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07/10/97 DAUPHIN DEPOSIT BANK AND TRUST COMPANY v.

July 10, 1997

DAUPHIN DEPOSIT BANK AND TRUST COMPANY, APPELLANT
v.
RALPH W. HESS, JOAN B. PATTISON, AND JARED L. HOCK, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATE, APPELLEES



Appeal from the Order of the Court of Common Pleas of Cumberland County, Civil Division at No. 907 CIVIL 1994. Before HESS, J.

Appeal from the Order Entered July 11, 1996, In the Court of Common Pleas of Cumberland County, Civil Division at No. 907 CIVIL 1994. Before HESS, J.

Before: Cirillo, P.j.e., Popovich and Hester, JJ. Opinion BY Popovich, J. Hester, J. files a Dissenting Statement.

The opinion of the court was delivered by: Popovich

OPINION BY POPOVICH, J.:

Filed July 10, 1997 We reverse the order of the Court of Common Pleas of Cumberland County refusing to approve the settlement of a class action suit.

The record discloses that Dauphin Deposit Bank and Trust Company (hereinafter the "Bank") filed a complaint seeking a declaratory judgment to terminate approximately 4,300 individual retirement accounts (hereinafter "IRA") opened between January 1, 1982, and June 30, 1984, and the proposed certification of a defense class represented by Ralph W. Hess, Joan B. Pattison and Jered L. Hock. Once the court certified the class, extensive discovery occurred and included requests for the production of documents, interrogatories and approximately one hundred and thirty depositions.

Thereafter, both sides moved for summary judgment on the Bank's request for declaratory relief. After briefing and argument, the trial court denied the motions and a bench trial commenced on April 1, 1996, and continued until April 4, 1996. The court suspended the trial indefinitely on April 10, 1996, to allow the parties to pursue a settlement. After extensive negotiations, the parties moved for settlement on May 13, 1996. A notice was sent to the entire class outlining the proposed offer to resolve the case.

The proposed settlement divided those class members, who chose not to opt out of the settlement, into two subclasses. For both classes, the eighteen-month variable rate account of each class member would be closed and the balance deposited in a certificate of deposit. So-called "class A" members would be given the option of a "ten for ten" certificate of deposit or a 9.35% APY fixed rate, ten-year certificate. Class B members would receive a "premium interest, ten-year certificate of deposit" with an annual percentage yield of not less than seven percent.

In order to qualify as a class A member, the notice of settlement required that the class member submit an affidavit, postmarked no later than June 15, 1996, setting forth the verbal or written evidence upon which the member claims to have been advised or led to believe [by Bank personnel] that the eighteen-month variable rate account could not be unilaterally terminated or discontinued by the Bank. A failure to file the affidavit by June 15th or to opt out of the settlement by the same date resulted in the person automatically being placed in class B.

In addition, class members were given written notice that there would be a hearing on June 21, 1996. The notice further provided that if a member objected to the proposed settlement and desired to make that objection known to the court, it was incumbent upon that person to file objections in writing with the Prothonotary's Office on or before June 15, 1996. The filing of objections would not have the effect of excluding a member from the class but even objectors would be bound by the settlement if it were eventually approved by the court. The notice prominently notified the class members that if they elected to be excluded from the settlement they would not be bound by its terms or, by the same token, receive any of the benefits of it. Those to be excluded from the class were warned that any subsequent action between them and the Bank would entail individual responsibility for costs of litigation [which had been paid by the Bank until then] including, but not limited to attorney's fees.

Trial Court Opinion, 7/11/96, at 2-3.

The court conducted a hearing on June 21, 1996, at which eighty-nine formal objections were filed and a lesser number of individuals elected to opt out of settlement. Thereafter, even though counsel for the Bank and the class moved for settlement, the court rejected the plan on the basis that: 1) the process was "not sound" in that the class had to make decisions prior to knowing whether the court would approve the settlement; 2) the objections raised were of sufficient "quality" to reject settlement; 3) the objectors' probability of success, if the case were tried to Conclusion, was "a reasonable one"; and 4) the creation of a defense class at the request of the Bank to secure a favorable financial ruling or dispense with a trial to approve settlement in the name of expediency denies "a day in court to the account holders".

The present appeal ensued and claims, in essence, that the trial court abused its discretion in rejecting settlement. Bryan v. Pittsburgh Plate Glass, 494 F.2d 799 (3d Cir. 1974). Under Pennsylvania law, an appellate court will find an abuse of discretion if the record shows that, "the law has been overridden or misapplied, or that the judgment exercised by the Court was manifestly unreasonable or motivated by partiality, prejudice, bias or ill-will . . .." Rosenberg v. Silver, 374 Pa. 74, 97 A.2d 92, 94 (1953).

Additionally, in assessing the merits of the appellant's claim, we look to various criteria employed by the courts in evaluating the ...


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