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Robert Alexander and James v. Washington Mutual

December 4, 2012


The opinion of the court was delivered by: O'neill, J.


Now before me for decision are representative plaintiff James Lee Reed's unopposed motion for final approval of class action settlement, certification of settlement class, approval of plan of allocation, appointment of class representative, and appointment of lead class counsel and class counsel (Dkt. No. 95).*fn1 Also before me is a submission concerning settlement filed by defendants WMI Holdings Corp.(formerly known as Washington Mutual, Inc. or WMI), WM Mortgage Reinsurance Company, Inc. (WMMRC), and J.P. Morgan Chase Bank, N.A. (JPMC), successor by merger to Washington Mutual Bank fsb (WMBfsb) (Dkt. No. 100). There have been no objections to the proposed settlement and only five of the 42,584 class members have opted out of the class. After reviewing the parties' submissions and holding a final fairness hearing on November 27, 2011 at which no one appeared to object on behalf of the class I will grant the unopposed motion.


In his complaint filed on October 22, 2007 (Dkt. No. 1), representative plaintiff alleges that defendants entered into captive reinsurance arrangements for the purpose of receiving kickbacks, referral payments and unearned fee splits, which were collected in the form of excessive reinsurance premiums from private mortgage insurers to whom WMB and WMBfsb referred borrowers, in violation of Sections 8(a) and (b) of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601 et seq.

After several years of litigation including a motion to dismiss by all defendants and an appeal therefrom, proceedings in Bankruptcy Court over the bankruptcy of WMI*fn2 , the dismissal of defendant Federal Deposit Insurance Company (FDIC) as receiver and party-in-interest for defendant Washington Mutual Bank (WMB) and formal mediation before Judge Cahn, the parties reached a settlement, the essential terms of which are as follows. The settlement class is to include:

All borrowers with residential mortgage loans closed on or after December 22, 2005 through September 25, 2008 that were originated by Washington Mutual Bank or Washington Mutual Bank fsb and reinsured by Washington Mutual Mortgage Reinsurance Company, excluding borrowers with residential mortgage loans purchased on the secondary market and residential mortgage loans insured with lender-paid PMI.

Defendants have funded a settlement fund in the amount of $4,000,000 for the benefit of the settlement class. The settlement amount will pay: (1) settlement payments to each participating class member on a pro rata basis; (2) a case contribution award to the representative plaintiff not to exceed $2,500; (3) attorneys' fees and litigation costs of plaintiffs' counsel totaling no more than 30% of the settlement amount; (4) the fees and costs of the settlement administrator; and (5) any other administrative costs incurred in connection with the implementation of the settlement agreement. The settlement includes a release and waiver in exchange for the class members' relief.*fn3 The parties agree that the proposed settlement is a fair and reasonable compromise of their claims.

On June 4, 2012, after more than four years of litigation, representative plaintiff filed an unopposed motion for preliminary approval of the proposed class action settlement (Dkt. No. 89). On June 25, 2012, the Court entered an Order preliminarily approving the Settlement, conditionally certifying the Class for settlement purposes, approving the form and manner of class notice, and setting a date for a final approval hearing.

Lead class counsel retained the professional settlement administration firm of The Garden City Group, Inc. to perform settlement administration services. On August 9, 2012, a Notice of Class Action Settlement was mailed to 42,584*fn4 potential class members and posted on a dedicated settlement website ( Lead class counsel also established a toll-free telephone number which Class Members were, and will continue to be, able to call if they have questions. Class members were informed that they could elect to opt-out of the class and not be bound by the settlement agreement. As of November 7, 2012, the Garden City Group had received only 5 opt-outs from the 42,584 members of the class. Dkt. No. 97 at ¶ 27. The Court held a fairness hearing on November 27, 2007. Counsel for the representative plaintiff and the defendants appeared at the fairness hearing and spoke on behalf of their clients. No objectors made an appearance.


"When presented with an unopposed motion for class certification and settlement approval, a court must separate its analysis of the class certification issue from its evaluation of the settlement's fairness." In re Am. Investors Life Ins. Co. Annuity Mktg.and Sales Practices Litig., 263 F.R.D. 226, 234 (E.D. Pa. 2009), citing In re Brokerage Antitrust Litig., 579 F.3d 241, 257 (3d Cir. 2009). I will first address the issue of class certification for the settlement class and will the consider the fairness of the settlement.

I. Class Certification

"Actions certified as settlement classes must meet the same requirements under Rule 23 as litigation classes." In re Gen. Motors Corp. Pick-Up Truck Fuek Tank Prods. Liab. Litig., 55 F.3d 768, 799 (3d Cir. 1995). In determining whether a settlement class should be certified, district courts must apply an even more rigorous, "heightened standard" in cases "where settlement negotiations precede class certification, and approval for settlement and certification are sought simultaneously." . . . [T]his "heightened standard" is designed to ensure that class counsel has demonstrated sustained advocacy throughout the course of the proceedings and has protected the interests of all class members.

In re Pet Food Prods. Liab. Litig., 629 F.3d 333, 349-50 (3d Cir. 2010). Representative plaintiff must satisfy the four elements of Rule 23(a) and one or more of the requirements of Rule 23(b).

A. Numerosity, Commonality, Typicality, Adequacy of Representation

Rule 23(a) states that:

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a). "These four elements are referred to in the short-hand as (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation." In re Corel Corp. Secs. Litig., 206 F.R.D. 533, 539 (E.D. Pa. 2002). "Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate" and "effectively limit[s] the class claims to those fairly encompassed by the named plaintiff's claims." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011), citing Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 156 (1982).

1. Numerosity

The numerosity requirement is met when "the class is so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). A "class does not need a magic number of claimants" nor must the"[plaintiffs] allege the exact number or identity of the class members." Cohen v. Chi. Title Ins. Co., 242 F.R.D. 295, 300 (E.D. Pa. 2007). While there is no precise number of putative class members that will ensure the numerosity requirement is met, a potential class exceeding forty members is generally considered sufficient. See Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001); Gates v. Rohm and Haas Co., 265 F.R.D. 208, 215 (E.D. Pa. 2010) (finding that the threshold is approximately 40 class members). Here, as defendants concede, representative plaintiff readily meets the numerosity requirement and estimates that the Class will include approximately 42,570 loans.

2. Commonality

Rule 23(a)(2) "provides that a proposed class must share a common question of law or fact." Sullivan v. DB Investments, Inc., 667 F. 3d 273, 311 (3d Cir. 2011). "Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury." Wal-Mart, 131 S. Ct. at 2551 (citations and internal quotation omitted). That is "[t]heir claims must depend upon a common contention . . . . That common contention, moreover must be capable of classwide resolution -- which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Id.

The common contention here is that defendants allegedly collected a portion of borrowers' mortgage insurance premiums for reinsurance services that representative plaintiff alleged exceeded and were not commensurate with the value of services actually rendered. The complaint alleges common questions of law and fact including, among others, whether defendants' captive reinsurance arrangements involved sufficient transfer of risk; whether payments to Washington Mutual's captive reinsurer exceeded the value of any services actually performed; whether Washington Mutual's captive reinsurance arrangements constituted unlawful kickbacks from private mortgage insurers; and whether defendants accepted a portion, split or percentage of borrowers' private ...

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