Illinois law. See 735 ILCS 5/2-801 et seq. This Court must consider the issue of class certification under Federal Rule of Civil Procedure 23. Not only has the applicable standard changed, but the parties now have agreed on a slightly broader proposed class definition for settlement purposes.
The Court conditionally finds that, within the meaning of Federal Rule of Civil Procedure 23(a), the proposed Settlement Class is so numerous that joinder of all members is impracticable; there are questions of law and fact common to the Settlement Class; the claims of the proposed Settlement Class Representative are typical of the claims of the Settlement Class; and the Settlement Class Representative will fairly and adequately protect the interests of the Settlement Class. Further, the Court conditionally finds that certification of this case as a class action for settlement purposes is appropriate under Federal Rule of Civil Procedure 23(b)(3). These conditional findings are without prejudice to the parties taking contrary positions if the ...