The opinion of the court was delivered by: BRODERICK
Michael E. Weisberg and three other individual plaintiffs brought this action individually and on behalf of a class of the buyers of three hundred thirty-four residential homes in Bucks, Chester, Montgomery and Philadelphia Counties, who settled on the purchase of their homes from one of the seventeen named defendants (builders of residential dwellings) between October 6, 1983 and November 19, 1984. The complaint alleges that the defendants violated the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. (RESPA), by requiring the plaintiff class members to purchase title insurance from the title insurance companies selected by the defendant builders. The plaintiffs alleged that the defendants imposed this requirement as a condition of the sale of the defendants' residential dwellings, in violation of 12 U.S.C. § 2608(a), which provides:
No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.
The class consists of all persons who (a) from on or after October 6, 1983 until November 19, 1984 settled on the purchase of a residential dwelling from any of the defendants; (b) purchased such dwelling with the assistance of a "federally-related mortgage loan," as defined by RESPA; (c) obtained title insurance from a title company selected by defendants pursuant to authorization contained in the Agreement of Sale; and (d) paid their own title insurance charges. Prior to class certification pursuant to Fed. R. Civ. P. 23(c), the parties reached a settlement. On June 27, 1985 a hearing was held on plaintiffs' motion to approve the proposed settlement pursuant to Fed. R. Civ. P. 23(e) following due notice to the members of the proposed settlement class. No class member filed any objection to the settlement, and no class member raised objections at the hearing. Although one class member wrote to the Clerk of Court requesting exclusion from the class, upon being informed that he would receive about $585 under the terms of the settlement he authorized counsel to "rescind" his request for exclusion.
For the reasons that follow the Court has determined that the proposed class settlement is fair, adequate, and reasonable, and accordingly the proposed settlement agreement will be approved pursuant to Fed. R. Civ. P. 23(e). The Court also has reviewed counsel's petition for an attorney's fee pursuant to the standards set forth by the Third Circuit in Lindy Bros. Bldrs. Inc. of Phila. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973), and has determined that the petition of Ronald Smolow, Esquire for attorney's fees and costs in the amount of $84,197.70 will be granted.
Approval of the Proposed Settlement
The proposed settlement agreement provides that the plaintiff class will receive a total of $265,000, payable by the defendants in two equal installments. Upon distribution, each class member will receive an award equivalent to approximately 105% of the amount actually paid for title insurance at the time of the closing. The amounts due the individual class members range from about $513 to about $1,390. In addition to the amount of the settlement, the defendants have agreed to modify their standard Agreement of Sale so as to comply with the provisions of RESPA with respect to the purchase of title insurance. It should be noted that, as counsel for plaintiffs advised the Court at the settlement hearing, the class members suffered no actual damages as a result of the alleged violation of the statute. Even if the class members had selected their own title insurance companies, they would have paid approximately the same premium for their title insurance as was charged by the title insurance companies selected by the defendants.
The approval or disapproval of a class action settlement is left to the sound discretion of the trial court, which must determine whether the proposed settlement is fair, adequate, and reasonable. Walsh v. Great Atlantic & Pacific Tea Co., 726 F.2d 956 (3d Cir 1983). The Third Circuit has identified a number of factors as relevant to this determination:
. . . (1) the complexity, expense and likely duration of the litigation . . .; (2) the reaction of the class to the settlement . . .; (3) the stage of the proceedings and the amount of discovery completed . . .; (4) the risks of establishing liability . . .; (5) the risks of establishing damages . . .; (6) the risks of maintaining the class action through the trial . . .; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery . . .; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation . . . .
Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975) (quoting City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974)).
After consideration of the factors set forth in Girsh, the Court finds that the proposed settlement agreement in this case is fair, adequate, and reasonable. First, it is clear that further litigation in this case would present issues which would be costly to resolve and which could result in protracted proceedings. The case involves a claim brought under a seldom-litigated statute, and it appears that it is the first class action brought under the provisions of RESPA. The defendants could oppose class-wide relief on a number of unsettled grounds, e.g., that proof must be established that the defendants applied the allegedly unlawful practice to all members of the class as a "policy or custom"; that each class member would have to establish that he or she requested and was refused the opportunity to choose their own insurance company; and that the fact that the class members suffered no actual damages should as a matter of law, preclude the use of the class action device as a means of redressing a "technical violation" of the statute. See Shroder v. Suburban Coastal Corp., 729 F.2d 1371 (11th Cir. 1984) (class action inappropriate under Truth-In-Lending Act where class members suffered no actual damages and violations of the Act were "technical" and had been corrected by defendants).
Furthermore, the expense of litigating the class issues alone, given the number of class members, defendants, and the costs of discovery on those issues, would be substantial, particularly with respect to proof of plaintiffs' claim that each of the seventeen defendant corporate entities was in fact controlled by defendant Toll Brothers. Finally, it appears that the defendants would have asserted several novel defenses to the merits of plaintiffs' claims, e.g., that certain "builder-bond" transactions used to finance the purchase of the residences were not, as a matter of law, "federally-related mortgage loans" within the purview of RESPA. See 12 U.S.C. § 2602(1); 24 C.R.F. § 3500.5(b). The novelty of the legal ...