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Edward T. Esslinger, et al v. Hsbc Bank Nevada

November 19, 2012


The opinion of the court was delivered by: Schiller, J.


The parties in this nationwide class action involving individuals who enrolled in debt cancellation and debt suspension products offered by HSBC entities have resolved their dispute. On February 22, 2012, the Court granted preliminary approval of the settlement. Following a fairness hearing on October 1, 2012, the parties now seek final certification of the Class, approval of the settlement, attorneys' fees, and incentive awards. For the following reasons, the Court certifies the Class, approves the settlement, grants incentive awards, and awards attorneys' fees and costs to Class counsel as laid out below.


A. Facts

Defendants offer debt cancellation and debt suspension products (hereafter "Plan" or "Plans"). Defendants market these Plans as services that, under specific circumstances such as unemployment or temporary disability, suspend or cancel the required minimum monthly payments due on the credit card accounts associated with the Plans and excuse the cardholders from paying the monthly interest charges and Plans' fees for a limited period of time. (Second Am. Compl. ¶¶ 4, 43.) The cost of a Plan is a monthly fee of $1.35 for every $100 of a cardholder's month-ending credit card balance. (Id. ¶ 55.) On average, cardholders paid less than $200 for the Plans. (Mem. of Law in Supp. of Mot. for Final Approval of Class Action Settlement and Plan of Allocation [Mem. in Supp.] at 17.)

Plaintiffs argue that Defendants illegally: (1) enrolled cardholders in Plans without their consent; (2) offered and marketed the Plans in a deceptive and unfair manner; and (3) administered claims under the Plans in a deceptive and unfair manner. (Second Am. Compl. ¶ 3.) The Second Amended Complaint outlines ten causes of action, including: breach of contract and fraudulent inducement; unconscionability; violations of the Truth in Lending Act; violations of various state deceptive trade practices statutes; common law fraud; and unjust enrichment. (Id. ¶¶ 184-259.)

B. Procedural History

On July 2, 2010, Plaintiffs filed a class-action complaint against HSBC Bank USA Inc. and HSBC Card Services, Inc. Plaintiffs filed a First Amended Class Action Complaint on September 16, 2010. On January 27, 2012, Plaintiffs filed a Second Amended Complaint, adding additional parties, including HSBC Finance Corporation (all relevant HSBC-related entities are collectively referred to hereafter as "HSBC").

Defendants HSBC Bank Nevada, N.A. and HSBC Card Services, Inc. filed a motion to dismiss on November 19, 2010. However, before the motion was fully briefed, the Court suspended the case to allow the parties to participate in settlement efforts. The parties filed a Notice of Settlement in July 2011. On January 27, 2012, Plaintiffs submitted a Motion for Preliminary Approval of Class Action Settlement. On February 22, 2012, following a preliminary approval hearing, the Court issued an order conditionally certifying the settlement class, preliminarily approving the class action settlement, and approving the notice plan. On October 1, 2012, the Court conducted a final approval hearing.

C. Settlement Agreement

In the Settlement Agreement, the parties agree to settle six class actions filed against HSBC in 2010 and 2011 relating to the Plans.*fn1 The Settlement Agreement defines the Class as "All persons in the United States who were enrolled in or billed for HSBC debt cancellation and debt suspension products . . . between July 2, 2004 and" the date of preliminary approval of the settlement, February 22, 2012. (Pls.' Mot. for Prelim. Approval of Class Action Settlement and Mem. of Law in Supp. of Mot. [Mot. for Prelim. Approval] Attach. [Settlement Agreement] at 6.)

Pursuant to the terms of the Settlement Agreement, HSBC agrees to pay $23.5 million, which will be used to pay settlement costs and claims by Class members. (Id. at 10.) A Class member who has not previously received a full refund or benefits, who enrolled in a Plan for twelve months or less, and who affirms that he was enrolled without his consent, may claim a settlement award of $30. (Id. at 11.) A Class member who submitted a claim for benefits under a Plan but believes that his claim was improperly denied may claim a settlement award of $60. (Id.) All other Class members who did not previously receive refunds and who affirm that they are dissatisfied with any aspect of a Plan may claim a settlement award of $15. (Id.) In the event that the Class member awards exceed or are less than the balance remaining in the settlement fund, the award amounts will be reduced or increased on a pro rata basis. (Id. at 12.) However, no Class member will receive more than $150. (Id.) Any amount remaining after payment of settlement costs and claims will be distributed as a cy pres award to charities mutually agreed upon by the settling parties and approved by the Court. (Id.)

As a condition of the settlement, the Class members agree to release HSBC from "any and all rights, duties, [and] obligations . . . that arise out of, relate to, or are in connection with any HSBC Payment Protection product . . . or that arise out of or relate in any way to the administration of the Settlement." (Id. at 16-17.)


A. Numerosity, Commonality, Typicality, Adequacy of Representation

Although this Court granted preliminary approval of the Settlement Agreement, there must still be a final determination as to whether to certify the class and grant final approval of the Settlement Agreement. See In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 797 (3d Cir. 1995). Federal Rule of Civil Procedure 23(a) mandates that four threshold requirements be met for a class to be certified: (1) the class must be so numerous that joinder of all members is impracticable; (2) there must be questions of law or fact common to the class; (3) the claims or defenses of the representative parties must be typical of the claims or defenses of the class; and (4) the representative parties must fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a); see also In re Life USA Holding Inc., 242 F.3d 136, 143 (3d Cir. 2001). These requirements are referred to as numerosity, commonality, typicality, and adequacy of representation.

1. Numerosity

The first requirement for a class action is that "the class is so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). While no magic number guarantees that the numerosity requirement is satisfied, a class of more than forty is generally considered sufficient. Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001). HSBC, based on a search of its record, reported over sixteen million Class members, a number which makes joinder impracticable. (See Mem. in Supp. at 38-39; Decl. of John L. Rindler in Supp. of Final Approval of Class Action Settlement [Rindler Decl.]; Aff. of Christopher M. Walsh, Esq. Regarding Dissemination of Notice to Class [Walsh Aff.].) Accordingly, the numerosity requirement is satisfied.

2. Commonality

The commonality requirement is met when "the named plaintiffs share at least one question of fact or law with the grievances of the prospective class." In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 597 (3d Cir. 2009). This "does not require identical claims or facts among class member[s]." Marcus v. BMW of N. Am., 687 F.3d 583, 597 (3d Cir. 2012). Rather, "for purposes of Rule 23(a)(2), even a single common question will do." Id.

The commonality requirement is easily met here. All Class members' claims stem from participation in HSBC Plans during a discrete time period. Their claims turn on whether HSBC marketed and administered these Plans in an unfair manner and all members' claims are subject to some of the same defenses, such as whether the claims against HSBC are preempted. Because the named Plaintiffs share multiple questions of fact or law with the other Class members, commonality is present.

3. Typicality

The typicality requirement examines "whether the named plaintiff's individual circumstances are markedly different [from those of unnamed class members] or . . . the legal theory upon which the claims are based differs from that upon which the claims of other class members will perforce be based." Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir. 1985); see also Baby Neal v. Casey, 43 F.3d 48, 57-58 (3d Cir. 1994). "The heart of this requirement is that the plaintiff and each member of the represented group have an interest in prevailing on similar legal claims." Seidman v. Am. Mobile Sys., Inc., 157 F.R.D. 354, 360 (E.D. Pa. 1994). "If a plaintiff's claim arises from the same event, practice or course of conduct that gives rise[] to the claims of the class members, factual differences will not render that claim atypical if it is based on the same legal theory as the claims of the class." Marcus, 687 F.3d at 598.

As explained above, all of the Class members, including the named Plaintiffs, object to HSBC's marketing and administering of the Plans. The claims are predicated on HSBC's standardized marketing and business practices, which were applied in a uniform manner to all cardholders, and standardized language in the Plans' terms and conditions. (Mem. in Supp. at 41-42.) The legal theories for all Class members, that HSBC marketed and administered the credit Plans in a deceptive way, will be the same. Therefore the typicality requirement is met. See In re Cmty. Bank of N. Va., 418 F.3d 277, 303 (3d Cir. 2005) ("Cases challenging the same unlawful conduct which affects both the named plaintiffs and the putative class usually satisfy the typicality requirement irrespective of the varying fact patterns underlying the individual claims.").

4. Adequacy of representation

This requirement ensures that the named plaintiffs fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(4). The court must be satisfied that: (1) plaintiffs' attorneys are qualified, experienced, and generally able to conduct the litigation; and (2) the interests of the named class representatives are not antagonistic to other class members. See In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 532 (3d Cir. 2004); Gen. Motors, 55 F.3d at 800-01.

In determining whether class counsel is qualified to represent the class, the court considers:

(1) the work counsel has done in identifying or investigating potential claims in the action; (2) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action; (3) counsel's knowledge of the applicable law; and (4) the resources that counsel will commit to representing the class. Fed. R. Civ. P. 23(g)(1)(A); see also Cmty. Bank of N. Va., 622 F.3d at 292. The Court believes that Class Counsel possesses the skill, experience, and qualifications necessary to conduct this litigation. For example, Class Counsel negotiated settlements with over ten credit card companies regarding similar payment protection plans, which resulted in Class Counsel having extensive experience with the operation of the Plans and types of claims asserted in this action. (See Mot. for Prelim. Approval at 17; id. Ex. 3 [Class Counsel Qualifications].) In addition to the firms' relevant experience, the individual attorneys of record also boast an impressive set of qualifications and pertinent class action litigation experience. (See Class Counsel Qualifications.) Similarly, Class Counsel performed substantial work and expended great resources becoming familiar with the specific facts and claims at issue here, including researching and drafting the complaints, reviewing informal discovery provided by HSBC, examining applicable federal and state law, and participating in multiple mediation sessions. (See Mot. for Prelim. Approval at 24; Mem. in Supp. at 25.)

As to the adequacy of the Class representatives, nothing in the record suggests to the Court that the named Plaintiffs acted in conflict with the Class or failed to vigorously pursue the claims of all Class members. The interests of the Class representatives and Class members are aligned; both assert the same legal claims and theories and seek similar relief stemming from similar conduct by the same credit card provider. The Court has no reason to believe that any conflicts of interest exist.

B. Rule 23(b)

In addition to meeting the four requirements of Rule 23(a), a proposed class must also qualify under one of the three sub-parts of Rule 23(b). Warfarin, 391 F.3d at 527. Here, Plaintiffs seek to maintain this class action under Rule 23(b)(3), which allows for a class action to proceed if "questions of law or fact common to class members predominate over any questions affecting only individual members, and [] a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).

1. Common questions of law or fact predominate "Predominance is normally satisfied when plaintiffs have alleged a common course of conduct on the part of the defendant." In re Janney Montgomery Scott LLC Fin. Consult. Litig., Civ. A. No. 06-3202, 2009 WL 2137224, at *5 (E.D. Pa. July 16, 2009). As is the case here, "[p]redominance is a test readily met in certain cases alleging consumer or securities fraud . . . ." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 (1997).Plaintiffs have alleged a common course of conduct here based on HSBC's actions in connection with its Plans. The dominant question of law is whether HSBC's actions, and its statements about and administration of the ...

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