For Your Information
Announced Action
for March 17, 2004
Commission authorization of amicus
brief filing: The Commission
has authorized the staff to file a motion for leave to file
an amicus brief in Schneider v. Citicorp Mortgage,
Inc., No. CV-97-837 (E.D. N.Y.). The case involves
allegations that Citicorp Mortgage Inc., now known as CitiMortgage,
Inc. (CMI), and Citicorp violated the Real Estate Settlement
Procedures Act (RESPA) and state consumer protection statutes
in connection with their payment of yield spread premiums
(YSPs) to mortgage brokers. The brief raises concerns about
whether the settlement class satisfies legal requirements,
whether there is actual value in the coupons class members
would receive, and whether the payment of up to $659,500 in
fees and costs to the class counsel is justified.
The brief suggests that this settlement
class may not satisfy the prerequisites of Rule 23, which
requires that, among other things, there are questions of
law or fact common to the class and that these common issues
predominate over issues unique to each class member’s
claim. In addition, the brief contends that, if the court
values the plaintiffs’ claims at greater than nuisance
value, the proposed settlement is far from adequate. The settlement
provides for coupons worth $100 against the cost of obtaining
a new first mortgage directly from CMI through its telesales
channel. The coupon must be used within two years and cannot
be redeemed in conjunction with any other offer or promotion.
Class members may only redeem one coupon in connection with
any single loan. The coupons are not transferrable at public
sale or auction. The Commission’s brief contends that
it is highly unlikely that the face value of the coupons,
$7.7 million, represents their actual value, since it is highly
unlikely most class members will use them in light of their
low value and limitations.
The brief argues that, if the court finds
that plaintiffs’ class claims are indeed valued at near
zero, it must then determine whether the payment to class
counsel of up to $659,500 in fees and costs is reasonable
in light of the recovery they obtained on behalf of the class.
The brief contends that counsels’ anticipated fee request
seems excessive if the value of the coupon settlement benefits
is likely far less than its face value. Finally, the brief
suggests ways of improving the proposed settlement with the
class members, if the court finds that the plaintiffs have
claims sufficient to justify a distribution to them.
The Commission vote authorizing the staff
to file the amicus brief was 5-0, with Commissioner Pamela
Jones Harbour concurring in part and dissenting in part, and
issuing a separate statement. Chairman Timothy J. Muris and
Commissioners Orson Swindle and Thomas B. Leary issued a separate
joint statement. Commissioner Mozelle W. Thompson issued a
separate statement. All statements are available on the FTC’s
Web site.
In her statement, Commissioner Harbour
said: “Today the Commission has voted to file a brief
amicus curiae in a consumer class action lawsuit pending in
a United States district court. One purpose of the Commission’s
brief is to critique the proposed settlement coupon, which
the Commission believes is of negligible value to the class,
and I concur with that portion of the Commission’s brief.
The Commission advises the court and the litigants that the
settlement is not fair, adequate or reasonable from the perspective
of the class members, and therefore should not be approved.”
“Were that substantially all
the brief had to say, I gladly would vote to file it, without
dissenting in part. I take issue, however, with the Commission’s
decision to opine on the ‘highly fact-based, difficult
and complex’ issues of class certification and attorneys’
fees. Under these circumstances, offering these other opinions
weakens the strength of the Commission’s legitimate
advocacy on the objective merits of this proposed settlement.
Therefore, I dissent in part from the Commission’s decision
to file the brief.”
In their separate statement, Chairman Muris
and Commissioners Swindle and Leary responded to Commissioner
Harbour’s statement. “Lawyers who, in exchange
for a contingent fee, labor mightily to produce a reward for
consumers should certainly receive a fair share of what they
have produced,” the statement said. “If the court
agrees that the result for consumers is largely valueless,
however, then the result for the attorneys who produced it
should be largely valueless as well. In this settlement, the
clients get largely valueless coupons, but the lawyers get
cold, hard cash.”
“Attorneys should not be the
only parties who benefit from a class action settlement,”
their statement concluded, “and consumers ultimately
are harmed when attorneys have an incentive to pursue settlements
of this kind.”
In his separate statement, Commissioner
Thompson said, “I agree with Commissioner Harbour that
it is ultimately within the Court’s discretion to determine
whether the settlement is fair to consumers. But the Commission’s
substantial experience with consumer redress settlements can
assist the Court in this regard. The Court will also be able
to determine whether plaintiff’s contingency fee petition
should be approved. To the extent the settlement provides
little or no value to consumers, I believe the attorneys’
fees should be adjusted accordingly.” (FTC File No.
P044210; staff contact is Robert M. Frisby, Bureau of Consumer
Protection, 202-326-2098.)
Copies
of the documents mentioned in this release are available from
the FTC’s Web site at http://www.ftc.gov
and also from the FTC’s Consumer Response Center, Room
130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.
Call toll-free: 1-877-FTC-HELP.
MEDIA CONTACT:
Office of Public Affairs
202-326-2180
(http://www.ftc.gov/opa/2004/03/fyi0419.htm)
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Related Documents:
Allen and Sharon Schneider v. Citicorp
Mortgage, Inc. and Citicorp, CV 97-837 (NG)(CLP) (Eastern
District of New York)
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