Opinion ID: 3015339
Heading Depth: 2
Heading Rank: 3

Heading: Consolidation of the Class Actions

Text: On July 11, 2003, and prior to any discovery, the named plaintiffs in all six actions, together with defendants CBNV, GNBT and RFC, filed a joint motion for preliminary approval of a proposed nationwide class action settlement. Under the terms of the settlement, the maximum total payout to the approximately 44,000 member plaintiff class was $33 million, and the agreed-upon attorney fees were $8.1 million. The settlement payouts ranged from $250 to $925 per borrower depending on the borrower’s residence and the date on which the loan was entered. In exchange, the borrowers were to release any and all state or federal claims that they might have relating to their second mortgage loan, including the right to use a violation of federal or state law as a defense to foreclosure or any other action. See, e.g.,15 U.S.C. § 1641(d)(1); 815 Ill. Comp. Stat. § 205/6; Kan. Stat. Ann. § 16a-5-202. The proposed settlement states that if more that .5% of the class members opt out of the settlement class, the settling defendants may terminate 10 the settlement.2 On July 17, 2003, less than a week after the motion was filed seeking approval of the settlement, the District Court, in an Order that in all material respects was a verbatim copy of the proposed Order offered by the settling parties in their July 11, 2003 joint motion, preliminarily approved the proposed settlement and consolidated all six actions listed above into the Kessler action. The case was thus consolidated at No. 03-cv00425. The plaintiff class was “conditionally certified” for settlement purposes only. The Order defined the class as: all persons . . . who (a) entered into a loan agreement with Community Bank of Northern Virginia . . . and/or Guaranty National Bank of Tallahassee . . .; (b) whose loan was secured by a second mortgage or deed of trust on property located in the United States; (c) whose loan was purchased by Residential Funding Corporation . . . and, (d) who [were] not . . . member[s] of the class certified in the action captioned Baxter v. Guaranty National Bank, et al., Case No 01-CVS-009168, in the General Court of Justice, Superior Court Division of Wake County, North Carolina. JA at 132. Significantly, before issuing the July 17, 2003 Order, the District Court did not analyze whether the proposed class satisfied the prerequisites for a class action set forth in Fed. R. Civ. P. 23 (a), (b)(3), or (c)(2), as the Court explicitly reserved such analysis for a settlement hearing to be held on November 2 Plaintiffs also agreed to dismiss Terry v. CBNV, 02-2534 GV (W.D. Tenn.), and Caton v. CBNV, CV 02 479286 (Court of Common Pleas Cuyahogo County, Ohio), two cases alleging the same fraudulent lending scheme as the current action. Plaintiffs in Terry and Caton were represented by the same counsel as plaintiffs in the consolidated action. 11 14, 2003. The July 17, 2003 Order also provided for the mailing and publication of the class notice. The class notice directed by the District Court was verbatim the proposed class notice offered by the settling parties; it described the action as: A group of CBNV and GNB[T] borrowers, who are referred to as the “Named Plaintiffs” in this Notice, claim in the Litigation that CBNV and GNB[T] violated certain federal and state laws in connection with the fees and interest charged on second mortgage loans. These claims are asserted against the Defendants CBNV, GNB[T] and RFC. JA 137. The notice also provided that all opt-outs must be received by the Settlement Administrator by October 1, 2003. Finally, class members were specifically instructed that they may discuss the settlement with their own attorneys.