Opinion ID: 177521
Heading Depth: 1
Heading Rank: 10

Heading: The Fairness of the Settlement

Text: The Settling Parties argue that, even if the [D]istrict [C]ourt's analysis about the viability of the posited TILA/HOEPA claims were flawed ..., the Modified Settlement still should be approved, given that it fairly compensates Class members for those hypothetical claims. (Settling Parties' Br. at 161.) We disagree, as there is no harmless error doctrine that applies to cure a class representative's inadequacy in light of what may appear to be a fair settlement. As the Supreme Court has recognized, [w]here differences among members of a class are such that subclasses must be established, we know of no authority that permits a court to approve a settlement without creating subclasses on the basis of consents by members of a unitary class, some of whom happen to be members of the distinct subgroups. The class representatives may well have thought that the Settlement serves the aggregate interests of the entire class. But the adversity among subgroups requires that the members of each subgroup cannot be bound to a settlement except by consents given by those who understand that their role is to represent solely the members of their respective subgroups. Amchem, 521 U.S. at 627, 117 S.Ct. 2231 (quoting In re Joint E. and S. Dist. Asbestos Litig., 982 F.2d 721, 742-43 (2d Cir. 1992)). Indeed, the determination whether `proposed classes are sufficiently cohesive to warrant adjudication' must focus on `questions that preexist any settlement.' Ortiz, 527 U.S. at 858, 119 S.Ct. 2295 (quoting Amchem, 521 U.S. at 622-23, 117 S.Ct. 2231); see also General Motors, 55 F.3d at 795 ([T]he inquiry into the settlement's fairness cannot conceptually replace the inquiry into the propriety of class certification.). Accordingly, because the settlement appears to lack structural assurance of fair and adequate representation for the diverse groups and individuals affected, Amchem, 521 U.S. at 627, 117 S.Ct. 2231, we again decline to address definitively the substantive fairness of the settlement. [32] Community Bank I, 418 F.3d at 318. However, nothing we have said should be interpreted as concluding that the total compensation provided in Modified Settlement could not be approved as fair, adequate, or reasonable. In particular, we are troubled by the Objectors' apparent belief that any settlement that does not fully account for (1) trebled damages under RESPA, and (2) the full measure of statutory (in addition to actual) damages under TILA and HOEPA, is hopelessly inadequate, unfair, and unreasonable. [33] Contrary to the Objectors' contentions, we know of no authority that requires a district court to assess the fairness of a settlement in light of the potential for trebled damages. Compare Suffolk Cty. v. Long Island Lighting, 907 F.2d 1295, 1324 (2d Cir.1990) ([I]t is inappropriate to measure the adequacy of a settlement amount by comparing it to a possible trebled base recovery figure.), with Rodriguez v. West Publishing Corp., 563 F.3d 948, 964-65 (9th Cir.2009) (We have never precluded courts from comparing the settlement amount to both single and treble damages. By the same token, we do not require them to do so in all cases.). In any event, the District Courthaving determined that the TILA/HOEPA claims were not viable because they were timebarrednever addressed the fairness of the settlement in light of the potential statutory damages available under TILA and HOEPA, and we do not do so in the first instance. We point out, however, that the Objectors' contentions that the statutory damages available in a TILA/HOEPA class action are automatic, and that there is no judicial discretion involved in the award to be made to the Class Members, are simply incorrect. (Objectors' Br., No. 08-3621, at 91.) The statute makes clear that, although there is no cap on claims for statutory damages in a class action asserting violations of the disclosure requirements for loans subject to HOEPA, see supra at 283 n. 9, a district court nonetheless has discretionafter considering several specifically stated factorsin determining the amount of the award to the class. See 15 U.S.C. § 1640(a) (In determining the amount of award in any class action, the court shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of compliance by the creditor, the resources of the creditor, the number of persons adversely affected, and the extent to which the creditor's failure of compliance was intentional. (emphasis added)).